Chapter 7 – Technology Strategy in Lumpy Market Landscapes

Chapter 7 discusses the “lumpy” aspect of emerging technology markets and ways to analyze and expand into other markets. A technology or product exists in a set of technology barriers, so finding ways to push the barriers can increase a company’s market share. Customers also value different attributes of the product higher than others, so understanding what attributes are important to customers and then exploiting that preference increases market share as well. Emerging technology markets are especially hard to predict because in this lumpy, changing, market scenery it must be decided what market and what attributes will derive the most benefit from the technology. Success with an emerging technology comes when the technology facilitates an improvement in the most favored set of attributes by the market. Companies need to understand the market and the lumpiness they are dealing with and strive to extend the barriers, either by looking for a technology to do so, or looking for a market to introduce a technology into.

Pushing Technology Barriers
Understanding the intersection between market segments and barriers created by the current technology, companies can use an emerging technology to expand the barriers and reach more customers. By expanding or eliminating barriers, companies can access markets that were previously out of reach and may still be out of reach by competitors. Also, when emerging technologies can create demand for new attribute sets, new customers can be acquired as well.

Identifying Valuable Technologies
To understand what technologies would be profitable for a market, the lumpiness of the market must be identified and understood. Attributes, most favored and valuation impact and technology barriers impact on market segments and attributes must be known. There are three different customer responses to attributes – basic, discriminators, and energize features, and by identifying a company’s current attributes, they can be categorized into valued attributes and ones that could be adjusted using emerging technology to provide more value and gain more customers. Once the attributes are scoped out, a company can look at what technology constraints are currently stopping the company from delivering the attributes. Companies can also look at what barriers might be present in the future. Understanding the current and future barriers makes it easier to identify or look for technology that will facilitate expanding the barrier to reach more customers. Market lumpiness is not static due to customer’s changing needs and wants, so by making small investments and employing options reasoning, a company can account for the changing atmosphere. Companies can position options – identify ways to extend barriers by looking for a technology to do so, or scout options – identify ways a technology will create attributes of value.

Identifying Positioning Options to Exploit Lumpy Markets
A company who wants to use technology to expand its barriers and enter new markets has three options to do so.
Single Niche Domination – A company extends a barrier and is now able to market a better product to a single market segment. This should be used when competition cannot provide better attributes because of technology barriers. The first company to use and emerging technology to provide a better product and extend that barrier will capture and control that niche.
Niche Fusion – A company identifies a technology that will change the current technology barriers and allow for the fusion of multiple market segments. That company will then dominate and capture those market segments. This should be used when the rate of performance improvement is sharp compared to alternatives.
Creating a New Technology Envelope – A company changes the attribute sets, usually by introducing an emerging technology. This radical change forces the competition to quickly adjust or go out of business, since the customers have transferred over to the new attributes and may not be interested in the old product or technology.

Identifying Scouting Options for Applying New Technologies
To be successful with this approach, companies must find attributes that can be created and improved by the emerging technology. The company then needs to determine what market segments would value the new or improved attributes the most. The attributes have to be measurable and dimensional, so by researching what dimensions the emerging technology will have an impact on will help determine what segment to market. Understanding what attributes the emerging technology will change and understanding how the customers view the attribute and their reaction to any changes will help a company choose the right market segment.
The lumpy market is just another facet in the complex and ambiguous nature of emerging technologies. Disrupting a technology barrier by introducing a new technology can provide huge benefits to a company, but can only be done when the lumpiness of the market and different customer segments is understood. Learning about the different segments and attributes that each segment values the most is key to being able to exploit the barriers and create improved attributes. A company can either look for a technology to facilitate expanding the barrier, or look for a market where their technology will expand the barrier. If done successfully, either option will yield more customers and increased profitability.

The book says in relation to creating a new technology envelope, “the Internet is putting conventional telephone network operators on edge.” I would have to disagree with that now, while VoIP has taken off in the business world (and decreased the use of PBX systems); it has not really become popular in the residential world (at least yet). Cell phones however, are displacing regular “land lines” and taking business away from the “telephone network operators.” The technology of cellular communication, not requiring a land line, has taken significant market share away from the conventional telephone companies.

Netbooks are a good example of the concepts presented in this chapter. By creating a very portable and very inexpensive laptop, companies are now able to reach a new market segment that previously did not own a laptop due to price. Customers who were not willing to pay a lot for a computer and do not have high computing demands can use a netbook. This customer segment in the past probably either owned a desktop (due to price) or no computer at all (due to low computing needs and price). By introducing the netbook into these segments, the main attribute of price can be decreased enough that this customer segment is now willing to purchase a computer/laptop.