Creating Value: Understanding patterns of market evolution

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Creating ValueUnderstanding patterns ofmarket
evolution
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The first of 3 key questions
How will we Create value?
How will we Capture value?
How will we Deliver value?
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Market Evolution over the Life Cycle

• Drivers of diffusion
• When does the S curve imply a diffusion curve?
• Managing the market
• Market segmentation
• Crossing the chasm
• New markets, new needs The Innovators Dilemma

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What drove the diffusion of the CD?
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The diffusion of many products andservices
follow a similar pattern
Penetration Or Cumulative Sales
Time
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The diffusion of many products andservices
follow a similar pattern
Penetration Or Cumulative Sales
Sales/year
Time
Time
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Understanding market dynamicsBasic segmentation
(Rogers)
Units Bought
Late Majority
Early Majority
Early Adopters
Laggards
Innovators
Time
Adopters differ by, for example, social, economic
status -- particularly resources, affinity for
risk, knowledge, complementary assets, interest
in the product
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Understanding market dynamicsBasic segmentation
(Rogers)
Units Bought
Crossing the chasm?
Late Majority
Early Majority
Early Adopters
Laggards
Innovators
Time
Making the transition from early adopters to
early majority users often requires the
development of quite different competencies e.g.
service, support capabilities, much more
extensive training.
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Characterizing the segments

• Innovators
• Early adopters
• Early majority
• Late majority
• Laggards

• Technology Enthusiasts
• Visionaries
• Pragmatists
• Conservatives
• Skeptics

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Does the chasm always occur attakeoff?
Performance
Maturity
Discontinuity
Takeoff
Ferment
Time
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What is the relationship between theS curve and
the diffusion curve?
Performance
Cumulative sales
Time
Time
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If technology never changed, wouldthere be
diffusion?
Performance
Cumulative sales
Time
Time
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Thinking through diffusion
Technology is
Static Evolving
Customers are


Homogeneous Heterogeneous
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Thinking through diffusion
Technology is
Static Evolving
Customers are
Information (eg w.o.m.) Externalities Supply constraint Price

Homogeneous Heterogeneous
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Thinking through diffusion
Technology is
Static Evolving
Customers are
Information (eg w.o.m.) Externalities Supply constraint Price

Homogeneous Heterogeneous
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Thinking through diffusion
Technology is
Static Evolving
Customers are
Technology push new capabilities gate demand

Homogeneous Heterogeneous
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Thinking through diffusion
Technology is
Static Evolving
Customers are

Market pull Diffusion evolves Across segments
Homogeneous Heterogeneous
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Thinking through diffusion
Technology is
Static Evolving
Customers are
Information (eg w.o.m.) Externalities Supply constraint Price Technology push new capabilities gate demand
Market pull Diffusion evolves Across segments
Homogeneous Heterogeneous
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Thinking aboutdiscontinuities from amarket
driven perspective
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From Moores perspective, why shoulddiscontinuiti
es be hard?
Performance
Maturity
Discontinuity
Takeoff
Ferment
Time
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Managing customers at momentsof disruption
Who buys a technology when it is first introduced?
Performance

• New technologies sell to
• New customers
• With new needs
• Often at lower margins

Time
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Initially, SR aligners sold to customerswith
different needs

• For example Semiconductor Photolithography

Speed
Scanning Projection Aligners
Step Repeat Aligners
Yield
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But then they improved sufficiently totake the
whole market

• For example Semiconductor Photolithography

Speed
Scanning Projection Aligners
Step Repeat Aligners
Yield
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Some new technologies sell to niche marketswith
less demanding requirements
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Are all discontinuities disruptive
inChristensens sense?
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Managing the change in customergroups may be the
hardest task!
Performance
Leading edge customer focused research may be a
critical capability
Effort
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A major materials supplierThe Problem
Market
SBU 1
CRD
CRD
SBU 2
?
SBU 3
100m Biomaterials work
?
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What can be done?

• Launch and hope?
• Lead user research
• Virtual products
• Small scale experiments

Significant resources required!