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TRANSCRIPT
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Marketing of High-Technology
Products and InnovationsJakki J. Mohr
Chapter 2:
Strategy and Corporate Culture inHigh-Tech Firms
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Internal (within the firm)Considerations in
High-Tech Marketing
Effective
Cross-Functional Marketing
/R&D Collaboration
Being Market-Orientated
Acquire Disseminate Use Information
Relationship Marketing
Partnering with important stakeholders
Access to Resources
Funding Management Expertise
Maintaining Innovativeness
Creative Destruction Corporate Imagination Expeditionary Marketing Culture of Innovation
ENHANCED
ODDS OF
SUCCESS
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Strategic Market Planning
Process in High-Tech Markets
Understand theCompetitiveChallenge
IdentifyAttractive
Opportunities
Define the
Business Arena
Understand theMarket
Environment
Make ToughStrategicChoices
Implement
Understand theProfit Dynamic
Assess Resourcesand
Competencies
Complete theWinning Strategy
Plan CriticalRelationships
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1. Define the Business Arena Potential customer segments that could be
served;
Potential applications or functionality that couldbe provided to these customers;
Possible technologies and capabilities that couldbe used to create the applications or
functionality; and Possible role for the organization in providing
the value to the customer versus the roles ofothers in the market chain.
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2. Identify Attractive
Opportunities Thoroughly segment the market
Assess profitability of serving eachsegment
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3. Understand the Market
Environment Depict market flows/supply chain
Understand buyer behavior
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4. Assess Resources and
Competencies Financial resources
Technology platforms
Intellectual capital
Manufacturing capacity
Brand equity Capabilities (including skills and
knowledge)
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5. Understand the
Competitive Challenge Identify the actual, potential and indirect
competitors
Determine: How each competitor competes
Their current and likely future performances
What drivers underlie their business strategies
Consider likely competitive responses toopportunity What are this competitors areas of weakness or
vulnerability that the firm could exploit?
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6. Make Tough Strategic
Choices Decide whether opportunity should be
pursued
What will it be worth to win?
Is the market opportunity attractive enough?
Is the strategy powerful enough to generate a
sufficient level of profitability? If not, are there compelling reasons to proceed?
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6. Make Tough Strategic
Choices (Cont.) Select/develop best strategy to take
advantage of opportunity
Achieve leadership position in theopportunity?
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6. Make Tough Strategic
Choices (Cont.) Do synergies exist within the portfolio of
opportunities being considered
Leverage a common technology
Leverage a common market chain
Are the strategies for the various
opportunities reasonably consistent?
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7. Plan Critical Relationships With other firms in the market chain
With organizations outside the marketchain
Company with a complementary product orservice
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8. Complete the Winning
Strategy Pricing
Marketing Communications
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9. Understand the Profit
Dynamic Develop a detailed financial model for
each opportunity
More refined profitability analysis based ondetailed understanding of completemarketing strategy and associated costs
Look for modifications to enhanceopportunitys overall profitability.
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10. Implement the Strategy Make sure people who will implement
are involved in the strategy formulation
process Commitment
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Liability of Bigness Traits of large firms can inhibit their
ability to develop radical innovations:
Bureaucratic
Focused on economies of scale
Core competencies become core rigidities
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Three Characteristics of
Core Competencies Difficult for competitors to imitate
Significantly related to benefits end-
user receives
Allow access to a wide variety ofdisparate product-markets.
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Tree Analogy to Core Competencies
SNOWBLOWERS
Branches/canopy
represents the wi dely dif ferent
product markets to whi chthe core competency has provided access
MOTORCYCLES
SMALL
CARS
LAWN
MOWERS
SUPERIOR R&D
SMALL
ENGINES
CORPORATE
CULTURESUPERIOR
MANUFACTURINGSUPERIOR MARKETING &
KNOWLEDGE OF CUSTOMERS
Roots are underlying ski l l s and capabil i ti es that represent core competencies.
Trunk is the core
product, or the physi cal
embodiment of the
core competenci es.
The core
product must be
signifi cantl y related to benefi t
end-user receives.
Implications of Co e
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Implications of CoreCompetencies in Strategic
Planning Resource allocations may defy
conventional logic
Violate ROI criterion
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When Core Competencies
Become Core Rigidities Core rigidities: ingrained routines,
knowledge, and skills become strait-
jackets that inhibit a firms ability todevelop new products built aroundunfamiliar skills, routines, and new
knowledge. Ex: cultural norms, over-reliance on
existing technologies
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How to Avoid Core Rigidities
Creative Destruction
Proactively develop next-generation technology
that may obsolete current technology Ex: Develop Web-sites that undermine current
distribution channels
Corporate Imagination Expeditionary Marketing
Culture of Innovation
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4 Elements of
Corporate Imagination (1) Willingness to overturn
price/performance assumptions
Incremental improvements to existingtechnologies (which move along the sameprice/performance curve) vs.
Radical innovations which allow greatly-
improved performance at roughly comparableprices as existing technology
Technology life cycles (see next slide)
Ex: Moores Law
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Technology Life Cycles
Performance
Time
Limit of Particular Technology
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Some Implications of
Technology Life Cycles New technologies often come from
companies not selling current generation of
technology Incumbents often invest in both improving
existing technology and developing new
Incumbents often underestimate viability ofnew developments
Therefore, new technologies can catchestablished firms by surprise
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4 Elements of
Corporate Imagination (Cont.) (2) Escape the tyranny of the served
market
Excessive focus on current customers
Obscures the fact that customer needsmay change over time and may be solved
in radically new ways Therefore, look for market opportunities
outside of existing product/markets.
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4 Elements of
Corporate Imagination (Cont.) (3) Use new sources of ideas for
innovation
Rather than using standard marketingresearch tools, use lead users andethnographic observation (empathicdesign) (Discussed fully in Ch. 5)
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4 Elements of
Corporate Imagination (Cont.) (4) Get out in front of customers.
Lead them where they want to go before
they themselves know it. Requires being close to the customerAND not being blinded by existing rulesand procedures.
B B kth h i
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Box: Breakthroughs inCorporate Strategy
Dont be constrained by existing industryboundaries
Competitors can be found in many places: Direct competitors, suppliers, partners
Product form competition
competition between product classes vs. betweendifferent brands of the same product
Firm may not control all critical assets
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Box: Breakthroughs in
Corporate Strategy (Cont.) Bring new voices into the strategy
formulation dialogue.
Create new connections acrosstechnologies, hierarchical levels,geographical and business units
Come from a new vantage point Have passion for discovery and novelty
Be willing to experiment (vs. focus on efficiency)
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Be a Market Pioneer??
First mover advantage
creates entry barriers Economies of scale Experience effects Reputational effects Technological leadership Buyer switching costs Higher profits and higher
share Define product exemplar
Higher consumerawareness
Large development costs
Market uncertainty
PROS CONS
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Pioneers
(First Movers) (Cont.) Successful Pioneers
Have technological foresight
Understand the market
Have marketing acumen
Understand competitors strengths and
weaknessesA bit oluck
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When do late movers
succeed? Identify overlooked product position
Undercut pioneer on price
Out-advertise or out-distribute thepioneer
Innovate superior product
Innovate superior business/marketingstrategy
Reshape the category
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Two ways to improve
new product success rates Improve the odds on each individual product
introductionthe hit rate. Gather as much information as possible, tailor the
product Drawbacks: time consuming, market needs may change
before launch. Ready, Aim, Aim, Aim.
Increase the number of forays into the market
the times at batExpeditionary Marketing Many quick incursions into the market increases learning
about the market
Low-cost, fast-paced incursions allow quick re-calibration
Combination of speed and learning enhances success
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Expeditionary Marketing
Model 1
Model 2
Model 3
Time
Development
Overall Revenue
Incr. Revenue
New Models
Expeditionary Marketing: Many fast-paced incursions in to the market
Relationship between Entr ies in the Market and Qual ity
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Expeditionary Marketing:
Advantages More accurate learning of customer needs
Time between market learning and product launch
is shortened Maximizes odds that product delivered matches
customers needs
Customer needs less likely to change in the short-term
Implication: Issue is less being right the first time,but being able to accumulate market experience,and quickly adapt market offerings
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Insights in the Ability to Learn
from the Market Competitive advantage derives less
from havinginformation, and more
from the superior ability to useinformation.
Interpersonal and organizational trust
enhances the use of information.
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Insights in the Ability to Learn
from the Market (Cont.) Caveats in using information Merely using some information is insufficient to generate
superior performance. Using knowledge held bymarketing managers contributes to superior performance.
Relying too excessively on organizational memory caninhibit innovativeness.
It is the marriage of marketing knowledge withtechnological knowledge that leads to effective product
innovation. Improvising with respect to product strategy may
be effectivebut only when a high degree ofinformation is shared both within and across the
organizations boundaries.
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Nurturing a
Culture of Innovation Characteristics of a firm that fosters
innovation
Identifies market needs that are divergentfrom (rather than congruent with) existingstrategies
Roles and responsibilities of key players may
not be clearly defined in early stages Screening for new product ideas not based on
formal criteria, but done informally based on
technical/market merit
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Characteristics of Organizations
Who Foster Innovation (Cont.) Role of product champion is key
Tireless crusaders for idea
Innovative firms have reward system andculture to promote influence of productchampions
Personnel given time and incentives tobe innovative
Tolerate risk and mistakes
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Skunk Works Isolate new venture groups outside the
normal organizational hierarchy
Pros:
- Allows for morecreativity, unfettered by
existing corporateprotocols.
Cons:
- Signals a corporate culture thathas impediments to innovation
(Creativity doesnt happenwithin normal operatingprocedures)
- Isolates the creative process
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Applying Lessons of Innovativenessto Businesses Internet Experiences
New business models came from industryoutsiders
Competitive Volatility Core rigidities and the tyranny of the served
market:
Existing companies bound by existing rules of thegame and existing customers
Underestimation of new competitors
Need for creative destruction
Applying Lessons of Innovativeness
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Applying Lessons of Innovativenessto Businesses Internet Experiences
(Cont.) Expeditionary Marketing:
Shorter learning cycles
Quicker opportunity to adapt strategies
Understand core competencies
Reliance on skunk works
Pioneering advantages
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The Liability of Smallness
Financial Resources
Reliance on venture capital
Formal companies/banks Informal angels
What Venture Capitalists Look For:
Management Team Marketing Plan
Technology/Product
ROI
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Other Resources for Start-Ups Technology incubators
Partners (Ch. 3)