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 Industry
Overview -- Session 1 of 2

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

Common High Technology Industry Characteristics
Technology
Uncertainty
Market
Uncertainty
Competitive
Volatility

Market
Uncertainty
■ 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

Competitive
Volatility
■ 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

Technology
Uncertainty
■ 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

Competitive
Volatility
Market
Uncertainty
Technology
Uncertainty
Business
Development of
High Technology
Innovations

■ 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?

■ 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 …
Externalities
Knowledge 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.

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”

■ 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 need
R&D / Marketing : Marketing Leads  “Customer Pull”
Interaction
Radical Breakthrough (the technical solution precedes the customer need)
Market : New technology creates new market
Product : Superior functional performance over
“old” technology
Initiator : Developed for a specific market opportunity
or to cover a secondary concern
R&D / Marketing : R&D Leads  “Technology push”
Interaction Radical Breakthrough
Incremental

■ 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

Innovation in High-Tech Companies
■ Internal Considerations
Maintaining Innovation
Creative Destruction Corporate Imagination Expeditionary 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

Technology Adoption
■ Product Life Cycle (Based on G. Moore “Crossing the Chasm”)
Time
Revenue
Pragmatists Conservatives Sceptics
Early
Adopters
Early
Majority
Late
Majority
LaggardsInnovators
VisionairesLead Users

Technology Adoption
Pragmatists 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

■ 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

■ 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
Technology Adoption After the CHASM

■ 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

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

Technology Adoption
■ Gaps in the Product Life Cycle
Moving from one type of adopters to the next one
Time
Revenue
Pragmatists Conservatives Sceptics
Early
Adopters
Early
Majority
Late
Majority
LaggardsInnovators
VisionairesLead Users
TheCHASM
Gap #1
Gap #2
Gap #3

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

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
TheCHASM
Creating
the CHASM
Very difficult and consumes
a lot of resource to cross
the CHASM

■ 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

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

■ 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)

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