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Title: Arto Rajala, Prof.


1
High-tech Marketing
  • Arto Rajala, Prof.
  • Helsinki School of Economics

2
Outline
  • What is High Technology?
  • High Technology in Finland
  • Whats the Difference between High and Low
    Technology?
  • What are the Marketing Implications of High
    Technology?
  • Identifying crossing the chasm
  • Building marketing offerings
  • Conclusions

3
Defining Marketing
  • Marketing is a business (management) discipline
    or orientation
  • ...performance of business activities that
    direct goods and services from produces to
    consumer or user (AMA)
  • Understanding actual and potential customer
    needs, by
  • developing/modifying products, facilitating
    customer access to its offerings, attracting and
    influencing the market, creating differential
    advantages (brand)
  • Establishing and maintaining customer
    relationships
  • Managing 4Ps (Product, Price, Place, Promotion)
  • STP-model (Segmenting Targeting Positioning)

4
Defining Technology (1/2)
  • Machinery, equipment, tools, artifacts, etc.
    (tangible)
  • Techniques specific ways of proceeding or
    completing instrumental acts and specific
    arrangements of persons, materials, and tasks
    (intangible)
  • The science of knowledge to practical purpose (to
    obtain something useful)
  • Knowledge and skills not only to develop but
    how to use ? making benefit from technology

5
Defining High Technology (2/2)
  • Novelty advanced compared to the-state-of-the-ar
    t
  • Knowledge intensity based on radical innovation
  • Dependence on RD and highly educated people
  • RD investments gt 4 of turnover (OECD)
  • usually btw 10 - 20
  • Intensive development cooperation btw
    universities and research institutes
  • Long RD phase short market existence

6
Categorisation of Technology
  • Product Technology
  • embedded in the product itself
  • Process Technology
  • a part of production or delivery system
  • Information Technology
  • a platform that enables communication
  • Management Technology
  • know-how and expertise to run the business
  • tacit vs. explicit knowledge

7
High-Tech Characteristics...
  • New technology
  • Makes the existing technology obsolete very
    rapidly
  • New products or even new industries emerge
  • Leading-edge technology
  • The-state-of-the-art in the field and not
    widespread acceptance by those working in the
    field
  • Technology-base is new
  • Cross-industry characteristics
  • Ability to create/modify new applications

8
High-Tech Characteristics
  • Developers vs. users view on technology
  • Technology adapters CUSTOMERS
  • Technology providers SUPPLIERS
  • Customer perceived value
  • Added value to customer
  • Knowledge intensity
  • Different technology settings
  • Technology life cycle
  • From product to process technologies

9
A Definition of High-Tech from Marketing
Point of View
  • High-tech is that of the leading-edge
    technology involving a high level of knowledge
    intensity, which enhances the value of the
    product or process to the customer in the sense
    that it provides better quality, lower costs, or
    it makes the use of the object easier compared to
    the old technology

10
High Technology in Finland...http//tilastokeskus
.fi/tk/yr/ttt_huippu.html http//www.research.fi
/
  • Turnover of high-tech companies 16 billion euro
    (1999)
  • Share of high-tech in manufacturing output 27
    USA 32
  • Average growth of production per year 31 btw
    1995-1999
  • Employed 42 000 people (1999) 30 500 (-95, 8
    /year
  • Number of RD stuff 68 000 (2000) 47,000 (-91)
  • 1 203 doctoral dissertations (2001) 524 (-91)
  • 20,9 of total export (2001) 10,0 billion euro
    6,0 in 1991
  • 17,8 of total import (2001) 6,4 billion euro
    12,1 in 1991
  • RD investments (2002) 3,47 of BNP (4.9 billion
    euro of which companies accounted for 70,7 )
  • 3 083 patent applications (-99), 4.6 dom. pat./10
    000
  • Large externalities (other industrial sectors)

11
Source www.research.fi
RD Expenditures in Finland
Tuotekehitysmenot
Universities
Public sector
Companies
Companies
12
Major High-Tech Sectors in Finland
  • Electronics
  • Telecommunication
  • Data and Office Equipment
  • Scientific Instruments
  • Biotechnology
  • High technology is a problem from industry
    classification point of view - no explicit
    statistic available!

ICT- Information Telecommunication Cluster
13
Source www.research.fi
High-technology share of export and import in
Finland
Export
Import
14
Source Statistics Finland
15
Source Statistics Finland
16
Factors behind the Finnish Success
  • Strong technology-base (Forest
    Metal/Engineering Industries)
  • High level of RD investments (public vs.
    private)
  • Focusing on core capabilities - outsourcing
    others (Nokia)
  • Technological co-operation between companies,
    research co-operation between companies and
    universities - Networking (Technology Villages)
  • Educated labour force (75 of 25-35 years old
    have a university or vocational training)
  • Rapid globalisation - born global companies
  • Access to venture capital funding

17
Source Statistics Finland
18
Innovations core of high techonology
http//tilastokeskus.fi/tk/yr/ttinno1.html
  • Innovation a totally new, or a remarkable
    enhanced, product, service or production
    system/process
  • EU innovation research 2000
  • Posted in Finland to 3 462 companies 50
    answered
  • Highest level of innovation activities in telecom
    (73 ), electrotechnical industry (67 ) and
    chemical industry (63 )
  • Innovation expenditures (2000) was estimated 4.9
    billion
  • Innovation activities had the highest impact on
    expanding product or service offering, enhancing
    quality, market expansion or increase in market
    share
  • The most important source of innovation was the
    company itself (90)
  • About 2/3 of companies involved in innovation
    activities were confronted with difficulties to
    implement them
  • Economical factors such as too high a risk,
    increasing costs, and the lack of suitable source
    of funding and competence personnel were the
    worst bottlenecks for innovation activities

19
Technology Life-Cycle
20
Nature of High Tech Markets
  • Why are high-tech markets different ?
  • HIGH-TECH ? high uncertainty about technology
    and market
  • Market uncertainty
  • Ambiguity about the type and extent of customer
    needs that can be satisfied by the technology
  • Technological uncertainty
  • Not knowing whether the technology - or the
    company providing it - can deliver on its promise
    to meet needs , once they have been articulated

21
Sources of Uncertainties
How will needs change in the future?
Will the new product function as promised?
Will the market adapt industry standard?
Will there be side effects of technology ?
How fast willthe innovation spread?
Will delivery timetables be met?
High-TechMarketing
TechnologyUncertainty
Market Uncertainty
How large isthe potentialmarket?
Will the vendor give high-quality service?
What needs can be met by new technology?
Will new high-tech make ours obsolete?
Based on Moriarty Kosnik (1989)
22
Taxonomy of Marketing Situations
Market Uncertainty
Low
High
BetterMousetrapMarketing
High TechMarketing
High
TechnologicalUncertainty
High FashionMarketing
Low TechMarketing
Low
Based on Moriarty Kosnik (1989)
23
Challenges for Marketing
  • New designs must win market share
  • Role of distribution channel
  • Customer perceptions
  • Competition
  • From higher performance to lower costs and
    differentiation through minor design variations
    and strategic positioning tactics
  • incremental changes take place
  • Segmenting - Targeting - Positioning

24
Commercialising High-Tech Products (1/2)
  • Identifying and Crossing the Chasm

25
Key Issues
  • Why so many excellent products fail?
  • 90-95 of new product ideas newer reach market
  • 30-50 of introduced products seem to fail on
    the market
  • Are there differences between high-tech and
    low-tech product concerning the commercialisation
    process?
  • Critical issue Time-to-Market
  • Using the Market Development Model

26
Technology Adoption Life-Cycle
Pragmatists create the dynamics of high-tech
market development.
Source Moore (1998)
27
Innovators - Technology Enthusiasts
  • Primary Motivation
  • Learn about new technologies for their own sake
  • Key Characteristics
  • Strong aptitude for technical information
  • Like to alpha test new products
  • Can ignore the missing elements
  • Do whatever they can to help
  • Challenges
  • Want unrestricted access to top technical people
  • Want no-profit pricing (preferably free)

28
Early Adopters - The Visionaries
  • Primary Motivation
  • Gain dramatic competitive advantage via
    revolutionary breakthrough
  • Key Characteristics
  • Great imaginations for strategic applications
  • Attracted by high-risk, high-reward propositions
  • Will commit to supply the missing elements
  • Perceive order-of-magnitude gains so not
    price-sensitive
  • Challenges
  • Want rapid time-to-market
  • Demand high degree of customization and support

29
Early Majority - Pragmatists
  • Primary Motivation
  • Gain productivity improvements via evolutionary
    change
  • Key Characteristics
  • Astute managers of mission-critical applications
  • Understand real-world issues and tradeoffs
  • Focus on proven applications
  • Like to go with the market leader
  • Challenges
  • Insist on good references from trusted colleagues
  • Want to see the solution in production at the
    reference site

30
Late Majority - Conservatives
  • Primary Motivation
  • Just stay even with the competition.
  • Key Characteristics
  • Better with people than technology
  • Risk averse
  • Price-sensitive
  • Highly reliant on a single, trusted advisor
  • Challenges
  • Need completely pre-assembled solutions
  • Would benefit from value-added services but do
    not want to pay for them

31
Laggards - Skeptics
  • Primary Motivation
  • Maintain status quo.
  • Key Characteristics
  • Good at debunking marketing hype
  • Disbelieve productivity-improvement arguments
  • Believe in the law of unintended consequences
  • Seek to block purchases of new technology
  • Challenges
  • Not a customer
  • Can be formidable opposition to early adoption

32
The Logic of Commercialising High-Tech Products
  • Seeding new products to Techis
  • Techis help and educate Visionaries
  • Visionaries serve good references for the
    Pragmatists
  • Becoming the market leader by serving Pragmatists
    and setting standards
  • Leverage success - generate sufficient volume
    experience -- reliable products which are also
    cheap enough to Conservatives
  • Leaving Sceptics to their on devices

33
Discovering the Chasm
  • High-tech products are warmly welcome in an early
    market (techies visionaries) but then will fall
    into a chasm (sales will falter and often
    plummet)
  • Visionaries dont see enough of a head start
  • Pragmatists see no reason to start yet
  • Crossing the chasm ?gaining the acceptance within
    a mainstream market - becomes and organisational
    imperative but very few high-tech products
    cross these chasms

Source Moore (1998)
34
Crossing the Chasm
  • Product vendors problem
  • 80 of many solutions100 of none
  • Pragmatists won't buy 80 solutions
  • Most common vendor mistake
  • Committing to the most common enhancement
    requests
  • Never finishing any one customer's wish-list
  • Solution
  • Focus on a single beachhead
  • Accelerate formation of that segment's whole
    product

Source Moore (1998)
35
Successful Crossing
  • Considering the difference between visionaries
    and pragmatists
  • the former is willing to bet on the come
  • the latter want to see the solutions in
    production (i.e. see the whole product before
    they by it)
  • Many high-tech companies are not willing to
    commit to develop any whole product
  • they focus on four to five likely candidate
    segments
  • risk for having everything for nobody
  • Putting all eggs in one basket is the only safe
    way to cross the chasm - Why? (Focus
    Globalisation)

36
Commercialising High-Tech Products (2/2)
  • On the Mainstream Market

37
Market Development Model
Main Street
Tornado
Total Assimilation
EarlyMarket
Chasm
BowlingAlley
Mainstream Market
Source Moore (1998)
38
Beyond the Chasm - Assessing Mass Market
  • The Bowling Alley
  • a period of niche-based adoption in advance of
    the general marketplace, driven by compelling
    customer needs and the willingness of vendors to
    craft niche-specific whole products
  • The Tornado
  • a period of mass-market adoption, when the
    general marketplace switches over to the new
    infrastructure paradigm
  • Main Street
  • a period of aftermarket development, when the
    base infrastructure has been deployed and the
    goal now is to flesh out its potential
  • End of Life
  • wholly new paradigms (technology) come to market

39
Technology vs. Category Life Cycles
Technology Adoption Life Cycle (First time
adopters)
Source Moore (1998)
40
Four Marketing Frameworks
1 on 1 Marketing
Mass Marketing
Deal Driven
Niche Marketing
Source Moore (1998)
41
Product Mix Offerings
Source Moore (1998)
42
Service Mix Offerings
Source Moore (1998)
43
Managing Marketing Offerings in High-Tech Firms
  • Are the 4 Ps still relevant?

44
Product Platform
  • Product platform is a collection of common
    elements, particularly the underlying technology
    elements, implemented across a range of products.
  • It is primarily a definition for planning,
    decision making, and strategic thinking.
  • Especially important in high-tech firms in which
    multiple products are related by common
    technology.
  • Platform defines the cost structure,
    capabilities, and differentiation of the
    resulting products.
  • Separating product platform strategy from product
    line and individual product strategy, a company
    can concentrate on its most important strategic
    issues.

45
Product Platform
Product 3
Segment III
Product 1b
Product 4
Segment II
Product 1
Product 1a
Uniqueproductelements
Product 2
Segment I
Element C
Commonplatformelements
Element B
Element A
Source McGrath (2000, 55)
46
Main Characteristics
  • Product platform is NOT a product!
  • ... but the lowest common determinator of
    relevant technology in a set of products or
    product line
  • Product failures in high-tech firms often caused
    by incomplete product platform strategy
  • Nature of product platforms varies across
    industries
  • e.g. in PC it consists of the microprocessor
    combined with its operating system, packaging,
    power supply, memory, disk drives, monitors, and
    interfaces
  • e.g. it can be a chemical compound combined with
    with the manufacturing process

47
Market Platform Plan (MPP)
  • MPP integrates knowledge about the market and
    knowledge about the product and its defining
    technology

Source McGrath (2000)
48
The Market Platform Plan Framework
  • Enables companies to translate platform strategy
    into a practicable attack plan for a target
    market
  • Characterize prioritize customer segments
  • Define the basis of customer value
    differentiation
  • Define the offerings to the customers
  • Define monitoring plan to sense environment
  • Establish economic metrics for measuring success
    in the market

49
Managing High-Tech Products
  • Distinctive nature of high-tech products create
    certain challenges for product managers
  • dependence on RD
  • risky business
  • global nature of markets
  • long development cycle - but short economic life
    cycle
  • What is the role of pricing decisions
  • Implications of Product Life Cycle Model

50
What is a product?
51
Managing High-Tech Products
  • Are prices and costs really related?
  • yes, but not so directly as we usually think
  • keep in mind PLC when making pricing decisions
  • most high-tech products evolve into commodities
  • emphasising the role of internal costs
  • risk of overlooking what happens in the market --
    what price customers are willing to pay
  • Surprisingly ... small differences in costs and
    margin objectives can have dramatic effects on
    the price a company must command in the market
    place

52
Evolution of the Whole Product
Source Moore (1998)
Different whole product priorities at different
stages of the life cycle.
53
Conclusions
  • What have we learned?

54
Current Wisdom on High-Tech Marketing
  • Interaction between marketing and RD
  • Coping with the high levels of technological and
    market uncertainty
  • Marketing capabilities business competencies
  • Product development processes
  • Rapid changes in technology and market settings
  • Shortening the breakthrough-time
  • Market offering and product platform approaches
  • Increasing importance of services
  • Emphasise technical support and after sales
    service
  • Differentiating from competitors
  • Building strong relationships with suppliers,
    channels and customers
  • Analysing value systems ? Networks, strategic
    alliances, partnerships
  • Rely on qualitative rather than quantitative
    approaches for market research
  • What the customers really value?

55
What does this mean?
  • The High-Tech label is not once and for all,
    so todays hot new technologies becomes
    tomorrows basic technology
  • Surprisingly, high-tech marketing is not so
    different from that of low-tech as often claimed
  • but there is a special need for more marketing
    focus in high-tech context because ...
  • Customers view is easily overlooked
  • To avoid developing a product which are
    engineer's dilemma but marketers nightmare
  • Knowing competitors well enough
  • Global view of high-tech business
  • Cross-industry effects and convergence of
    different technologies
  • Focusing more and more on services

56
Lähteitä
  • High Technology in Finland 2001 (also 1999, 1997,
    1995, 1993, 1991), Finnish Academies of
    Technology.
  • McGrath, Michel E. (2001), Product Strategy for
    High-Technology Companies Accelerateing Your
    Business to Web Speed. N.Y McGrew Hill.
  • Mohr, J. J. (2001), Marketing of High-Technology
    Products and Innovations. Upper Saddle River,
    N.J Prentice Hall.
  • Moore, G. (1995), Crossing the Chasm Marketing
    and Selling High-Tech Products to Mainstream
    Customers. New York HarperCollins Publishers.
  • Moore, G. (1998), Inside the Tornado Marketing
    Strategies from Silicon Valleys Cutting Edge.
  • Moore, J. F. (1997), The Death of Competition
    Leadership Strategy in the Age of Business
    Ecosystems. N.Y. HarperCollins Publisher.
  • Paija, L. (2001), Finnish ICT Cluster in the
    Digital Economy, Helsinki Taloustieto Oy.
  • Simon, H. (1996), Hidden Champions Lessons for
    500 of the Worlds Best Unknown Companies.
    Boston, Mass Harvard Business School Press.
  • Tapscott, D. (1999), Creating Value in the
    Network Economy. A Harvard Business Review Book.
  • Tidd, Joe, John Bessant and Keith Pavitt (1997),
    Managing Innovation Integrating Technological,
    Market and Organizational Change. Chichester, UK
    John Wiley Sons
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