Creating a Market for the Technology
In the article “Long Term Success or Survival” I quoted one of my professors when he said that “the failure rate (of large companies) is so high not despite the efforts of MBA-educated managers, but because of it! In fact they are awarded a Master in Business Administration and not a Master in Business Innovation”.
The message is that managing new and innovative markets is distinctively different from managing existing ones. It will require different competencies, different strategies and, most importantly, a different managerial mindset.
In existing, mature markets the threat of imitation is particularly high, meaning that companies have an incentive to keep knowledge and technology proprietary. A firm developing a new soft drink will try to keep its formula secret. A shoe manufacturer will not let competitors copy its new design before it hits the market. So far so good, after all that is what people learn in business schools.
When we consider new markets, however, trying to hold knowledge or technology proprietary might backfire. Companies that successfully introduced innovations often shared their technology to the benefit of other economic actors, deliberately reducing their revenues in favor of a faster customer adoption.
One of the reasons JVC´s VHS video recording technology out placed Sony’s Betamax was the broad adoption it conquered. JVC licensed out the VHS technology to a variety of electronic manufacturers including Hitachi, RCA and Matsushita (Panasonic). Sony, on the other hand, tried to keep its technology (superior under most technical parameters) strictly proprietary.
Sony invested in a technology and tried to profit from the technology. JVC invested in a technology, created market, and profited from that market. Those a quite different approaches.
Innovation management is not only about creating a technology for the market, but also creating a market for the technology.
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Great post, Dominic. Legions of companies have failed because they didn’t perceive the need to nurture a market (which needs multiple suppliers). Licensing your IPR, as JVC did, may seem like giving away part of a market to your competitors–and it is, in essence. But in this and many other cases there’s tons more profit to be made by gaining 15-20% market share of a large, successful market than by being the only supplier in a market that doesn’t materialize.
Sorry, Daniel. Had a brain malfunction and momentarily forgot your name. My apologies.
[…] Daniel Scocco kicks off our third carnival with: Creating a Market for the Technology posted at Innovation Zen […]
I agree with the fact that the surrounding environment will play a role in the absorption of the technology.
Leggo ed imparo sul vostro luogo. grazie!
[…] From a innovation Zen post: Sony invested in a technology and tried to profit from the technology. JVC invested in a technology, created market, and profited from that market. Those a quite different approaches. […]
[…] Found this brilliant article that I happen to agree with COMPLETELY. In fact, I believe Daniel Scocco must have read some of my papers! He says that managing, actually, CREATING new markets is distinctively different from managing current ones. He’s absolutely, positively correct. […]
Interesting observation by your Professor on companies not having managers with a ‘Master of Business Innovation’.
We believe creating, not just managing, new markets is distinctively different from managing current ones. We’ve shared our observations in this post:
http://www.grabbinglightning.com/creating-new-markets-for-novel-technologies/