Lecture 5. Learning from markets.pot

Theme 5

Learning from markets

Managing Innovation

Outline

1. How Do Technology and Markets Affect

Commercialization?

2. Differentiating Products

3. Creating Architectural Products

4. Marketing Technological Products

5. Commercializing Complex Products

How Do Technology and Markets Affect

Commercialization?

product innovation results in new or improved products and

services, and may change the basis of competition

innovations in logistics may affect how a product or service is made available to customers, including distribution channels and nature

of

sales points;

product innovation allows some scope for premium pricing, and

process innovation may result in price leadership

innovations in media provide new opportunities for promotion.

4 Ps (Marketing mix)


Commercialization?

• Segmentation is the only method more

effective for routine development projects

• prototyping, industry experts, focus

groups and latent needs analysis are all

more effective for novel development

projects


Commercialization?


Commercialization?

• Differentiated

Both the technologies and markets are mature, and

most innovations consist of the improved use of

existing technologies to meet a known customer need.

Products and services are differentiated on the basis of

packaging, pricing and support.


Commercialization?

• Architectural

Existing technologies are applied or combined to create

novel products or services, or new applications.

Competition is based on serving specific market

Niches and on close relations with customers.

Innovation typically originates or is in collaboration with

potential users.


Commercialization?

• Technological

Novel technologies are developed which satisfy known

customer needs.

Such products and services compete on the basis of

performance, rather than price or quality.

Innovation is mainly driven by developers.


Commercialization?

• Complex

Both technologies and markets are novel, and co evolve.

In this case there is no clearly defined use of a new

technology, but over time developers work with lead

users to create new applications.

The development of multimedia products and services is

a recent example of such a co-evolution of technologies

and markets.

Differentiating Products

Differentiation measures the degree to which

competitors differ from one another in a

specific market

Differentiating Products

Analysis of the Strategic Planning Institute’s

database of more than 3000 business units

helps us to identify the profit impact of market

strategy (PIMS):

High relative quality is associated with a high return on

sales.

Good value is associated with increased market share

Product differentiation is associated with profitability


Commercialization?

• Process innovation helps to improve relative quality and to reduce

costs, thereby improving the relative value of the product.

• Product innovation also affects product quality, but has a greater

effect on reputation and value.

• Together, innovation, relative value and reputation drive growth in

market share.

Creating Architectural Products

• Architectural products consist of novel combinations of existing

technologies that serve new markets or applications. In such cases

the critical issue is to identify or create new market segments.

• Market share is associated with profitability: on average, market

leaders earn three times the rate of return of businesses ranked fifth

or less. Therefore the goal is to segment a market into a sufficiently

small and isolated segment which can be dominated and defended.

• This allows the product and distribution channels to be closely

matched to the needs of a specific group of customers.

• The basis of segmentation should have clear operational

implications, such as differences in preferences, pricing, distribution

or sales strategy. Customers could be segmented on the basis of

how experienced, sophisticated or price-sensitive they are.

Creating Architectural Products

The process is complicated by the number of people

involved in the buying process:

• The actual customer or buyer, who typically has the formal

authority to choose a supplier and agree terms of purchase.

• The ultimate users of the product or service, who are normally,

but not always, involved in the initiation and specification of the

purchase.

• Gatekeepers, who control the flow of information to the buyers and

users.

• Influencers, who may provide some technical support to the

specification and comparison of products.

Marketing Technological Products

Several features are unique to the marketing of high

technology products, and affect buying behaviour:

1. Buyers’ perceptions of differences in technology

affect buying behaviour.

In general, where buyers believe technologies to be

similar, they are likely to search for longer than when they

believe there to be significant differences between

technologies.


2. Buyers’ perceptions of the rate of change of the

technology affects buying behaviour.

In general, where buyers believe the rate of technological

change is high, they put a lot of effort in the search for

alternatives, but search for a shorter time.

In non-critical areas a buyer may postpone a purchase.


3. Organizational buyers may have strong

relationships with their suppliers, which increases

switching costs

In general, the higher the supplier-related switching costs,

the lower the search effort, but the higher the compatibility-

related switching costs, the greater

the search effort.

Commercializing Complex Products

Lead users are critical to the development and

adoption of complex products. As the title suggests, lead

users demand new requirements ahead of the general

market of other users, but are also positioned in the market

to significantly benefit from the meeting of those

requirements.

Where potential users have high levels of sophistication,

for example in business-to-business markets such as

scientific instruments, capital equipment and IT systems,

lead users can help to co-develop innovations, and are

Therefore often early adopters of such innovations.

Commercializing Complex Products

Characteristics of lead users:

• Recognize requirements early – are ahead of the

market in identifying and planning for new requirements.

• Expect high level of benefits – due to their market

position and complementary assets.

• Develop their own innovations and applications –

have sufficient sophistication to identify and capabilities

to contribute to development of the innovation.

• Perceived to be pioneering and innovative – by

themselves and their peer group.

Lecture 5. Learning from markets.pot

Business

Transcript of Lecture 5. Learning from markets.pot