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Book Review Three (Chapter 6,7,8) IS8500, Fall 2014 Group 3 Eric Palmer Sorna Dhanabalan Michael Sims Lee Duncan Irene Murigu-Hengerer.

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Presentation on theme: "Book Review Three (Chapter 6,7,8) IS8500, Fall 2014 Group 3 Eric Palmer Sorna Dhanabalan Michael Sims Lee Duncan Irene Murigu-Hengerer."— Presentation transcript:

1 Book Review Three (Chapter 6,7,8) IS8500, Fall 2014 Group 3 Eric Palmer Sorna Dhanabalan Michael Sims Lee Duncan Irene Murigu-Hengerer

2 Chapter 6: Assessing Future Markets 3 Approaches Diffusion and Adoption Exploration and Learning Triangulation for Insights

3 Chapter 6: Assessing Future Markets DIFFUSION AND ADOPTION New Product Characteristics Determine Gestation Period 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?

4 Chapter 6: Assessing Future Markets

5 Rate of Adoption / Diffusion Depends on number of buyers who progress through the adoption process: AWARENESS  KNOWLEDGE  INTEREST  EVALUATION  TRIAL  ADOPTION Innovators (technology enthusiasts) Early Adopters (visionaries) Early Majority (pragmatists) Late Majority (conservatives) Laggards (tradition bound)

6 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?

7 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 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 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)

8 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

9 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 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 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 Example: Refrigerators industry finds lead users in Computers industry for cooling

10 Chapter 6: Assessing Future Markets 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 Multiple Methods – 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

11 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

12 Chapter 7: Technology Strategy in Lumpy Markets Introduction: Lumpy markets & Tech strategy “Lumpy” markets: Unevenly distributed sets of customers 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)

13 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.

14 Chapter 7: Technology Strategy in Lumpy Markets 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.

15 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

16 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.

17 Chapter 7: Technology Strategy in Lumpy Markets Recap: Customers don’t pay for tech; value if satisfies customers needs Understand favored attributes = increased market share Even today, companies strive to: understand market lumpiness & opportunities 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), doi:http://dx.doi.org.proxy.kennesaw.edu/ /mac 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), doi:http://dx.doi.org.proxy.kennesaw.edu/ /s

18 Chapter 7: Technology Strategy in Lumpy Markets Creation of “Barrier Register” Investing in Options 1.Positioning Options 2.Scouting Options

19 Chapter 7: Technology Strategy in Lumpy Markets Identifying Positioning Options to Exploit Lumpy Markets – Single Niche Domination – Niche Fusion – Creating a New Technology Envelope

20 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

21 Chapter 7: Technology Strategy in Lumpy Markets 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.

22 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

23 Chapter 8: Commercializing Emerging Technologies Through Complementary Assets 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 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.

24 Chapter 8: Commercializing Emerging Technologies Through Complementary Assets 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 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.

25 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

26 Questions

27 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), doi:http://dx.doi.org.proxy.kennesaw.edu/ /mac 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), doi:http://dx.doi.org.proxy.kennesaw.edu/ /s 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), doi: / Minch, R. (2008, March 31). Wharton Chapter 7 - Technology Strategy in Lumpy Market Landscapes. Retrieved September 18, 2014, from Alan's Emerging Technologies Blog: Worrell, c., & 'amico, e. (2013). subcontractors build On niches in 'lumpy' market. ENR: Engineering News- Record, 271(10), NY21.


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