Market Making
Following the The Commodity Magnet management must create a balance between incremental and breakthrough innovation. The authors suggest a 70%/30% split between incremental vs breakthrough projects. In balancing a product portfolio the following policy implications apply:
- Budget, incremental innovations are usually funded by business units, breakthrough innovations require corporate budget.
- Management, heavyweight projects require heavy weight people
- Evaluation, different criteria apply for different types of innovation, incremental innovations require market success and on time to market. For strategic innovations, learning is important.
- Deletion, Usually deletion arouses tension between marketing managers (who want to rationalize the assortment) and sales managers (who want to maximize the assortment)
Growth markets, upon first entry may reveal unpleasant surprises to the optimistic investor. See the following for more on over optimism in the early phases of a technology: Surge of a technological revolution, Abernathy-Utterback framework and Dominant Design Paradigm
Furthermore it is not necessary the best product that gets the market. Early mover effects may have advantages but some markets, specifically high-tech have a Winner-Takes-All nature.
Market making is not limited to the high end of the market. It may involve opening up the low price end of the market as well. In Blue Ocean Strategy the authors talk about the Price Corridor of the mass market, this is the price range that attracts the mass of target buyers.
The more a company build its selling strategy on price, the more the company it educates its customers to negotiate on price. Price buyers are loyal to the price, not to the company. With price there can only be a single winner. With differentiation there can be many winners. A company aiming to pursue Cost leadership strategies often fights this with a Fighter brand
