Marketing of High-Technology

Products and Innovations

Jakki J. Mohr
Chapter 2:
Strategy and Corporate Culture in
High-Tech Firms
Jakki Mohr 2001
Internal (within the firm)
Considerations in
High-Tech Marketing










Effective
Cross-Functional Marketing
/R&D Collaboration
Being Market-Orientated


Acquire Disseminate Use Information
Relationship Marketing

Partnering with important stakeholders
Access to Resources
Funding Management Expertise
Maintaining Innovativeness
Creative Destruction Corporate Imagination Expeditionary Marketing Culture of Innovation



ENHANCED
ODDS OF
SUCCESS
Jakki Mohr 2001
Strategic Market Planning
Process in High-Tech Markets





Understand the
Competitive
Challenge
Identify
Attractive
Opportunities

Define the
Business Arena
Planning Process


Understand the
Market
Environment


Make Tough
Strategic
Choices


Implement
the
Strategy
Understand the
Profit Dynamic


Assess Resources
and
Competencies








Complete the
Winning Strategy


Plan Critical
Relationships


Jakki Mohr 2001
1. Define the Business Arena
Potential customer segments that could be
served;
Potential applications or functionality that could
be provided to these customers;
Possible technologies and capabilities that could
be used to create the applications or
functionality; and
Possible role for the organization in providing
the value to the customer versus the roles of
others in the market chain.
Jakki Mohr 2001

2. Identify Attractive
Opportunities
Thoroughly segment the market
Assess profitability of serving each
segment
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3. Understand the Market
Environment
Depict market flows/supply chain
Understand buyer behavior
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4. Assess Resources and
Competencies
Financial resources
Technology platforms
Intellectual capital
Manufacturing capacity
Brand equity
Capabilities (including skills and
knowledge)
Jakki Mohr 2001
5. Understand the
Competitive Challenge
Identify the actual, potential and indirect
competitors
Determine:
How each competitor competes
Their current and likely future performances
What drivers underlie their business strategies
Consider likely competitive responses to
opportunity
What are this competitors areas of weakness or
vulnerability that the firm could exploit?
Jakki Mohr 2001
6. Make Tough Strategic
Choices
Decide whether opportunity should be
pursued
What will it be worth to win?
Is the market opportunity attractive enough?
Is the strategy powerful enough to generate a
sufficient level of profitability?
If not, are there compelling reasons to proceed?
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6. Make Tough Strategic
Choices (Cont.)
Select/develop best strategy to take
advantage of opportunity
Achieve leadership position in the
opportunity?
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6. Make Tough Strategic
Choices (Cont.)
Do synergies exist within the portfolio of
opportunities being considered
Leverage a common technology
Leverage a common market chain
Are the strategies for the various
opportunities reasonably consistent?
Jakki Mohr 2001
7. Plan Critical Relationships
With other firms in the market chain
With organizations outside the market
chain
Company with a complementary product or
service
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8. Complete the Winning
Strategy
Pricing
Marketing Communications
Jakki Mohr 2001
9. Understand the Profit
Dynamic
Develop a detailed financial model for
each opportunity
More refined profitability analysis based on
detailed understanding of complete
marketing strategy and associated costs
Look for modifications to enhance
opportunitys overall profitability.
Jakki Mohr 2001
10. Implement the Strategy
Make sure people who will implement
are involved in the strategy formulation
process
Commitment
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Liability of Bigness
Traits of large firms can inhibit their
ability to develop radical innovations:
Bureaucratic
Focused on economies of scale
Core competencies become core rigidities
Jakki Mohr 2001
Three Characteristics of
Core Competencies
Difficult for competitors to imitate
Significantly related to benefits end-
user receives
Allow access to a wide variety of
disparate product-markets.
Jakki Mohr 2001
Tree Analogy to Core Competencies

SNOWBLOWERS
Branches/canopy
represents the widely different
product markets to which
the core competency has provided access
MOTORCYCLES
SMALL
CARS
LAWN
MOWERS
SUPERIOR R&D
S
M
A
L
L

E
N
G
I
N
E
S

CORPORATE
CULTURE
SUPERIOR
MANUFACTURING
SUPERIOR MARKETING &
KNOWLEDGE OF CUSTOMERS
Roots are underlying skills and capabilities that represent core competencies.
Trunk is the core
product, or the physical
embodiment of the
core competencies.
The core
product must be
significantly related to benefits
end-user receives.
Jakki Mohr 2001
Implications of Core
Competencies in Strategic
Planning
Resource allocations may defy
conventional logic
Violate ROI criterion
Jakki Mohr 2001
When Core Competencies
Become Core Rigidities
Core rigidities: ingrained routines,
knowledge, and skills become strait-
jackets that inhibit a firms ability to
develop new products built around
unfamiliar skills, routines, and new
knowledge.
Ex: cultural norms, over-reliance on
existing technologies
Jakki Mohr 2001
How to Avoid Core Rigidities
Creative Destruction
Proactively develop next-generation technology
that may obsolete current technology
Ex: Develop Web-sites that undermine current
distribution channels
Corporate Imagination
Expeditionary Marketing
Culture of Innovation
Jakki Mohr 2001
4 Elements of
Corporate Imagination
(1) Willingness to overturn
price/performance assumptions
Incremental improvements to existing
technologies (which move along the same
price/performance curve) vs.
Radical innovations which allow greatly-
improved performance at roughly comparable
prices as existing technology
Technology life cycles (see next slide)
Ex: Moores Law
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Technology Life Cycles

P
e
r
f
o
r
m
a
n
c
e

Time
Limit of Particular Technology
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Some Implications of
Technology Life Cycles
New technologies often come from
companies not selling current generation of
technology
Incumbents often invest in both improving
existing technology and developing new
Incumbents often underestimate viability of
new developments
Therefore, new technologies can catch
established firms by surprise

Jakki Mohr 2001
4 Elements of
Corporate Imagination (Cont.)
(2) Escape the tyranny of the served
market
Excessive focus on current customers
Obscures the fact that customer needs
may change over time and may be solved
in radically new ways
Therefore, look for market opportunities
outside of existing product/markets.
Jakki Mohr 2001
4 Elements of
Corporate Imagination (Cont.)
(3) Use new sources of ideas for
innovation
Rather than using standard marketing
research tools, use lead users and
ethnographic observation (empathic
design) (Discussed fully in Ch. 5)
Jakki Mohr 2001
4 Elements of
Corporate Imagination (Cont.)
(4) Get out in front of customers.
Lead them where they want to go before
they themselves know it.
Requires being close to the customer
AND not being blinded by existing rules
and procedures.
Jakki Mohr 2001
Box: Breakthroughs in
Corporate Strategy
Dont be constrained by existing industry
boundaries
Competitors can be found in many places:
Direct competitors, suppliers, partners
Product form competition
competition between product classes vs. between
different brands of the same product
Firm may not control all critical assets
Jakki Mohr 2001
Box: Breakthroughs in
Corporate Strategy (Cont.)
Bring new voices into the strategy
formulation dialogue.
Create new connections across
technologies, hierarchical levels,
geographical and business units
Come from a new vantage point
Have passion for discovery and novelty
Be willing to experiment
(vs. focus on efficiency)

Jakki Mohr 2001
Be a Market Pioneer??
First mover advantage
creates entry barriers
Economies of scale
Experience effects
Reputational effects
Technological leadership
Buyer switching costs
Higher profits and higher
share
Define product exemplar
Higher consumer
awareness
Large development costs
Market uncertainty


PROS CONS
Jakki Mohr 2001
Pioneers
(First Movers) (Cont.)
Successful Pioneers
Have technological foresight
Understand the market
Have marketing acumen
Understand competitors strengths and
weaknesses
A bit oluck

Jakki Mohr 2001
When do late movers
succeed?
Identify overlooked product position
Undercut pioneer on price
Out-advertise or out-distribute the
pioneer
Innovate superior product
Innovate superior business/marketing
strategy
Reshape the category
Jakki Mohr 2001
Two ways to improve
new product success rates
Improve the odds on each individual product
introductionthe hit rate.
Gather as much information as possible, tailor the
product
Drawbacks: time consuming, market needs may change
before launch. Ready, Aim, Aim, Aim.
Increase the number of forays into the market
the times at batExpeditionary Marketing
Many quick incursions into the market increases learning
about the market
Low-cost, fast-paced incursions allow quick re-
calibration
Combination of speed and learning enhances success
Jakki Mohr 2001
Expeditionary Marketing


Model 1
Model 2
Model 3
Time
Development
Overall Revenue
Incr. Revenue

New Models


Expeditionary Marketing: Many fast-paced incursions into the market
Relationship between Entries in the Market and Quality

Jakki Mohr 2001
Expeditionary Marketing:
Advantages
More accurate learning of customer needs
Time between market learning and product launch
is shortened
Maximizes odds that product delivered matches
customers needs
Customer needs less likely to change in the short-term
Implication: Issue is less being right the first time,
but being able to accumulate market experience,
and quickly adapt market offerings
Jakki Mohr 2001
Insights in the Ability to Learn
from the Market
Competitive advantage derives less
from having information, and more
from the superior ability to use
information.
Interpersonal and organizational trust
enhances the use of information.
Jakki Mohr 2001
Insights in the Ability to Learn
from the Market (Cont.)
Caveats in using information
Merely using some information is insufficient to generate
superior performance. Using knowledge held by
marketing managers contributes to superior performance.
Relying too excessively on organizational memory can
inhibit innovativeness.
It is the marriage of marketing knowledge with
technological knowledge that leads to effective product
innovation.
Improvising with respect to product strategy may
be effectivebut only when a high degree of
information is shared both within and across the
organizations boundaries.

Jakki Mohr 2001
Nurturing a
Culture of Innovation
Characteristics of a firm that fosters
innovation
Identifies market needs that are divergent
from (rather than congruent with) existing
strategies
Roles and responsibilities of key players may
not be clearly defined in early stages
Screening for new product ideas not based on
formal criteria, but done informally based on
technical/market merit


Jakki Mohr 2001
Characteristics of Organizations
Who Foster Innovation (Cont.)
Role of product champion is key
Tireless crusaders for idea
Innovative firms have reward system and
culture to promote influence of product
champions
Personnel given time and incentives to
be innovative
Tolerate risk and mistakes
Jakki Mohr 2001
Skunk Works
Isolate new venture groups outside the
normal organizational hierarchy
Pros:
- Allows for more
creativity, unfettered by
existing corporate
protocols.
Cons:
- Signals a corporate culture that
has impediments to innovation
(Creativity doesnt happen
within normal operating
procedures)
- Isolates the creative process
Jakki Mohr 2001
Applying Lessons of Innovativeness
to Businesses Internet Experiences
New business models came from industry
outsiders
Competitive Volatility
Core rigidities and the tyranny of the served
market:
Existing companies bound by existing rules of the
game and existing customers
Underestimation of new competitors
Need for creative destruction

Jakki Mohr 2001
Applying Lessons of Innovativeness
to Businesses Internet Experiences
(Cont.)
Expeditionary Marketing:
Shorter learning cycles
Quicker opportunity to adapt strategies
Understand core competencies
Reliance on skunk works
Pioneering advantages
Jakki Mohr 2001
The Liability of Smallness
Financial Resources
Reliance on venture capital
Formal companies/banks
Informal angels
What Venture Capitalists Look For:
Management Team
Marketing Plan
Technology/Product
ROI
Jakki Mohr 2001
Other Resources for Start-Ups
Technology incubators
Partners (Ch. 3)