innovation in high technology (1/2)

This document may contain information which is confidential and can not be reproduced --- Guy Laliberté, 2009

Guy Laliberté, September 2009

Innovation in the High Technology IndustryOverview -- Session 1 of 2

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Innovation in the High Technology Industry


What is “High Technology” ?

■ First, Technology is : Most general definition The practical application of knowledge a manner of accomplishing a task using technical processes, methods, or knowledge the application of science to industrial or commercial objectives

■ High Technology Any highly technical or specialized technological equipment or application. Mostly used for technology involving complex electronics or software.

■ Examples of traditional “High-Tech” industries Telecommunications Computers / Electronic Devices Robotics Information Technology Internet

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Common High Technology Industry Characteristics

TechnologyUncertainty

MarketUncertainty

CompetitiveVolatility

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MarketUncertainty

■ Market Uncertainty Consumer fear, uncertainty and doubt (FUD) Customer needs change rapidly and unpredictably Customer anxiety over the lack of standards and dominant design Uncertainty over the pace of adoption Uncertainty over / inability to forecast market size

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CompetitiveVolatility

■ Competitive Volatility Uncertainty over who will be future competitors Uncertainty over “the rules of the game” (i.e., competitive strategies and tactics) Uncertainty over “product form” competition

competition between product classes vs. between different brands of the same product

Implication: Creative destruction

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TechnologyUncertainty

■ Technology Uncertainty Uncertainty over whether the new innovation will function as promised Uncertainty over timetable for new product development Ambiguity over whether the supplier will be able to fix customer problems with the

technology Concerns over unanticipated/unintended consequences Concerns over obsolescence

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Competitive Volatility

Market Uncertainty

Technology Uncertainty

Business Development of

High Technology Innovations

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■ Other Characteristics typical in High Technology “Unit-one” costs

The cost of producing the first unit is most of the time extremely high relative to the costs of high volume production.

Examples : Development cost of a software VS selling CD-ROMs Prototype of a new electronic device VS selling it in mass production

Tradeability Problems Difficulty to value a new technology What should be the selling price ?Examples :

How much to charge for a licensing right of a waste-eating microbe?

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■ Other Characteristics typical in High Technology Bandwagon Effect

Often, the value of a product increases as more people adopt it. Implications: At first, you may give away products for free …

ExternalitiesKnowledge Spillover

Technological developments in one domain spur new developments and innovations in other areas.

■ Transfers from universities to the industry

Environment Putting new technology on the market often have impact on the environment since

society and governments are rarely ready to support the full product life cycle from manufacturing to use and recycling.

■ It took 20 years for governments to initiate the first actions to start recycling the millions of tons of electronic equipments thrown in the garbage each year.

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What is “Innovation” ?

■ Invention or Innovation ? An invention is useful only to its inventor unless it is offered and used in a

market. If the invention improves some product, process or service in a market,

then that invention transforms into an innovation. An innovation is the extension of an invention. Innovation is not only new technologies but also improvements in

processes, design or services.

■ Innovation in the High Technology Business The future of most businesses depends upon their ability to innovate Innovation is to sustain competitive advantage, maintain market share or generate

growth Innovation is rarely part of a business strategies and often confused with R&D Companies culture and leadership are the two prominent barriers to innovation Tools & methods exists to “make innovation happens”

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■ Types of innovations (High Level) Incremental (the need is known)

Market : Extension of an existing product for the same market

Product : Its characteristics are well-defined Initiator : Often developed in response to a

specific market needR&D / Marketing : Marketing Leads “Customer Pull”

Interaction

Radical Breakthrough (the technical solution precedes the customer need)

Market : New technology creates new marketProduct : Superior functional performance over

“old” technology Initiator : Developed for a specific market opportunity

or to cover a secondary concernR&D / Marketing : R&D Leads “Technology push”

Interaction Radical Breakthrough

Incremental

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■ Types of innovations (Detailed Level)

1. Disruptive Innovation : Takes a cheaper, low-end disruptive or a new market disruptive innovation to the market

2. Application Innovation : Takes existing technologies into new markets to serve new purposes

3. Product Innovation : Takes established offers in established markets to the next level (a type of sustaining innovation)

4. Process Innovation : makes processes for established offers in established markets more efficient or effective (also a type of

sustaining innovation)

5. Experiential Innovation : makes cosmetic/surface modifications of established products or processes that improve customers’

experience

6. Marketing Innovation : improves customer touching processes e.g. by marketing communications or consumer transactions

7. Business Model Innovation : reframes an established value proposition to the customer or a company’s established role in the value chain or both

8. Structural Innovation : Capitalizes on disruption to restructure industry relationships


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Innovation in High-Tech Companies

■ Internal Considerations

Maintaining Innovation

Creative Destruction Corporate ImaginationExpeditionary Marketing Culture of Innovation

Access to Resources

Funding Management Expertise

Being Market-Oriented

Acquire Disseminate Use Information

Relationship Marketing

Partnering with important stakeholders

Effective Cross-Functional Marketing / R&D Collaboration

Enhanced Odds of Success

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Technology Adoption

■ Product Life Cycle (Based on G. Moore “Crossing the Chasm”)

Time

Revenue

Pragmatists Conservatives Sceptics

EarlyAdopters

EarlyMajority

LateMajority

LaggardsInnovators

VisionairesLead Users

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Technology AdoptionPragmatists Conservatives ScepticsVisionairesLead Users■ The Innovators / Lead User

Technology Enthusiasts They are first to adopt any new technology They want to try it to see if it works They derive value from the technology itself They will spend hours trying to get your products to work

They demand The truth, without any tricks Access to an expert immediately when a problem occur They want to be the first to get the new stuff – that is their reward They want your product (relatively) cheap – but they will pay for it.

The key Look for the enthusiast that the big bosses listen to

Before the CHASM

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Pragmatists Conservatives ScepticsVisionairesLead Users■ The Early Adopters Visionaries

They want to match an emerging technology to a strategic opportunity They have the temperament to translate that insight to a high risk project They have the charisma to get the rest of their organisation to buy into that project

They want They are looking for a fundamental breakthrough and ROI

They derive value not from the technology itself (as the Lead Users do), but from the strategic leap forward it enables

They like project orientation and exert dead-lines that are hard to meet

The key They give you the first big break and may generate the first burst of revenue and

visibility.

Technology Adoption Before the CHASM

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■ The Early Majority

Pragmatists They are accepted as ”technology leaders” by the late majority They feel that risk is a negative word but sometimes you have to take some – but

with good safety nets in place They are reasonably price-sensitive Hard to win, but loyal once won They communicate with others if they are like themselves

The problem Market leadership is crucial to winning pragmatist customers hence a Catch-22

occurs They won’t buy from you until you are established, yet you can’t get established until

one of them buys from you…

The key To be patient and put time to get a reputation for quality and service

Pragmatists Conservatives ScepticsVisionairesLead Users

Technology Adoption After the CHASM

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■ The Late Majority Conservatives

They are against discontinuous innovations They believe far more in tradition than in progress When something works good enough for them, they stick to that They like to buy preassembled product packages, with everything bundled, at a heavily

discounted price

The keys to success You must have thoroughly thought of the whole solution You must have lined up a low-overhead distribution channel

The key To understand that they are very important after the technology development phase

since they represent a large portion of the total market share.


Technology Adoption After the CHASM

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Technology Adoption

■ The Laggards Sceptics

They do not really want to buy the product but “have to” if they do purchase it. They represent about 15 % of the market

The key To learn from them since they can teach us what we are doing wrong in designing new

products


After the CHASM

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Technology Adoption

■ Gaps in the Product Life Cycle Moving from one type of adopters to the next one

Time

Revenue

Pragmatists Conservatives Sceptics

EarlyAdopters

EarlyMajority

LateMajority

LaggardsInnovators

VisionairesLead Users

Th

e C

HA

SM

Gap #1

Gap #2

Gap #3

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Technology Adoption

■ Gap #1 The Early Adopters talk to the Innovators but hot new

technology cannot be readily translated into major new benefits. Business process problems exist.

To pass Gap #1, you must enable a strategic leap forward

■ Gap #2 The Late Majority talks to the Early Majority Whereas the Early Majority is willing and able to become

technically competent, the Late Majority is not To pass Gap #2, you must ensure user-friendliness, and an

ease to adopt.

■ Gap #3 The Laggards listen to the Late Majority The laggards are the last ones to adopt a new technology. To pass Gap #3, there must be no other choices and a clear

economic advantage to compensate for a “very cumbersome technology shift”.


Gap #1


Gap #2


Gap #3

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Technology Adoption

■ The CHASM The Early Majority does not talk to the Early Adopters Early Adopters

The Early Adopters want a technical change agent The Early Adopters expect a radical discontinuity between the old and the new

Early Majority The Early Majority want a productivity improvement for existing operations The Early Majority want to minimize the discontinuity with the old way Technology is to enhance, not overthrow, the established business They want a more or less bug free product, the real 1.0 version

Pragmatists Conservatives ScepticsVisionairesLead Users Th

e C

HA

SM

Creating the CHASM

Very difficult and consumes a lot of resource to cross

the CHASM

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■ Culture of Innovation■ To be resilient and target growth, a high-tech company must “deeply integrate”

innovation in its culture.

■ A culture of innovation must be present at all levels of the company.

■ Innovation “as a mean of reaching company objectives” must be understood and part of the strategic and operational plan.

■ Innovation is more then “new technology = new product”. A product is more then only technology (technology + commercial spin + price)

■ Innovation can be only “internal” and still impact results on the market (i.e. : implementing new processes or equipment to reduce cost and thus price of a product on the market)

■ Key Factors■ First step is to work on “integrating” innovation in the culture of a company. From the

executive to the middle management, all must obliged by it. ■ Key to innovation is the collaboration between marketing and engineering.

■ An invention badly launched on the market will never become an innovation.■ You can have the best technology but without the adequate means to target the right

markets, you will not succeed.

■ Understanding the life cycle of a product is key in taking decisions for success.

■ More and more innovations are “completed with external means” such as partnership and use of third party technologies.

Conclusions

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1. Brief review of Session 1

2. How to cross the CHASM ?

3. Aligning R&D & Business Development / Marketing Efforts

4. Conclusions and Remarks

Session 2 -- Agenda

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■ Marketing of High-Technology Products and Innovations■ Author: Jakki J. Mohr, Sanjit Sengupta, Stanley Slater

■ Crossing the Chasm■ Author: Geoffrey A. Moore ■ Articles by : Eric von Hippel, Geoffrey Moore, James Utterback and Clayton Christensen

■ Strategic Business Planning■ Author: Geoff Linton

References

innovation in high technology (1/2)

Technology

high technology unit

new technology

technology concerns

guy lalibert

industry environment

new innovation

tactics uncertainty

promised uncertainty