Arto Rajala, Dr. Helsinki School of Economics Department of Marketing

Arto Rajala, Dr.Arto Rajala, Dr.Helsinki School of EconomicsHelsinki School of Economics

Department of MarketingDepartment of Marketing

26.3.2004High-tech Marketing - Arto Rajala (HSE)2

OutlineOutline

DefinitionsDefinitions

Characteristics of High TechnologyCharacteristics of High Technology

Commercializing High-Tech ProductsCommercializing High-Tech Products

Identifying and Crossing the ChasmIdentifying and Crossing the Chasm

On the Mainstream MarketOn the Mainstream Market

Managing Marketing Offerings in High-TechManaging Marketing Offerings in High-Tech

ConclusionsConclusions

Appendix: High Technology in FinlandAppendix: High Technology in Finland

DefinitionsDefinitions

Marketing & High TechnologyMarketing & High Technology


Defining MarketingDefining Marketing

MarketingMarketing is a business (management) discipline or is a business (management) discipline or orientationorientation””...performance of business activities that direct goods and ...performance of business activities that direct goods and

services from produces to consumer or user (AMA)”services from produces to consumer or user (AMA)”

Understanding actual and potential customer needs, byUnderstanding actual and potential customer needs, bydeveloping/modifying products, facilitating customer access to developing/modifying products, facilitating customer access to its offerings, attracting and influencing the market, creating its offerings, attracting and influencing the market, creating differential advantages (brand)differential advantages (brand)

Establishing and maintaining customer relationshipsEstablishing and maintaining customer relationships

Managing 4P’s (Product, Price, Place, Promotion)Managing 4P’s (Product, Price, Place, Promotion)

Segmenting Segmenting Targeting Targeting Positioning Positioning


Mass MarketingSame product to all consumers (no segmentation, i.e Coca-Cola)

Segment MarketingDifferent products to one or more segments

(some segmentation, i.e. Marriott)

Niche MarketingDifferent products to subgroups within segments

(more segmentation, i.e. Standard or Luxury SUV’s)

MicromarketingProducts to suit the tastes of individuals and locations

(complete segmentation)

Local Marketing

Tailoring brands/ promotions to local customer groups, i.e Sears

Individual Marketing

Tailoring products and programs to the needs of individual customers, i.e. Dell

Through Through Market SegmentationMarket Segmentation, Companies Divide Large, , Companies Divide Large, Heterogeneous Markets into Smaller Segments that Can be Heterogeneous Markets into Smaller Segments that Can be Reached More Efficiently And Effectively With Products and Reached More Efficiently And Effectively With Products and

Services That Match Their Unique Needs.Services That Match Their Unique Needs.


Segmentation ProcessSegmentation Process

Market Segmentation1. Identify bases for segmenting the market2. Develop segment profiles

Market Targeting3. Develop measure of segment attractiveness4. Select target segments

Market positioning5. Develop positioning for target segments6. Develop a marketing mix for each segment

See more in e.g.Kotler & Armstrong (2003), Principles of Marketing. 10th edition, Prentice Hall.


Requirements for Effective SegmentationRequirements for Effective Segmentation

• Size, purchasing power, profiles of segments can be measured. • Segments can be effectively

reached and served.

• Segments are large or profitable enough to serve.

Measurable Measurable

AccessibleAccessible

SubstantialSubstantial

DifferentialDifferential

ActionableActionable

• Segments must respond differently to different marketing mix elements & programs.• Effective programs can be designed to attract and serve the segments.


Characteristics of High Technology…Characteristics of High Technology…

NoveltyNovelty – advanced compared to the-state-of-the-art – advanced compared to the-state-of-the-art

Knowledge intensityKnowledge intensity – based on radical innovation – based on radical innovationLeading-edge technologyLeading-edge technology

The-state-of-the-art in the field and not widespread acceptance by The-state-of-the-art in the field and not widespread acceptance by those working in the fieldthose working in the fieldTechnology-base is newTechnology-base is new

Cross-industryCross-industry characteristics characteristicsAbility to create/modify new applicationsAbility to create/modify new applications

Dependence on R&D and highly educated peopleDependence on R&D and highly educated people

R&D investments > 4% of turnover (OECD)R&D investments > 4% of turnover (OECD)

usually between 10% - 20%usually between 10% - 20%

Long R&D phase – short market existence Long R&D phase – short market existence


Developer’s vs. user’s view on technologyDeveloper’s vs. user’s view on technologyTechnology adapters = Technology adapters = CUSTOMERSCUSTOMERS

Technology providers = Technology providers = SUPPLIERSSUPPLIERS

Customer perceived valueCustomer perceived valueAdded value to customerAdded value to customer

Knowledge intensityKnowledge intensityDifferent technology settingsDifferent technology settings

Technology life cycleTechnology life cycleFrom product to process technologiesFrom product to process technologies

……Characteristics of High TechnologyCharacteristics of High Technology


A Definition of High-Tech …A Definition of High-Tech …… from Marketing Point of View… from Marketing Point of View

““High-tech is that of the High-tech is that of the leading-edge technologyleading-edge technology

involving a high level of involving a high level of knowledge intensityknowledge intensity, ,

which enhances the which enhances the valuevalue of the product or of the product or

process to the customer in the sense that it process to the customer in the sense that it

provides better quality, lower costs, or it makes the provides better quality, lower costs, or it makes the

use of the object easier compared to the old use of the object easier compared to the old

technology”technology”

High TechnologyHigh Technology

What Makes High-Tech so Difficult for What Makes High-Tech so Difficult for Marketers?Marketers?


Innovations – Innovations – CORECORE of high techonology of high techonology

InnovationInnovation ~ a totally new, or a remarkable enhanced, ~ a totally new, or a remarkable enhanced, product, service or production system/processproduct, service or production system/processProduct innovationsProduct innovations

New, or enhanced innovative products or servicesNew, or enhanced innovative products or services Process innovationsProcess innovations

New information and material flows within and between units and New information and material flows within and between units and organizations as well as innovative principles of working, organizations as well as innovative principles of working, working methods, roles and the tools used in the business working methods, roles and the tools used in the business processprocess

Organizational (managerial) innovationsOrganizational (managerial) innovationsRefers to innovations about administrative, social and Refers to innovations about administrative, social and organizational elements (e.g. new organizational structure, organizational elements (e.g. new organizational structure, management & reward systems, business models) management & reward systems, business models)

Process and organizational innovations differ from product Process and organizational innovations differ from product innovations in terms of the implementation of ideas. innovations in terms of the implementation of ideas.

Process and organizational innovations have an internal focus, Process and organizational innovations have an internal focus, i.e., they are most often implemented within the company i.e., they are most often implemented within the company Product innovations are embedded into products and launched Product innovations are embedded into products and launched into external markets by different individuals and departmentsinto external markets by different individuals and departments


Continuum of InnovationsContinuum of Innovations

Incremental InnovationIncremental InnovationExtension of existing Extension of existing product or processproduct or processProduct characteristics Product characteristics well definedwell definedCompetitive advantage Competitive advantage on low-cost productionon low-cost productionOften developed in Often developed in response to specific response to specific market needmarket needDemand-side marketDemand-side marketCustomer pullCustomer pull

Radical InnovationRadical InnovationNow technology creates Now technology creates new marketnew marketR&D invention in the labR&D invention in the labSuperior functional Superior functional performance over ’old’ performance over ’old’ technologytechnologySpecific market Specific market opportunity or need of opportunity or need of only secondary concernonly secondary concernSupply-side marketSupply-side marketTechnology pushTechnology push


Technology Life-CycleTechnology Life-Cycle

Time

Era of Ferment Design Competition Substitution

Era of IncrementalChange Elaboration of

Dominant Design

TechnologicalDiscontinuity 1


DominantDesign 1

Time

Era of Ferment Design Competition Substitution

Era of IncrementalChange Elaboration of

Dominant Design



DominantDesign 1

Source: Anderson & Tushman (1990)


Nature of High Tech MarketsNature of High Tech Markets

Why are high-tech markets different ?Why are high-tech markets different ?Market uncertaintyMarket uncertainty

Ambiguity about the type and extent of customer Ambiguity about the type and extent of customer needs that can be satisfied by the technologyneeds that can be satisfied by the technology

Technological uncertaintyTechnological uncertaintyNot knowing whether the technology - or the Not knowing whether the technology - or the company providing it - can deliver on its promise company providing it - can deliver on its promise to meet needs, once they have been articulatedto meet needs, once they have been articulated

Competitive volatilityCompetitive volatilityChanges in the competitive landscapeChanges in the competitive landscape


Sources of UncertaintiesSources of Uncertainties

MarketUncertainty

Sources of MarketUncertainty

1. What needs mightbe met by the newtechnology?

2. How will needschange in the future?

3. Will the marketadopt industrystandards?

4. How fast will theinnovation spread?

5. How large is thepotential market?

TechnologicalUncertainty

Sources ofTechnological Uncertainty

1. Will the newproduct function aspromised?

2. Will the deliverytimetable be met?

3. Will the vendorgive high-qualityservice?

4. Will there be sideeffects of theproduct or service?

5. Will the new technology makeours obsolete?

CompetitiveVolatility

Sources of Competitive Uncertainty

1. Who will be the newcompetitors in future?

2. What competitive tacticswill be used?

3. What products will wecompete with

Marketing ofHigh Technology

Products andInnovations

Source: Mohr (2001)


Challenges for MarketingChallenges for Marketing

New designs must win market shareNew designs must win market shareRole of distribution channelRole of distribution channel

Customer perceptionsCustomer perceptions

CompetitionCompetitionFrom higher performance to lower costs From higher performance to lower costs and differentiation through minor design and differentiation through minor design variations and strategic positioning tacticsvariations and strategic positioning tactics

incremental changes take placeincremental changes take place

Segmenting Segmenting Targeting Targeting Positioning Positioning

Commercialising Commercialising High-Tech Products (1/2)High-Tech Products (1/2)

Identifying and Crossing the ChasmIdentifying and Crossing the Chasm


Key IssuesKey Issues

Why so many excellent products fail?Why so many excellent products fail?90-95 % of new product ideas newer reach market90-95 % of new product ideas newer reach market

30-50 % of introduced products seem to fail on the 30-50 % of introduced products seem to fail on the marketmarket

Are there differences between high-tech and Are there differences between high-tech and low-tech product concerning the low-tech product concerning the commercialisation process?commercialisation process?

Critical issue: Time-to-MarketCritical issue: Time-to-Market

Using the ‘Market Development Model’Using the ‘Market Development Model’


Technology Adoption Life-CycleTechnology Adoption Life-Cycle

Pragmatists create the dynamics of high-tech market development.Pragmatists create the dynamics of high-tech market development.

Source: Moore (1998)

AdoptersEarly

14%

Late Majority

33%

Early Majority

33%

Innovators

2,5%

Laggards

16,5%

Techies:Try it!

Visionaries:Get ahead of the herd!

Skeptics:No way!

Conservatives:Hold on!

Pragmatists:Stick with the herd!


Innovators ~ Technology EnthusiastsInnovators ~ Technology Enthusiasts

Primary Motivation:Primary Motivation:Learn about new technologies for their own sakeLearn about new technologies for their own sake

Key Characteristics:Key Characteristics:Strong aptitude for technical informationStrong aptitude for technical informationLike to alpha test new productsLike to alpha test new productsCan ignore the missing elementsCan ignore the missing elementsDo whatever they can to helpDo whatever they can to help

Challenges:Challenges:Want unrestricted access to top technical peopleWant unrestricted access to top technical peopleWant no-profit pricing (preferably free) Want no-profit pricing (preferably free)


Early Adopters ~ VisionariesEarly Adopters ~ Visionaries

Primary Motivation:Primary Motivation: Gain dramatic competitive advantage via Gain dramatic competitive advantage via revolutionaryrevolutionary breakthrough breakthrough

Key Characteristics:Key Characteristics:Great imaginations for strategic applicationsGreat imaginations for strategic applicationsAttracted by high-risk, high-reward propositionsAttracted by high-risk, high-reward propositionsWill commit to supply the missing elementsWill commit to supply the missing elementsPerceive order-of-magnitude gains — so not price-Perceive order-of-magnitude gains — so not price-sensitivesensitive

Challenges:Challenges:Want rapid time-to-marketWant rapid time-to-marketDemand high degree of customization and supportDemand high degree of customization and support


Early Majority ~ PragmatistsEarly Majority ~ Pragmatists

Primary Motivation:Primary Motivation:Gain productivity improvements via Gain productivity improvements via evolutionaryevolutionary changechange

Key Characteristics:Key Characteristics:Astute managers of mission-critical applicationsAstute managers of mission-critical applicationsUnderstand real-world issues and tradeoffsUnderstand real-world issues and tradeoffsFocus on proven applicationsFocus on proven applicationsLike to go with the market leaderLike to go with the market leader

Challenges:Challenges:Insist on good references from trusted colleaguesInsist on good references from trusted colleaguesWant to see the solution in production at the Want to see the solution in production at the reference sitereference site


Late Majority ~ ConservativesLate Majority ~ Conservatives

Primary Motivation:Primary Motivation:Just stay even with the competition.Just stay even with the competition.

Key Characteristics:Key Characteristics:Better with people than technologyBetter with people than technologyRisk averse Risk averse Price-sensitive Price-sensitive Highly reliant on a single, trusted advisorHighly reliant on a single, trusted advisor

Challenges:Challenges:Need completely pre-assembled solutionsNeed completely pre-assembled solutionsWould benefit from value-added services but do not Would benefit from value-added services but do not want to pay for themwant to pay for them


Laggards ~ SkepticsLaggards ~ Skeptics

Primary Motivation:Primary Motivation:Maintain status quo.Maintain status quo.

Key Characteristics:Key Characteristics:Good at debunking marketing hypeGood at debunking marketing hypeDisbelieve productivity-improvement argumentsDisbelieve productivity-improvement argumentsBelieve in Believe in the law of unintended consequencesthe law of unintended consequencesSeek to block purchases of new technologySeek to block purchases of new technology

Challenges:Challenges:Not a customerNot a customerCan be formidable opposition to early adoptionCan be formidable opposition to early adoption


The Logic of Commercialising High-The Logic of Commercialising High-Tech ProductsTech Products

Seeding new products to TechisSeeding new products to TechisTechis help and educate VisionariesTechis help and educate VisionariesVisionaries serve good references for Visionaries serve good references for the Pragmatiststhe PragmatistsBecoming the market leader by serving Becoming the market leader by serving Pragmatists and setting standardsPragmatists and setting standardsLeverage success - generate sufficient Leverage success - generate sufficient volume & experience -- reliable volume & experience -- reliable products which are also cheap enough products which are also cheap enough to Conservativesto ConservativesLeaving Sceptics to their on devicesLeaving Sceptics to their on devices


Discovering the ChasmDiscovering the Chasm

High-tech products are warmly welcome in an High-tech products are warmly welcome in an early market but then they usually fall into a early market but then they usually fall into a chasm (sales will falter and often plummet)chasm (sales will falter and often plummet)

Visionaries don’t see enough of a head startVisionaries don’t see enough of a head startPragmatists see no reason to start yetPragmatists see no reason to start yet

Early Market Mainstream Market

Chasm



Crossing the ChasmCrossing the Chasm

High-tech paradox…High-tech paradox…80% of many solutions but none of 100%80% of many solutions but none of 100%Pragmatists won't buy 80% solutions !!!Pragmatists won't buy 80% solutions !!!

High-tech myopia…High-tech myopia…Committing to the most common enhancement requestsCommitting to the most common enhancement requestsNever Never finishingfinishing any one customer's wish-list any one customer's wish-list



Successful CrossingSuccessful Crossing

Understanding the difference between Understanding the difference between visionariesvisionaries and and pragmatistspragmatists

The former is willing to bet ‘on the come’The former is willing to bet ‘on the come’The latter want to see the solutions in production (i.e. The latter want to see the solutions in production (i.e. see the whole product before they by it)’ see the whole product before they by it)’

Clear focus on a single beachheadClear focus on a single beachheadUse a niche strategy Use a niche strategy a full solution for one niche a full solution for one nichePutting all eggs in one basket (e.g. Nokia in 1990s)Putting all eggs in one basket (e.g. Nokia in 1990s)

Global focus with local applicapilityGlobal focus with local applicapility‘‘Think global act local’ Gaining the acceptance within Think global act local’ Gaining the acceptance within a mainstream marketa mainstream marketGaining the acceptance within a mainstream marketGaining the acceptance within a mainstream market

Commercialising Commercialising High-Tech Products (2/2)High-Tech Products (2/2)

On the Mainstream MarketOn the Mainstream Market


Market Development ModelMarket Development Model

BowlingAlley

Chasm

Tornado

TotalAssimilation

Main Street

EarlyMarket

Mainstream Market



Beyond the Chasm Beyond the Chasm ~ Assessing Mass Market~ Assessing Mass Market

The Bowling AlleyThe Bowling Alleya period of niche-based adoption in advance of the a period of niche-based adoption in advance of the general marketplace, driven by compelling customer general marketplace, driven by compelling customer needs and the willingness of vendors to craft niche-needs and the willingness of vendors to craft niche-specific whole productsspecific whole products

The TornadoThe Tornadoa period of mass-market adoption, when the general a period of mass-market adoption, when the general marketplace switches over to the new infrastructure marketplace switches over to the new infrastructure paradigmparadigm

Main StreetMain Streeta period of aftermarket development, when the base a period of aftermarket development, when the base infrastructure has been deployed and the goal now is infrastructure has been deployed and the goal now is to flesh out its potentialto flesh out its potential

End of LifeEnd of Lifewholly new paradigms (technology) come to marketwholly new paradigms (technology) come to market


Technology vs. Category Life CyclesTechnology vs. Category Life Cycles

Product CategoryLife Cycle

(Ongoing sales)

Technology Adoption Life Cycle(First time adopters)

Market shareis captured here

Market share is converted intoserved installed base here



Four Marketing FrameworksFour Marketing Frameworks

DealDriven

NicheMarketing

MassMarketing

1 on 1Marketing



Product MixProduct Mix Offerings Offerings

ApplicationSystems

• Photography

• Color printing

• Wireless telephony

• Word processing

• Internetworking

• Worldwide Web

AftermarketProducts

• Film, lenses

• Cartridges, paper trays

• Batteries, modems

• Suite upgrades

• Performance tools

• Plug-ins


Core Products

• Cameras

• Inkjet printers

• Cell phones

• Word processors

• Routers, switches

• Browsers/servers


Service Service Mix Mix OfferingsOfferings

ProfessionalServices

• Consultative selling

• Business process reengineering

• Systems integration

• Project management

• Custom training

• System conversion

• Contract management

TransactionServices

• Order processing

• Maintenance

• Facilities management

• Outsourcing

• Upgrade management

• Broadcast data feeds

• Proprietary database access privileges

DistributionServices

• Competitive selling

• System configuration

• Implementation support

• Train-the-trainers

• Customer service

• Technical support

• Warranty


Managing Marketing Offerings Managing Marketing Offerings in High-Tech Firmsin High-Tech Firms

Are the 4 P’s still relevant?Are the 4 P’s still relevant?


What is a product?What is a product?

Installation

Aftersalesservices

Warranty

Augmented product

Actual product

Core product

Potential product

Corebenefit or

service

Packaging

Features

StylingQuality

Brandname

Deliveryand credit


Evolution of the Whole ProductEvolution of the Whole Product

Different whole product priorities at different stages of the life cycle.Different whole product priorities at different stages of the life cycle.

Mostlycustom

work

Plug & playsome

customization

Fullyintegrated

Masscustomized



What is a Marketing Offering?What is a Marketing Offering?

Problems of (business) customers are often complex Problems of (business) customers are often complex and can rarely be solved by a physical product aloneand can rarely be solved by a physical product alone

Call for marketer’s problem solving abilities and adviceCall for marketer’s problem solving abilities and adviceAbility to make promises Ability to make promises value proposition value propositione.g. each € spent on the purchase of ERP (Enterprise e.g. each € spent on the purchase of ERP (Enterprise Resource Planning) software Resource Planning) software further 5 € are spent on further 5 € are spent on service and consulting in the choice and implementation of the service and consulting in the choice and implementation of the systemsystem

Offerings often related to quality Offerings often related to quality misused term misused termFive elements of a Marketing OfferingFive elements of a Marketing Offering ... ...

Product, Services, Logistics, Advice, and AdaptationProduct, Services, Logistics, Advice, and Adaptation

Offerings also depend on the customer’s demand Offerings also depend on the customer’s demand ability !!!ability !!!


Elements of an OfferingElements of an Offering

Product

Service

Logistics

Advice Adaptation

Source: Ford et al. (2002)


ProductProductss

A physical part of the offering – what customers A physical part of the offering – what customers see and feel after the purchasesee and feel after the purchase

Products are often wrongly considered by many Products are often wrongly considered by many customers and suppliers to be the most customers and suppliers to be the most important element, but...important element, but...

... usually the product element is relatively ... usually the product element is relatively unimportantunimportant

Does not itself have intrinsic value ... Does not itself have intrinsic value ... ””There is no market for quarter inch drills, but there is There is no market for quarter inch drills, but there is an enormous market for quarter inch holes.”an enormous market for quarter inch holes.”


ServicesServices

Are often the major part of the offerings, Are often the major part of the offerings, because ...because ...

products have little value without the associated products have little value without the associated services (e.g. paper machine & automation software)services (e.g. paper machine & automation software)

customers purchase a service instead of a product customers purchase a service instead of a product (e.g. leasing vs. buying cars)(e.g. leasing vs. buying cars)

companies are depended on ’external’ technologies companies are depended on ’external’ technologies (e.g. outsourcing design activities in automotive and (e.g. outsourcing design activities in automotive and fashion industries; contract manufacturing in fashion industries; contract manufacturing in electronic and telecommunication sectors; electronic and telecommunication sectors; maintenance in aircraft industry)maintenance in aircraft industry)


LogisticsLogistics

Are not just the ways in which the other Are not just the ways in which the other elements of the offering are delivered, but...elements of the offering are delivered, but...

often the most vital element of an offering for often the most vital element of an offering for competitive success competitive success DIFFERENTIATION (JIT, DIFFERENTIATION (JIT, zero-inventory, MRO – maintenance, repair & zero-inventory, MRO – maintenance, repair & operations in-plantoperations in-plant

Important also to advertising agencies, Important also to advertising agencies, accountants, trainers, and consultantsaccountants, trainers, and consultants

Relationships with competitors to advice and service Relationships with competitors to advice and service clients in other countriesclients in other countries


AdviceAdvice

Concerns all the activities which are aimed at Concerns all the activities which are aimed at increasing the customer’s understanding increasing the customer’s understanding

reducing the perceived uncertainty of the reducing the perceived uncertainty of the customerscustomers

Suppliers skills in communication its offering and Suppliers skills in communication its offering and influencing its customersinfluencing its customers

Two-way process in business relationshipsTwo-way process in business relationshipsRReducing supplier’s uncertainties – how the customer educing supplier’s uncertainties – how the customer will use the offeringwill use the offering


AdaptationAdaptation

Occurs when a supplier makes a change to any Occurs when a supplier makes a change to any element of its offering that it element of its offering that it would not normally would not normally do for other customersdo for other customers

Important to demonstrate commitment to a Important to demonstrate commitment to a relationshiprelationship

Results in considerable costs & disruption to a Results in considerable costs & disruption to a company’s operationscompany’s operations

Translating customer problems into offerings that can Translating customer problems into offerings that can provide solutions for different customers with the provide solutions for different customers with the maximum commonality maximum commonality Need for close internal Need for close internal coordinationcoordination


Matching Offerings to ProblemsMatching Offerings to Problems

Offering < ProblemOffering < ProblemOnly a part of the problem is solved by the offeringOnly a part of the problem is solved by the offering

Technological, resource or cost problems (supplier)Technological, resource or cost problems (supplier)Poor diagnostics of the problem (customer or supplier)Poor diagnostics of the problem (customer or supplier)

Offering = ProblemOffering = ProblemSolution exactly solves the problemSolution exactly solves the problemOptimal quality – contractual Optimal quality – contractual

Offering > ProblemOffering > ProblemOffering does more than solve the original problem Offering does more than solve the original problem Customer Customer delightdelightDemonstrating commitment & building a relationshipDemonstrating commitment & building a relationship

Offering <> ProblemOffering <> ProblemSolution exceeds the problem in some aspects but fails to meet Solution exceeds the problem in some aspects but fails to meet requirements in others (e.g. over-standardization, poor requirements in others (e.g. over-standardization, poor communication)communication)


Product PlatformProduct Platform

Product platform is a Product platform is a collection of common elements, collection of common elements, particularly the underlying technology elements, particularly the underlying technology elements, implemented across a range of productsimplemented across a range of products..

It is primarily a definition for planning, decision making, and It is primarily a definition for planning, decision making, and strategic thinking.strategic thinking.

Especially important in Especially important in high-tech firmshigh-tech firms in which multiple in which multiple products are related by common technology.products are related by common technology.

Platform defines the cost structure, capabilities, and Platform defines the cost structure, capabilities, and differentiation of the resulting products.differentiation of the resulting products.

Separating product platform strategy from product line Separating product platform strategy from product line and individual product strategy, a company can and individual product strategy, a company can concentrate on its most important strategic issues.concentrate on its most important strategic issues.


Product Platform Product Platform

Element A

Element B

Element C

Product 1

Product 3

Product 2

Product 1b

Product 1a

Product 4

Segment III

Segment II

Segment I

Uniqueproduct

elements

Commonplatformelements

Source: McGrath (2000, 55)


Main CharacteristicsMain Characteristics

Product platform is Product platform is NOTNOT a product! a product!... but the lowest common determinator of relevant ... but the lowest common determinator of relevant technology in a set of products or product linetechnology in a set of products or product line

Product failures in high-tech firms often caused by Product failures in high-tech firms often caused by incomplete product platform strategyincomplete product platform strategyNature of product platforms varies across industriesNature of product platforms varies across industries

e.g. in PC it consists of the microprocessor e.g. in PC it consists of the microprocessor combined with its operating system, packaging, combined with its operating system, packaging, power supply, memory, disk drives, monitors, and power supply, memory, disk drives, monitors, and interfacesinterfacese.g. it can be a chemical compound combined with e.g. it can be a chemical compound combined with with the manufacturing processwith the manufacturing process

ConclusionsConclusions

What have we learned?What have we learned?


‘‘Current Wisdom’ on High-Tech MarketingCurrent Wisdom’ on High-Tech Marketing

Interaction between marketing and R&DInteraction between marketing and R&DCoping with the high levels of technological and market uncertaintyCoping with the high levels of technological and market uncertainty

Marketing capabilities & business competenciesMarketing capabilities & business competencies

Product development processesProduct development processesRapid changes in technology and market settingsRapid changes in technology and market settings

Shortening the ‘breakthrough-time’Shortening the ‘breakthrough-time’

Market offering and product platform approachesMarket offering and product platform approaches

Increasing importance of services Increasing importance of services Emphasise technical support and after sales serviceEmphasise technical support and after sales service

Differentiating from competitorsDifferentiating from competitorsBuilding strong relationships with suppliers, channels and customersBuilding strong relationships with suppliers, channels and customers

Analysing value systems Analysing value systems Networks, strategic alliances, partnerships Networks, strategic alliances, partnershipsRely on qualitative rather than quantitative approaches for market Rely on qualitative rather than quantitative approaches for market researchresearch

What the customers really value?What the customers really value?


What does this mean?What does this mean?

The ‘High-Tech’ label is not ‘once and for all’, so today’s The ‘High-Tech’ label is not ‘once and for all’, so today’s hot new technologies becomes tomorrow’s basic hot new technologies becomes tomorrow’s basic technology technology Surprisingly, high-tech marketing is not so different from Surprisingly, high-tech marketing is not so different from that of low-tech as often claimed … that of low-tech as often claimed … … … but there is a special need for more marketing focus but there is a special need for more marketing focus in high-tech context because ...in high-tech context because ...

Customer’s view is easily overlookedCustomer’s view is easily overlookedTo avoid developing a product which are ‘engineer's dilemma but To avoid developing a product which are ‘engineer's dilemma but marketer’s nightmare’marketer’s nightmare’

Knowing competitors well enoughKnowing competitors well enoughGlobal view of high-tech businessGlobal view of high-tech businessCross-industry effects and convergence of different Cross-industry effects and convergence of different technologiestechnologiesFocusing more and more on servicesFocusing more and more on services


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Thank You !Thank You !

[email protected]@hkkk.fi

mailto:[email protected]

APPENDIXAPPENDIX

High Technology in FinlandHigh Technology in Finland


Some statistics…Some statistics…http://tilastokeskus.fi/tk/yr/ttt_huippu.html & http://www.research.fi/

Turnover of high-tech companies ~16 billion € (1999)Turnover of high-tech companies ~16 billion € (1999)

Share of high-tech in manufacturing output 27 % [USA 32 %]Share of high-tech in manufacturing output 27 % [USA 32 %]

Average growth of production/year ~31 % between 1995-1999Average growth of production/year ~31 % between 1995-1999

Employed 42,000 people (1999) [30,500 (-95, + 8 % /year]Employed 42,000 people (1999) [30,500 (-95, + 8 % /year]

Number of R&D stuff Number of R&D stuff 73,00073,000 (2003) [47,000 (-91)] (2003) [47,000 (-91)]

1,257 1,257 doctoral dissertations (2003) [ doctoral dissertations (2003) [524 524 (-91)](-91)]

20.6 20.6 % of total export (2002) % of total export (2002) 9.79.7 billion euro [ billion euro [6.0 6.0 % in 1991]% in 1991]

16.0 % of total import (2002)16.0 % of total import (2002) 5.7 5.7 billion euro [billion euro [12.1 12.1 % in 1991]% in 1991]

R&D investments (2003) R&D investments (2003) 3.43 3.43 %% of GNP ( of GNP (4.9 4.9 billion euro of which private billion euro of which private sector accounted for sector accounted for 70 70 %)%)

2,575 2,575 patent applications (2002) [6,762 (1995)]patent applications (2002) [6,762 (1995)]

Government budget (2004)Government budget (2004) for R&D 1,538 M€ (Universities 27 %, for R&D 1,538 M€ (Universities 27 %,

Tekes 26 %) i.e. 1.0 % of GNP and 4.5 % of the budgetTekes 26 %) i.e. 1.0 % of GNP and 4.5 % of the budget

http://tilastokeskus.fi/tk/yr/ttt_huippu.html

http://www.research.fi/




R&D expenditure by sectorR&D expenditure by sector


R&D personell by sectorR&D personell by sector


R&D funding in the state budget in 2004R&D funding in the state budget in 2004


Finnish patent applicationsFinnish patent applications


GDP share of R&D expenditure (%) GDP share of R&D expenditure (%)


Major High-Tech Sectors in FinlandMajor High-Tech Sectors in Finland

ElectronicsElectronics

TelecommunicationTelecommunication

Data and Office EquipmentData and Office Equipment

SoftwareSoftware

BiotechnologyBiotechnology

Environmental technologyEnvironmental technology

High technology is a problem from industry classification High technology is a problem from industry classification point of view - no explicit statistic available!point of view - no explicit statistic available!

ICT- Information & Telecommunication Cluster

“Big expectations”


High technology exports and imports: Finland's main trade partners in 2002 High technology exports and imports: Finland's main trade partners in 2002

Source: www.research.fi

Exports € Million % Imports € Million %

United Kingdom 1,397.6 14.4 United States 1,203.7 21.1

Germany 707.9 7.3 Germany 661.1 11.6

France 623.7 6.4 Japan 545.1 9.6

United States 607.7 6.3 United Kingdom 466.3 8.2

Russia 590.7 6.1 China 449.5 7.9

United Arab Emirates 487.8 5.0 Sweden 265.2 4.7

Italy 427.1 4.4 Estonia 208.3 3.7

Sweden 337.9 3.5 Ireland 195.6 3.4

China 316.5 3.3 Netherlands 163.9 2.9

Switzerland 269.3 2.8 Malaysia 150.2 2.6

Netherlands 269.0 2.8 Taiwan 137.3 2.4

Saudi Arabia 237.1 2.4 South Korea 125.1 2.2

Japan 231.0 2.4 France 124.2 2.2

Ireland 198.5 2.0 Denmark 115.0 2.0

Thailand 183.6 1.9 Switzerland 85.2 1.5

Hong Kong 181.3 1.9 Singapore 81.4 1.4

Greece 179.1 1.8 Italy 74.6 1.3

Poland 174.1 1.8 Hungary 74.5 1.3

Spain 171.9 1.8 Czech Republic 62.3 1.1

Denmark 143.9 1.5 Belgium 58.0 1.0

Total 7,735.9 79.6 Total 5,246.5 92.1

Other countries 1,977.3 20.4 Other countries 449.5 7.9

Total exports

9,713.2 100.0 Total imports 5,696.0 100.0




Source: Statistics Finland


Factors behind the Finnish success Factors behind the Finnish success

Strong technology-base (Forest & Metal/Engineering Strong technology-base (Forest & Metal/Engineering Industries)Industries)High level of R&D investments (public vs. private)High level of R&D investments (public vs. private)Focusing on core capabilities - outsourcing others Focusing on core capabilities - outsourcing others (Nokia)(Nokia)Technological co-operation between companies, Technological co-operation between companies, research co-operation between companies and research co-operation between companies and universities - Networking (Technology Villages)universities - Networking (Technology Villages)Educated labour force (75% of 25-35 years old have a Educated labour force (75% of 25-35 years old have a university or vocational training)university or vocational training)Rapid globalisation - ‘born global’ companiesRapid globalisation - ‘born global’ companiesAccess to venture capital fundingAccess to venture capital funding

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Arto Rajala, Dr. Helsinki School of Economics Department of Marketing

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