Strategies during the pattern

What are possible scenario’s after the invention?

• Almost directly after invention large-scale production and diffusion

• Quickly after the invention a market introduction and after that a long period of trial and error before large-scale diffusion

• Long period of development before the first market introduction

• After invention innovation fails in innovation phase or early in adaptation phase

“best” category of strategies

Expected yield and risk of strategies relation

• Wait-and-see low risk/yield

• Mass market high risk/yield

Strategies during the innovation phase

1. Length of the innovation phase?

2. Why does it take so long? (Depends on your model/theory!)

3. What are the activities and barriers or problems in the phase?

4. What are the strategies to deal with that?

Why does it take so long?

Product development issue in life cycle perspective

What are the activities and barriers or problems in the innovation phase?

Activities

1. Basic research to improve principle (scientific development).

2. Basic research on subprinciples in the larger system (scientific development).

3. Applied research required to complete the system (technology development).

4. Formation of network of actors with complementary competences/resources.

5. Vision on the system (function, type of use, type of product type of users).

6. Competition with other new or incumbent (existing) systems.

7. Choice product/market combination(s).

8. NPD-process (product/service, marketing-mix, production, organization).

9. Pilot/testing.

Problems to tackle

1. Funding problem

2. Principle technology immaturity problem; uncertainty performance competitive systems

3. (Shared) vision is lacking

4. Network of actors willing to learn and build up vision is lacking or scattered

Strategies during the innovation phase overview

1. In house-development strategy   (Dupont, Philips, Bell labs) Early 20th century: corporations

   1. Portfolio innovation strategy.  Closed innovation (risk pooled in large portfolio) When?

2. Joint development strategy.  (JSF, ..) Late 20th century: innovation networks

   1. License in strategy.  Open innovation

   2. Buy (shares in) company strategy.  Pharmaceutical companies buy (shares in) Biotech starters

   3. Joint ventures  Pool risk and resources (car brands share platform)

3. Subsidized development strategy.  (sustainable energy technologies)

   1. Pre-competitive subsidy (EU, ..)  advantage: standard; disadvantage: not proprietary

4. Pre-funding development strategy.

   1. Crowd funding strategy  (drones-pre funding)

   2. Sell (shares in) company strategy.  Genentech (when? Radical promising technology)

   3. Made-to order funded by client.  (ASML)(when? If company has good track record)

5. Sell idea, concept or design  (Medical molecule creation)

   1. License out strategy

   2. Sell design strategy.

6. Demo experiment strategy.  (telegraph, video telephone)

   1. Living lab strategy.

7. Wait & see strategy.

Strategies during the adaptation phase

1. mass market

2. wait and see

3. niche market

Niche strategies

• specific product(version)-market(segment) combi to start diffusion and survive the first hurdles before mass market.

A niche is a combination of a specialized version of a product specifically

for a small group of customers.

• Niche next to a mass market (car mass market, handmade car niche)

• Niche before a mass market has emerged (focus of our work)

Niche after a mass market has emerged  (vacuumtube amplifier for audio-enthusiasts

Managerial Relevance of niche markets for new high-tech products

Problem: Success rate for pioneers of radically new products is much lower than for incrementally new products.

• Min et al. (2006): pioneer failure rate radical/incremental: 77/39%

• Tellis & Golder, (1996): pioneers out of business before success: 75%

Solution (?): Niche players are relatively successful

(Lynn et al., 1996; Hultink et al., 1997; Moore, 2002;)

For managers it is important to realize that targeting niche applications can be an important initial step to create a market. Niches can form a transition path to reach a large-scale application (DeBresson, 1995).

Finally: Large-scale introduction (mass market strategy) is often not possible.

Telephone:     Infrastructure for intercity use simply not available.

Nylon:    ****Production to make a fine fabric was not mastered yet.

Adamson, 2003 (sustainable techn)

1. Primary niche  niche unique functionality  no competition

2. Secondary niche  niche compete other tech  limited competition

3. Mass market  all market segments  full competition

Schot & Geels, 2008; Tso & Chang, 2003; Monaghan, 2009 (sustainable tech)

1. Technological niche  governm protected   no competition

2. Market niche  subsidized  limited competition

3. Regime shift  multiple niches  substitution

• Testing experimental setting; Economies of scale, learning create compl. Prod/serv

Jorgensen et al, 2007; Little et al, 2010; McFadden et al, 2009 (organic food)

1. Act of idealism of small group sharing an idea of ideal society, food =part

   • Barter, alternative systems of payment (in kind)

   • Buyers cooperation using home to distribute food from selected farmers

   • Culture building: pot luck dinners, recipe swaps

2. Real market segment (chains of specialized shops)

   • Comprising the great ideal

3. Mass market supermarkets

   • Research institutes, Tests

Data on niches

Observations

• Most Business niches, then Government (military) then Consumer niches

• Significant differences in number and type of niches per industry

General

• Most private-private sequences (in all industries)

• Public-private and reverse are almost equal in size (in all industries)

Per industry

• Pharma & Healthcare is different

Public-public sequences differ per industry

Strategies

What to expect?

Why?

What to do?

What to expect? (pattern)

• Development lasts long, much longer than a project takes.

• Market formation last long and is different from a slow diffusion start.

Why? (actors and factors)

• Barriers to large scale diffusion (12)

• Tracked over time to choose strategy

What to do? (strategies)

• We found ten niche strategies.

Barriers to large-scale diffusion

1. Socio cultural aspects

2. Production system

3. Knowledge application

4. new high-tech product

5. macro-economic aspects

6. complementary product services

7. accidents unexpected events

8. knowledge technology

9. institutional aspects

10. suppliers (network of organisations)

11. customers

12. natural resources and labor

Goal Barriers + niche?

elate barriers ---to--- niche strategies

1. In extant literature general list of barriers to large-scale diffusion (12)

2. Design strategies to deal with these barriers?

The main point: The combination of two types of barriers indicates what type of strategy to aim for

barriers + niche: layers

Ten niche strategies + application

1. Demo, experiment and develop niche strategy

2. Top niche strategy

3. Subsidized niche strategy

4. Redesign niche strategy

5. Dedicated system or stand-alone niche strategy

6. Hybridization or adaptor niche strategy

7. Educate niche strategy

8. Geographic niche strategy

9. Lead user niche strategy

10. Explore multiple markets niche strategy

Strategies during the stabilization phase

1. Mass market strategy

2. Market penetration strategy

3. Market skimming strategy

4. Differentiation strategy

5. Focus strategy

Logic strategies Adaptation-Stabilization

Strategy formation

• Step 1: Explore alternative strategies

• Step 2: Decide to innovate?

• Step 3: Focus on Technological innovation (it is developed)

• Step 4: Assess the pattern and current position of your technological innovation.

• Step 5: Assess the status of the Technological Innovation System framework (TIS)

• Step 6: Choose a strategy (fitting pattern stage + TIS)