extra on innovation

8/2/2019 Extra on Innovation

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Marketing of Technology

Products and Innovations

Introduction to the World ofTechnology Marketing


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Opening vignette: Innovations in

Automobiles and Transportation

Jet Pack International

Moller SkyCar

Aptera

Tesla

MIT Smart Cities CityCar

Tata Nano

See also: A Better Place (electric car companyusing an innovative business model)
http://www.jetpackinternational.com/http://www.moller.com/http://www.aptera.com/http://www.teslamotors.com/http://cities.media.mit.edu/projects/citycar.htmlhttp://tatanano.inservices.tatamotors.com/tatamotors/http://www.betterplace.com/http://www.betterplace.com/http://tatanano.inservices.tatamotors.com/tatamotors/http://cities.media.mit.edu/projects/citycar.htmlhttp://www.teslamotors.com/http://www.aptera.com/http://www.moller.com/http://www.jetpackinternational.com/


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Why Do So Many High-Tech Innovations Fail?

Some high-tech companies believe that marketing is

superfluous

The role of marketing is downplayed or misunderstood

Marketing for high-tech products is complicated anddifficult

Marketing is an after-thought to product development

Cross-functional collaboration is difficult High-technology companies are not market-driven


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Importance of High-Tech Marketing

Technological superiority alone does not ensuresuccess for high-tech products

Combination of technology superiority ANDmarketing competence maximizes the odds of

success.

Requires intimate understanding of customers


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Distinction Between Tech Marketing & Marketing of

Tech Products

Tech Marketing can mean:

Use of technology for marketing purposes

New media, paid search, online advertising, Web 2.0,

etc.

Covered primarily in Chapter 11 on Advertising and

Promotion

Marketing of tech products/innovations Primary focus of this book: how standard marketing

strategies are adapted/modified for tech products


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Lexicon of Marketing

Marketing

Set of activities, processes, and decisions tocreate, communicate, and deliverproducts/services that offer value to customersand other stakeholders

A philosophy of doing business that focuses oncreating value for customers

Uses market-based information to guide internaldecisions

Brings the voice of the customer into the firm


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Three Levels of Marketing Decisions: Strategic

Strategic: Proactive decisions to chart thecompanys efforts in the market

Segmentation, targeting, positioning

Which markets, which segments? What value proposition/competitive position?

May include a companys corporate social

responsibility initiatives


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When strategic decisions are not made,companys efforts are diffused across marketsegments and product development projects

Recipe for disaster

Responsibility for strategic decisions must be

vested with some department in the company

Resources for research must be allocated


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Decisions regarding the 4 Ps of marketing:

Product, Price, Place (distribution), Promotion

Consistency across the marketing mix Requires effective cross-functional collaboration

Common focus for all departments is delivery of

superior customer value: Moments of truth: every interaction a customer has

with a company either cements or undermines thatcustomer relationship


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4 Ps of Marketing

Product: e.g., new product development process;licensing; intellectual property rights; services; etc.

Develop a stream of products with the right set of featuresto satisfy customer needs in a compelling yet simplefashion.

Price: Establish prices for the companys product

Consider the cost to produce/manufacturer the goods;

margins along the distribution channel; competitors prices;customer value; total cost of ownership; prices for productbundles; and profitability.


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Place: Distribution channels and supply chain

management.

Promotion:

Advertising (both media and messaging decisions) Sales promotion (price deals, trade incentives, etc.)

Personal selling (recruiting, training, compensating sales people)

Public relations/publicity (garnering favorable trade press

attending trade shows, engaging in cause-related marketing, etc.) The Internet and other new media

Collateral materials


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Actual implementation of specific marketing tools

Development of marketing brochures and collateral

Website development

Decisions about which trade shows to attend

Where to place ads


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Definitions of Technology

Technology:

Cutting edge, advanced products/processes that

rely on scientific/engineering knowledge

Innovations:

Things that are newsome of which are high-tech


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Market

Uncertainty

Technological

Uncertainty

Competitive

Volatility

Marketing of

Tech Products &Innovations

Characterizing the Tech Environment: Common

Characteristics


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Ambiguity about the type and extent of customer needs

that can be satisfied by a particular technology

Consumer fear, uncertainty and doubt (FUD)

Customer needs change rapidly and unpredictably

Customer anxiety over the lack of standards and dominant

design

Uncertainty over the pace of adoption

Uncertainty over/inability to forecast market size


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Not knowing whether the technology or the companycan deliver on its promise

Uncertainty over whether the new innovation will functionas promised

Uncertainty over timetable for new product development

Ambiguity over whether the supplier will be able to fixcustomer problems with the technology

Concerns over unanticipated/unintended consequences

Concerns over obsolescence


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Changes in competitors, offerings, strategies

Uncertainty over who will be future competitors

Uncertainty over the rules of the game (i.e., competitive

strategies and tactics)

Uncertainty over product form competition

Competition between product classes vs. between different

brands of the same product

Convergence


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Implications:

Avoid myopia

Engage in creative destruction


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Three Sources of Marketing Myopia

in Tech Markets

Our technology is so new we have no competitors. But: customer needs are already being solved; entrenched

customer habits harder to address than real competition.

The new technology being commercialized by new

competitors will not pose a large threat. But: Youve been amazoned!

That competitor is in a different industry, and its strategiesdont/wont affect my business.

But: customer needs can be solved using different underlyingtechnology platforms.


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Technology Life Cycles

Evolution in new generations of technology Moores Law:

Performance of an existing technology doubles every 18 months

with no increase in price;

Predicts upper limits of a particular generation of technology

Typically embodied in new product forms

Often S-shaped curves (see next slide)

May also be irregular step functions and may not be overlapping

in terms of performance levels


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Technology Life Cycles (cont.)

Performance

Time

Limit of Particular Technology


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Some Implications of

Technology Life Cycles

New technologies often come from companies not sellingcurrent generation of technology

At its initial introduction a new discontinuous technologyoften underperforms the legacy technology

Incumbents often underestimate viability of newdevelopments

Therefore, new technologies can catch established firms by

surprise


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Flurry of new companies ultimately shakes out and industrycoalesces around dominant design

Performance of new technology takes off and overcomescapability of legacy technology

Creative destruction: new technologies obsolete oldtechnologies creating new winners/losers in the industry


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Will a Dominant Design Emerge?

How Long?

Dominant design emerges when:

Company/industry follows open business model

Innovation is less radical

R&D intensity is high (creates pressure to selectdominant design)

Dominant design emerges sooner when:

Value network has large number of firms (createspressure to know what dominant design will be)

De facto process guides development of industrystandards (versus imposed by some body)


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Other Strategies to Become Industry Standard

Get Big Fast Strategies

Free offerings

License technology to other industry players

Create customer lock-in based on switching costs to a

competitive offering

Caveats:

Best technology may not win the standards war

Companies that are the de facto industry standard arecarefully scrutinized for monopolistic behavior

Superior technology may not unseat established standards


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Types of Innovations

1. Incremental versus breakthrough

2. Product versus process versus organizational

3. Architectural versus modular (component)

4. Sustaining versus disruptive

f


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Types of Innovations:

Incremental vs. Breakthrough

Continuations of existing products, methods or practices

Minor improvements made with existing methods and technology

Evolutionary as opposed to revolutionary

Totally new products

Considerable change in basic technologies and methods

Revolutionary ideas that can create new markets

IncrementalInnovations

Breakthrough Innovations


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Product vs. Process

New products offering improvements in functional characteristics,technical abilities, ease of use, or other dimensions(incremental orbreakthrough)

New techniques of producing goods or services

Improve the effectiveness or efficiency of production processes

Facilitate the discovery of underlying scientific properties of technologicaldomains

Product innovations of one firm may be used as a

process innovation by another and vice versa

ProductInnovations

Process Innovations


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Architectural vs. Modular

New foundations or fundamentals of how the various components of

a system work together to function

Based on scientific principles

Different from existing technological platforms

May be considered radical.

New parts or materials within the same technological platform Example: Magnetic tape, floppy disk, and zip disk differ by components or materials, all

three based on the platform of magnetic recording

ArchitecturalInnovations

Modular Innovations

f


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Sustaining vs. Disruptive

Target demanding, high-end customers with improved performance

Typically through incremental innovations

New, simpler, more convenient, less sophisticated and/or less expensive

than existing products or services

Appeal to customers at the lower end of the market

Low-end disruption: attracts low-end customers initially, moves into more upscale

markets over time as the technology improves

New-market disruption: converts previous non-customers into new customers,

thereby creating a new market

SustainingInnovations

Disruptive Innovations

f


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Organizational

Create or alter business structures, practices, and models

Business model (strategy) innovations

Change in the way business is done in terms of capturing value New methods of financial management

Innovations aimed at social needs and issues

Innovations in marketing

OrganizationalInnovations
http://en.wikipedia.org/wiki/Business_model


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Continuum of Innovations

Incremental Radical

Extension of existing product or

process

Product characteristics well-

definedCompetitive advantage on low

cost production

Often developed in response to

specific market need

"Demand-side" market/customer

pull

New technology creates new

market

R&D invention in the lab

Superior functional performanceover "old" technology

Specific market opportunity or

need of only secondary concern

"Supply-side" market/technologypush


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Radical vs. Disruptive Innovation Radical Innovation

Substantially new technology relative to what alreadyexists in the industry

Disruptive Innovation

Increased sophistication of the feature set in productofferings at a faster rate than customers can keep upmay lead to a gap in the marketplace.

Gap = Opportunities New companies may enter the market with lower-

end products, selling to lower-end customers first


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Supply Chain for Auto Industry

SuppliersCar

Manufacturers

Car

Dealers Customers

-raw materials-components

-production equipment

-services

-personalconsumption

-business use

(fleets, etc.)

C i i l id S l Ch i


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Critical ideas on a Supply Chain

Perspective on Technology

Often, technological innovations occur at upstream (i.e.,supplier) levels in the supply chain

Such innovations may radically affect the manufacturing

process or the inner workings of a product, but

End-user behavior may not be significantly affected

Examples: food, fashion, apparel


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Differential Strategies:Breakthrough vs. Incremental Innovations

Companies must be ambidextrous and manageboth types of innovation processes

Incremental innovations require: Attention to cost competitiveness, manufacturing,

understanding the market

Breakthrough innovations require: More long term thinking; risk tolerance; ambiguous

market information


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Contingency Theory of Tech Marketing

Type of marketing strategy is contingentupon the nature of the innovation.

New ProductSuccess

MarketingStrategy

Type ofInnovation-Breakthrough-Incremental

I li ti f C ti Th


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Implications of Contingency Theory:

Examples

R&D/MarketingInteraction

R&D leads;technology push

Marketing leads;customer pull

Type of Marketing

Research

Lead users;

empathic design

Surveys; focus

groups

Role ofAdvertising

Primary demand;customer education

Selective demand;build image

Pricing May be premium More competitive

Breakthrough Incremental

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