2016 - Learning from markets

1. Theme 5
Learning from markets
Managing Innovation

2. Outline
1. How Do Technology and Markets Affect
Commercialization?
2. Differentiating Products
3. Creating Architectural Products
4. Marketing Technological Products
5. Commercializing Complex Products

3. 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)

4. How Do Technology and Markets Affect
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

5. How Do Technology and Markets Affect
Commercialization?

6. How Do Technology and Markets Affect
Commercialization?

7. How Do Technology and Markets Affect
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.

8. How Do Technology and Markets Affect
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.

9. How Do Technology and Markets Affect
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.

10. How Do Technology and Markets Affect
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.

11. Differentiating Products
 Differentiation measures the degree to which
competitors differ from one another in a
specific market

12. 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

13. How Do Technology and Markets Affect
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.

14. 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.

15. 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.

16. 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.

17. Marketing Technological Products
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.

18. Marketing Technological Products
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.

19. 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.

20. 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.