Transcript Document

Book Review Three
(Chapter 6,7,8)
IS8500, Fall 2014
Group 3
Eric Palmer
Sorna Dhanabalan
Michael Sims
Lee Duncan
Irene Murigu-Hengerer
Chapter 6: Assessing Future Markets
3 Approaches
• Diffusion and Adoption
• Exploration and Learning
• Triangulation for Insights
Chapter 6: Assessing Future Markets
DIFFUSION AND ADOPTION
New Product Characteristics Determine Gestation Period
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Perceived Advantages - Relative to best available alternative
Risks - Performance, Economic Loss, Changing Standards
Barriers to Adoption - Investment in previous generation tech., Regulatory restrictions
Opportunities to Learn and Try - Do buyers know benefits? Will they try it?
Chapter 6: Assessing Future Markets
Chapter 6: Assessing Future Markets
Rate of Adoption / Diffusion
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Depends on number of buyers who progress through the adoption process:
AWARENESS  KNOWLEDGE  INTEREST  EVALUATION  TRIAL  ADOPTION
Innovators
(technology
enthusiasts)
Early Adopters
(visionaries)
Laggards
(tradition bound)
Early Majority
(pragmatists)
Late Majority
(conservatives)
Chapter 6: Assessing Future Markets
CONTINUOUS EXPLORATION OF MARKETS
• What are we trying to learn about?
• What decisions have to be made and what alternatives should be considered?
Chapter 6: Assessing Future Markets
Interpreting and Acting
• Interpreting means “arriving at a shared meaning” about the emerging market
– The emphasis on shared meaning is to avoid compartmentalized thinking or departmental silos
based decisions
– “Information Dissemination” is the critical input to derive tangible “Usage of Market Information”
in the market learning process
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Use the market information from interpretation to make informed decisions and
actions
– The results of the actions are critical feedback to organizational memory for future strategies and
continuous improvements
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Example:
– Cloud based services is inevitable as it is niche, competitive and cost effective, and enables
corporates to focus on their core business instead of IT services (Interpreting)
– Strategic Decisions to invest keeping “Data” in-house (for Real-time BI and Analytics) but moving
applications to niche cloud providers (Acting)
Chapter 6: Assessing Future Markets
Triangulation of Market Insights
• Why Triangulation?
– Traditional or conventional methods work only for incremental innovation and
formal stage-gate based products and technologies
• Example: Surveys, Concept Tests, Focus Groups, Market Stimulation Studies etc.
– “Triangulation with Multiple Methods” will work when capturing market insights
for embryonic but disruptive and discontinuous emerging markets
– Assessing future markets is “arts and science”.
– Multiple methods will help capturing the “usage behavior and patterns” of lead
users and beyond for products and technologies
Chapter 6: Assessing Future Markets
Triangulation - Approaches and Methods
• Learning from Lead Users
– Start with prospective consumers, and then strategize the product/technology development
for widespread market consumption
– Collect Lead User Analysis Data with usage, patterns and effectiveness on how it solves
their problems
• Types of Lead Users
– “Prototype” Users
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Prospect users that are in involved/experimented in “concepts” or “prototype” models. Example: Auto Makers working
with Race Car Builders for lead users to test new brake system
– Users in “analogous” Markets
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Prospect users share similar problem or similar application contributing from a different market. Example: Healthcare firm
finds lead user for antibacterial products tested in veterinary space
– Users with “core or common attributes” in general problem
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Example: Refrigerators industry finds lead users in Computers industry for cooling
Chapter 6: Assessing Future Markets
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Learning from Latent Needs
– Technologies could help latent needs that are not
even foreseen by neither lead users or nor
consumers
– Find the indirect evidence of market needs through
immersion into customer’s world and experience in
terms of their problem solving
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Multiple Methods
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Problem Identification
Story Telling
Observations
Anticipation of Inflections
Methodical Guesswork
Tracking Leading Indicators
Diffusion Modeling
Information Acceleration
Book Page Scan, Credit: Wharton on Managing Emerging Technologies
Chapter 6: Assessing Future Markets
Triangulation of Insights – 2010 to Present, Example Cases
• (2013) Cable/Telecom/Media industry loosing out to Google Fiber
– Most of the cable industries thought Set Top Boxes would still dominate at home for watching TV
and Video. They also thought FTP (Fiber To Premise) can wait as HFC (Hybrid Fiber Coax) cable
could still meet bandwidth
– Google Fiber is great example for cable industries that it *missed the calculation* in collecting
triangulated analysis from customers, latent needs for connected homes
• Compare this 2013 Fiber scenario to Corning, missed its fiber for long distance
telecommunications earlier
• Latent needs of Mobile/Smart Phone based beyond its OS
– Example: Text/SMS, Cameras to share pictures, via Social Media Mobile Apps.
• Anticipating Inflections and Tracking Leading Indicators
– Real-time BI and Analytics through “Big Data”
– iPhone 6 Launch collects real-time customer analysis data
Chapter 7: Technology Strategy in Lumpy Markets
Introduction: Lumpy markets & Tech strategy
• “Lumpy” markets:
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Unevenly distributed sets of customers
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Distributed on features/diff
preferences
• Importance: Target diff markets & Product
dev.
• Attributes restricted by tech barriers/
resources
Lumpiness of Segmented Markets:
• Customers don’t pay for technology
• Tech value only if meets customer
needs
• ‘Dimension of merit ‘=valued attribute
• Products=‘transponders’ translate tech
into attribute sets
• Strategy=’most favored set’
• Small changes in attributes=shifts -/+
customers (lumps in market)
Chapter 7: Technology Strategy in Lumpy Markets
Fig 7.1 Highly simplified view of
technological barriers for laptop computers
2 attributes:
• X axis - Ruggedness
• Y axis - Portability
• Technology barriers that limit attributes:
• Components (light blue line)
• Materials (purple line)
• Energy (light green line)
Figure 7.1 Day, G. S., Schoemaker, P. J. H., & Gunther, R. E. (2000) The Technology Envelope for Laptop Computers , 7.25 x 10cm. From
Day, G. S., Schoemaker, P. J. H., & Gunther, R. E. (pg. 155), Wharton on managing emerging technologies. New York: Wiley.
Chapter 7: Technology Strategy in Lumpy Markets
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Fig 7.2: Introduces notion of segments
based on preferences (market lumpiness)
3 kinds of laptop users: executive, sales &
service (each with different needs)
At specified price:
– Each group of users 1-6 will buy
different combinations of features
– Each segment would be prepared to
make different tradeoffs
Executives prepared to buy along red line
AB; Sales along yellow Line CD & Service
group along Blue line EF
Figure 7.2 Day, G. S., Schoemaker, P. J. H., & Gunther, R. E. (2000) Lumpy Market Segments for Laptop Computers, 7.25 x 10cm. From
Day, G. S., Schoemaker, P. J. H., & Gunther, R. E. (pg. 155), Wharton on managing emerging technologies. New York: Wiley.
Chapter 7: Technology Strategy in Lumpy Markets
Pushing Tech Barriers in lumpy markets
• Interaction-markets & tech barriers
• Deploy emerging tech = +/- barriers
• Enable access to out-of-reach markets
• ‘Waves of creative destruction’
Emerging tech->new design-> new
attributes-> dominance-> new market
• ‘Disruptive’ technologies-initially fail;
improvements e.g. heavy->light laptop
Chapter 7: Technology Strategy in Lumpy Markets
To understand market lumps, companies must have insight into 3 conditions:
1. Attributes that differentiate one offering from another
2. How sets of attributes appeal to diff market segments
3. Understand influence of tech barriers on attributes & segments
Attribute matrix tool: Attributes organized in matrix based on customer reactions and
intensity of reactions: 3 components:
1.Basic: taken for granted; must be included or firm precludes firm but no value
2.Discriminators: Distinguishes providers; both –/+ attributes (-ve slow internet speed)
3.Energizing factors: Draws sharp distinctions; usually new features or functionalities;
energizing features w/ dramatic influence on customers propensity to purchase product.
Chapter 7: Technology Strategy in Lumpy Markets
Recap:
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Customers don’t pay for tech; value
if satisfies customers needs
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Understand favored attributes =
increased market share
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Even today, companies strive to:
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understand market lumpiness
& opportunities
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extend barriers via current/
emerging technologies
Updates to strategy in lumpy markets:
• Bachmann, R., Caballero, R. J., & Engel, E. A.
(2013). Aggregate Implications of Lumpy
Investment: New Evidence and a DSGE Model.
American Economic Journal: Macroeconomics,
5(4), 29-67.
doi:http://dx.doi.org.proxy.kennesaw.edu/10.125
7/mac.5.4.29
• Worrell, c., & 'amico, e. (2013). subcontractors
build On niches in 'lumpy' market. ENR:
Engineering News-Record, 271(10), NY21.
• Brito, D. L., & Rosellon, J. (2011). Lumpy
Investment in Regulated Natural Gas Pipelines:
An Application of the Theory of the Second Best.
Networks And Spatial Economics, 11(3), 533-553.
doi:http://dx.doi.org.proxy.kennesaw.edu/10.100
7/s11067-009-9125-8
Chapter 7: Technology Strategy in Lumpy Markets
• Creation of “Barrier
Register”
• Investing in Options
1. Positioning Options
2. Scouting Options
Chapter 7: Technology Strategy in Lumpy Markets
• Identifying Positioning Options to Exploit Lumpy
Markets
– Single Niche Domination
– Niche Fusion
– Creating a New Technology Envelope
Chapter 7: Technology Strategy in Lumpy Markets
Scouting Options for Applying New Technologies
• Firms are pursuing technology and want to find
valuable market applications.
• Dimensional Search
Chapter 7: Technology Strategy in Lumpy Markets
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Understanding the lumpiness of markets and market impact of pushing technology
barriers
Opportunities can be discovered through an options-driven, experimental approach
Technology Register gives additional framework for identifying technology barriers that
inhibit access to specific segments.
Technology Register can be used to identify and undertake that positions it to use an
emerging technology to occupy that segment.
Emerging technology cannot be undertaken without understanding the relation between
technology trajectories and barriers and the opportunity spaces created by the
lumpiness of the firm’s market.
Chapter 8: Commercializing Emerging Technologies
Through Complementary Assets
• Mergenthaler Linotype
– In 1886 the company created a automatic typeset machine called the linotype.
– It dominated the market for over 60 years and was able to be successful
despite new technological changes
• Three Challenges of Commercialization
– Change in complementary assets
– Change in customers
– Change in competition
Chapter 8: Commercializing Emerging Technologies Through
Complementary Assets
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Change in complementary assets
– Possess unique additional assets Resources
to distribution
• Service capability
• Customer relationships
• Supplier relationship
• Complementary products
– Ex: In 1923, Mergenthaler had valuable
complementary assets from their extensive
library of typefaces
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Change in customers
– Emerging technologies not only
revolutionize the firms, but the customers.
– When developing a commercialization
strategy, a firm should examine the impact
on customers.
– New technologies create new customer
segments which have different needs.
– Traditional market research is not effective
for new technologies.
• Hard to determine customer needs.
Chapter 8: Commercializing Emerging Technologies Through
Complementary Assets
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Changes in Competition
– New technologies bring new competition
– Identify the capabilities and incentives of the
new competition.
• Determine how new competition is
different from traditional competition.
• Get a better understanding of new
competition from social networks.
– Attend meetings
– Attend Technical conferences
– Attend Trade shows
– Stay updated through email
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Applying the Framework: Digital Imaging
– Complementary Assets
• Traditional Cameras are bought in specialty shops.
• Digital Cameras are bought in computer stores as
peripherals and utilize image software to print on
film, paper, or electronically
– Customers
• A digital camera can use lower quality images,
transfer data on the internet, and at higher
speeds.
– Competitors
• Consumer electronics, graphic arts, computer
hardware, and computer software.
Chapter 8: Commercializing Emerging Technologies Through
Complementary Assets
• Three Hurdles of Emerging Technologies
– Decision to invest in developing a new technology
• Failed Technologies and Investment under Uncertainty
(Eggers, 2012)
– Using investments to develop or acquire a new technology
– Challenge of commercializing a technology
Questions
References
Bachmann, R., Caballero, R. J., & Engel, E. A. (2013). Aggregate Implications of Lumpy Investment: New
Evidence and a DSGE Model. American Economic Journal: Macroeconomics, 5(4), 29-67.
doi:http://dx.doi.org.proxy.kennesaw.edu/10.1257/mac.5.4.29
Brito, D. L., & Rosellon, J. (2011). Lumpy Investment in Regulated Natural Gas Pipelines: An Application of the
Theory of the Second Best. Networks And Spatial Economics, 11(3), 533-553.
doi:http://dx.doi.org.proxy.kennesaw.edu/10.1007/s11067-009-9125-8
Day, G. S., Schoemaker, P. J. H., & Gunther, R. E. (2000). Wharton on managing emerging technologies. New
York: Wiley.
Eggers, J. P. (2012). Falling Flat: Failed Technologies and Investment under Uncertainty. Administrative Science
Quarterly, 57(1), 47-80. doi:10.1177/0001839212447181
Minch, R. (2008, March 31). Wharton Chapter 7 - Technology Strategy in Lumpy Market Landscapes .
Retrieved September 18, 2014, from Alan's Emerging Technologies Blog: http://alanghunt.blogspot.com/
Worrell, c., & 'amico, e. (2013). subcontractors build On niches in 'lumpy' market. ENR: Engineering NewsRecord, 271(10), NY21.