November 27, 2014

Market Development for New Products, Processes and System

Market development is the last mile of  any innovation.  The authors proposed  two very
different kinds of market development. Accelerating adoption applies to individual products, services, and business models, while creating new markets is a more fundamental process that supports the success of revolutionary business ideas.

Accelerating Adoption

For introducing a single innovation to the marketplace, firms often rely on proven techniques such as
advertising, public relations, and trade shows to persuade potential customers that the new products or services are worth paying attention to. One of the reasons for the increased sophistication required for breakthrough innovations is that their users make fundamental change to how they function or how they behave, changes that involve switching costs incurred by the end user to make use of the new product or service. This cost is the most significant factor in new product adoption and may inhibit the adoption.

The development of principles in this area  has been significantly influenced by Everett Rogers, a Stanford professor whose book "Diffusion of Innovations" pioneered the study of the critical relationship between innovations and the customers who adopt them. Rogers showed that the rate
of new product adadoption commonly follows a bell curve, and defined different groups within a total population according to how quickly or slowly they tended to adopt innovations. He also explored issues such as opinion leadership, diffusion networks, change agents, and innovation in
organizations, all of which are significant factors in market development. Consultant Geoffrey Moore subsequently applied Rogers’ ideas in a model that has become widely used in high tech industries. Moore’s book, "Crossing the Chasm", explains how the adoption curve can be applied to
understand how and why new high tech products succeed or fail in the market. It also examines how differing psychological factors affect different groups of buyers, and therefore how marketing, advertising, and sales have to be adapted at each different phase of the adoption curve.
Moore identifies four groups of adopters: early adopters who in the technology world tend to be technology enthusiasts, and then visionaries, pragmatists, and conservatives. The mass market that is your goal begins with the pragmatists,  The important principle is that marketing communications have to be different for different groups. Hence the organization has to identify when the product is moving into the hands of the next group and change its marketing communications to create awareness first and then attract the persons in the target group to sample the product and then become advocates of the product.

Malcolm Gladwell’s concept of the “tipping point,” described in his book of the same name, also explores the factors underlying the adoption of new ideas and new products.   The book
shows how contagious behavior—like a fashion trend or the sudden emergence of a bestselling book—starts in an organic fashion and then suddenly takes off exponentially, much like a virus, without any central control or master plan. The idea from which the book takes its title is that moment in a
system’s development when a small change leads to a huge effect in a very rapid time frame, and spreads contagiously. For those who want to instigate rapid change, the principles of the
tipping point model are important.

The rapid growth is usually started by a handful of people who exhibit some kind of exceptional behavior. In the propagation of infectious diseases, some people, who by the nature of what they do or the lifestyle they lead, allow the growth of the disease to tip so that it becomes an epidemic.
The same can be said for many other trends—a small number of people (like skateboarders) have the ability to infect a large number of other people with a new idea (like a style of clothing or shoes). Gladwell suggests that there are three types of exceptional people whose disproportional influence can make a change tip and become a trend. They’re Connectors, Mavens and Salesmen.

Connectors are people who seem to know everyone. As information travels through networks it’s highly likely to come in contact with a connector, and if the information engages the connector’s interest, he or she will distribute it to a huge number of other individuals in a short period of time, creating a tipping point. Only a small number of connectors are needed in any system to propagate a new trend.

Mavens are information specialists. They’re the people who seem to know everything there is to know about a certain topic, and they have one additional characteristic that makes them different from ordinary experts: they love to share what they know with others. If somebody asks them, they ar willing to explain and share.  Mavens are important as tipping points because they’re on the leading edge of acquiring new information.

Salesmen are the quintessential persuaders who can get people to make decisions and take actions that they ordinarily wouldn’t take if left to themselves. They’re individuals who have the ability to persuade in part because they can get another person to root for them in the same way that an audience roots for a performer on stage. Their ability to persuade makes them strong carriers of infectious ideas, concepts, trends and changes.

Creating New Markets

When new markets or industries emerge, it’s often because someone has been able to catalyze the connectors, mavens, and salesmen in a community, although this doesn’t necessarily happen quickly.

If you look down the list of breakthrough technologies, you’ll notice that just about every breakthrough, and many of the new business models, was supported by focused market development efforts that articulated existing needs and defined new possibilities for meeting them.

Autos: Minivans
Computer: Personal Computers
Banking: ATMs
Food: Genetic Engineering (still an ongoing development process)
Airlines: Online reservations
Telecommunications: Cell phones
Health Care: MRI / CAT Scan
Retail: Bar codes
Office Supply: Post-it Notes
Media: BLOGs

Early adopters bought the first versions of nearly all these products, and gradually the value was proven as more and more users were satisfied. Mainstream buyers eventually became interested, leading to the development of a large customer base. All this was supported by advertising, and constant effort to gain favorable (and free) media publicity.

From Permanent Innovation - Langdon Morris

Permanent Innovation
The Definitive Guide to the Principles, Strategies, and Methods of
Successful Innovators
Langdon Morris

Langdon Morris is a co-founder and principal of InnovationLabs LLC and Senior Practice Scholar at the Ackoff Center of the University of Pennsylvania and Senior Fellow of the Economic Opportunities Program of the Aspen Institute.

MBA Core Management Knowledge - One Year Revision Schedule

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