Innovation: Finding New Markets for New and Disruptive Technologies

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InnovationFinding New Markets for
NewandDisruptive Technologies
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OVERVIEW

• 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

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SHIFTING 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

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BASIS 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

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Functional Organization Structure-Fig 1a
General manager
Finance
Human resources
Research and development
Operations
Product marketing
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Hybrid Beatrice International One Functional
Automobile Products Business Fig-1b
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Product Structure-Fig 2a
CEO
Finance
Human resources
Electronic instruments
Medical instruments
Computers
RD
Operations
Marketing
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H. J. Heinz Product Division ( S.B.U.)
Structure - Fig 2b
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Intersecting 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
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• 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

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PERSPECTIVE

• 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

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CHOOSING 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

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TWO 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

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STOPFORD AND WELLSS INTEGRATED STAGES MODEL

• (Next Page)

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The 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
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DISCOVERING 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

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Discovery-Driven PlanningA new way of thinking
for new Ventures
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OVERVIEW

• 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

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COMMON 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)

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OVERVIEW 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