Managing Innovation. The Marketing Mix: The 4-P s4

Transcription

1 Managing Innovation Chapter 7 Learning from Markets 1 The Marketing Mix: The 4-P s4 The set of competition variables controllable by the company: Product Price Place Promotion Strategic - Which markets to enter Tactical Differentiating existing products and extensions to products 2 1

2 Influence of Innovation on Commercialisation Nature of different technologies and markets affect the process of selection and involvement of customers No best way,, rather a range of alternatives Traditional methods of market research often of little use developers of radical new products and services required to educate potential users Need to examine how the novelty and complexity of technologies and markets influence the identification, development and adoption of innovations 3 Different Processes Required to Support Development Characteristics of an innovation (novelty, market) constrain options for development Marketing texts focus on relatively mature, simple, low-technology products or services Different factors relevant in the case of novel, complex, high-technology products or services 4 2

3 Table 7.1 The effect of product novelty on the tools used for new product and service and development 5 Different Processes to Support Development: Differentiation If both technologies and markets are relatively mature, differentiation is key Standard marketing techniques may be employed to identify differentiation strategies Enhanced functionality and/or product quality enable value-based competition Low-cost competition is normally to be avoided although maintenance of perceived relative value is of vital importance, particularly in cost-sensitive sensitive market segments 6 3

4 Different Processes to Support Development: New Markets The application of existing technologies to meet the needs of new markets is referred to as Architectural Innovation Key issue is the re-segmentation of markets to identify potential new applications Markets may be initially segmented on the basis of Business or Consumer Inferior/constrained technologies may be used to satisfy the needs of technologically less- demanding, typically cost-sensitive, sensitive, latent markets disruptive innovation 7 Different Processes to Support Development: Technological Markets Applying new technology in existing markets is generally less risky than in new markets Key issue is to assess the advantage the new technology may have over existing solutions in specific applications Next step is to identify target users based upon behavioural characteristics 8 4

5 Different Processes to Support Development: Co-evolution Where both technologies and markets are new and complex the key issue is the relationship between developers and potential users Highest risk but potentially greatest rewards few, if any, competitive alternatives Technologies and markets co-evolve through experimentation/trial-and-error process some products (firms) succeed, many others tend to fail Typical examples include multi-media media products and services 9 Figure 7.1 Technological and market maturity determine the marketing process 10 5

6 Figure 7.2 Market maturity affects the innovation process 11 Product Differentiation Differentiation measures the degree to which competitors differ from one another in a specific market Product Impact of Market Strategy (PIMS) High relative quality High ROS Good value Increased market share Product differentiation - Profitability 12 6

7 PIMS: More Lessons Process innovation helps to improve relative quality and to reduce costs improves relative value Product innovation helps to improve product quality but has a greater effect on reputation and value Relative quality more important than absolute quality Linear dependence between market growth and product innovation Sustained innovation results, relatively quickly, in increased market share Consumer market success depends on reputation (brand image) as well as high levels of new product introduction 13 Figure 7.3 Relationship between innovation and market performance 14 7

8 Quality Function Deployment (QFD) Technique for translating customer requirements into development needs Used to identify product improvement/ development/ differentiation opportunities Basis QFD steps: Customer requirements (primary, secondary, negative) Rank by importance Determine appropriate measurable characteristics Link relationship between customer requirements and technical product characteristics + strength of link Choose units of measure + target values based on customer requirements and competitor benchmarks 15 Figure 7.4 Quality function deployment matrix 16 8

9 Segmentation Market share profitability Need to identify viable segment, capture and defend it Maximise variance between internally homogeneous segments Use factor and cluster analyses to identify segments Yuppies, Dinkys, Yappys, Sitcoms and Skiers 17 Business Market Segmentation Rational segmented on basis of common buying factors or purchasing processes Application, experience, sophistication, price- sensitivity Purchasers/Influencers: Buyer User Gatekeeper Influencer Behaviour/Function Matrix 18 9

10 Matching Products to Customers Cross-functional teams + customers to define new product concepts Refine via QFD Prototypes evaluation experiments Core product extension: Enhancement Upmarket extension Downmarket extension Custom product Hybrid product Merging of two or more core technologies Disruptive approach typical of new entrants Modular approach platforms change slowly, functions may be varied rapidly 19 Products and Technologies Technologists create devices which marketing incorporates into products which are attractive to target customer groups Unique features of high-tech product marketing: Buyers perceptions of differences in technology affect buying behaviour Buyers perceptions of differences in the rate of change of the technology affects buying behaviour Organisational buyers have strong relationships with suppliers, which increases switching costs loyalty + dependence 20 10

11 Figure 7.5 Technical and behavioural segmentation for marketing high-technology products 21 Exploiting Intellectual Property Licensing IPR Reduce costs + lower risk Exploit in other applications Establish standards Gain access to complementary technology Block competing developments Convert competitor into a defender Costs based on: Market rate (6%) 25% gross profit share ROI of licensor Profit sharing 22 11

12 Intellectual Property as a Route to Market Patent rights may be granted, usually for 20 years, provided certain legal tests are satisfied: 1. Novelty 2. Inventive step 3. Industrial application 4. Clear and complete disclosure 5. Copyright Patenting is expensive Defence may be even more expensive 23 Intellectual Property as a Route to Market Disclosure provides valuable information for (potential) competitors Provides protection for the technological invention and a proprietary opportunity to gain an unfair competitive advantage may be undermined by reverse engineering Potentially opens up licensing opportunities market risk reduction, increased rate of diffusion and additional/alternative revenue stream 24 12

13 Intellectual Property as a Route to Market: Patent Requirements Novelty No part of prior art,, including publications, written or oral anticipation In most countries the first to file the patent is granted the rights in the USA it is (now) the first to invent Inventive step Not obvious to a person skilled in the art A relative test - the assumed level of skill is higher in some fields than others 25 Intellectual Property as a Route to Market: Patent Requirements Industrial application Utility test requires the invention to be capable of being applied to a machine, product or process Patent must specify an application for the technology and additional patents sought for any additional application(s) Patentable subject discoveries and formulae cannot be patented In Europe (unlike the USA) neither software nor new organisms can be patented the former is subject to copyright 26 13

14 Intellectual Property as a Route to Market: Patent Requirements Clear and complete disclosure A patent provides only certain legal property rights in the case of infringement the patent holder is entitled to take appropriate legal action In some cases secrecy may be a preferable strategy 27 Intellectual Property as a Route to Market: Patent Requirements Copyright Concerned with the expression of ideas and not the ideas themselves Exists only if the idea is made concrete for example, in a book or recording No requirement for registration Test of originality is low compared to a patent requires only that the author of the work must have used his own skill and effort to create the work 28 14

15 Developers and Users Customers purchase (integrated) solutions Need for a flow of information: Initially, inflows are important in guiding the direction of development Later, educational (knowledge) outflows are important to facilitate adoption and use Resource flows are linked to information flows 29 Developers and Users: Relationships Few applications + few users direct negotiation Few applications + many users Segmentation but little user interaction Many applications + few users Core (platform) technology + custom interfaces Many applications + different users Generic design 30 15

16 Figure 7.6 Developer-adopter relationships for development 31 Figure 7.7 Typical diffusion curve for a new product 32 16

17 Forecasting and Diffusion of Innovations The characteristics of potential users affect the development and adoption of innovations: The traditional distinction between early adopters and laggards in adoption profiles is unhelpful we need to understand what factors affect the adoption of novel products and services Most marketing research examines the behaviour of consumers, but industrial and business users demand different relationships 33 Forecasting and Diffusion of Innovations The diffusion of an innovation depends on The characteristics of the innovation The nature of potential adopters The process of communication The relative advantage, compatibility, trialability and observability of an innovation all affect the rate of diffusion The skills, psychology, social context and infrastructure of adopters also affects adoption 34 17

18 Forecasting and Diffusion of Innovations Epidemic models assume that innovations are spread by communication between adopters bandwagons do not require this direct communication as early adopters influence the development of an innovation, but adopters may be more influenced by competitive and peer pressures The process of adoption and diffusion of novel and complex innovations involves the co-evolution of technologies and markets, a process of experimentation, learning and adaptation, involving many different parties 35 18