TMitTI 1 © Sakari Luukkainen Technological change Market change Standardization Productization Marketing R&D Technology Assessment and Forecasting Market.

Slides:



Advertisements
Similar presentations
Networks and Positive Feedback
Advertisements

INFORMATION TECHNOLOGY IN BUSINESS AND SOCIETY SESSION 23 – NETWORK EFFECTS & POSITIVE FEEDBACK SEAN J. TAYLOR.
1 Digital Products Pricing Switching Costs Network Externalities.
TMitTI 1 © Sakari Luukkainen Technological change Market change Standardization Productization Marketing R&D Technology Assessment and Forecasting Market.
Innovation Management 3rd meeting Technology phases Industry attractiveness and pressures Customer Value.
COMPETITIVE STRATEGY - Dolly Dhamodiwala.
Tutorial 5 Five forces and PEST analysis
The Fundamentals of Managerial Economics
©2009 Prentice Hall 10-1 MGMT 738 Management of Technology Lecture 5 Capturing Value from Innovation.
Networks and Positive Feedback John Morgan. Important Ideas Positive feedback Network effects Returns to scale Demand side Supply side.
7-1 Ch.7:PRODUCT STRATEGY Product Classification (1 of 3) Consumer Product Classifications –Convenience Products –Shopping Products –Specialty Products.
5 Chapter 5: Building Competitive Advantage Through Business-Level Strategy BA 469 Spring Term, 2007 Prof. Dowling.
SIMS Networks and Positive Feedback Hal R. Varian.
Tailoring Strategies to Fit Specific Industry and Company Situations
©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Information Rules: A Strategic Guide to the Network Economy Managing Lock-In Carl Shapiro Hal R. Varian.
WebTrends Live Service Development Discussion Focus: Pricing & “Lock-In” Recap Service Development Exercise.
1 Teck-Hua Ho Apr 22, 2006 FreeMarkets I. Economic and Behavioral Foundations of Pricing II. Innovative Pricing Concepts and Tools III. Internet Pricing.
Information Rules: A Strategic Guide to the Network Economy Recognizing Lock-In Carl Shapiro Hal R. Varian.
Building Competitive Advantage through Business Level Strategy
Objectives Understand how companies find and develop new-product ideas. Learn the steps in the new-product development process. Know the stages of the.
MARKETING STRATEGY O.C. FERRELL • MICHAEL D. HARTLINE
Chapter 8 Tailoring Strategies to Fit Specific Industry and Company Situations.
Create the Product Chapter Eight.
TMitTI 1 © Sakari Luukkainen Content Previous technology cycle Analog Modems ISDN Technology cycle of fixed broadband Case ADSL Case DOCSIS Conclusion.
Strategy #5. IT Architecture and IT Infrastructure are Metaphors Architecture - the relationship between planning and building Infrastructure - examples.
Timetable Introduction, Sakari Luukkainen
The Product Lifecycle and New Product Development
Professor Ran Kivetz Columbia Business School Spring 2007 High Technology Marketing and Entrepreneurship THE ROLE OF MARKETING (& “Can this High-tech Product.
08 Network Effects 5 Aaron Schiff ECON Reading: Cabral, Ch 17.
Overview of Network Industries Nien-Pen Liu. Main Characteristics Consumption externalities Complements, compatibility and standards Switching costs and.
MGT-519 STRATEGIC MARKETING AAMER SIDDIQI 1. LECTURE 24 2.
© iStockphoto.com/ktsimage Lamb, Hair, McDaniel Chapter 19 Pricing Concepts © Cengage Learning All Rights Reserved.
CHAPTER 1 The Fundamentals of Managerial Economics Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without.
Industry Analysis. t All companies face competition. © For resources, customers, sales revenues, and profits. t All companies face uncertain industry.
 All companies have to adapt to change  Driving forces that affect an industry environment:  External Forces + New Competitive Change = Change in an.
The Economics of Networks An Overview. Networks: Nothing New.
TMitTI 1 © Sakari Luukkainen Timetable Introduction, Sakari Luukkainen Technology Marketing, Jari Haggren Market Dynamics of Telecom.
©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 0 in Chapter 10 Chapter 10 Developing, Positioning, and.
MT 219 Marketing Unit Five New Products and Pricing Note: This seminar will be recorded by the instructor.
TMitTI 1 © Sakari Luukkainen T Network Services Business Models (3 cr) Sakari Luukkainen Helsinki University of Technology Telecommunications.
Marketing Today. WHAT IS MARKETING? Businesses have two main functions Businesses have two main functions Innovation and Marketing, the rest are… Innovation.
1 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 16 Pricing Concepts 16 Canadian Adaptation prepared by Don Hill, Langara College.
TMitTI 1 © Sakari Luukkainen Timetable Introduction, Sakari Luukkainen Technology Marketing, Jari Haggren Market Dynamics of Telecom.
1Chap. 17 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Prepared by Deborah Baker Texas Christian University Chapter 17 Pricing.
Characteristics of Innovation
CHAPTER 8 Creating the Product
0 Chapter 10 Developing, Positioning, and Differentiating Products through the Life Cycle.
TMitTI 1 © Sakari Luukkainen Technological change Market change Standardization Productization Marketing R&D Technology Assessment and Forecasting Market.
MT 219 Marketing Unit Five New Products and Pricing Note: This seminar will be recorded by the instructor.
Chapter 7 Strategy and Technology
MARKETING 3.01 Product/Service Management. Intro Who is responsible for the last product you bought? Did you know….. -It took over 3 years to develop.
Entrepreneurship and Negotiation Marketing in a New Firm 9.
Cooperation and Compatibility
PORTER’S FIVE FORCES MODEL
Unit III - Services Marketing - Mr.K.Mohan Kumar
Carl Shapiro Hal R. Varian
Tailoring Strategies to Fit Specific Industry and Company Situations
Objectives of Growth 3.2 Business growth.
Chapter 7 Strategy and Technology
Tailoring Strategies to Fit Specific Industry and Company Situations
Chapter 7 Strategy and Technology
Chapter 7: Strategy in High-Technology Industries
Dominant design Timing of entry Dr Marianna Sigala.
Chapter 7 Strategy and Technology
Chapter 7 Strategy and Technology
Tailoring Strategies to Fit Specific Industry and Company Situations
Tailoring Strategies to Fit Specific Industry and Company Situations
Tailoring Strategies to Fit Specific Industry and Company Situations
Competitive Strategy and the Industry Environment
Presentation transcript:

TMitTI 1 © Sakari Luukkainen Technological change Market change Standardization Productization Marketing R&D Technology Assessment and Forecasting Market Assessment and Forecasting Innovation process

TMitTI 2 © Sakari Luukkainen Market uncertainty (Gaynor) Recognizing lock-in (Varian chapter 5) Managing lock-in (Varian chapter 6) Networks and positive feedback (Varian chapter 7) Content

TMitTI 3 © Sakari Luukkainen Era of Incremental Change Era of Ferment Technological Discontinuity Dominant Design Variation Selection Era of Incremental Change Era of Ferment Technological Discontinuity Dominant Design Variation Selection Technological Substitution Technology cycle

TMitTI 4 © Sakari Luukkainen What is market uncertainty Market uncertainty relates to the inability of vendors and service providers offering new communications solutions to predict what are the latent end users needs The uncertainty exists partly also because users do not know what they want until they see and use it When users are first introduced to new technology they tend to view it in the context of the older technology Users needs evolve hiearchically from basic features to more sophisticated ones along with the technology evolution as they become more educated about the benefits it provides

TMitTI 5 © Sakari Luukkainen Market uncertainty and Internet A similar phenomen has happened with the Internet Nobody predicted in the early 90´s what Web is today and its impact to society Understanding market uncertainty affects directly to R&D When Netscape started its development there was extreme uncertainty, it altered the traditional sw development process in a way that allowed taking into account early feedback from users

TMitTI 6 © Sakari Luukkainen Managing market uncertainty The only way to meet uncertain markets is to experiment several ideas and hope at least one will work When market uncertainty is high, being lucky with correct guess about the market is likely to produce more revenue than being right in markets with low uncertainty In high uncertainty competition is feature based and low price based The use of distributed architecture in the introduction phase of new communications platform when the market uncertainty is high Centralized management structure should then be used in later phases of the cycle when the technology and market is mature

TMitTI 7 © Sakari Luukkainen Recognizing Lock-in Investments in varying complementary assets related to the actual ICT investment influence switching costs When the switching costs from one brand to another are substantial, customers face lock-in Sonera & Radiolinja example: low number of moving customers before portability of telephone number iki.fi solution to reduce switching cost Proprietary interfaces

TMitTI 8 © Sakari Luukkainen Recognizing Lock-in Existing installed customer base with high switching cost is significantly valuable asset Collective switching costs, group pricing of mobile calls Total switching cost = costs the customer bears + costs the new supplier bears The present discounted value to a supplier of locked-in customer is equal to total switching costs, plus the quality or cost advantage of current supplier’s product

TMitTI 9 © Sakari Luukkainen Contractual commitmentsCompensatory or liquidated damages Durable purchasesReplacement of equipment Brand-specific trainingLearning new system Information and dbConverting data to new format Specialized suppliersFinding of new supplier Search costsLearning about quality of altern. Loyalty programsLost benefits from existing supplier Type of Lock-in Switching Costs

TMitTI 10 © Sakari Luukkainen Managing Lock-in – Customer view Bargaining before lock-in taking into account life- cycle cost Being aware about whole cost structure before investment decision, e.g. maintenance contracts are typically offered afterwards Second sourcing and open systems Long view to the next supplier choice situation Keeping record about perceived cost structure

TMitTI 11 © Sakari Luukkainen Managing Lock-in – Supplier view Investments to build large installed base Concentrating on influential customers with high switching costs Differential pricing Being aware of customer`s timing in brand selection points Reselling and bundling of complementary products and long maintenance contracts Usage of purchase history of existing customers in the marketing of new products

TMitTI 12 © Sakari Luukkainen Positive Feedback Market Share (%) Time Winner Loser Battle zone

TMitTI 13 © Sakari Luukkainen Adoption Dynamics Number of Users Time Saturation Launch Takeoff Critical mass Laggards (16%) Late majority (34%) Early majority (34%) Early adopters (13,5%) Innovators (2,5%) Source: Rogers, 1995

TMitTI 14 © Sakari Luukkainen Internet Servers Source: Koski, H., Rouvinen, P., & Ylä-Anttila, P. (2001)

TMitTI 15 © Sakari Luukkainen Fax-service Source: Varian

TMitTI 16 © Sakari Luukkainen Demand-side Economies of Scale Value to User Number of Compatible Users Virtuous cycle Vicious cycle

TMitTI 17 © Sakari Luukkainen Networks and Positive Feedback Increasing returns to scale (economies of scale) exist when the cost per unit decreases as more units of the good are produced. Recently, the term "increasing returns to scale" has been used to describe more generally a situation where the net value of the last produced unit [= (€ amount consumers are willing to pay for the last unit) - (average per unit cost of production)] increases with the number of units produced. This effect can be called also demand side of economies of scale.

TMitTI 18 © Sakari Luukkainen Networks and Positive Feedback A network exhibits network externalities when the value of a subscription to the network is higher when the network has more subscribers. Metcalfe´s law: n * (n-1) = n 2 – n Dominant design is a technology that wins the allegiance of the market place, it usually takes the form of a new product (or a set of features) synthesized from individual technological innovations introduced independently

TMitTI 19 © Sakari Luukkainen Networks and Positive Feedback Virtual Network is a collection of compatible goods (that share a common technical platform). In a virtual network network externalities arise because larger sales of component A induce larger availability of complementary components B1,..., Bn, thereby increasing the value of component A. The increased value of component A results in further positive feedback. For example, all VHS video players, cassettes and accessories make up a virtual network. Similarly, all computers running Windows or mobile phones and their accessories can be thought of as a virtual network.

TMitTI 20 © Sakari Luukkainen Performance vs Compatibility Compatibility Performance Evolution Revolution Improved Design or adapters

TMitTI 21 © Sakari Luukkainen Openness vs Control Your Share of Industry Value Total Value Added to Industry Proprietary Open Your Reward Optimum

TMitTI 22 © Sakari Luukkainen Generic Network Strategies ControlOpenness CompatibilityControlledOpenmigration PerformancePerformanceDiscontinuity play