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Strategy in technology intensive companies
The document discusses challenges in today's complex and dynamic markets including long and unstable market chains, rapid market changes, shrinking product lifecycles, and network effects. Successful strategies require developing relationships along the value chain and being able to adapt to disruptive technologies and changing customer demands. Factors like high fixed costs, network effects, and standardization also impact strategies that must focus on achieving high sales volumes quickly through practices like reducing costs and building multi-sided platforms. Common strategic mistakes are identified such as a lack of market focus, moving too fast with products, and conducting irrelevant market research.
Strategy in technology intensive companies
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- 2. Complex andDynamic Market Chains Rapid Market Changes Shrinking Product Life Cycles Unique Cost Structure Network Effects 2
- 3. There isless vertical integration, resulting in long market chains with many organizations along the chain At the downstream end there are sometimes many niche market opportunities Market chains are in many cases unstable, with many companies moving up and down the chain Successful strategies require developing strong relationships with various players along the value chain Relationships can be focused on sales, marketing, operations or technology 3
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- 5. New emergingtechnologies and disruptive technologies create changes , resulting in discontinuities Disruptive, enabling technologies can invalidate products or entire business models Difficulty predicting the evolution of customer feature demands and use models Strategic decisions cannot rely on conventional market research and assumptions Strategic plans must be dynamic and allow for rapid changes and modifications or be able to withstand change 5
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- 7. Rapidly shrinkingproduct development cycles allowing fast introduction of new features and products creating cannibalization Too many features are developed – resulting in high development costs and complicated products Shrinking product/technology Adoption cycles resulting in shorter product life span Developing a platform strategy that will allow introducing new products on the platform Achieving rapid high sales volume by expanding to many global markets and offering low prices 7
- 9. The Chasm Innovation Visionaries Pragmatists Conservatives Laggards Adopters Follow instincts Analyzers Revolutionary Prefer steady change Rule Breakers Rule followers Avoid Crowd Crowd followers Risk takers Avoid risk See future See today’s possibilities problems 5% 40% 40% 13% 2% LIfe Cycle
- 10. High upfrontfixed costs of research and development and low marginal production costs Results in high priced products upon introduction with rapidly dropping prices Companies must achieve high volume sales quickly, resulting in strong price competition Strategies must identify means for reducing upfront fixed costs, such as outsourcing Marketing must focus on achieving high volumes quickly 10
- 11. The valueof a product or service to the user depends on the number of other users or if more complements become available Largely rely on standardized or competing platforms or components developed by other vendors Encourages companies to invest heavily to become industry standards, or at least to comply with standards It is common for companies to give away a basic version of their product to encourage adoption and become the standard The most successful companies are those who build multi-sided platforms (MSPs), which spawn large ecosystems of users and suppliers of complementary products and services 11
- 12. 1. Lack ofMarket Segment Focus 2. Excessive Pace of Product Improvement 3. Incomplete solutions 4. Too many features 5. Channel mismanagement 6. Failure to Establish the Right Competitive Barriers 7. Misinterpretation of the Technology Adoption Lifecycle Model 8. Irrelevant Market Research 9. New development vs. product customization 12