1. High Tech Marketing Fundamentals: Process and Product

2. Complexity of Technology Unintended Consequences (when things bite back) Unintended Consequences (when things bite back) Cars Cars South American Fire Ant South American Fire Ant Mobile Phones Mobile Phones Automated stock trading Automated stock trading Technological Paradoxes Technological Paradoxes Freedom-Enslavement Freedom-Enslavement Control-Chaos Control-Chaos Technological Backlash Technological Backlash Luddites Luddites GMO GMO Others? Others?

3. The business enterprise has two —and only two—basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs… -- Peter Drucker

4. Innovation without Marketing… Television (1930s) Television (1930s) AT&T Picturephone AT&T Picturephone Missing business model Ahead of time (1960)

5. Technology is ubiquitous Examples of traditional “high-tech” industries: Examples of traditional “high-tech” industries: Computers and information technology Computers and information technology Biotechnology Biotechnology Telecommunications Telecommunications Internet Internet Examples of some industries where technological innovation is creating radical changes: Examples of some industries where technological innovation is creating radical changes: Agriculture Agriculture Agriculture Waste Management (GM organisms) Waste Management (GM organisms) Automotive Automotive Consumer Products (GMO, irradiated chicken) Consumer Products (GMO, irradiated chicken)

6. A Supply Chain Perspective on Technology Often, technological innovations occur at upstream (i.e., supplier) levels in the supply chain… Often, technological innovations occur at upstream (i.e., supplier) levels in the supply chain… …affecting the manufacturing process or the inner workings of a product, but… …affecting the manufacturing process or the inner workings of a product, but… …end-user behavior may not be significantly affected …end-user behavior may not be significantly affected Examples: cars, food, computing, medication, hair styling, Internet, phone Examples: cars, food, computing, medication, hair styling, Internet, phone

7. The Where of Technology Process technology Process technology Product technology Product technology

8. Definition of Technology: Technology is people using knowledge, tools, and systems to control processes and the environment. Technology is people using knowledge, tools, and systems to control processes and the environment.

9. Definition of High-Technology: No single preferred method for identifying high technology industries. No single preferred method for identifying high technology industries. High technology industries have a great dependence on science and technology innovation that leads to new or improved products and services. High technology industries have a great dependence on science and technology innovation that leads to new or improved products and services.

10. Definitions of Technology: Government Perspective Classify industries based on objective, measurable indicators: Classify industries based on objective, measurable indicators: the number of technical employees the number of technical employees $ spent on R&D $ spent on R&D # of patents filed in industry # of patents filed in industry

11. Why is it so difficult to succeed in High-Tech settings? Complexity of Context Complexity of Context (Hyper)competition (Hyper)competition Dynamic/Fickle/Ultra-demanding consumers Dynamic/Fickle/Ultra-demanding consumers Incomplete Information/Partial Knowledge Incomplete Information/Partial Knowledge Timing/Synchronization problems Timing/Synchronization problems Organization/Culture problems Organization/Culture problems Money problems Money problems

12. Strategic Concerns

13. Characteristics Common to High-Tech Markets: Supply Side “Unit-one” costs: when the cost of producing the first unit is very high relative to the costs of reproduction “Unit-one” costs: when the cost of producing the first unit is very high relative to the costs of reproduction Ex: development vs. reproduction of software Ex: development vs. reproduction of software Demand-side increasing returns : When the value of the product increases as more people adopt it Demand-side increasing returns : When the value of the product increases as more people adopt it Also called network externalities and bandwagon effects Also called network externalities and bandwagon effects Ex: telephone, fax, MS Word Ex: telephone, fax, MS Word Implications: may give away products for free (IM) Implications: may give away products for free (IM)

14. Characteristics Common to High-Tech Markets: Supply Side Tradeability problems arise because it is difficult to value the know-how which forms the basis of the underlying technology Tradeability problems arise because it is difficult to value the know-how which forms the basis of the underlying technology Ex: How much to charge for licensing the rights to a waste-eating microbe? Ex: How much to charge for licensing the rights to a waste-eating microbe? Knowledge spillover: Another type of externality that arises from the fact that technological developments in one domain spur new developments and innovations in other areas. Knowledge spillover: Another type of externality that arises from the fact that technological developments in one domain spur new developments and innovations in other areas. Ex: Human Genome Project Ex: Human Genome Project

15. Common, Underlying Characteristics of High-Tech Markets: Demand Side Perspective Market Uncertainty Market Uncertainty Technological Uncertainty Technological Uncertainty Competitive Volatility Competitive Volatility

16. Effects of Uncertainty? Adoption rate! Adoption rate! There are five variables that have been cited as responsible for speed of technology adoption: There are five variables that have been cited as responsible for speed of technology adoption: Relative Advantage: the degree to which an innovation is perceived as better than the idea it supersedes Relative Advantage: the degree to which an innovation is perceived as better than the idea it supersedes Compatibility: the degree to which an innovation is perceived as consistent with existing values, technologies, past experiences, and needs of potential users Compatibility: the degree to which an innovation is perceived as consistent with existing values, technologies, past experiences, and needs of potential users Complexity: the degree to which an innovation is perceived as relatively difficult to use and understand Complexity: the degree to which an innovation is perceived as relatively difficult to use and understand Trialability: the degree to which an innovation may be experimented with on a limited basis Trialability: the degree to which an innovation may be experimented with on a limited basis Observability: the degree to which the results of an innovation are visible to others (Wow-factor). Observability: the degree to which the results of an innovation are visible to others (Wow-factor). Rogers, “Diffusion of Innovation.” Rogers, “Diffusion of Innovation.”

17. Value: Perceived Need-Perceived Price Variables essential to the successful uptake of technology: Variables essential to the successful uptake of technology: Providing an infrastructure Providing an infrastructure Providing a function Providing a function Providing the right price point Providing the right price point Providing a compelling need to buy (make it a necessity). Providing a compelling need to buy (make it a necessity).

18. What is a disruptive technology? Disruptive technologies typically have worse performance, at least in the near term. Disruptive technologies typically have worse performance, at least in the near term. But: They have features that a few fringe and generally new customers value and which represent a key source of competitive value in the future. But: They have features that a few fringe and generally new customers value and which represent a key source of competitive value in the future. Products based on them are typically cheaper, simpler, smaller and frequently more convenient to use - often representing a new product architecture, design, and even market (category). Products based on them are typically cheaper, simpler, smaller and frequently more convenient to use - often representing a new product architecture, design, and even market (category). They often bring a new and different value proposition. They often bring a new and different value proposition. See Christensen: “The Innovator's Dilemma” See Christensen: “The Innovator's Dilemma”

19. Examples: Muskets Muskets Steam ships Steam ships Automobiles Automobiles PCs PCs Digital photography Digital photography

20. Continuum of Innovations IncrementalRadical Extension of existing product or process Product characteristics well-defined Competitive advantage on low cost production Often developed in response to specific market need "Demand-side" market New technology creates new market R&D invention in the lab Superior functional performance over "old" technology Specific market opportunity or need of only secondary concern "Supply-side" market

21. Supplier vs. Customer Perceptions of Nature of Innovation

22. Contingency Theory Type of marketing strategy is contingent upon the nature of the innovation.

23. Examples of Implications of Contingency Theory: R&D/Marketing Interaction Type of Marketing Research Role of Advertising Pricing BreakthroughIncremental “ technology push” “customer pull” Lead users; developers Surveys; focus groups Primary demand; customer education Selective demand; build image May be premium More competitive