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Is Your High-Tech Firm Market Driven? By Richard A. Siegel You hear much these days about adopting a market-driven, customer oriented approach to technology, business and product development. Call it Market-Driven Development (MDD). If you think this is just another fad in management science, think again. Adopting this approach can have a profound affect on your bottom line. Just look at Dell Computer, Microsoft, Yahoo and 3M, to name just four market-driven firms. Some, like Dell, package technology in ways that are highly responsive to market needs and interests. Others, like Microsoft, modify existing technology to provide new consumer benefits. Still others invent technology that enables new products to uniquely solve user problems or provide entirely new user benefits, like Yahoo and 3M. How are you deciding where and how to commercialize your technologies? What approach do you use? Some choices include:
All five have been known to work -- some superbly. But if you want to increase the odds of success in each of your development programs, the choice is clear. Market-driven development is for anyone seeking to maximize returns on technology investment. Perhaps started in the field of consumer product development and marketing, it is becoming a strategic tool in the arsenal of domestic and global organizations serving industrial and institutional markets alike. Organizations practicing MDD share a sensitivity to the needs of their current and future markets, and knowledge of the specific economic and performance requirements needed to sell something new to them. The most sophisticated of them form special relationships and alliances with innovative leaders in these target markets to gain the special knowledge needed to precisely guide tech development and commercialization. For many, sensitivity to market requirements results from intense interactive programs with the market. Intensive interaction leads to intensive learning. For a few, the process is intuitive, such as in the case of Yahoo. But it's hard to bank on intuition occurring just when you need it. That's where market-driven development comes in. But moving to an MDD environment may involve more than you think, and a change in the way you do it. First, some questions Let's assume you run a technology-based company and the majority of your people have technical backgrounds. How do you shift to MDD? If you shift your development emphasis from being tech-driven to market-driven, should you drop those activities that are solely the former? If you conduct technology transfer for a government agency, how can you apply MDD approaches to significantly increase returns from technology licensing and partnering with commercial companies? What's the most effective way to allocate resources for technology development and commercialization so as to maximize the value-creation potential of your costly technology investments? These are some questions for executives of advanced technology organizations with revenues based partly or solely on the sale of new materials, systems, processes, equipment -- or on the license or sale of technology. These include thousands of industrial companies plus government contractors, agencies, labs and university research centers. In every case, increased returns from tech investments are constantly needed to generate added profit or support more development, right? While government-contracted or funded organizations initially produce new technologies, materials or systems for government uses (e.g., NASA, DOD, DOE), there is growing pressure to find ways to generate revenue streams from other uses for these technologies in domestic or global commercial markets. Here, too, the application of a MDD approach can more rapidly lead to identification of specific market opportunities, licensees and partners. This isn't rocket science. It just has to do with a fit between your technical capabilities and resources and market needs. New thinking required The change in required thinking is reflected in a recent comment I received from a senior technologist of a leading U.S. tech-based systems company. He had read my first article on "bogus assumptions" in Technology Business (March-April 1998) and was energized by a suggested approach for securing high quality market guidance for new product development from the market. The article discussed a MDD technique where creative technologists from the developer company meet with counterparts from prospective customer companies to informally explore ways to optimize product specifications. This approach has been extremely effective for many of our U.S. and Europe-based clients. This reader said he told one senior manager about the ideas, and was told it's the marketer's job, not the engineer's. The manager remained unconvinced that technologist-to-technologist rapport is superior, insisting the company needed better product marketers instead. This reasoning is contrary to developing a market-driven organization. The senior manager keeps the business functions pigeon holed, figuring that a technologist is an inside person while marketers work outside. Well not any more! Not if you want to build a dynamic market-driven company and reap the benefits of this approach. (To say nothing of avoiding added costs of misdirected technical and market development.) A fundamental requirement of shifting to an MDD organization is integrating diverse disciplines and assigning new responsibilities. This means equally involving your technical, business development and market development people into the product and business development process. And, most importantly, it means installing a system that enables all of them to interact with current and prospective customers in controlled but informal ways -- always moving closer to shaping what you have into market needs. Why a multi-disciplinary approach? There are lots of reasons, but here's my favorite: Each of these disciplines, when presented with the opportunity to talk face-to-face with counterparts on the buying side of the market, will produce different and unique insights into customer solutions! Then when you combine these different perspectives, you'll be able to construct unique total solutions built upon your particular technological strengths and the actual needs and interests of your customers or prospective customers. These types of solutions often possess strong competitive advantages because they're uniquely tailored around your particular strengths and resources. So what does it mean to be market-driven? Among other things, it means:
And it means that your technologists are interacting with the market, perhaps for the first time, and doing it with some regularity to remain well directed. This is one of the cornerstones of MDD. It also means a constant two-way flow of information between you and the market -- an iterative approach that builds clarity and makes decision making much easier. It means creating solutions from your technologies that offer competitive advantages to your customers and to your customer's customers. In short, being market-driven means letting the market provide the direction. Everybody Wins. The policy of a truly market-driven company is that satisfying and anticipating customer needs and problems will significantly contribute to financial success and growth. This attitude and commitment must come from the top and be passed down to every department. But in addition to the right attitudes are the right actions. A market-driven, tech-based company discovers ways to secure strategic direction from the market and rapidly use it to direct technology, product and market development. Being market-driven involves all people in the company who have contact with the market, as well as some who today may not. Included are technical support, R&D, engineering, design and development, business development, strategic planning and even upper management. You'll recall the concept of "excellence" that was popular some years ago. It was very customer oriented, but arguably not necessarily market-driven when it came to setting direction for new products, new markets, and new services. The difference between the so-called "excellent" company and a market-driven one is that the latter leverages its customer and market relationships better, as well as its market intelligence gathering systems, in the development and commercialization of technology and development of new products and services. It finds many ways for the market to offer real-world direction and treats the market as its partner when making commercialization decisions. Is MDD and an M-D business for everyone? For everyone who wants to sell or license something, yes. Is it the only approach that works? No. If you run a tech-based organization, you must maintain a tech-driven effort at all times. This is how totally unexpected discoveries are made that can lead to business opportunity, and it can fuel a good portion of your growth. It's a question of balance between the market-driven and the technology-driven approach that's critical -- the balance of resources applied to each. A market-driven environment will lead you to develop relevant new technologies, and it will also help you focus or refocus your technological discoveries into areas of high opportunity. And what about the opportunistic approach? Sure, I'll accept my lottery winnings. I just won't bet the farm on my number being chosen, or my shareholders' dollars. Richard Siegel is founder and CEO of ISIS International Inc., a Connecticut-based international consultancy specializing in strategic planning, new business development and international technology commercialization. He can be reached at 203/261-5300, Fax 203/261-4911 or rsiegel@isisusa.com. Article republished with permission of Technology Business Magazine. Copyright © 1999 Richard A. Siegel. All rights reserved. |
