Title: Innovation: Finding New Markets for New and Disruptive Technologies
1InnovationFinding New Markets for
NewandDisruptive Technologies
2OVERVIEW
- FOCUS ON CREATIVITY ININNOVATION-HOW TO FIND
UNIQUE PRODUCTS AND SERVICES VALUED IN THE MARKET - TOOL KITS DEVELOPED
- SHIFTING BASES OF COMPETITION
- DISCOVERING WHAT HAS BEEN DISCOVERED
- DISCOVERY-DRIVEN PLANNING
- TOOLS ARE BUILT ON A SET OF PRINCIPLES
- A STRUCTURED WAY OF THINKING, PLANNING, AND
WORKING - TO COPE WITH AN UNCERTAIN FUTURE
- INVREASE PROBABILITY THAT INNOVATIVE PRODUCTS AND
SERVICES WILL BE COMMERCIALLY SUCCESSFUL - HELP GEN MGR STRUCTURE THE WORK OF OTHERS IN
MARKETING, RD, FINANCE AND PLANNING TO INCREASE
THE PROBABLILITY THAT THEY WILL INNOVATE
SUCCESSFULLY
3SHIFTING BASIS OF COMPETITION
- BASIS OF COMPETITION IN ANY MARKET TIER IS THE
PRODUCT ATTRIBUTES FOR WHICH CUSTOMERS WILL MOST
READILY PAY A PREMIUM. - THIS ATTRIBUTE DEFINES THE TRAJECTORY OF
PERFORMANCE IMPROVEMENT FOR INNOVATORS - FUNDAMENTAL PREMISES ARE
- IN EACH TIER OF A MARKET AT A GIVEN POINT IN
TIME, THERE IS A DIMENSION OF THE PRODUCT, CALLED
THE BASIS OF COMPETITION, THAT IS, THE DOMINANT
CRITERION FOR CHOOSING ONE PRODUCT OVER ANOTHER. - MARKET SEGMENTS ARE ALSO DEFINED BY THIS
DIMENSION-BASIS OF COMPETITION - WHEN THE PERFORMANCE OF PRODUCTS IMPROVES ALONG
THIS DIMENSION BEYOND THE LEVEL THAT A MARKET CAN
ABSORB, THEN THE BASIS OF COMPETITION WILL SHIFT
TO A NEW DIMENSION OR ATTRIBUTE
4BASIS FOR COMPETITION
- IN EARLY STAGES OF MOST MARKETS, FUCTIONALITY
DRIVES CUSTOMER CHOICES - See Next Page
- REGION A PRODUCTS IMPERFECTLY MEET WHAT
CUSTOMERS WANT - PAY A PREMIUM FOR HIGHEST PERFORMERS
- A TEMPORARY CONDITION
- REGION B (FIG 3) ACCEPTABLE FUNCTIONALITY OF
MULTIPLE PRODUCTS IN A GIVEN TIER INCREASES PRICE
COMPETITION UNTIL AN INNOVATOR INTRODUCES A
PRODUCT THAT IS A SUBSTANTIAL IMPROVEMENT ALONG A
DIMENSION NOT YET SATISFIED-USUALLY RELIABILITY
5Functional Organization Structure-Fig 1a
General manager
Finance
Human resources
Research and development
Operations
Product marketing
6Hybrid Beatrice International One Functional
Automobile Products Business Fig-1b
7Product Structure-Fig 2a
CEO
Finance
Human resources
Electronic instruments
Medical instruments
Computers
RD
Operations
Marketing
8H. J. Heinz Product Division ( S.B.U.)
Structure - Fig 2b
9Intersecting Trajectories of Improvement
Performance Improvement by Industry
Technologists, vs. Performance Improvement that
the Market Can Absorb Fig 3
Trajectory of Improvement that technologist are
able to provide the market.
Region B
High-end markets
Trajectories of performance improvement that
customers need or are able to absorb
Product Performance
Low-end markets
Region A
Disruptive Technology
Time
10- WHEN MULTIPLE PRODUCTS OFFER ENOUGH FUNCTIONALITY
AND RELIABILITY, CUSTOMERS ARE RELUCTANT TO PAY
PRICE PREMIUM FOR IMPROVEMENTS IN EITHER OF THESE - INSTEAD THEY WILL CHOOSE EASIER TO USE PRODUCTS
FROM SUPPLIERS WITH WHICH IT IS CONVENIENT TO DO
BUSINESS - AND THEY ARE WILLING TO PAY A PREMIUM FOR THIS
CONVENIENCE
11PERSPECTIVE
- TYPICALLY, FIRMS SEEK INNOVATIONS THAT PROVIDE
MORE AND BETTER ATTRIBUTES THEIR CUSTOMERS VALUE - INNOVATION THAT TRANSFORM INDUSTRIES AND CREATE A
NEW WAVE OF GROWTH OCCUR WHEN INNOVATORS
CORRECTLY REDEFINE A NEW TRAJECTORY
12CHOOSING LEAD CUSTOMERS
- CHOOSING WHICH CUSTOMERS TO SERVE IS ONE OF THE
MOST IMPORTANT STRATEGIC DECISION IN MANAGING
INNOVATION - SELECTING CUSTOMERS DEFINES THE SORT OF PROBLEMS
A COMPANT CONFRONTS, AND SOLVING THEM DETERMINES
ITS CAPABILITIES AND HOW SUCCESSFULLY IT CAN
COMPETE - LEAD CUSTOMERS MOST SOPHISTICATED AND PURCHASE
PRODUCTS AT THE UPPER END OF THE PRODUCT RANGE - THEIR GUIDANCE IS VALUABLE WHEN A LARGE PORTION
OF THE MARKET IS DISSATISFIED WITH THE CURRENT
FUNCTIONALITY - THOSE CUSTOMERS WHO WILL HELP FIRMS DEFINE A NEW
TRAJECTORY ARE AT THE BOTTOM RATHER THAN TOP OF
THE MARKET
13TWO BASIC FORCES INFLUENCING INT ORGANIZATION
DESIGNS
- FORCES FOR CROSS MARKET COORDINATION/INTEGRATION
- SCALE ADVANTAGES AND COMPETITIVE STRATEGY
- FORCES FOR NATIONAL RESPONSIVENESS/DIFFERENTIATION
- CONSUMER PREFERENCES, MARKET DIFFERENCES, GOVT
POLICY
14STOPFORD AND WELLSS INTEGRATED STAGES MODEL
15The Typical Structure Path for a Multi-National
Corporations
High
Worldwide S.B.U./GBU 2b
Global Matrix 3a
(Differentiated Network)
Alternative Path 3
Foreign Product Diversity
Alternative Path 2
Regional S.B.U. 29
International Division 1
Low
Foreign Revenue as a Percentage of Total Revenue
Low
High
Source Stepford Wells, 1972
16DISCOVERING WHAT HAS BEEN DISCOVERED
- CONTEXT AFFECTS INNOVATIVE FLEXIBILITY
- INNOVATORS ABILITIES TO SEE NEW OPPORTUNITIES
ENHANCED BY ASSUMING DIFFERENT PERSPECTIVES - HOW WOULD SMALL START UP FIRMS IMPLEMENT THE
IDEA? - HOW DOES IT LOOK TO OPINION LEADERS AT LEADING
EDGE OF MARKET, TO UNSOPHISTICATED CUSTOMERS AT
THE BOTTOM? - DISCOVERY DRIVEN PLANNING
- INVOLVES BUILDING PLANS TO LEARN FOR UNKNOWABLE
ENVIRONMENTS
17Discovery-Driven PlanningA new way of thinking
for new Ventures
18OVERVIEW
- NEW STRATEGIC VENTURES ARE RISKY
- NEW VENTURES HAVE A HIGH RATIO OF ASSUPTIONS TO
KNOWLEDGE - PLATFORM PLANNING (CONVENTIONAL) NOT APPROPRIATE
EURO DISNEY FOR EXAMPLE - BY INCORPORATING NEW INFOR, DDP CONVERTS
ASSUMPTIONS INTO KNOWLEDGE - REAL POTENTIAL OF THE VENTURE IS DISCOVERED AS IS
EVOLVES - DDP IMPOSES DISCIPLINE ON NEW VENTURE PLANNING
19COMMON PLANNING ERRORS
- AFTER A FEW DEISIONS ARE MADE, MGT PROCEEDS AS
THOUGH ASSUMPTIONS ARE FACTS - FAIL TO USE HARD FACTS AVAILABLE TO CHECK
ASSUMPTIONS - HAVE DATA TO KNOW REAL OPPORTUNITY EXIST BUT MAKE
IMPLICIT AND INAPPROPRIATE ASSUMPTIONS ABOUT
IMPLEMENTATION - START WITH GOOD DATA BUT ASSUME STATIC
ENVIRONMENT AND FAIL TO NOTICE CHANGES IN KEY
VARIABLE - DANGEROUS IMPLICIT ASSUMPTIONS (P194)
20OVERVIEW OF DDP PROCESS
- A SYSTEMATIC WAT TO UNCOVER AND CHALLENGE
IMPLICIT ASSUMPTIONS WHICH MIGHT BE INCORPORATED
INTO A PLAN - A MEANS FOR IMPOSING DISCIPLINE AND INCORPORATE
NEW INFORMATION - INVOLVES CREATING FOUR MAJOR DOCUMENTS
- A REVERSE INCOME STATEMENT MODELS THE BASIC
ECONOMICS OF BUSINESS - PRO FORMA OPERATIONS SPECS LAYS OUT THE
OPERATIONS NEEDED TO RUN BUSINESS - KEY ASSUMPTIONS CHECK LIST
- MILESTONE PLANNING CHART SPECIFIES THE
ASSUMPTIONS TO BE TESTED AT EACH MILESTONE