High Techonology Marketing

High Techonology Marketing
High-tech Marketing Arto Rajala, Prof. Helsinki School of Economics Arto Rajala / HUT

Outline What is High Technology? High Technology in Finland What’s the Difference between High and Low Technology? What are the Marketing Implications of High Technology? Identifying & crossing the chasm Building marketing offerings Conclusions High Technology Marketing ar Arto Rajala / HUT

Defining Marketing Marketing is a business (management) discipline or orientation ”...performance of business activities that direct goods and services from produces to consumer or user (AMA)” Understanding actual and potential customer needs, by developing/modifying products, facilitating customer access to its offerings, attracting and influencing the market, creating differential advantages (brand) Establishing and maintaining customer relationships Managing 4P’s (Product, Price, Place, Promotion) STP-model (Segmenting – Targeting – Positioning) High Technology Marketing ar

Defining Technology (1/2)
Machinery, equipment, tools, artifacts, etc. (tangible) Techniques – specific ways of proceeding or completing instrumental acts and specific arrangements of persons, materials, and tasks (intangible) The science of knowledge to practical purpose (to obtain something useful) Knowledge and skills – not only to develop but how to use  making benefit from technology High Technology Marketing ar

Defining High Technology (2/2)
Novelty – advanced compared to the-state-of-the-art Knowledge intensity – based on radical innovation Dependence on R&D and highly educated people R&D investments > 4% of turnover (OECD) usually btw 10% - 20% Intensive development cooperation btw universities and research institutes Long R&D phase – short market existence High Technology Marketing ar

Categorisation of Technology
High Techonology Marketing Categorisation of Technology Product Technology embedded in the product itself Process Technology a part of production or delivery system Information Technology a platform that enables communication Management Technology know-how and expertise to run the business tacit vs. explicit knowledge High Technology Marketing ar Arto Rajala / HUT

High-Tech Characteristics...
High Techonology Marketing High-Tech Characteristics... New technology Makes the existing technology obsolete very rapidly New products or even new industries emerge Leading-edge technology The-state-of-the-art in the field and not widespread acceptance by those working in the field Technology-base is new Cross-industry characteristics Ability to create/modify new applications High Technology Marketing ar Arto Rajala / HUT

… High-Tech Characteristics
High Techonology Marketing … High-Tech Characteristics Developer’s vs. user’s view on technology Technology adapters = CUSTOMERS Technology providers = SUPPLIERS Customer perceived value Added value to customer Knowledge intensity Different technology settings Technology life cycle From product to process technologies High Technology Marketing ar Arto Rajala / HUT

A Definition of High-Tech … … from Marketing Point of View
High Techonology Marketing A Definition of High-Tech … … from Marketing Point of View “High-tech is that of the leading-edge technology involving a high level of knowledge intensity, which enhances the value of the product or process to the customer in the sense that it provides better quality, lower costs, or it makes the use of the object easier compared to the old technology” High Technology Marketing ar Arto Rajala / HUT

High Technology in Finland. http://tilastokeskus. fi/tk/yr/ttt_huippu
Turnover of high-tech companies 16 billion euro (1999) Share of high-tech in manufacturing output 27 % [USA 32 %] Average growth of production per year 31 % btw Employed people (1999) [ (-95, + 8 % /year] Number of R&D stuff (2000) [47,000 (-91)] 1 203 doctoral dissertations (2001) [524 (-91)] 20,9 % of total export (2001) 10,0 billion euro [6,0 % in 1991] 17,8 % of total import (2001) 6,4 billion euro [12,1 % in 1991] R&D investments (2002) 3,47 % of BNP (4.9 billion euro of which companies accounted for 70,7 %) 3 083 patent applications (-99), 4.6 dom. pat./10 000 Large externalities (other industrial sectors) High Technology Marketing ar

Tuotekehitysmenot R&D Expenditures in Finland Universities
Source: R&D Expenditures in Finland Tuotekehitysmenot Universities Public sector Companies Companies High Technology Marketing ar

Major High-Tech Sectors in Finland
Electronics Telecommunication Data and Office Equipment Scientific Instruments Biotechnology High technology is a problem from industry classification point of view - no explicit statistic available! ICT- Information & Telecommunication Cluster High Technology Marketing ar

High-technology share of export and import in Finland
Source: High-technology share of export and import in Finland Export Import High Technology Marketing ar

High Technology Marketing ar
Source: Statistics Finland High Technology Marketing ar

Factors behind the Finnish Success
High Techonology Marketing Factors behind the Finnish Success Strong technology-base (Forest & Metal/Engineering Industries) High level of R&D investments (public vs. private) Focusing on core capabilities - outsourcing others (Nokia) Technological co-operation between companies, research co-operation between companies and universities - Networking (Technology Villages) Educated labour force (75% of years old have a university or vocational training) Rapid globalisation - ‘born global’ companies Access to venture capital funding High Technology Marketing ar Arto Rajala / HUT

High Technology Marketing ar
Source: Statistics Finland High Technology Marketing ar

Innovations – core of high techonology http://tilastokeskus
Innovation ~ a totally new, or a remarkable enhanced, product, service or production system/process EU innovation research 2000 Posted in Finland to 3 462 companies – 50% answered Highest level of innovation activities in telecom (73 %), electrotechnical industry (67 %) and chemical industry (63 %) Innovation expenditures (2000) was estimated 4.9 billion € Innovation activities had the highest impact on expanding product or service offering, enhancing quality, market expansion or increase in market share The most important source of innovation was the company itself (90%) About 2/3 of companies involved in innovation activities were confronted with difficulties to implement them Economical factors such as too high a risk, increasing costs, and the lack of suitable source of funding and competence personnel were the worst bottlenecks for innovation activities High Technology Marketing ar

Technology Life-Cycle
High Techonology Marketing Technology Life-Cycle High Technology Marketing ar Arto Rajala / HUT

Nature of High Tech Markets
Why are high-tech markets different ? HIGH-TECH  high uncertainty about technology and market Market uncertainty Ambiguity about the type and extent of customer needs that can be satisfied by the technology Technological uncertainty Not knowing whether the technology - or the company providing it - can deliver on its promise to meet needs , once they have been articulated High Technology Marketing ar

Sources of Uncertainties
High Techonology Marketing Sources of Uncertainties How will needs change in the future? Will the new product function as promised? Will the market adapt industry standard? Will there be side effects of technology ? How fast will the innovation spread? High-Tech Marketing Will delivery timetables be met? Market Uncertainty Technology Uncertainty How large is the potential market? Will the vendor give high- quality service? What needs can be met by new technology? Will new high-tech make ours obsolete? Based on: Moriarty & Kosnik (1989) High Technology Marketing ar Arto Rajala / HUT

Taxonomy of Marketing Situations
Market Uncertainty Low High Better Mousetrap Marketing High Tech Marketing High Technological Uncertainty High Fashion Marketing Low Tech Marketing Low Based on: Moriarty & Kosnik (1989) High Technology Marketing ar

Challenges for Marketing
New designs must win market share Role of distribution channel Customer perceptions Competition From higher performance to lower costs and differentiation through minor design variations and strategic positioning tactics incremental changes take place Segmenting - Targeting - Positioning High Technology Marketing ar

Commercialising High-Tech Products (1/2)
High Techonology Marketing Commercialising High-Tech Products (1/2) Identifying and Crossing the Chasm Arto Rajala / HUT

Key Issues Why so many excellent products fail? 90-95 % of new product ideas newer reach market 30-50 % of introduced products seem to fail on the market Are there differences between high-tech and low-tech product concerning the commercialisation process? Critical issue: Time-to-Market Using the ‘Market Development Model’ High Technology Marketing ar Arto Rajala / HUT

Technology Adoption Life-Cycle
High Techonology Marketing Technology Adoption Life-Cycle Pragmatists: Stick with the herd! Conservatives: Hold on! Visionaries: Get ahead of the herd! Adopters Early 14% Late Majority 33% Early Majority Innovators 2,5% Laggards 16,5% Skeptics: No way! Techies: Try it! Pragmatists create the dynamics of high-tech market development. Source: Moore (1998) High Technology Marketing ar Arto Rajala / HUT

Innovators - Technology Enthusiasts
High Techonology Marketing Innovators - Technology Enthusiasts Primary Motivation: Learn about new technologies for their own sake Key Characteristics: Strong aptitude for technical information Like to alpha test new products Can ignore the missing elements Do whatever they can to help Challenges: Want unrestricted access to top technical people Want no-profit pricing (preferably free) Fundamentally committed to new tech They love to get their hands on the latest and greatest innovation All organisations support techies From marketing point of view… they usually do not have the money they are gatekeepers to the rest of life cycle innovations get hearing with their endorsement new products are ‘given’ to them to gain their support High Technology Marketing ar Arto Rajala / HUT 6

Early Adopters - The Visionaries
High Techonology Marketing Early Adopters - The Visionaries Primary Motivation: Gain dramatic competitive advantage via revolutionary breakthrough Key Characteristics: Great imaginations for strategic applications Attracted by high-risk, high-reward propositions Will commit to supply the missing elements Perceive order-of-magnitude gains — so not price-sensitive Challenges: Want rapid time-to-market Demand high degree of customization and support Are the true revolutionaries in business government who want to use the innovation to make a brake with the past and start an entirely new future Being first to exploit the new capability to achieve competitive advantage Extraordinary influence on high-tech marketing are the first constituency who can and will bring real money to the table help publicise the new innovation, but… Each visionary require special modifications that no one else would use overtax R&D resources need to find customers for ‘standard solutions’ High Technology Marketing ar Arto Rajala / HUT 7

Early Majority - Pragmatists
High Techonology Marketing Early Majority - Pragmatists Primary Motivation: Gain productivity improvements via evolutionary change Key Characteristics: Astute managers of mission-critical applications Understand real-world issues and tradeoffs Focus on proven applications Like to go with the market leader Challenges: Insist on good references from trusted colleagues Want to see the solution in production at the reference site Make the bulk of all technology infrastructure phases do not love technology of its own sake believe on evolution not revolution Interested in enhancing their systems’ efficiency by using new technology strong reference base needed -- trust adopt the new innovation when time is ready Prefer to buy from market leader everyone else in the market makes the product work with the leader’s market leader attracts many third-party companies into its aftermarket High Technology Marketing ar Arto Rajala / HUT 8

Late Majority - Conservatives
High Techonology Marketing Late Majority - Conservatives Primary Motivation: Just stay even with the competition. Key Characteristics: Better with people than technology Risk averse Price-sensitive Highly reliant on a single, trusted advisor Challenges: Need completely pre-assembled solutions Would benefit from value-added services but do not want to pay for them Pessimistic about their ability to gain any value from technology investments undertake them only when they must - no other alternatives or others pass them by price-sensitive, sceptical, and very demanding However, they represent a large opportunity for high-tech products need to be handled with care simplify and commodities systems - just work, no more ‘they are happy to by several dozen of the world’s most advanced microprocessors, as long as they are deeply embedded inside a BMW’ High Technology Marketing ar Arto Rajala / HUT 9

Laggards - Skeptics Primary Motivation: Maintain status quo. Key Characteristics: Good at debunking marketing hype Disbelieve productivity-improvement arguments Believe in the law of unintended consequences Seek to block purchases of new technology Challenges: Not a customer Can be formidable opposition to early adoption High Technology Marketing ar Arto Rajala / HUT 10

The Logic of Commercialising High-Tech Products
High Techonology Marketing The Logic of Commercialising High-Tech Products Seeding new products to Techis Techis help and educate Visionaries Visionaries serve good references for the Pragmatists Becoming the market leader by serving Pragmatists and setting standards Leverage success - generate sufficient volume & experience -- reliable products which are also cheap enough to Conservatives Leaving Sceptics to their on devices High Technology Marketing ar Arto Rajala / HUT

Discovering the Chasm Early Market Mainstream Market Chasm High-tech products are warmly welcome in an early market (techies & visionaries) but then will fall into a chasm (sales will falter and often plummet) Visionaries don’t see enough of a head start Pragmatists see no reason to start yet Crossing the chasm gaining the acceptance within a mainstream market - becomes and organisational imperative … but very few high-tech products cross these chasms Source: Moore (1998) High Technology Marketing ar Arto Rajala / HUT 13

Crossing the Chasm Product vendor’s problem 80% of many solutions—100% of none Pragmatists won't buy 80% solutions Most common vendor mistake: Committing to the most common enhancement requests Never finishing any one customer's wish-list Solution Focus on a single beachhead Accelerate formation of that segment's whole product Source: Moore (1998) High Technology Marketing ar Arto Rajala / HUT 14

Successful Crossing Considering the difference between visionaries and pragmatists the former is willing to bet ‘on the come’ the latter want to see the solutions in production (i.e. see the whole product before they by it)’ Many high-tech companies are not willing to commit to develop any ‘whole product’ they focus on four to five likely candidate segments risk for having everything for nobody Putting all eggs in one basket is the only safe way to cross the chasm - Why? (Focus & Globalisation) High Technology Marketing ar

Commercialising High-Tech Products (2/2)
High Techonology Marketing Commercialising High-Tech Products (2/2) On the Mainstream Market Arto Rajala / HUT

Market Development Model
High Techonology Marketing Market Development Model Main Street Tornado Total Assimilation Early Market Chasm Bowling Alley Mainstream Market Source: Moore (1998) High Technology Marketing ar Arto Rajala / HUT

Beyond the Chasm - Assessing Mass Market
High Techonology Marketing Beyond the Chasm - Assessing Mass Market The Bowling Alley a period of niche-based adoption in advance of the general marketplace, driven by compelling customer needs and the willingness of vendors to craft niche-specific whole products The Tornado a period of mass-market adoption, when the general marketplace switches over to the new infrastructure paradigm Main Street a period of aftermarket development, when the base infrastructure has been deployed and the goal now is to flesh out its potential End of Life wholly new paradigms (technology) come to market High Technology Marketing ar Arto Rajala / HUT

Technology vs. Category Life Cycles
High Techonology Marketing Technology vs. Category Life Cycles Market share is converted into served installed base here Market share is captured here Product Category Life Cycle (Ongoing sales) Technology Adoption Life Cycle (First time adopters) Source: Moore (1998) High Technology Marketing ar Arto Rajala / HUT

Four Marketing Frameworks
High Techonology Marketing Four Marketing Frameworks 1 on 1 Marketing Mass Marketing Deal Driven Niche Marketing Source: Moore (1998) High Technology Marketing ar Arto Rajala / HUT

Product Mix Offerings Application Systems Photography Color printing Wireless telephony Word processing Internetworking Worldwide Web Core Products Cameras Inkjet printers Cell phones Word processors Routers, switches Browsers/servers Aftermarket Products Film, lenses Cartridges, paper trays Batteries, modems Suite upgrades Performance tools Plug-ins Source: Moore (1998) High Technology Marketing ar Arto Rajala / HUT

Service Mix Offerings Distribution Services Competitive selling System configuration Implementation support Train-the-trainers Customer service Technical support Warranty Transaction Services Order processing Maintenance Facilities management Outsourcing Upgrade management Broadcast data feeds Proprietary database access privileges Professional Services Consultative selling Business process reengineering Systems integration Project management Custom training System conversion Contract management Source: Moore (1998) High Technology Marketing ar Arto Rajala / HUT

Managing Marketing Offerings in High-Tech Firms
High Techonology Marketing Managing Marketing Offerings in High-Tech Firms Are the 4 P’s still relevant? Arto Rajala / HUT

Product Platform Product platform is a collection of common elements, particularly the underlying technology elements, implemented across a range of products. It is primarily a definition for planning, decision making, and strategic thinking. Especially important in high-tech firms in which multiple products are related by common technology. Platform defines the cost structure, capabilities, and differentiation of the resulting products. Separating product platform strategy from product line and individual product strategy, a company can concentrate on its most important strategic issues. High Technology Marketing ar Arto Rajala / HUT

Product Platform Product 3 Product 1b Product 4 Product 1 Product 1a
Segment III Product 1b Product 4 Segment II Product 1 Product 1a Unique product elements Product 2 Segment I Element C Common platform elements Element B Element A Source: McGrath (2000, 55) High Technology Marketing ar

Main Characteristics Product platform is NOT a product! ... but the lowest common determinator of relevant technology in a set of products or product line Product failures in high-tech firms often caused by incomplete product platform strategy Nature of product platforms varies across industries e.g. in PC it consists of the microprocessor combined with its operating system, packaging, power supply, memory, disk drives, monitors, and interfaces e.g. it can be a chemical compound combined with with the manufacturing process High Technology Marketing ar Arto Rajala / HUT

Market Platform Plan (MPP)
MPP integrates knowledge about the market and knowledge about the product and its defining technology Core strategic vision Product platform strategy Product line strategy New product development Market platform plans Defining technology Platform architecture Product line plans Platform management Where are we going? How will we get there? Why will we be successful? Source: McGrath (2000) High Technology Marketing ar

The Market Platform Plan Framework
Enables companies to translate platform strategy into a practicable ’attack plan’ for a target market Characterize & prioritize customer segments Define the basis of customer value & differentiation Define the offerings to the customers Define monitoring plan to sense environment Establish economic metrics for measuring success in the market High Technology Marketing ar

Managing High-Tech Products…
High Techonology Marketing Managing High-Tech Products… Distinctive nature of high-tech products create certain challenges for product managers dependence on R&D risky business global nature of markets long development cycle - but short economic life cycle What is the role of pricing decisions Implications of Product Life Cycle Model High Technology Marketing ar Arto Rajala / HUT

Core benefit or service
What is a product? Core benefit or service Packaging Features Styling Quality Brand name Installation After sales services Warranty Delivery and credit Augmented product Actual product Core product Potential product High Technology Marketing ar

… Managing High-Tech Products
High Techonology Marketing … Managing High-Tech Products Are prices and costs really related? … yes, but not so directly as we usually think keep in mind PLC when making pricing decisions most high-tech products evolve into commodities emphasising the role of internal costs risk of overlooking what happens in the market -- what price customers are willing to pay Surprisingly ... small differences in costs and margin objectives can have dramatic effects on the price a company must command in the market place High Technology Marketing ar Arto Rajala / HUT

Evolution of the Whole Product
High Techonology Marketing Evolution of the Whole Product Mostly custom work Plug & play some customization Fully integrated Mass customized Source: Moore (1998) Different whole product priorities at different stages of the life cycle. High Technology Marketing ar Arto Rajala / HUT

Conclusions What have we learned?

‘Current Wisdom’ on High-Tech Marketing
High Techonology Marketing ‘Current Wisdom’ on High-Tech Marketing Interaction between marketing and R&D Coping with the high levels of technological and market uncertainty Marketing capabilities & business competencies Product development processes Rapid changes in technology and market settings Shortening the ‘breakthrough-time’ Market offering and product platform approaches Increasing importance of services Emphasise technical support and after sales service Differentiating from competitors Building strong relationships with suppliers, channels and customers Analysing value systems  Networks, strategic alliances, partnerships Rely on qualitative rather than quantitative approaches for market research What the customers really value? High Technology Marketing ar Arto Rajala / HUT

What does this mean? The ‘High-Tech’ label is not ‘once and for all’, so today’s hot new technologies becomes tomorrow’s basic technology Surprisingly, high-tech marketing is not so different from that of low-tech as often claimed … … but there is a special need for more marketing focus in high-tech context because ... Customer’s view is easily overlooked To avoid developing a product which are ‘engineer's dilemma but marketer’s nightmare’ Knowing competitors well enough Global view of high-tech business Cross-industry effects and convergence of different technologies Focusing more and more on services High Technology Marketing ar Arto Rajala / HUT

Lähteitä High Technology in Finland 2001 (also 1999, 1997, 1995, 1993, 1991), Finnish Academies of Technology. McGrath, Michel E. (2001), Product Strategy for High-Technology Companies: Accelerateing Your Business to Web Speed. N.Y: McGrew Hill. Mohr, J. J. (2001), Marketing of High-Technology Products and Innovations. Upper Saddle River, N.J: Prentice Hall. Moore, G. (1995), Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers. New York: HarperCollins Publishers. Moore, G. (1998), Inside the Tornado: Marketing Strategies from Silicon Valley’s Cutting Edge. Moore, J. F. (1997), The Death of Competition: Leadership & Strategy in the Age of Business Ecosystems. N.Y.: HarperCollins Publisher. Paija, L. (2001), Finnish ICT Cluster in the Digital Economy, Helsinki: Taloustieto Oy. Simon, H. (1996), Hidden Champions: Lessons for 500 of the World’s Best Unknown Companies. Boston, Mass: Harvard Business School Press. Tapscott, D. (1999), Creating Value in the Network Economy. A Harvard Business Review Book. Tidd, Joe, John Bessant and Keith Pavitt (1997), Managing Innovation: Integrating Technological, Market and Organizational Change. Chichester, UK: John Wiley & Sons High Technology Marketing ar Arto Rajala / HUT

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