a methodological approach to the marketing process in the biotechnology-based companies

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A Methodological Approach to the Marketing Process

in the Biotechnology-based Companies

Carla Costa1*, Margarida Fontes2 and Manuel V. Heitor1

1. Center for Innovation, Technology and Policy Research, Instituto Superior

Técnico, Lisboa Portugal

2. INETI, Lisboa Portugal

* corresponding author, [email protected]

Paper accepted for publication in the “ Industrial Marketing Management

Journal”, Elsevier

July 2003

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BIOGRAPHICAL NOTES:

Carla Costa

MSc in Engineering Policy and Management of Technology and with a Business

Administration Degree at ISCTE – Instituto Superior de Ciências do Trabalho e da

Empresa, Lisbon, she is a researcher at Center for Innovation, Technology and Policy

Research, IN+, associated to the entrepreneurship promotion programme Green-wheel

at Instituto Superior Técnico, in Lisbon.

Margarida Fontes

Researcher at Departamento de Modelação e Simulação de Processos/Instituto Nacional

de Engenharia e Tecnologia Industrial (INETI) with a PhD in Management of

Innovation and an MSc in Management Sciences from the Manchester School of

Management, University of Manchester Institute of Science and Technology, UK. Her

main research interests are: management of technological innovation, academic- industry

relationships and technological entrepreneurship.

Manuel V. Heitor

Professor of Mechanical Engineering at the Instituto Superior Técnico in Lisbon, and

director of the Center for Innovation, Technology and Policy Research, IN+, he is co-

editor of several books and author of several scientific papers in the area of energy and

environment and related fields, with emphasis on fluid mechanics and combustion. He

is a Senior Research Fellow of IC² Institute, The University of Texas at Austin and, in

this context, he has led the Organizing Committee of a series of International

Conferences on “Technology Policy and Innovation,” which began in 1997 in Macau.

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ABSTRACT:

The paper addresses the commercialisation activities of biotechnology-based companies

in a European context and discusses whether these companies are able to gain adequate

market perceptions and set adequate marketing processes, taking into account three

analytical steps: strategic marketing definition, marketing implementation, and

evolution of strategy and implementation. A methodological approach was developed,

considering the specific nature of the technology and the companies. The case of

Portuguese companies was used to test this methodology.

The findings support the hypothesis that marketing issues constitute a problem for these

companies, since most of them had serious difficulties in going through the marketing

process. Marketing deficiencies were largely connected to the access to human

resources with relevant management and marketing capabilities and were particularly

felt by companies introducing discontinuous innovations.

The research confirms that this methodology is useful in the assessment of the

marketing management process in biotechnology-based companies.

KEYWORDS:

Biotechnology-based companies, marketing of innovation, marketing of technology

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1. Introduction

The emergence of a biotechnology industry has been a motive for much discussion and

both the business and the academia worlds envision a life-science revolution emerging

from the knowledge-based economy of the 21st century [EuropaBio 1997, Enriquez

2000, EC 2001].

History shows that the emergence and development of industrial biotechnology has very

particular characteristics [Orsenigo 1989]. Its most remarkable feature is the strong

influence of science, which represents a fundamental source of progress in this new

technological paradigm [Orsenigo 1989, Dosi 1984, Pavitt 1987]. A further

differentiating feature was the role played by new biotechnology-based companies, that

stem from a spontaneous division of labour in the research and productive activities

[Orsenigo 1989, Nelson and Winter 1982, Teece 1988]. Small dedicated biotechnology

companies are recognised to be the most efficient available organisational solution for

the development of innovative activities in biotechnology [EC 2001]: they have better

access to new scientific developments [Walsh et al 1995] and a remarkable capability

for creative development [Sharp and Galimberti 1993], being particularly effective in

identifying and exploring the emerging technological and market opportunities of the

new scientific paradigm [Orsenigo 1989]. Thus, these companies act as intermediates in

the process of transferring biotechnology from the research laboratories to industry,

representing an institutional innovation motivated by technological change [Orsenigo

1989].

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However, even science-based companies do not subsist solely due to research and

development activities aiming to create new products and services: it is essential to take

these to the market and turn them into successful innovations. In the case of

biotechnology, companies may adopt different commercialisation routes: either take

their technology directly to the market as a final product or channel it through the large

established companies that will then apply their know-how and resources to

commercialise it [Cetindamar and Laage-Hellman 2000]. Alternatively, they may

follow a hybrid model, combining research services and licensing with research for own

product development, in order to survive while aiming for an integrated activity in the

future [Pfirrmann 1999]. But, whichever strategy companies adopt, the marketing

process is an unavoidable step. Yet, biotechnology-based companies may face particular

marketing problems, due to the combination between the nature of the technology being

commercialised and the characteristics of the companies that developed it. In fact, these

are often young, highly innovative SMEs created by entrepreneurs with a research

background and, therefore, they may lack the resources and competences required to

define a market strategy and to implement an adequate marketing process. Thus, one

hypothesis to explore is that marketing process deficiencies are often present and raise

critical obstacles to business development, particularly in the case of companies

introducing more radical innovations.

2. The Biotechnology Industry and High-Technology Marketing

2.1 The Nature of the Biotechnology Business

Much has been said about the somehow disappointing results obtained by most life-

sciences pioneer companies, if compared to the initial expectations [Enriquez and

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Goldberg 2000]. This is especially the case in Europe, which has been lagging behind

the US in this field [EC 2001, Storey and Tether 1996, Orsenigo 1999]. Factors like

financing shortages, technological problems, legislation barriers and low public

acceptance have been pointed out as causes for company failure in this area [EC 2001,

Sharp and Senker 1999]. It is possible that the marketing-related deficiencies are also

responsible for lack of business success in biotechnology.

In order to succeed in the market, companies have to address the marketing issues and

tackle them adequately. Biotechnology-based companies are a particular case, because

the strategic decisions and the marketing issues to handle may not be ordinary. In fact,

due to the science based nature of biotechnology, most biotechnology-based companies

are technology intensive, being often involved in the development and

commercialisation of highly innovative products. However, high technology marketing

can be very complex, requiring companies to adopt counterintuitive strategies and to

possess good management competencies and, in some cases, enough resources to sustain

a delayed market entry processes.

The development of new technologies/products in biotechnology has been mainly

conducted by small science-based companies due to the division of labour between the

new technology- intensive companies and the existing companies, which possessed a

number of complementary assets in the production and marketing areas [Teece 1986].

As a result, although some companies can become fully integrated and grow, they

usually start as SMEs and the majority remain small and specialised [Orsenigo 1989,

Sharp and Senker 1999]. Thus, most of the new biotechnology developments – which

often involved radical innovations – were introduced by young science-based SMEs. It

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is recognised that the objectives and flexibility of small firms are more compatible with

this type of innovative business project [Christensen 1997]. However, they have a

number of limitations concerning resources and competencies that may constrain their

capacity to handle the requirements of high technology marketing. One such limitation

concerns their competence base, since they are often created by technical entrepreneurs

with a strong technological orientation but without formal management training.

Another limitation concerns their lower level of financial resources and the financing

problems they have to solve in order to invest in long-term research and lengthy

commercialisation processes. As a result they often do not possess and may find

difficulties in accessing the necessary skills, especially in the strategic management and

marketing areas.

The typical company profile described above has implications for the internal

management process, since management procedures tend to be less formal and strategy

may not be formally expressed. On the other hand, companies are frequently unaware of

the specific nature of the marketing process in the case of radical innovations. In

conclusion, these features may cause additional difficulties and thus raise strong

obstacles to the development of the new biotechnology-based companies, which are

critical elements of the biotechnology system [EC 2001, Orsenigo 1989, Walsh et al

1995].

Because Europe's institutional set-ups, history, traditions and skills are different from

those of the US the creation and development of European biotechnology companies

followed a path that differs from that of their US counterparts [EC 2001]. As a result,

European companies are known to be, in general, smaller, less active in the global

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network of collaborative relations and in the markets for technology, being mainly

present in platform technologies and maintaining diversified strategic portfolios [EC

2001, Brandys 1998]. They are also more often integrated companies, selling products

and services, while American (and to some extent British) ones predominantly sell

patents or contract research [Mangematin et al 2001]. Marketing management may be

more complex but at the same time more critical for the integrated companies that

actually have to take the final products or services to the market. Nevertheless, most

existing research focuses on the commercialisation route linked to patents and research

contracts, especially in the pharmaceutical industry, where this business model is used

extensively. Given the weight in Europe of integrated and hybrid companies, that follow

a different business model [Mangematin et al 2001], research about the

commercialisation process should consider both types of companies, taking into account

the different marketing implications.

2.2 High Technology Marketing

The marketing management process in high technology companies requires the use of

basic marketing techniques, founded on the same philosophy and principles as applied

to any other product, guiding the company's offer according to market needs [Moriarty

and Kosnik 1987]. Therefore, the traditiona l concepts of strategic planning and

marketing management, as defined by Kotler [1991], are valid in such cases.

Consequently concepts like market selection, marketing-mix and differentiation are also

critical for high technology products [Moriarty and Kosnik 1987].

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Moreover it has been argued that the marketing of high-technology products may face

different challenges from the low-technology ones, particularly when the technology

has a disruptive or discontinuous nature [Brandys 1998, Moore 1995a, Lynn et al 1996].

The basis for this argument is the long period of time that precedes the dissemination of

major innovations and the list of marketing defeats related to high-technology products.

Indeed, there are many examples of well-managed firms that registered cases of failure

in the introduction of new technologies. According to Christensen [1997], the reason

behind such failures is the fact that their managers followed the widely accepted

management principles in conditions that were not `normal'. This author maintains that

a company attempting to introduce disruptive technologies should not strictly follow the

marketing rules that apply to sustaining innovations. By the time a disruptive

technology emerges, it results in products that have a worse performance, at least in the

near-term, although they have a very different value proposition that is valued by a few

fringe customers. Only on a later stage will this technology clearly become an

advantageous substitute for the existing technology. The problem, or the innovator's

dilemma, is that although the level of information about the market potential is low, the

advantages of a first-mover are very strong. This calls for investment decisions in a low

information situation. Hence, it is recognised that the best strategy definition cannot be

known in advance: it requires managers to develop plans for learning along the way,

creating a discovery-based planning through an iterative process of trial, learning and

trial again. With respect to entry strategies, the most appropriate strategy seems to be

using a new market niche, populated by customers that appreciate the product's

distinctive features. This author considers that small companies have more incentives

than large ones to introduce disruptive innovation, since their dimension is more

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compatible with the initial low returns, which is consistent with the role played by

biotechnology-based SMEs.

Other research present similar conclusions: Moore [1995a] and Lynn et al [1996]

explain the market difficulties of innovative products through the concept of

discontinuous innovation, which is similar to that of disruptive technologies.

Innovations can be classified in a continuum that goes from continuous innovation to

discontinuous innovation, passing through dynamically continuous innovation.

Continuous innovations are small improvements introduced over time, while

dynamically continuous innovations involve some change in technology, although the

product is used in the same way as its predecessors. Discontinuous innovations involve

fundamental changes in the customers' attitude and behaviour and in the infrastructure.

A discontinuous innovation is more difficult to market, since greater changes are

required in the way things are done, but the rewards can be more significant.

Lynn et al [1996] point out that, in the case of discontinuous innovations, the product

development process should place less emphasis on analysis and more on probing and

learning from the experience. This probing process consists of experimenting potential

markets with early versions of the product, learning from the probes and probing again

with an improved version. This process should be seen as experimental design and

exploration, rather than blind trial and error. The authors also conclude that unless the

opportunity for a discontinuous innovation is a strategic imperative to the business,

management will fail to persist the probing and learning process.

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Moore [1995a] added insights from the Technology-Adoption Life-Cycle Model

[Rogers 1962] to the classical discussion on innovation discontinuity. According to this

model, when a company introduces a new technology in the market, the customer

adoption process follows a specific path in terms of the type of customer profile

reached, because people differ strongly in their readiness to try new products and new

technologies.

Figure 1 - The Technology Adoption Life Cycle

Source: Moore, Geoffrey [1995a]

The model is represented by a Bell Curve, with five segments representing groups of

customer psychographic profiles in terms of the relative adoption time: Innovators or

Technical Enthusiasts, Early Adopters or Visionaries, Early Majority or Pragmatists,

Late Majority or Conservatives, and Laggards or Sceptics. Moore [1995a] argues that

the explanation for the difficulties faced by many companies lies in the fact that there is

a major gap in the transition between Early Adopters and Early Majority. This is

because these two groups of customers are totally different in terms of underlying

values and thus communication between them is almost impossible. The main

difference is that the former are willing to bet on prototypes whereas the latter want to

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see whole product finished solutions before they buy. To cross the Chasm between the

early market and the mainstream, a company must therefore change the market strategy

[Moore 1995a]. The failure to cross this Chasm in the progression of the adoption cycle

has driven many technologies and companies to oblivion. The fact that the Chasm

typically goes unrecognised makes it even more dangerous. According to Moore

[1995a], a company that becomes aware of being caught in the Chasm must target a

very specific niche market that it can easily dominate and use as a base for broader

operations. It must identify the niche that presents the most compelling reason to buy

the technology and invest all its efforts and resources in becoming the niche leader. To

reach this market niche it must transform the prototype under development into a whole

product that has the characteristics that appeal to the chosen niche. When the company

wins four or five niche customers, the word-of-mouth effect will spontaneously start,

creating a very effective and inexpensive communication campaign that will help the

company achieve niche leadership and cross the Chasm. Once a company manages to

leave the Chasm behind and is settled as leader of a market niche, it will find itself in

the “Bowling Alley” stage [Moore 1995a and 1995b], when it must strive to gain

leadership in additional market niches. If the company implements a successful

“Bowling Alley” strategy, it will soon find itself in the “Tornado” phase, climbing to

conquer the pragmatists’ market. When this demand flow calms down, the company

finds itself on the more stable “Main Street“. If the company does not adapt its strategy

it will lose the opportunity to become market leader.

The evolution along the Technology-Adoption Life-Cycle for discontinuous innovations

requires companies to change market strategies at the various stages, often to opposite

approaches [Moore 1995a and 1995b]. This can be counterintuitive and confusing for

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the companies, making it a difficult path to follow. The challenge is likely to be greater

for companies with limited business and marketing competencies, as is often the case

with new biotechnology-based SMEs. Therefore, the problems typically faced by the

technology-based companies could be related with the difficulties to manage the

marketing process for discontinuous innovations, especially while crossing the Chasm.

Other problems could be related to their business definition, for instance, since it is

recognised that some technology-based companies tend to possess too many different

strategic business areas because of their high tendency for diversification. This tendency

reflects a research-oriented strategy that is found in companies whose entrepreneurs or

key people had research backgrounds, since the inquisitive spirit of a scientist often

drives him from problem to problem, diversifying the areas of research and crossing

barriers between different subjects. This tendency to over-diversify, especially in an

early stage, is often prejudicial to the company's development and success [Plaut and

Ilan 1987, Mustar 1998] since it does not allow the company to concentrate its scarce

resources and efforts in the same market-learning path.

Biotechnology-based companies may also face financial difficulties while they search

for venture capital or corporate investments. In the cases where this process is lengthy

or unsuccessful, companies may be unable to afford hiring managers and marketing

managers. In these situations, or when the entrepreneurs with research background do

not recognise the need for professional marketing staff, companies may lack the

necessary competencies for the marketing process.

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Therefore, it can be suggested that, while this type of company shows some advantages

regarding the process of biotechnology development and commercialisation, it is also

likely to face specific marketing problems. These may be particularly serious when the

companies are introducing discontinuous innovations and do not possess or are not able

to access or acquire the competencies necessary to address this process adequately.

The above discussion allows us to conclude that the commercialisation process of the

biotechnology-based companies should not be analysed through the same perspective as

for companies operating in less technology- intensive fields. The specific characteristics

of both the technology and the organisations developing it bring critically different

features to the marketing process that should be taken into account.

3. Methodology

3.1 Research Approach

This research aimed to understand the process by which the biotechno logy-based

companies take biotechnology products to the market, in an European context: the case

of Portugal. Assuming that the specific nature of biotechnology influences the

marketing process, requiring companies to set up marketing strategies and practices

adequate to the technological and organisational context where they operate, the

objective is to investigate whether these biotechnology-based companies are being able

to handle the specificities of their marketing process, considering both the

characteristics of their technological and organisational profiles.

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The basic research question is, therefore, whether and how do biotechnology-based

companies gain adequate market perceptions and set an adequate marketing process? In

order to answer this generic question, the following issues were addressed: a) Are the

companies able to go through the process of defining an adequate marketing strategy

and of adequately implementing such strategy?; b) Do companies engage in a learning

process, acquiring marketing competencies and dynamically adjusting their marketing

strategy ?; c) Is companies' ability to pursue an adequate marketing process, affected by

the type of innovation in presence (discontinuous or non-discontinuous)?.

Taking into consideration the arguments put forward in the previous section, the

working hypothesis was that marketing process deficiencies constitute relevant obstacles

to the development of biotechnology-based companies. Additionally the following

derived hypothesis were also tested: a) These marketing deficiencies are connected with

the absence or difficulty to access human resources with the relevant management and

marketing capabilities; b) Companies introducing discontinuous innovations reveal

additional marketing difficulties. The analysis was therefore centred on the strategies

devised by companies to reach the market and on the procedures adopted to handle the

marketing process and the research approach followed the traditional basic strategic

planning decisions and the marketing process. Given the characteristics of the actors

involved, aspects known to pose difficulties to this type of company, such as business

definition, market “probing and learning” and marketing of discontinuous innovations

were addressed in greater detail. Similarly, the impacts on the marketing process of

some typical characteristics of biotechnology-based companies, such as lack of

resources (human and others) and excessive technological focus were also given

particular attention.

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Using this research approach it will be possible to verify if the biotechnology-based

companies are in fact defining and implementing adequate marketing processes and if

these respect the specific needs of this type of company and products (technology) or if,

as proposed, their marketing difficulties may be responsible for their lack of success.

3.2 Research Methodology

In order to address this research problem, a methodological approach was defined that

takes into consideration the specificities of the marketing process in this particular

technological field and the characteristics of the companies that conduct it. The research

looked into the marketing process developed by each company, assessing its ability to

follow the steps that lead to the establishment of a strategy and its implementation, as

well as its capacity to learn and adjust to a changing environment. The methodology

adopted combined insights from generic marketing management theory and high-

technology marketing theories with knowledge about the behaviour of young

technology- intensive companies, being specifically designed to address the

biotechnology case.

This methodology was based on the notion that companies must take the necessary steps

to ensure adequate strategic planning and marketing planning (or definition) and

implementation. This implies that they should become engaged in recurrent analysis of

the market, products, competition, etc., and decision making on the company's strategy

and implementation. Thus the approach consisted of investigating whether the

companies were following the basic procedures assumed to be involved in an adequate

marketing process [Kotler 1991], and additionally if they made adequate options

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considering their organizational and technological profiles, including the analysis of

whether the companies acknowledged the nature of the innovation in presence

(continuous/dynamically continuous/discontinuous) and conducted the market

assessment process accordingly. When the companies were not performing an adequate

marketing approach and considering the specificities of their profile, efforts were made

to identify probable causes and consequences of this behaviour. Because the analysis

would not be complete if referring only to the present situation, it was also necessary to

look at the companies' ability to learn and adapt their strategy as the basis of the

evolution of marketing strategy and the changes introduced to it. The manager's

perceptions regarding companies' learning through time was also taken into account.

The analysis focused on the identification of deficiencies in marketing as a process or

mistakes in terms of strategy or implementation, rather than on assessing companies'

activity against a `perfect' marketing strategy.

The methodological approach to the marketing process was divided into three analytical

steps: strategic marketing definition; marketing implementation; strategy and

implementation evolution. These steps separate the strategy and its implementation in

order to facilitate the task of understanding the company's overall strategy and then

verifying if that strategy was adequately implemented. This separation also allows the

identification of the nature of problems in presence.

Strategic marketing definition: analyse if the companies are making a clear and correct

strategic definition of their business and of their market approach. This phase

comprehends strategic and marketing planning therefore it is critical for the marketing

process, since it provides the companies with a market orientation and a set of principles

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that will guide the implementation phase. Therefore it is crucial to go through the

marketing definition steps appropriately. The analysis was divided in stages. The first

concerned an evaluation of the level of clarity of the companies' business definition,

considering three dimensions: customer groups to be served, customer needs to be met

and the technology that will satisfy these needs [Abell 1980]. There is also an

assessment of the level and adequacy of the market research performed and the

companies' awareness in terms of the market segmentation and competition was

analysed, leading to the identification of the target market. In a second stage companies'

strategic decisions regarding competitive position and geographical market scope were

assessed. In a last stage an attempt was made to evaluate the overall strategic marketing

definition that would be adequate to the each company's characteristics and the market it

aims to serve.

Marketing implementation: analyse and evaluate companies' capacity to implement an

adequate marketing strategy, verifying if they consider the relevant information and

follow the strategy defined, going through the necessary steps, making the adequate

decisions and reaching out for the crucial resources. The analysis was also divided in

stages. The first involved the identification of the customer profile, in terms of their

level of attraction for discontinuous technology, considering the type of innovation in

presence, and also the evaluation of how companies introducing discontinuous

innovations were managing the evolution along the Technology Adoption Life Cycle

and, in particular, if they are being able to cross the Chasm. In a second stage the way

the companies differentiate and position their products, services or patents was analysed

and the third stage looked at the corresponding marketing mix. On the fourth stage, an

attempt was made to evaluate the companies' overall strategy implementation process.

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Strategy and implementation evolution: evaluate the changes in the marketing strategy

definition and/or implementation in order to identify adjustments due to a learning

process. Since the definition of the companies' strategy should be a dynamic rather than

a static process, of shaping and reshaping the business and products in order to match

their objectives and resources with the changing market opportunities [Kotler 1991], it

is important to analyse how the companies adapt their strategy through time, responding

to external changes or attempting to better fit the market. A further critical issue is the

extent to which companies are able to learn and accumulate knowledge in order to

reshape their strategy. This analysis was performed in five stages. The first concerned

the identification of areas of more intense learning. A second stage uncovered the

changes of marketing strategy that occurred during the companies' lifetime. Such

information was expected to provide some evidence on a learning process and on its

impact upon company's behaviour. A third stage focused on the competencies possessed

by the companies, to determine whether they met their needs and which skills deficits

existed that could hinder the learning process. The fourth stage was centred on the

learning process, addressing the mistakes identified by the companies and the new

capabilities created. The last stage reviews and evaluates the companies' ability to

engage in the learning process.

The three steps follow a logical marketing sequence but in practice strategy definition

and implementation are not necessarily distinct phases: there is a strong and continuous

interaction and they are sometimes developed simultaneously. Particularly in the case of

research-based companies, it has been noted that strategy is not always defined up-front,

rather it evolves over a period of time [Mustar 1991]. Nevertheless, for operational

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reasons, each step was addressed separately, evolution and interactions being

considered in the final step.

Having in mind the characteristics of the companies, a classical approach to the

marketing process and to market assessment would not be appropriate and might not

fully seize the desired information. The objective was to achieve an understanding of

the market perceptions and marketing strategy concepts underlying the company's

decisions. Being aware that small firms often do not have formal documents or even

explicit statements concerning strategic issues, although they still carry out some form

of “strategic thinking” [Kazanjian 1988, D'Amboise and Muldowney 1988], they were

not simply inquired about formal plans or documents. Rather, the method used was

speaking at length with the managers about their strategic views and their market-

oriented activities, in order to gain an insight about the actual strategy. Also, marketing

technical terms were avoided when the interviewees were not familiar with this

language.

The strategies and practices adopted by biotechnology-based companies to

commercialise their technologies in a wide range of application fields (namely beyond

the pharmaceutical field) are still under-exploited areas of research. Therefore, this

research was largely exploratory and based in less formalised research methods [Miles

and Huberman 1984]. It had as starting point the literature about the development of a

biotechnology industry, the characteristics and problems generally faced by the

biotechnology-based companies and the specificities of high- technology marketing, but

adopted an inductive and interactive approach, in order to allow confrontation of the

empirical data obtained with the concepts present in the literature. On the other hand, it

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relied on qualitative methods to obtain in-depth information on the companies'

behaviour in the marketing field. Thus, the research instruments chosen were direct

interviews, based on a semi-structured questionnaire. The questionnaire included open

questions, with a natural conversation flow around a common set of issues, closed

questions about specific topics, questions using Likert scales and relevant quantitative

data gathering.

3.3 Empirical Setting

The empirical setting chosen to test the hypothesis and also the validity of the

methodology was the process followed by Portuguese biotechnology-based companies

to take their products to the market [Costa 2001]. A biotechnology-based company was

defined as a company that bases a significant part of its products or services on third

generation biotechnologies, or on second generation biotechnologies [Faulkner 1989,

Walsh 1993], when the technology is non-traditional and the company assumes an

active part in its development and/or specification. Sixteen companies were interviewed

comprising 85% to 90% of the population at the time of the interviews (1999). Two

companies were value-added resellers (VARs) that were introducing biotechnology

products and services that did not exist in the Portuguese market. They were included in

the analysis because their initial intention was to develop their own products or services

and because they perform the important role of new market openers for other

companies.

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4. The Marketing Process in the Portuguese Biotechnology-based Companies

4.1 Characterisation of the Companies

All the companies analysed were SMEs, half of them created before 1996 and the other

half created between 1996 and 1999. Six companies were classified as science-based

and eight as engineering-based [Autio 1997]. Nine companies were created by

entrepreneurs (average age of 37) and the remaining resulted from corporate

investments. Six entrepreneurs had previous occupational backgrounds linked to

research Jones-Evans [1995] and the most frequent motivations behind the

entrepreneurial act were the exploitation of market opportunities and the possibility of

working in their field of specialisation.

Concerning the initial resources of the companies, both the financial and human levels

were considered. In what refers to financing, in addition to equity funds, twelve

companies received some form of small grant, subsidy or prize that contributed to

complement the internal investment. Nevertheless, in order to finance the heavy

investments in research or to support market introduction, six companies had to obtain

additional resources, through service or commercialisation activities or the production

of an unrelated traditional product. This was often detrimental to companies'

development, since entrepreneurs had to devote time and resources to areas that brought

no knowledge accumulation in the relevant area. Other financial sources used by

biotechnology companies elsewhere, like bank loans and especially venture capital, had

a very low incidence. With respect to human resources, the majority of the companies

had, at start-up, management experienced staff, with only four companies mentioning

very limited or no experience in this area. Marketing skills were the scarcest: only

corporate investments had trained and experienced people in this area. Five companies

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employed people without marketing training but having previous market experience,

four companies had no marketing experience but had benefited from short specific

training courses and two companies recognised to lack marketing skills or experience.

The products, services or technologies offered by the companies were characterised

according to their development stage, type of innovation in presence, degree of

innovation, type of market and stage of the life-cycle achieved. Table 1 summarises

some generic characteristics of the companies and presents their main product features.

For confidentially reasons each company is identified by a letter of the alphabet (from A

to P, attributed according to a random order). Having provided a general overview of

the companies under analysis, the marketing process analysis will follow.

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Table 1 – Products, Services and Patents’ Characteristics ID Age E/C* Product/Service/

Patent Develop. Stage Type of Innovation Life-Cycle Stage

A 1998 E Patent Testing Dynamically Continuous Introduction

B 1996 E Patents R&D Testing

Discontinuous Dynamically Continuous

Introduction Growth

C 1986 E Product (with a service component)

On the market Discontinuous Growth

D 1999 C Pure product Waiting for approvals Product design

Dynamically Continuous Growth/Maturity

E 1997 E Product (with a service component)

R&D Testing Product design Market prospecting

Discontinuous Introduction

F 1995 C Pure product

Waiting for approvals On the market

Dynamically Continuous Dynamically Continuous

Maturity Introduction

G 1998 C Pure product R&D Dynamically Continuous Maturity H 1984 E Pure product Waiting for approvals

(for certified product) On the market

Discontinuous Introduction/Growth

I 1989 C Pure product On the market Dynamically Continuous Maturity J 1992 C Pure product On the market Dynamically Continuous Maturity K 1999 C Pure product Product design Discontinuous Introduction/Growth L 1998 E Pure product R&D Discontinuous Introduction/Growth M 1984 C Pure product On the market Dynamically Continuous Growth/Maturity N 1995 E Product with a

strong service component

On the market Discontinuous Introduction

O 1997 E Product with a strong service component – VAR

On the market Discontinuous Introduction

P 1994 E Product with a strong service component – VAR

On the market Discontinuous Introduction/Growth

* E – Entrepreneurial investment C – Corporate investment

4.2 Marketing Strategy Definition

The analysis of the three stages here included allowed to conclude that, although

exhibiting some difficulties in what refers to the business definition, 10 out of 16

companies appeared to have defined appropriate strategies. Nevertheless, six companies

defined inappropriate strategic marketing plans (A, E, I, J, K, M). The main problem

faced by the underperforming companies appears to be a tendency to over-diversify the

activities at a too early stage of the company's development, precluding the

concentration of scarce resources and efforts in the same market- learning path. Two

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such companies were facing technological blockages that limited the marketing strategy

spectrum. Companies that revealed greater difficulties in the basic steps of the

marketing definition process had no or low marketing competencies.

The results of each stage of analysis that lead to the above conclusions are as follows:

Stage 1 – The analysis of each company's business definition was expected to provide

an insight on how the companies view themselves presently and in the future. Table 2

shows that the majority of the companies were able to offer clear business definitions,

the exception being companies that denoted an excessive tendency to diversify their

business activity, loosing sight of their core competencies (A, E, K, M). According to

some authors, small and young companies should not invest in diversification but in

specialisation [Mustar 1998 , Plaut and Ilan 1987]. A strategy based on diversification is

riskier, since it requires the dispersion of the investment and resources throughout

several areas. In fact, the tendency to diversify does not allow the companies to totally

profit from the accumulated knowledge (both on market and technology) requiring them

to develop new learning processes every time they switch to a different technology or

market.

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Table 2 – Strategy Definition Steps

ID Business Definition

Market Research

Segmentation User Needs Target Market

Competitors

A Unclear Inadequate Well prepared Identified In accordance Believes to have none

B Clear Adequate Well prepared Identified In accordance Believes to have none C Clear Adequate Well prepared Identified In accordance Knows who they are D Clear Adequate Well prepared Identified In accordance Knows who they are E Unclear Inadequate Well prepared Identified In accordance Knows who they are F Clear Adequate Well prepared Identified In accordance Knows who they are G Clear Adequate Well prepared Identified In accordance Knows who they are H Clear Adequate Well prepared Identified In accordance Knows who they are I Clear Inadequate Random or no

segmentation Unidentified Pre-defined

without analysis Knows who they are

J Clear Inadequate Random or no segmentation

Unidentified Pre-defined without analysis

Knows who they are

K Unclear Adequate Well prepared Unidentified In accordance but hesitating

Knows who they are

L Clear Adequate Well prepared Identified In accordance Knows vaguely of their existence

M Unclear Inadequate Random or no segmentation

Identified Pre-defined without analysis

Knows vaguely of their existence

N Clear Adequate Well prepared Identified In accordance Knows who they are O Clear Adequate Well prepared Identified In accordance Knows vaguely of their

existence P Clear Adequate Well prepared Identified In accordance Knows who they are

An assessment of whether companies went through the necessary steps to define the

company's marketing strategy (Table 2), allowed us to conclude that: a) While most

companies seemed to be able to perform a minimum level of market research

(sometimes in quantitative terms, but more often in qualitative terms), it was not

necessarily an easy task and five companies failed to achieve it (A, E, I, J, M); b)

Market segmentation, was well prepared in most cases – in spite of some information

deficits – with the companies being able to indicate the main market segments and their

relative importance (exceptions being companies I, J and M); c) Only three companies

revealed clear difficulties in identifying unmet user needs that they would try to satisfy

(I, J, K), one of them being a very young company, without close contact with the

market; d) All but four companies (I, J, K, M) were able to give a clear notion of their

target market, coherent with the previous analysis; the ones that were unable to do so,

did not base their choices on an adequate analysis and were not conscious of the profile

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of the potential customers; e) The majority of the companies were able to clearly

identify the main competitors and their products, being also able to compare them with

their own products. Two companies that intend to sell patents (A, B) claimed to have no

direct competitors, but their analysis missed the potential indirect competitors. Three

companies (L, M, O) did not make an effort to identify their competition although they

were aware of their existence.

Stage 2 – This stage looked at the strategic decisions regarding the competitive position

and the market scope. Regarding competitive position, Table 3 presents results showing

that companies divided themselves mostly between those that prefer to serve niches and

those that choose to be market leaders or challenge the leaders. Only three companies

chose the less innovative, although not forcefully less profitable, role of market

followers. Regarding the geographical scope of their strategies (Table 3), there were

eight companies planning for international coverage, although some of them did not

know how and when they would implement it (D, E, G, I, K). Companies that had

already devised internationalisation strategies based them on agreements with

multinational companies, either to license patents (A, B) or to distribute products (C).

One company started with international focus but was forced to shift to the national

market (J). The remaining companies – mostly those with niche strategies – focused

primarily on the national market, although two would resort occasionally to the

international market, for excess production (H, J) and four were willing to

internationalise in the future (F, L, M, N).

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Table 3 – Marketing Strategy

ID Strategy National/International

A Leader International from the beginning

C Leader National but already expanded

F Leader National but expecting to expand

H Leader National from the beginning

D Challenger International from the beginning

E Challenger International from the beginning

G Challenger International from the beginning

M Challenger National but expecting to expand

B Nicher International from the beginning

L Nicher National but expecting to expand

N Nicher National but expecting to expand

O Nicher National from the beginning

P Nicher National from the beginning

I Follower National from the beginning

J Follower International in the beginning but shifted to national

K Follower International from the beginning

Stage 3 – In this stage an attempt was made to evaluate the degree of appropriateness of

the companies' strategic marketing definition. This evaluation was based on the way the

companies developed the marketing process, therefore the focus was more on the

procedures than on the content.

Considering that six companies were unable to adequately define a marketing strategy,

it can be concluded that the strategy definition phase presents relevant difficulties to the

biotechnology companies' development.

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4.3 Marketing Implementation

Considering the four stages analysis it can be concluded that only three companies were

found to have an inadequate behaviour (I, J, M), although several showed deficiencies

in their marketing implementation. There was one success story for crossing the Chasm,

but the remaining companies do not seem to be following the appropriate steps to

address this stage. On the other hand, the underperforming companies had

undifferentiated products with limited distribution and poor promotion. Two were

facing technological problems due to the rupture of alliances with foreign parent

companies. All of them had low marketing skills.

Because a few companies were not yet on the market (D, E, G, K, L), the analysis in

those cases considered the outline definition for future implementation. The results for

four stages of analysis are as follows:

Stage 1 – In this stage the companies' customer profiles were established, considering

the type of innovation in presence (Table 4). For companies introducing discontinuous

innovations (half of the sample) the company was also located in the respective stage of

the Technology-Adoption Life-cycle [Moore 1995a] (on the basis of the customers'

profiles and life-cycle stage). This allows for an analysis of their situation in terms of

Chasm crossing and for an evaluation of whether companies introducing discontinuous

innovations were being able to cope with the associated market problems. Only

company C had already crossed the Chasm (Table 4), while five other companies are

starting to face the problems related to the Chasm, and three others are still starting to

access their Early Market.

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Taking advantage of strong market knowledge and assistance from technical support

and regulatory bodies and benefiting from strong word-of-mouth communication,

company C quickly managed to prevail over the initial resistance of the consumers and

became leader in several niches. The present need to change the strategy in order to

create a wave of acceptance from the customers was understood and thus the company

was preparing to consolidate leadership in the Tornado stage. One company (N) had

identified the relevant market niche and was beginning to approach it. However, it was

preparing itself to move forward to other market niches and to a higher production

scale, ignoring the possible delays motivated by the Chasm. Two companies (E, H) are

starting to approach the market but did not identify the primary market niche. Company

H, opted for trying to reach the largest market segment – which is the one with lower

resistance to change and more capacity to absorb the technology – adopting a

“demonstration strategy” that may be appropriate for the agricultural market it targets.

But its progress may be undermined by the negative role played by public regulatory

bodies which unduly delay product certification. The VARs (O, P) are expanding the

customer base beyond the innovators, benefiting from word-of-mouth communication.

Even so, company O was not able to select a market niche to privilege and was trying to

reach several segments, while company P identified a primary target, but maintained

interest in other segments. However, both companies have limited influence upon their

products and thus may be unable to adapt the products to specific niche requirements

and cross the Chasm. Finally, Company B will not be required to cross the Chasm

because it adopted a patent selling strategy, transfering the problem to the buyer.

Companies K and L did not enter the market yet and have not identified a target market

niche.

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Table 4 – Customers Profile

ID Customer Profile Type of Innovation Stage of the Technology Adoption Life Cycle

C Late majority Discontinuous The Bowling Alley E Innovators Discontinuous Early Market – Chasm N Innovators Discontinuous Early Market – Chasm O Innovators and Early-adopters Discontinuous Early Market – Chasm P Innovators and Early-adopters Discontinuous Early Market – Chasm H Innovators and Early majority Discontinuous Early Market – Chasm K Will be Innovators and Early adopters Discontinuous Will be Early Market L Will be Innovators Discontinuous Will be Early Market B Will be Early majority

Will be Innovators Dynamically continuous Discontinuous

- Will be Early Market

A Will be Innovators, Early adopters and Early majority

Dynamically continuous -

D Will be Late majority and Laggards Dynamically continuous - F Late majority and Laggard Dynamically continuous - G Will be Late majority and Laggard Dynamically continuous - I Late majority Dynamically continuous - J Late majority Dynamically continuous - M Late majority and Laggard Dynamically continuous -

Stage 2 – The decisions on differentiation, positioning and product design process were

analysed, considering: effectiveness of differentiation, ability to define and

communicate a clear positioning and degree of customer involvement in the product's

development. Almost all companies included customer participation or consultation in

technological development, in order to direct the product to their needs (exceptions

being D, F, I, J M) (Table 5). Most companies were able to base their strategies in

effective differentiation, although in the case of companies E and K such differentiation

was only achieved towards traditional products and not in relation to advanced

competitors using a comparable technology. This problem was being addressed by

company E through the introduction of clearly differentiated new products. Finally,

some companies (D, M) compensated lack of product differentiation with low price

positioning, adopting a market challenger position (Table 3). The effectiveness of a

product's positioning is not easy to assess. Nevertheless an attempt was made to identify

the companies' perspective and the customers' perception about the product, for the

companies with products on the market. Most companies were able to determine a clear

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positioning strategy (exceptions were E, I, J and D), although some had difficulties in

expressing it in adequate terms and might not be fully aware of its importance. A

positioning based exclusively on lower price arguments (D, M, B), may be difficult to

maintain in a global market.

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Table 5 – Implementation Steps

ID Product Design

Differentiation Positioning

A Incorporating customer needs

Effective – Fast technical performance Intended: Clear – Scientific/technical advantage Obtained: Unknown*

B Incorporating customer needs

Effective – Performance and other technical aspects

First patents: Intended: Clear – Lower price (for the final product); Obtained: Clear – Lower price (for the final product) New patents: Intended: Clear – Scientific/technical

C Incorporating customer needs

Effective – Performance (quality) and Image For the national market also Conformance to local products and additional service assistance

Intended: Clear – High perceived quality Obtained: Clear – High perceived quality (high price and full support service)

D Technical development

Non-existing – the product is similar to its competitors

Intended: Clear – Lower price Obtained: Unknown*

E Incorporating customer needs

First product: Effective – Reliability (compared to traditional products); Non-existing if compared to modern competitors New products: Effective – Performance (specificity), Reliability and added service

First products: Intended: Clear – Reliability and Lower price; Obtained: Unclear – Similar to competitors New products: Intended: Clear – Performance, Reliability and Lower price

F Technical development

First products : Effective – Image New products: Effective – Performance, Reliability and Image

First products: Intended: Clear – Quality and Reliability; Obtained: Clear – Quality and Reliability New products: Intended: Clear – Effectiveness

G Incorporating customer needs

Effective – Timing advantage (produced in a period with lower offer) and Quality (to be achieved yet)

Intended: Clear – Timing advantage, Lower price and Quality Obtained: Unknown*

H Incorporating customer needs

Effective – Performance (quality and productivity), Reliability. For the national market also Conformance to local products

Intended: Clear – Productivity, High perceived quality Obtained: Clear – but could be reinforced by the product certification

I Technical development

Non-existing – Quality is superior but only to a small extent

Intended: Unclear – none Obtained: Unclear – product seen as equivalent to others

J Technical development

Effective – Superior quality if compared to the main competitors (not very valued by the market)

Intended: Clear – Quality and Low Price Obtained: Unclear – no conscious effort to communicate the positioning (also the price is not low compared to new competitors)

K Incorporating customer needs

Effective (if compared to traditional products) – Superior performance and control. Non-existing if compared to modern competitors

Intended: Unclear – not defined yet (possibly it will be based on strong image and fast delivery) Obtained: Unknown*

L Incorporating customer needs

Effective – Performance (security and flexibility) (to be achieved yet)

Intended: Clear – Safety, High quality, Flexibility and Low price (directed to SMEs) Obtained: Unknown*

M Technical development

Non-existing – the product is similar to others Intended: Clear – Lower price Obtained: Unclear – Lower reliability and efficiency

N Incorporating customer needs

Effective – Performance (effectiveness and superior safety)

Intended: Clear – Low price (with maintenance), Effectiveness and superior safety Obtained: Clear – Low price, Effectiveness and safety

O External – developed by the suppliers

Effective (if compared to traditional products) – Performance (quality, safety and added service – customer training, consulting service, etc.) Effective if compared to modern competitors (performance)

Intended: Clear – Superior Performance and Safety Obtained: Not very clear for the market since it is difficult for the company to inform and do the awareness effort for the technology

P External – developed by the suppliers

Effective – Performance (effectiveness and environmental impact) and Service (delivery, customer training, consulting service)

Intended: Clear – Time utility (delivery), Service, and Quality perception Obtained: Clear – Quality perception, Service

* Unknown because it is too soon for an evaluation. Stage 3 – With respect to the marketing mix established by the companies in order to

implement their strategy, two main features were identified: a) While communication

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strategy was absent in three companies (I, J, M), three others (C, O, P) were able to

create a word-of-mouth effect, which emerged as a very effective communication tool

in their restricted market; b) A mix of distribution strategies was used by most

companies (distributor, influencers or distribution centres, exclusively or in addition to

direct shipping), with only four relying exclusively on direct distribution (F, H, K, O).

Stage 4 – The global evaluation was not conducted for companies whose market

implementation strategy was still in an early stage of development (D, E, G, K, L).

From the above analysis it can be concluded that the strategy implementation phase also

presents relevant difficulties to the biotechnology companies' development, remarkably

in the case of the companies introducing discontinuous innovations that are, in most

cases, unaware of the specificities of their situation.

4.4 Strategy and Implementation Evolution

The results from this five stages show that most companies felt the need to change or

adapt, in order to adjust to changing environments, to respond to modifications in the

internal conditions, or as a result of a learning process about their business. Past

mistakes identified by the companies are above all related to management and

marketing decisions and this area accounts for the most intense capability development.

The results from each of the five stages are as follows:

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Stage 1 – This stage addresses the importance of marketing and management learning.

Marketing was an important learning area for almost all companies. Those who did not

mention it either had not yet reached the market (D), or had not been able to maintain a

consistent market path, which resulted in low market knowledge accumulation (I, M).

Management learning occurred more intensely in the companies founded by

entrepreneurs, who did not have previous business experience. One company also

reported the accumulation of knowledge in the intellectual property rights area.

Stage 2 – With respect to changes in the marketing strategy, it may be concluded that

most companies that already had some contact with the market, did in fact introduce

more or less radical modifications to their initial strategy, in order to adapt to the actual

market conditions or to respond to other significant factors that affected them. Only

three companies believed their initial strategy remained adequate (C, F, H). Main

reasons for change included: closer contact with the market or contact with business

experts that helped them gain a better market perception (A, B); adoption of a “probe

and learn process” to find the adequate product and market for the technology

developed (E, N); loss of a major foreign shareholder whose input was critical in

technological and market terms (I, J). In the particular case of the two VARs, which

planned to later develop their own products, the inability to establish alliances and

obtain funds for research forced them to readjust their strategy and remain solely

resellers.

Stage 3 – Regarding the competencies balance between what companies recognise to

need and what they could effectively access (internally or externally), it can be

concluded that the most problematic area is management, and particularly marketing.

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Seven companies face serious insufficiencies in terms of management skills (A, E, I, J,

L, M, P). The main reasons mentioned to explain this deficit include difficulties in

finding people with management experience who are willing to work in small

companies and/or lack of financial resources to pay them, although there were also

some companies that did not recognise the need to recruit. These problems were

particularly critical to companies that were unable to build and retain a pool of people

with sufficient skills in most areas (J,M), and implied, in the most serious cases, the

impossibility of accumulating both technical and management competencies (I, P).

Stage 4 – Concerning the companies’ own assessment of the capabilities developed

along time, one possible approach is to see whether they identified mistakes derived

from lack of competencies and the learning process achieved from correcting them.

Only three companies considered not to have made mistakes, two of them because of

their youth (D, G) and another one because of its inability to reconstitute the past, due to

high staff turnover (M). Mistakes were frequently related to lack of management

competencies (in many cases in the marketing area) and only in one case to inability to

build technological capabilities (J). The inability to deal with public authorities was also

problematic for some firms (F, H). Regarding the new capabilities that the companies

claim to have gained along the process, all but one said that the market and marketing

were important areas of capabilities development. Most companies also mentioned

development of technological capabilities. Furthermore, it is also possible to conclude

that most companies – particularly the companies created by entrepreneurs – changed

significantly their initial market perception to adapt it to the market specificities.

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Stage 5 – Overall analysis of companies' ability to learn, acquire capabilities and

consequently adapt their marketing strategy.

It can be concluded from the analysis that the companies went through important

learning processes, above all in terms of market and that limitations in those processes

were due to human resources problems. The marketing and even management

competencies possessed by the companies seemed to have a major impact on their

marketing process performance, but not all companies saw them as a priority.

4.5 Marketing Management Process – Overall Evaluation

As a result of the analysis and comparison of the biotechnology companies' strategic

marketing process, it was possible to identify four groups, according to the adequacy of

the overall marketing process: 1, 2, 3 and 4, considering a descending order of adequacy

(Table 6).

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Table 6 – Skills and Competencies Balance

ID Market Strategy

Marketing Implementation

Marketing Learning Innovation /Chasm*

Marketing Skills

Management Skills

C Appropriate Appropriate No major changes Building market knowledge

D – Bowling Alley Sufficient Sufficient

D Appropriate Under development No major changes (too soon) DC Sufficient Sufficient

F Appropriate Appropriate No major changes Product line improvements

DC Sufficient Sufficient

1

G Appropriate Under development No major changes (too soon) DC Sufficient Sufficient

B Appropriate Appropriate Radical change Support of external experts

DC D – Early Market

Insufficient Sufficient

H Appropriate Appropriate No major changes Major regulatory obstacles

D – Early Market Chasm

Sufficient Sufficient

L Appropriate Under development No major changes (too soon)

D – Early Market Insufficient Insufficient

2

N Appropriate Appropriate Strong change Probing and learning


Sufficient Sufficient

A Inappropriate Appropriate Radical change Support of external experts

DC Insufficient Insufficient

E Inappropriate Under development Radical change Probing and learning


Insufficient Insufficient

K Inappropriate Under development No major changes (too soon) D – Early Market Sufficient Sufficient

O Appropriate Appropriate Strong change Less ambitious strategy


Insufficient Sufficient

3

P Appropriate Appropriate Strong change Less ambitious strategy


Insufficient Insufficient

I Inappropriate Inappropriate Strong change Less ambitious strategy


J Inappropriate Inappropriate Radical change Less ambitious strategy


4

M Inappropriate Inappropriate Radical change Probing with low learning


* D – Discontinuous innovation DC – Dynamically Continuous innovation

Companies that reached Group 1 in the marketing process were able, so far, to define

and implement an adequate strategy. With an adequate approach defined at an early

stage, companies C and F had no need for major changes and evolution was smooth.

Companies D and G are very young and not yet on the market and for that reason there

were only minor adaptations to the initial strategy, which seemed consistently designed.

Only one Group 1 company was introducing a discontinuous innovation and managed

to overcome Chasm crossing difficulties. All Group 1 companies possessed sufficient

management and marketing skills.

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Group 2 companies were those which somehow managed to define and implement

strategy appropriately, but denoted difficulties in that process. Company B benefited

from the support of external experts in strategy definition, learning from this experience

and acquiring capabilities at this level, in spite of insufficient marketing skills.

Company N went through an important probing and learning process that enabled

market adjustment, but with high costs in terms of time to the market. Company L did

not introduce major strategy changes because it did not reach the market yet,

nevertheless the difficulties it is likely to face to introduce a discontinuous innovation,

associated to a lack of marketing and management skills, predict some problems.

Company H faced problems regarding regulatory issues and the inability to deal with

them delayed the expected results. All Group 2 companies are introducing

discontinuous innovations and facing Chasm related difficulties and all were created by

entrepreneurs.

The majority of companies classified in Group 3 were not able to define adequate

marketing strategies and had very weak marketing processes (A, E, K, O and P).

Companies A and E were engaged in profound marketing changes, based on counselling

with experts and probing and learning. Nevertheless company A still shows a tendency

to loose focus and therefore it is not clear whether it absorbed the required knowledge.

Company E radically changed the market approach while probing the market, but with

high financial and time costs. Moreover, because the company also changed business

area, learning was limited. The majority of Group 3 companies were introducing

discontinuous innovations and faced difficulties in recognising and handling their

requirements. The majority lacked marketing and management skills. The exception

was company K, but even so it was unable to focus on one of two very different market

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segments. Companies O and P also faced technological constraints that hindered their

market approach.

Finally, all three companies classified as Group 4 were unable to define and implement

an acceptable marketing strategy, even though they were working with non-

discontinuous innovations (I, J and M). The reasons behind their inability to handle the

marketing process are twofold: technological deficiencies blocked product

improvements, with negative consequences for their marketing strategy; and the lack of

human resources with adequate management and marketing skills keep the companies

from learning and evolving. Although their marketing strategies went through strong

changes, there was no significant learning or business refocusing in less ambitious

paths.

It was interesting to notice that the companies with the weakest performance (Group 4)

were corporate investments, created before 1995, which may be surviving artificially

with support from the parent company. They were unable to define and implement

adequate business strategies and obtain the relevant competencies. The two VARs, that

also have weak evaluations, are trapped by their technological limitations and if they

remain unable to cope with this problem, they will never become integrated companies

developing their own products. Finally, there was a group of companies that faced a

number of difficulties regarding business strategy and/or have some limitations

regarding management competencies, but their problems appear to be manageable, if

the companies reassess their business orientations and make some adjustments.

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5. Conclusions

This research intended to understand the process by which the biotechnology-based

companies take biotechnology products to the market. The objective was to investigate

whether these companies are being able to handle the specificities of their marketing

process, considering both the characteristics of their technological and organisational

profiles. The working hypothesis was that marketing process deficiencies constitute

relevant obstacles to the development of biotechnology-based companies. These

deficiencies are particularly felt by companies introducing discontinuous innovations

and are largely related to the absence or difficulty to access human resources with

relevant management and marketing capabilities. A methodological approach for this

analysis was proposed and was tested using the case of the Portuguese biotechnology-

based companies. The methodology considered three phases of the marketing process:

strategic marketing definition, marketing implementation and evolution of strategy and

implementation.

The research findings confirm that the methodological approach used is useful in the

assessment of the marketing process management in biotechnology-based companies.

The methodology fulfilled the objectives of respecting the specific characteristics of the

technology and of the companies commercialising it, allowing us to draw conclusions

regarding the research question and to verify the research hypothesis.

Concerning strategic marketing definition, the empirical research revealed that most

companies managed to get through the relevant phases of strategy definition: only five

failed to do so. But several experienced difficulties along the process, particularly

science-based companies whose entrepreneurs or directors had a research background.

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Deficiencies were found at the following levels: performing or acquiring market

research, market segmentation, identification of customer critical needs or identification

of competitors. But the main problem was the attainment of an adequate business

definition, neither too broad nor too narrow. Indeed, some science-based companies

revealed a tendency to over-diversify their business activity, following a typical

research-oriented behaviour, less adequate to the business world. Hence, the strategy

definition phase also presented some difficulties for the biotechnology-based

companies, especially in what refers to the critical stage of business definition.

A similar conclusion can be reached regarding the phase of marketing implementation.

Although only three companies were unable to describe conceptually acceptable plans,

several showed some deficiencies. These included: neglecting customers' involvement

in product development process, absence of product differentiation, risky low price

strategies, unclear positioning, no communication strategy. Nevertheless, it should also

be pointed out that three companies performed quite well, having such positive impact

on the market that they benefited from a strong word-of-mouth communication.

Because companies introducing discontinuous innovations face particular challenges,

their case was analysed in more detail. So far, only one out of the 9 companies had a

success story for crossing the Chasm. The remaining companies seemed unable to

recognise the problems associated to their situation, having difficulties in defining and

implementing Chasm crossing strategies. Their main problem was the incapacity to

identify or focus on the critical market niche to privilege, followed by inadequate

pricing and regulatory problems. For companies offering dynamically continuous

innovations, the market access process is usually less demanding in terms of marketing

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expertise and effort. In fact, in average, this type of companies (seven cases) faced more

straightforward paths to market, although some of them experienced other types of

problems. It can thus be concluded that the strategy implementation phase also

presented some difficulties to biotechnology companies' development, remarkably in

the case of the companies introducing discontinuous innovations that were, in most

cases, unaware of the specificities of their situation and unprepared to deal with it.

In what concerns the companies' capacity to modify their market strategy, most

companies felt the need to adapt their strategies, in order to adjust to external or internal

change and/or as a result of a learning process about their business. The most commonly

mentioned causes behind significant changes were: the counsel of external experts, the

results of probe and learn processes aiming to identify the market receptivity, and the

inability to develop or sustain alliances. The main mistakes identified by companies

concern management and marketing decisions and this area also accounts for the most

intense learning. In fact, most companies mentioned intense learning related to the

market and the strategies to access it, which enabled them to identify past mistakes and

to reorientate their strategies accordingly. Strategic changes, resulting from these

learning processes, occurred more frequently in entrepreneurial companies, possibly due

to their lower access to specialised marketing competencies at an early stage.

Exceptions to this trend were a few companies that appeared to lack the capacity to

absorb new knowledge, due to the absence of the necessary skills and competencies or

lack of ability to access them. Although this was particularly evident in the management

and marketing areas, it also occurred in technological areas, with a very serious impact

on companies' performance.

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An overall analysis of the adequacy of companies' marketing process enabled us to

define and characterise four groups: Group 1 – companies able to define and implement

an adequate strategy from an early stage and possessing the required competencies;

Group 2 – companies introducing discontinuous innovations that somehow managed to

define and implement a strategy appropriately, but that mentioned difficulties in that

process and experienced intense learning; Group 3 – mostly companies introducing

discontinuous innovations, unable to define adequate marketing strategies, having a

very weak marketing processes and experiencing profound changes; Group 4 –

companies introducing non-discontinuous innovations, unable to define and implement

an acceptable marketing strategy, as well as to learn from mistakes, mostly due to

incapacity to overcome competence deficiencies. In conclusion, only 4 companies

(Group 1) were able to straightforwardly handle the marketing process without

significant problems.

Summing up, it can be considered that, in addition to the generic difficulties that the

Portuguese biotechnology companies face in terms of technology, finance and other

non-market related issues, the market assessment factors also place relevant problems to

the companies, confirming the initial research hypothesis. Although most companies

had adequate perceptions about the market and the manner to reach it, most of them still

struggled to achieve an adequate management of their marketing process and, despite

their learning processes, several are still far from dealing adequately with this area.

Companies introducing discontinuous innovations experienced particular difficulties in

becoming aware of the obstacles in their path and in finding strategies to overcome

them, which also supports the hypothesis.

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It is equally relevant to point out that the biotechnology-based companies have been

able to evolve, learn and adapt. Most companies, especially the entrepreneurial ones,

introduced changes in their market strategy in an attempt to adjust their market

perceptions. They engaged in intense tacit learning processes, particularly in the

management and marketing areas, in order to reorient or refine their business strategy.

Starting-up with limited management and marketing competencies, many companies

underwent trial and error processes, along which they strived – with greater or lesser

success – to acquire or obtain elsewhere missing skills and develop new competencies.

The fact that companies with skills deficits had more problems supports the hypothesis.

This discussion brought some light to the market behaviour of biotechnology-based

companies, uncovering some of the problems they face and identifying the main

obstacles in their path to the market. However, because it used the case of Portuguese

companies as empirical setting, the results may be influenced by the environmental

factors relative to the Portuguese context, which influence the nature and performance

of the companies analysed. Nevertheless, this analysis enabled us to develop and test a

methodology that was found to be adapted to address this problem and could therefore

be applied to analyse marketing strategy behaviour of the biotechnology-based

companies in other settings.

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a methodological approach to the marketing process in the biotechnology-based companies

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