TMit TI 1 Innovation process Technological change Technology

TMit. TI 1 Innovation process Technological change Technology Assessment and Forecasting R&D Standardization Productization Market Assessment and Forecasting Market change © Sakari Luukkainen Marketing

TMit. TI 2 Michael E. Mc. Grath: Product Strategy for High Technolgy Companies • Amazon et al ~35 € © Sakari Luukkainen

TMit. TI 3 Content • • • Vision and Strategy Product Platform Strategy Product Line Strategy Leveraged Expansion Sustained Differentiation Product Pricing First-to-Market vs. Fast-Follower Strategy Global Product Strategy Cannibalization Growth Through Acquisition Process of Product Strategy © Sakari Luukkainen

TMit. TI 4 Strategic Vision • Everything in a company should be done for purpose, which is to make money, to make money company needs products and/or services, to know what they are there should be a direction which is defined in a strategic vision • Good strategic vision has focus, clarity, completeness, feasability • Where does company want to go, how will it get there, why will it be successful? © Sakari Luukkainen

TMit. TI 5 How Vision Guides Strategy • Directing technology strategy • Defining core competence • Focusing the efforts of identifying new product opportunities • Setting expectations for customers, employees and investors • Establishing a framework for product platform strategy © Sakari Luukkainen

TMit. TI 6 Product Platform Strategy • Platform is an architecture of the common elements implemented across a range of products • Key elements in the platform represent defining technology • Dictates life cycle, capabilities, limitations • Based on core competence • Difficult to copy by competitors • The choice if defining technology is perhaps the most critical strategic decision that a high tech company makes © Sakari Luukkainen

TMit. TI 7 Product Platforms Product 3 Product 1 B Product 1 C Product 1 A Product 2 Product 5 Segment A Unique segmenting Segment B elements, common channel Segment C elements Common platform Element A Defining and supporting technology elements Element B Element C © Sakari Luukkainen

TMit. TI 8 Benefits of Platform Strategy • Focuses management on key decisions at the right time • Enables rapid & consistent product development • Encourages a long-term view on product strategy • Dominant design position achievement • Resource and channel synergies – parallel cost and differentiation advantage • Can leverage operational efficiencies • R&D costs – reuse • Manufacturing costs – economies of scale • Makes marketing and support easier – segmentation and channel reuse –> more value by decreasing unit cost © Sakari Luukkainen

TMit. TI 9 Product Line Strategy • A time-phased plan for developing products from a common platform, each product targeting a specific market segment • The true potential of a platform strategy is extracted with an effective product line strategy • Covers all primary targeted market segments • Each product offering should be sufficiently focused • Time-phased scheduling / sequencing – all products cannot be released simultaneously – priorization • Similar products / product lines are coordinated – To avoid rework and confusion in marketing and among customers © Sakari Luukkainen

TMit. TI 10 Segmenting Products • Based on what customers are trying to do with product or who is customer • Based on differentiation • High-end version first and then low-end by subtracting value from it • New features first to high-end, then diffuse to lowend as competitive upgrades • Three versions is a good default choice, most revenue from the middle version • Creation of metrics for continuous evaluation of product profitability © Sakari Luukkainen

TMit. TI 11 Leveraged Expansion Case studies show that: The success of expansions to new product markets depends highly on ability to leverage: – Existing market knowledge – Technical skills © Sakari Luukkainen

TMit. TI 12 Leveraged Expansion (contd. ) Diversification Leveraged Expansion Strategies New Segments Existing Platform Management © Sakari Luukkainen

TMit. TI 13 Sustained Differentiation • ICT products cost of production is dominated by the “firstcopy R&D costs”, and cost of distribution is falling • This cost structure leads to substantial economies of scale without capacity constraints • Competitive forces tend to move the price toward marginal cost • A vector of differentiation enables sustained competitive product differentiation by continuous incremental innovation along as specific path with distinct benefit or value proposition • Positions, segments, evolves through life cycle • Differentiation as vector not point, product roadmap © Sakari Luukkainen

TMit. TI 14 Relative positioning © Sakari Luukkainen

TMit. TI 15 High-Tech Differentiation • • • • Unique features Measurable benefits Ease of use Improved productivity Protecting the customer´s investment Lower cost of product failure Higher-performance products Unique fundamental capabilities Design Standards Total solutions Total cost of ownership Brand Convenience © Sakari Luukkainen

TMit. TI 16 Risks of differentiation • Not sustained • Insufficient proximity to price • Customer preferences misunderstood • High cost • Unfocus • Subsegmenting the market • Emerging technology • Perception of differentiation © Sakari Luukkainen

TMit. TI 17 Product Pricing Offensive • • • Establish price leadership as the basis for competing Penetration pricing to increase the market Experience-curve pricing to discourage competition Compete of price/performance Promotional discounting Defensive • • • Adapt to maintain highest competitive price Use price to segment the market Skim pricing Value-based pricing Redirect product line sales by bait-and-switch pricing © Sakari Luukkainen

TMit. TI 18 Product Pricing Risks of offensive pricing • price leadership not sustainable • price war • no supporting cost advantage Sorces of cost advantage • • • design economies of scale supply chain superior techology R&D process global scale © Sakari Luukkainen

TMit. TI 19 Advantages of Being First to Market • Market share advantage • Earlier experience • Influence to standards © Sakari Luukkainen

TMit. TI 20 Advantages of Being the Fastest • Nearer in time to the market • Get ahead and stay ahead • Can user newer technology © Sakari Luukkainen

TMit. TI 21 First-to-Market Strategies • Be the first to upgrade products with new technology • Respond rapidly to market changes • Introduce continual product innovation • Be the first to create a new market Fast-Follower Strategies • Wait until a new market is clarified • Reverse-engineer successful competitive product © Sakari Luukkainen

TMit. TI 22 Risks of Timing Strategies • Entering the market prematurely • Compressing product lifecycles • Relying on an inferior product development process © Sakari Luukkainen

TMit. TI 23 Global Product Strategies • Develop products uniquely for country markets • Leverage country-specific product • Customize global product platform • Develop universal global product © Sakari Luukkainen

TMit. TI 24 Cannibalization Causes of Unfavorable Cannibalization • New product creates less profits • New product requires siginificant retooling • Greater technical risks Offensive Strategies • Attack market leader • Introduce new technology first Defensive Strategies • Cannibalize yourself before competitors • Continue as technology leader • Pricing • Specific market segments © Sakari Luukkainen

TMit. TI 25 Growth through Acquisition • Acquire product platform to expand into new market • Acquire technology and technucal skills to develop new product platform • Acquire market and channel expertise to enter new market • Acquire a competitor to strengthen a current market position • Acquire a company with the capability to diversify into new market © Sakari Luukkainen

TMit. TI 26 Strategic Balance Trade-offs • Focus vs. diversification • Short vs. long term • Current vs. new platform • One business unit vs. another • Research vs. development • High vs. low risk • Financial return © Sakari Luukkainen

TMit. TI 27 Process of Product Strategy © Sakari Luukkainen