Firm Capabilities & Market Opportunities Innovation Management Kevin O’Brien
Firm Capabilities & Market Opportunities
Innovation ManagementKevin O’Brien
Learning Objectives
Appreciate how competitive success is achieved by aligning firm capabilities with market opportunities
Identify the role of technological and marketing capabilities
Understand the concept of technology trajectories and the impact of disruptive technologies
Understand the concept of market orientation and how this impacts on innovation and new product performance
Marketing and Innovation
‘There is only one valid definition of business purpose: to create a customer ….. It is the customer who determines what the business is ….. Because it is its purpose to create a customer, any business enterprise has two – and only these two – basic functions: marketing and innovation’
Peter F. Drucker, The Practice of Management
Markets and Technology
Newtechnology
Newmarket
opportunities
Assets&
capabilitiesNew products
Lower costImproved attributes
New attributes
Resource-based Marketing
Market needs& conditions
Organisationalresources
Marketingstrategy
Strategy adapted to theneeds and requirements
of the market
Organisational resourcesneeded for implementation of
the strategy
Organisational resourcessuited to the markets in
which it operates
(Hooley et al., 1998)
Technology Trajectories
Source: Reproduced from Intel website http://www.intel.com/research/silicon/mooreslaw.htm Source: Reproduced from Intel website http://www.intel.com/research/silicon/mooreslaw.htm
1,000
10,000
100,000
1,000,000
10,000,000
100,000,000
1970 1975 1980 1985 1990 1995 2000 2005
Millions of transistors per microprocessor
(log scale)
Pentium 4 processor
Pentium III processor
Pentium II processor
Pentium processor
486 DX Processor
386 processor
286 Processor
8086 processor
8080 processor
8008 processor4004 processor
Impact of Technological Change
Changing product life cycles Changing product technology = shorter life cycles Increased risk in high volume/low cost strategies
Changing market segments Less segment stability Increased segment fragmentation Importance of market sensitivity/target marketing
New industries/new competitors Shifts in product-market boundaries Importance of competitive intelligence Fights over ‘standards’
Deregulation of markets Globalisation of markets Changing organisation
(Adapted from Capon & Glazer, 1987)
Core Competencies
Core Competencies at CanonPrecision
MechanicsFine Optics Micro-electronics
Basic camera
Compact camera
Autofocus camera
Video still camera
Laser beam printer
Colour video printer
Bubble jet printer
Basic fax
Laser fax
Calculator
Plain paper copier
Colour copier
Laser copier
Still video system
(Prahalad & Hamel, 1990)
Core Rigidities
Core competencies can become obstacles to innovation Cultural norms Preferences for
existing technology Established routines
and procedures Status hierarchies Economics
Values
Skills/knowledge
Managerialsystems
Physicalsystems
High
Low
Rel
ativ
e di
fficu
lty o
f cha
nge
(Leonard-Barton, 1992)
Innovations
Sustaining innovations Maintain current rate of performance improvement Give customers something more/better in currently
valued attributes Disruptive innovations
Different attributes from those valued by mainstream customers
Often poor performance in mainstream market/applications
Used/valued in new markets or applications Often create new markets
Disruptive Innovations
Established companies: Develop & commercialise new technologies
(incremental & radical) to meet needs of current customers
Market research, technology trends, cost structure, profit assessment, resource allocation
Entrant companies: Low cost structures Secure a foothold in emerging market Improve technology performance Attack mainstream market
Disruptive Innovations
Time
Perf
orm
ance
Current performance of potentially disruptive technology
Expected trajectory of performance improvement
Performance improvement required by
mainstream market
(Bower & Christensen, 1995)
Market Orientation
Customerorientation
Competitororientation
Focus on thelong term
Inter-functionalco-ordination
Market-ledorganisational
culture
Kohli & Jaworski (1990), Narver & Slater (1990)
Understanding customers & how to create value for them
Using all organisational resources to
create value for customers
Long-term shareholder value as the main
business objective
Identifying competitors and being
aware of their capabilities
Market Orientation & New Products
Strong association between market-orientation, innovative capability, and new product success When intensity of market competition and
industry hostility are high During the early stages of life-cycle More for incremental than radical changes
Marketing capability has most positive effect in firms with strong technical skills
Small and large firms(Atuahene-Gima, 1995)
Impact on Business Performance
Customerorientation
Competitororientation
InterfunctionalCoordination
Marketturbulence
TechnologicalturbulenceMarket
Orientation
Organizational Innovation
Environmental Conditions
Organizationalperformance
Technicalinnovation
Administrativeinnovation
(Han et al., 1998)
Marketing Processes
Value-defining processes Understanding the environment
Market research, buyer behaviour, segmentation, product use etc.
Understanding resources & capabilities Assess ‘value created’
Value-developing processes Value proposition for customer
Procurement, NPD, distribution, strategic alliances, pricing etc.
Value-delivering processes Product/service delivery, customer relationships,
communications, customer service etc.(Webster, 1997)
Marketing Capabilities
Outside-inprocesses
Inside-outprocesses
Spanning processes
External Emphasis Internal Emphasis
Market sensingCustomer linkingChannel bondingTechnology monitoring
Customer order fulfilmentPricingPurchasingCustomer service deliveryNew product developmentStrategy development
Financial managementCost controlTechnology developmentIntegrated logisticsManufacturing processesHRMEnvironment, H&S
(Day, 1994)
Marketing Capabilities
Market sensing Systematic gathering, interpretation & use of
market information Sensing customer & market changes ahead of
competitors Customer linking
Creating & managing close customer relationships Purposeful cooperation
Channel bonding Relationships with suppliers, wholesalers, retailers
etc.
(Day, 1994)
References
Atuahene-Gima, K. (1995) An exploratory analysis of the impact of market orientation on new product performance, J. Prod. Innov. Manag., 12, 275-293.
Bower, J.L. & Christensen, C.M. (1995) Disruptive technologies: catching the wave, Harvard Business Review, 73(Jan-Feb), 43-53.
Capon, N. & Glazer, R. (1987) Marketing and technology: a strategic coalignment, Journal of Marketing, 51(July), 1-14.
Day, G.S. (1994) The capabilities of market-driven organizations, Journal of Marketing, 58(Oct), 37-52.
Han, J.K., Kim, M. and Srivastava, R.K. (1998) Market orientation and organizational performance: is innovation the missing link? Journal of Marketing, 62(October), 30-45.
Hooley, G., Broderick, A. & Moller, K. (1998) Competitive positioning and the resource-based view of the firm, Journal of Strategic Marketing, 6, 97-115.
Kohli, A.K. and Jaworski, B.J. (1990) Market orientation: the construct, research propositions, and managerial implications, Journal of Marketing, 54(April), 1-18.
References
Leonard-Barton, D. (1992) Core capabilities and core rigidities: a paradox of managing new product development, Strategic Management Journal, 13, 111-125.
Narver, J.C. and Slater, S.F. (1990) The effect of market orientation on business profitability, Journal of Marketing, 54(October), 20-35.
Prahalad, C.K. & Hamel, G. (1990) The core competence of the corporation, Harvard Business Review, 68, (May-June), 79-91.
Webster, F.E. (1997) The future role of marketing in the organization, in D.R. Lehmann and K.E. Jocz (eds) Reflections on the Futures of Marketing, Cambridge MA: Marketing Science Institute.