1. Marketing of High-Technology Products and Innovations
Chapter 2:
Strategy and Corporate Culture in High-Tech Firms

2. Questions to consider
What is the strategic marketing planning process in high-tech firms?
What constitutes competitive advantage in a high-tech firm?
What characterizes an innovative culture in high-tech companies?
What are the unique challenges faced by small high-tech start-ups?
© Mohr, Sengupta, Slater 2005

3. Internal (within the firm) Considerations in High-Tech Marketing
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4. The Strategy Process Market Planning Market Strategy Competitive
Advantage
Evaluation
& Control
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5. Strategic Market Planning Process in High-Tech Markets
Implement
strategy
Define goals
and mission
Choose
arena
(from Ryans, et al.)
Understand
profit model
Identify
opportunities
Planning Process
Complete
the strategy
Plan key
relationships
Make tough
choices
© Mohr, Sengupta, Slater 2005

6. Define Mission and Goals
Why does the business exist?
Who are our customers?
What needs are we trying to solve?
How will we solve them?
Goals
Profit
Growth
New product acceptance
Customer satisfaction
© Mohr, Sengupta, Slater 2005

7. Select the Business Arena
Potential customer segments that could be served;
Potential applications or functionality that could be provided to these customers;
Possible technologies and capabilities that could be used to create the applications or functionality; and
Possible role for the organization in providing the value to the customer versus the roles of others in the market chain.
© Mohr, Sengupta, Slater 2005

8. Identify Attractive Opportunities
Scan and understand the market environment
Carefully segment the market
Evaluate “fit” of company capabilities and resources to market needs
Identify current, potential, and indirect competitors
Determine competitors’ strengths and likely strategies
Assess profitability of serving each segment
© Mohr, Sengupta, Slater 2005

9. Make Tough Strategic Choices
Decide whether opportunity should be pursued
What will it be worth to win?
Is the market opportunity attractive enough?
Is the strategy powerful enough to generate a sufficient level of profitability?
If not, are there compelling reasons to proceed?
© Mohr, Sengupta, Slater 2005

10. Make Tough Strategic Choices (Cont.)
Select/develop best strategy to take advantage of opportunity
Achieve leadership position in the opportunity?
Do synergies exist within the portfolio of opportunities being considered
Leverage a common technology
Leverage a common market chain
Are the strategies for the various opportunities reasonably consistent?
© Mohr, Sengupta, Slater 2005

11. Plan Critical Relationships
With other firms in the market chain
With organizations outside the market chain
Company with a complementary product or service
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12. Complete the Winning Strategy
Positioning
Product Development and Management
Pricing
Distribution path/channeling
Marketing promotion
Political relationship
Meeting 4C (customer/cost/convenience/communication)
© Mohr, Sengupta, Slater 2005

13. Understand the Profit Dynamic
Develop a detailed financial model for each opportunity
More refined profitability analysis based on detailed understanding of complete marketing strategy and associated costs
Look for modifications to enhance opportunity’s overall profitability.
Beyond expectation
retaliation from competitors
market/technology uncertainty
© Mohr, Sengupta, Slater 2005

14. Implement the Strategy
Make sure people who will implement are involved in the strategy formulation process
Design the effective organization:
Leadership
Structure and relationships
Systems
Culture and values
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15. Key Strategy Decisions
Who are our target customers?
What mix of products and services should we offer?
When should we enter a market?
The timing decision
The requisite guts
How can we execute our strategy efficiently and effectively?
Championship
© Mohr, Sengupta, Slater 2005

16. Who are Target Customers?
“Served” market
Potential pitfall: Tyranny of the served market
The marketing myopia
Bi-focal vision
Search for new market space
Independent unit & spin-off corporate
© Mohr, Sengupta, Slater 2005

17. Product/Service Mix Provide value for customers Man/machine interface
The usage analysis
Functionality, performance, price, post-sale maintenance, disposal
© Mohr, Sengupta, Slater 2005

18. Timing of Market Entry: Be a Market Pioneer?
PROS CONS
First mover advantage creates entry barriers
Economies of scale
Experience effects
Reputational effects
Technological leadership
Buyer switching costs
Higher profits and higher share
Define product exemplar
Higher consumer awareness
Large development costs
Market uncertainty
© Mohr, Sengupta, Slater 2005

19. Pioneers (“First Movers”) (Cont.)
Successful Pioneers
Have technological foresight
Understand the market
Have marketing acumen
Understand competitors’ strengths and weaknesses
A bit of luck
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20. An Advantage of Being A Follower
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21. When do “late” movers succeed?
Identify overlooked product position
Undercut pioneer on price
Out-advertise or out-distribute the pioneer
Innovate superior product
Innovate superior business/marketing strategy
Reshape the category
© Mohr, Sengupta, Slater 2005

22. Drivers of Strategy Innovation
Bring new voices into the dialogue
Foster new connections inside and outside of the company
Look at the “business” from a new perspective
Exude passion for discovery and novelty
Experiment and learn!
© Mohr, Sengupta, Slater 2005

23. Sources of Competitive Advantage
Tangible assets:
Products
Facilities
Financial Resources
Intangible assets:
Brands/reputation
Know-how
Culture
Competencies:
Routines
Processes
© Mohr, Sengupta, Slater 2005

24. Three Characteristics of Core Competencies
Difficult for competitors to imitate
Significantly related to benefits end-user receives—valuable assets
Allow access to a wide variety of disparate product-markets—high potential
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25. Tree Analogy to Core Competencies—a case of Honda Motor
Aircraft engine
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26. Implications of Core Competencies in Strategic Planning
Resource allocations may defy conventional logic
Violate ROI criterion
Development
learning
Accumulation
Transferring
Exploitation
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27. An Illustration of Sources of Competitive Advantage for Dell
Tangible
Product
Convenience
Intangible
Reputation
Confidence
Supply Chain
Competency
Price/Cost
Management
© Mohr, Sengupta, Slater 2005

28. Requirements for Competitive Advantage
Is the resource/competency:
Valuable
to Buyers No
Yes
Superior to
Competitors No
Yes
Difficult
to Imitate No
Yes
Competitive
Advantage
Disadvantage
Parity
Temporary
Sustainable
Profitable No
Average
Superior
Consistently
Rarity is a variation on superiority.
Transparency, replicability, and transferability
are variations on imitability.
© Mohr, Sengupta, Slater 2005

29. Culture and Climate in High-Tech Firms
Obstacles to Innovativeness
Core Rigidities
Innovator’s Dilemma
Liability of Bigness
Facilitators of Innovativeness
Creative Destruction
Firm Dominance
Unlearning
Corporate Imagination
Expeditionary Marketing
Indulgence in the past successes
Laggard response to challenges
Self-cannibalization
Reshape the business mind-set
© Mohr, Sengupta, Slater 2005

30. When Core Competencies Become Core Rigidities
Core rigidities: ingrained routines, knowledge, and skills become strait-jackets that inhibit a firm’s ability to develop new products built around unfamiliar skills, routines, and new knowledge.
Ex: cultural norms, over-reliance on existing technologies
© Mohr, Sengupta, Slater 2005

31. The Innovator’s Dilemma
"The innovator's dilemma is that many of the very same
good management practices that help a company succeed,
in the end cause it to fail. For example, listening to your
best customers and incorporating their needs into the stream
of new products you develop is absolutely essential to
becoming a successful company. But the dilemma is that this
can be very misleading when certain innovations - which I call
'disruptive technologies' - emerge in the market. Very often,
mainstream customers in existing markets can't use new
technologies when they first emerge; they can only be used
by different customers in different applications."
Clayton Christensen
© Mohr, Sengupta, Slater 2005

32. “Liability of Bigness”
Traits of large firms can inhibit their ability to develop radical innovations:
Bureaucratic
Focused on economies of scale
Core competencies become core rigidities
Fear of cannibalization
Incumbent’s dilemma
© Mohr, Sengupta, Slater 2005

33. Facilitators of Innovativeness
Creative Destruction (see next slide)
Proactively develop next-generation technology that may obsolete current technology
Ex: Develop Web-sites that undermine current distribution channels
© Mohr, Sengupta, Slater 2005

34. Creative Destruction
A term coined in 1942 by Joseph Schumpeter in his work,
Capitalism, Socialism and Democracy, to denote a
"process of industrial mutation that incessantly revolutionizes
the economic structure from within, incessantly destroying
the old one, incessantly creating a new one."
In other words, creative destruction occurs when something
new kills an old thing. A great example of this is personal computers.
The industry, led by Microsoft and Intel, destroyed many
mainframe computer companies--but in doing so, entrepreneurs
created one of the most important inventions of this century.
Creative destruction may be the antidote to the Innovator’s
Dilemma if it can overcome internal rigidity.
© Mohr, Sengupta, Slater 2005

35. Leveraging Firm Dominance Effectively
Sources of dominance:
Investments in the existing product generation
Market share
Wealth
The first two factors can inhibit innovation; the latter facilitates the development of innovation
© Mohr, Sengupta, Slater 2005

36. Leveraging Firm Dominance (cont.)
Manager’s fears of obsolescence:
Positively related to innovation
(the willingness to cannibalize)
© Mohr, Sengupta, Slater 2005

37. Final thoughts on Leveraging Firm Dominance
Dominant firms reap greater rewards from introducing radical innovations if they quick follow the industrial dynamics
Smaller firms can overcome their disadvantage by:
Marketing support (e.g., sales effort)
Technology support (e.g., R&D spending, patent protection, etc.)
from some key complements
© Mohr, Sengupta, Slater 2005

38. “Unlearning”
Innovation is facilitated by unlearning practices that worked in the past but are not useful, or even detrimental, to future success.
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39. Technology Life Cycles
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40. Some Implications of Technology Life Cycles
New technologies often come from companies not selling current generation of technology
Incumbents often invest in both improving existing technology and developing new
Incumbents often underestimate viability of new developments
Therefore, new technologies can catch/attack established firms by surprise
© Mohr, Sengupta, Slater 2005

41. Corporate Imagination (by Hamel & Prahalad)
Overturn price/performance assumptions (see next slide)
Escape the “tyranny of the served market”
Use new sources of ideas for innovation
Get out in front of customers
© Mohr, Sengupta, Slater 2005

42. 4 Elements of Corporate Imagination
(1) Willingness to overturn price/performance assumptions
Incremental improvements to existing technologies, which move along the same price/performance curve, vs.
Radical innovations that allow greatly-improved performance at roughly comparable prices as existing technology
Technology life cycles
Ex: Moore’s Law
© Mohr, Sengupta, Slater 2005

43. 4 Elements of Corporate Imagination (Cont.)
(2) Escape the “tyranny of the served market”
Excessive focus on current customers
Obscures the fact that customer needs may change over time and may be solved in radically new ways
Therefore, look for market opportunities outside of existing product/markets.
© Mohr, Sengupta, Slater 2005

44. 4 Elements of Corporate Imagination (Cont.)
(3) Use new sources of ideas for innovation
Rather than using standard marketing research tools,
use lead users
Who are the browser’s lead users?
and ethnographic observation (empathic design) (Discussed fully in Chapter 5)
© Mohr, Sengupta, Slater 2005

45. 4 Elements of Corporate Imagination (Cont.)
(4) Get out in front of customers.
Lead them where they want to go before they themselves know it.
Requires being “close to the customer” AND not being blinded by existing rules and procedures.
© Mohr, Sengupta, Slater 2005

46. The Learning Organization
“In an economy where the only certainty is uncertainty, the one
sure source of lasting competitive advantage ‘is knowledge’”
Ikujiro Nonaka
The Knowledge Creating Company
“A unique characteristic of knowledge is that it is one of the few assets
that grows most - usually exponentially - when shared”
James Brian Quinn
Intelligent Enterprise
“Learning may be the only source of sustainable competitive advantage”
Ray Stata
CEO, Analog Devices
© Mohr, Sengupta, Slater 2005

47. Learning Opportunities
Market-focused Learning (users’ expectation)
Competitive Benchmarking (competitors’ excellence) (師夷之長技以制夷)
Learning from Alliances, Joint Ventures, Partnerships, and Acquisitions (approaches)
Continuous Improvement through Experience (feedback control, adaptation & adjustment)
Market or Operational Experiments (uncertainty & expectation management)
Utilization of Outside Experts or Consultants (objectivity of bystander’s standpoint)
Organizational Memory (the possibility of core rigidity)
© Mohr, Sengupta, Slater 2005

48. Do We Know Anything for Sure?
Life is pretty simple: you do some stuff. Most fails.
Some works. You do more of what works. If it works
big, others quickly copy it. Then you do something
else. The trick is in the doing something else. You
must take pot shots at today’s star before you are
mimicked. Today’s radiantly blooming flowers are
tomorrow’s mulch. Don’t forget that for a moment.
But don’t think about it too long either.
Tom Peters
© Mohr, Sengupta, Slater 2005

49. Expeditionary Marketing
Frequent fast-paced market incursions (see next slide)
More accurate learning of customer needs
Time between market learning and product launch is shortened
Maximizes odds that product delivered matches customer’s needs as needs are less likely to change in the short-term
Implication: Issue is less being right the first time, but being able to accumulate market experience, and quickly adapt market offerings
the try-out
strategy
Beta testing
© Mohr, Sengupta, Slater 2005

50. Expeditionary Marketing
Successive times at bat
Many small bets
© Mohr, Sengupta, Slater 2005

51. Nurturing a Culture of Innovation
Characteristics of a firm that fosters innovation—
Disciplined rather than unfettered creativity
Continued R&D efforts, even in cyclical downturns
Broaden the absorptive capability
Enlightened experimentation
An useful and economical way of R&D—simulation and prototype before great bets
© Mohr, Sengupta, Slater 2005

52. Characteristics of Firms that Nurture a Culture of Innovation (cont.)
Identifies market needs that are divergent from (rather than congruent with) existing strategies
Roles and responsibilities of key players may not be clearly defined in early stages
Compensation for taking risk and challenges
Screening for new product ideas not based on formal criteria, but done informally based on technical/market merit
Unexpected success or failure!
© Mohr, Sengupta, Slater 2005

53. Characteristics of Organizations Who Foster Innovation (Cont.)
Role of product champion is key
Tireless crusaders for idea
Innovative firms have reward system and culture to promote influence of product champions
Personnel given time and incentives to be innovative
Tolerate risk and “mistakes”
Only paranoid survives!
© Mohr, Sengupta, Slater 2005

54. Skunk Works
Isolate new venture groups outside the normal organizational hierarchy
Pros:
- Allows for more creativity, unfettered by existing corporate protocols.
Cons:
- Signals a corporate culture that has impediments to innovation
(Creativity doesn’t happen within normal operating procedures)
- Isolates the creative process
© Mohr, Sengupta, Slater 2005

55. Applying Lessons of Innovativeness to Businesses’ Internet Experiences
New business models came from industry outsiders
Competitive Volatility
Core rigidities and the tyranny of the served market:
Existing companies bound by existing rules of the game and existing customers
Underestimation of new competitors
Need for creative destruction
© Mohr, Sengupta, Slater 2005

56. Applying Lessons of Innovativeness to Businesses’ Internet Experiences (Cont.)
Expeditionary Marketing:
Shorter learning cycles
Quicker opportunity to adapt strategies
Understand core competencies
Reliance on skunk works
Pioneering advantages
© Mohr, Sengupta, Slater 2005

57. “The Liability of Smallness:” Challenges for High-Tech Start-ups
Sources of Funding
Other Resources (complements)
Navigating Complex Environments
© Mohr, Sengupta, Slater 2005

58. Sources of Funding Friends and Family Bootstrapping
Reliance on venture capital
Informal “angels”
Formal companies/banks
© Mohr, Sengupta, Slater 2005

59. Considerations of Venture Capitalists
What Venture Capitalists Look For:
Management Team
Marketing Plan
Technology/Product
ROI
© Mohr, Sengupta, Slater 2005

60. Other Resources for Start-Ups
Technology incubators
Partners (Ch. 3)
© Mohr, Sengupta, Slater 2005

61. Navigating a Complex Environment
Key Success Factors for Small High-Tech Firms
Speed to market positioning
Flexibility to respond changes
Time Orientation to anticipate and disseminate insights and coordinate the young management team
© Mohr, Sengupta, Slater 2005