1. Marketing of High-Technology Products and Innovations Jakki J. Mohr
Chapter 7:
Product Development and Management in High-Tech Firms

2. Chapter Overview Technology Maps “What to Sell”
Product Platforms and Derivatives
“Stopping” rules in new product projects
Intellectual Property
© 2000
Jakki Mohr

3. Review of other Product Management Concepts (covered earlier in the text)
Classification for high-tech products
Incremental versus Breakthrough
(Chapter 1)
Technology Life Cycles
(Chapter 2)
Adoption and Diffusion of Innovation
(Chapter 6)
© 2000
Jakki Mohr

4. Technology Maps
Define a stream of new products (breakthroughs + derivatives) company plans to develop over time.
Used for:
Commitment to new product development
Allocation of resources
A flexible blueprint that must be updated regularly
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Jakki Mohr

5. Technology Map: 4-Step Process
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Jakki Mohr

6. 1. Technology Identification
Inventory of firm’s valuable know-how that may be sources of revenue generation
Products
Processes
Such as superior manufacturing skills
Management practices
Such as knowledge management
© 2000
Jakki Mohr

7. 2. Decide on needed additions
Where does firm need new skills/products to round out its offering?
“Make vs. buy” decision
Internal development
External acquisition
Partnering
© 2000
Jakki Mohr

8. Adding New Technology: Focus on Development Risk
Internal Development
New development close to existing skills
Confidentiality reasons
“NIH” (not invented here): Only good technology is developed internally.
External Acquisition
Someone else has already developed
Save time and effort
Let others take risks first
Keep up with competitors
Obtain technology for existing brand name/marketing resources
© 2000
Jakki Mohr

9. Commercialization Decision: “What to sell?” Focus on Marketing Risk
Continuum of options, based on the additional expenditures customers must incur beyond the cost of the purchase to derive the intended benefits of the technology
Know-how only
“Proof of concept”
Components to OEM
Final products to end-user
Service bureau
© 2000
Jakki Mohr

10. Lean Towards Selling Know-How When:
Technology lacks fit with corporate mission
Lack of financial resources to exploit technology
Tight window of opportunity and lack of speed
Market smaller than expected/business unlikely to be profitable
When allowing firms access to technology is most appropriate (next slide)
When range of technologies in market is diverse
© 2000
Jakki Mohr

11. Allow other firms access to technology (license) when:
Network externalities: more value as more customers use a product
Tends to favor position close to know-how
But, know-how hard to price, which pushes away from selling know-how.
Seek standardization of technology via licensing, etc.
(Aside) Likely customer of “know-how?”
One closest to having knowledge themselves
© 2000
Jakki Mohr

12. Lean Toward Selling End-Product When:
Firm’s components are incompatible with general industry standards.
What if firm competes at end-product with iconoclastic product?
Hard to get third-party developers
© 2000
Jakki Mohr

13. Sell at Multiple Points on the “What to Sell” continuum when
Offering technology to competitors may encourage industry standardization
License know-how or sell components on an OEM basis
Firm may have skills in some segments but not others
Major buyers require second source
To maximize rate of return on technology investment
© 2000
Jakki Mohr

14. A Caveat: International Markets
Sales of manufacturing technology and know-how may result in setting up a new low-cost competitor
© 2000
Jakki Mohr

15. 4. On-going product management
Managing platforms and derivatives
“Killing” products
Protecting intellectual property
© 2000
Jakki Mohr

16. Product Platforms and Derivatives
Develop a set of subsystems and interfaces around a common underlying technology “platform”
Common structure for development/production of a stream of derivative products
Single design and components shared across set of products, using same underlying technology
© 2000
Jakki Mohr

17. Platform Strategy is Attractive in High-Tech Markets
Unit-one cost structures
Allows for rapid development of market share/revenues
Speed and flexibility in going after niches
“gap filling”
Modularity for customers to “plug-and-play” different firm’s products.
Industry standards
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Jakki Mohr

18. Product Platforms and Derivatives
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Jakki Mohr

19. Defining appropriate platform
Design for high-end of the market
Incorporate as many features as needed for this segment
To recover high fixed costs
Makes it easier to sell lower priced versions at only modest incremental cost (vs. vice versa)
Subtraction of features!
Consistent with both lead user and chasm concepts
© 2000
Jakki Mohr

20. When to “Kill” New Products?
Escalation of commitment
Product champions and technology enthusiasts are perennial optimists
Personal stake in project
Biases in interpreting information
Recall info that confirms beliefs
Ignore info that disconfirms beliefs
Re-interpret neutral info as positive, and even negative info as positive!
© 2000
Jakki Mohr

21. More information is not the answer!
Foster internal culture that fosters open questioning.
Remove project from core of the firm
“De-couple” withdrawal decision from prior investments
Different manager make the decision
Rely on benchmarks established at outset
© 2000
Jakki Mohr

22. Protection of Intellectual Property
“Original works that are creations of the mind” and to which the inventor has rights to protect.
How to protect it?
Patents
Copyright
Trademark
Trade Secret
© 2000
Jakki Mohr

23. Patents
Confer owner the right to exclude others from making, using, or selling product or process for specific time period
In U.S., 20 years from date of filing
Three criteria applicant must meet:
Useful: performs some function that benefits humanity
Novel: no prior evidence of invention exists
Nonobvious: no suggestion of invention exists, even when multiple writings are combined
© 2000
Jakki Mohr

24. Two Types of Patent Applications in U.S.
Provisional:
$150, 1 year time frame to “hold”
Allows inventor to do further research
Establishes a “priority date” of invention
Utility:
$790 for examiner to render a decision
Granted or denied; applicant can appeal or re-file (another $790)
© 2000
Jakki Mohr

25. Disadvantages in Using Patents
Patents are public information
From time of filing in countries outside US
From time of grant of patent within US
Competitors may “invent around”
Patent owner must enforce rights
Costly!
© 2000
Jakki Mohr

26. New Issues with Patent Protection
Can now patent “business methods”
Effective July 1998
Implications:
Patents on E-commerce business models/methods
Patents on medical treatment methods
© 2000
Jakki Mohr

27. Tension in Granting Intellectual Property Rights
Foster creativity and “common good”
Give inventors incentives (exclusive rights to revenue from their inventions)
Inhibit creativity and consumer welfare
Slow spread of valuable commercial innovations
Lack of competition and access
© 2000
Jakki Mohr

28. Steps in Granting Patents
Hire patent agent
Provide thorough, accurate understanding of invention
Assess state of prior art:
Is the idea truly novel?
Draft the claims to define the boundaries of the invention
Draft drawings and application in easy-to-understand terms
© 2000
Jakki Mohr

29. Trouble Spots in Patent Protection
Inventor has previously disclosed idea prior to filing application
At a conference, with investors, etc.
Fatal in foreign protection
US grants one year “grace period” from disclosure
Conflict patent rights that infringe on others
© 2000
Jakki Mohr

30. Patent Process (Cont). File patent application ($790)
If patent granted:
Pay “issue fee” ($1320)
Pay “maintenance” fees
3 ½ years: $1050
7 ½ years: $2100
11 ½ years: $3160
© 2000
Jakki Mohr

31. International Filing Under PCT
File within 1 year of national application to claim priority back to original filing date
PCT enables filing one application in home language
Determine individual countries
PCT application published 18 months after priority date
At applicant’s option, examiner will issue “search” report and/or preliminary judgment of patentability
© 2000
Jakki Mohr

32. International Filing Under PCT
PCT application enters designated countries and goes before examiners in each
Translation is required, with fees
Rights must be enforced in each country
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Jakki Mohr

33. Patenting Costs
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Jakki Mohr

34. Copyrights
Protect tangible form or manner in which idea is expressed, not the idea itself.
Example: software code
Grants inventor right to reproduce and distribute copyrighted works
Term is:
Life of author + 50 years -or-
Shorter of 75 years from publication or 100 years from creation of work
Easy to obtain ©
Register with US Copyright office in case lawsuit is filed
© 2000
Jakki Mohr

35. Trademarks Names, symbols, devices to distinguish/ identify goods
Protects firm against unscrupulous competitors who try to deceive/mislead customers
© 2000
Jakki Mohr

36. Trade Secrets Any concrete information that: Has commercial value
useful to company
Secret
generally unknown
Not easily ascertainable
Developed at some expense
Provides competitive advantage
© 2000
Jakki Mohr

37. Trade Secrets (Cont.)
Financial, business, scientific, technical, information including patterns, plans, compilations, formulas, designs, methods, programs, etc.
To be granted “trade secret” protection, firm must take reasonable steps to protect information
© 2000
Jakki Mohr

38. Premised on the notion of confidential relationships
Nondisclosure Agreements (NDAs)
Signer will not disclose information
Noncompete Agreements
Signer will not establish/join a competitor’s firm within a given time frame/territory
Invention assignment clauses
Grant firm rights to employees’ inventions
© 2000
Jakki Mohr

39. Patents or Trade Secret Protection?
Trade Secrets When:
Secret not eligible for patent protection
Product life cycle is short
Patent would be hard to enforce
Secret is not detectable in the product
(via reverse engineering for example)
Patents When:
Product will have long market life
Product can be reverse-engineered
Protection can/will be enforced
Corporate policy
© 2000
Jakki Mohr

40. Effective Proprietary Information Programs
Focus on employees
Morale
Look to senior managers’ behavior
Stand behind security programs
Share information on a need-to-know basis only
Have minimal use of information for power/ politics
© 2000
Jakki Mohr

41. Effective Proprietary Information Programs
Have a stated policy that is enforced via monitoring
Acknowledge communication based on professional/friendship ties
Use caution in sharing information in partnering relationships (including nondisclosures)
Have awareness of competitive intelligence tactics of other firms
© 2000
Jakki Mohr

42. Managing Intellectual Property
An asset base that deserves strategic focus
Patent inventions that fit business strategy
© 2000
Jakki Mohr

43. Economic Espionage Act (1996)
© 2000
Jakki Mohr