Technology drives our economy. An explosion of new technologies has given rise to endless new market opportunities. The challenge is linking technological development with the world of buyers, customers, and competitive markets. Often new technology is pushed on to marketing and sales departments to create a demand for the new product or service. Managers of technology and product development must work together with sales and marketing managers within companies to integrate technological choices with the critical elements of market strategy to drive market focus that drives cash flow. Unfortunately, I have often seen research and development not aligned with market focus.
Dr. Roger More, a former Harvard Business School professor and a professor at the Ivey Business School, University of Western Ontario coined the phrase Market Focused Planning. At its core, this business planning strategy focuses on connecting a business and its resources to developing products or services with significant differentiation that can create long-run customer demand and profitability, and disconnects the company and its resources from all other activities. Market Focused planning has been the bedrock of my business strategy philosophy.
Expanding on Dr. More’s theory, the commercialization of technology involves creating and managing three powerful and strategic forces: market focus, competitive differentiation, and strategic synergies. Managers must integrate the four market-focused analyses and decision points to drive cash flow and profitability from new technology. The four points are technology, product functionalities, customer segments, and market networks.
The second key characteristic of a hot zone is focusing on creating competitive differentiation in the four points in the value chain: technology, product functionality, market networks, and customer segments. Ideally, we would want a strategy that creates high competitive differentiation in all four areas. Unfortunately, this is not always possible. High competitive differentiation in two or more areas can prove to be successful. However, technology and product functionality that doesn’t meet customer needs or expectations will never succeed regardless of the efficiency of the market network or the size of the customer base.
Creating, growing, and managing strategic synergies is the third critical characteristic of a hot zone. Strategic synergy reflects the extent of competitive differentiation, creating focus and differentiation in the others. If the technology is highly focused and differentiated, it may generate focus and differentiation for product functionalities or customer segments and market networks. For example, the technology behind Apple’s iPad drove the value chain.
In his book Transforming New Technologies into Cash Flow, Dr. More outlines six critical processes to analyze and bundle the elements of the four points in the value chain to achieve hot zones. They are:
Technology and Product Functionality – Technology drives product functionalities. The process must combine the best product functionality to maximize market networks and customer segments.
Technology and Market Networks – Technology bundles must match the capability of a chosen market network in terms of customer engagement, distribution, and service requirements. Managers must understand potential gaps.
Technology and Customer Segments – Technology bundles must be consistent and supportive of the needs and perceived functional differentiation in the eyes of the end-user.
Product Functionality and Market Networks – High product differentiation is key to market success. However, the marketing, sales, and service structure must maximize unique product features and benefits’ reach and cash flow potential.
Product Functionality and Customer Segments – Product functionality choices must transform the product into focused differentiation that will drive buyer choice in the customer segments.
Market Networks and Customer Segments – Market networks must match the complexity of the customer’s choice/rejection process. The customer engagement and delivery system must efficiently support the characteristics of a highly differentiated product supported by technological advances.
These six processes must be managed well, but they must be integrated together to create an overall market focus and differentiation that drive adoption rate and new cash flow. Generating sustainable net cash flow must always be the key objective throughout the process.