18 Mar You will then write a 45 page paper in which you use this new knowledge and proven strategies to respond to the five statements
You will then write a 4–5 page paper in which you use this new knowledge and proven strategies to respond to the five statements below.
- Discuss the necessity of short-term and long-term forecasting for developing the key elements of the business plan.
- Evaluate the importance of developing formal and informal networks when building new business opportunities and expanding into new markets.
- Discuss the importance of knowledge management in the digital age and identify two risks organizations must address to mitigate competitive pressures.
- Consider the various components of a business plan and identify two components that you believe would be the most challenging for you as an aspiring entrepreneur.
- Describe how technology could help overcome identified business plan challenges.
- Evaluate the components of a business plan related to forecasting, networking, and knowledge management.
Innovation and Entrepreneurship, Bessant and Tidd, 2nd Rd.
CASE STUDY 7
Pre-Launch Decisions which Influence Innovation Success
It has been extensively documented in management literature that an incredibly large share of
firms’ investments in technological innovation do not generate substantial financial returns.
Three main reasons underlying this phenomenon can be identified. First, technological
innovation creates knowledge and technological assets that often remain largely unexploited.
Various studies show that between 70 and 90% of corporate technology assets often never get
used in core products or lines of business. Second, the likelihood that an innovation project
reaches completion and that the new product is introduced into the market is strikingly low. It
has been estimated that the probability of new product commercialization is about 40% in many
industries, with some cases (e.g., pharmaceutics) where the mortality of innovation projects is
much higher. Finally, a large share of the innovations that ultimately reach the market do not
experience a satisfactory diffusion and their sales are discontinued. Empirical studies have
shown indeed that on average 40–50% of fully commercialized new products turn out to be
An important managerial question is however left unanswered: which are the levers a manager
can act upon to achieve adoption network acceptance and early adopters’ acceptance for a high-
tech innovation, having a given functional content and a set of technical specifications, which is
introduced within the scope of a given competitive and product strategy (Table 7.5)?
TABLE 7.5 Commercialization factors influencing the adoption of
– When will the innovation first be launched into the market?
– Will the firm announce the innovation to the press long before its market
– Will the firm partner with external organizations long before the official
– Which market segments will the innovation will be addressed to?
– Which will be the position of the innovation in the eyes of potential adopters
in each of the targeted market segments?
– Will the firm target different segments as long as the commercialization
– Which external organizations will the firm partner with during the
commercialization of the innovation?
Variable Description – Which forms of relationships will be most appropriate (e.g., licensing
agreements, strategic, long-term partnerships) to organize such relationships?
– Which bundle of additional adds-on, services and functionalities surrounding
the ‘core’ innovation will be included in the basic configuration of the new
– Which type of distribution strategy (e.g., push or pull) will be needed to
streamline the market penetration of the innovation?
– Which types of distribution channels will be chosen to deliver the innovation
to market (e.g., retail or specialized distributors)?
– Which critical functions (e.g., customer education) will they be required to
– Which message will be communicated during the pre-announcement and
post-launch advertising campaign?
– Which types of communication channels will be employed for these
advertising and promotion initiatives (e.g., mass or specialized channels)?
– Which pricing strategy (e.g., skimming or penetration) will be used for the
market introduction of the new product?
– Which pricing strategy will be adopted for complementary goods and
The commercialization processes of 11 technological innovations, launched in high-technology
markets in the past 30 years, were investigated using this approach (Table 7.6).
TABLE 7.6 Successful and unsuccessful innovation examined
Radical innovations Systemic innovations
3DO Interactive Multiplayer
Tom Tom GO
Comparing the commercialization of the successful and unsuccessful systemic innovations in the
sample, a number of decisions were taken along the dimensions.
Our analysis indicates that obtaining the support from the critical members of innovation’s
adoption network requires chiefly a careful administration of the inter-firm relationships that are
established before and along the commercialization process.
The decision to prevent other companies (e.g., competitors and suppliers of complementary
hardware and software) from manufacturing products based on the innovation’s underlying
technology is likely to be a first detrimental decision for the large-scale adoption of a high-
technology innovation. This is due to the strong network externalities that high-tech markets,
because of their tight interconnectedness, are currently experiencing. Accordingly, letting the
actors of the adoption network manufacture products based on the innovation’s technology (e.g.,
through advantageous out-licensing agreements) increases the availability of complementary
products and the chances that a potential adopter chooses to purchase the innovation. This in turn
exponentially enhances the value of the innovation in the eyes of both subsequent adopters and
the other members of the adoption network, in a self-reinforcing double-loop cycle. The effects
of this commercialization decision are very clear when comparing the cases of the Palm Pilot
(whose OS operating system was released for free to all manufacturers of adds-on and software
applications) with that of Sony Betamax (with the Japanese firm that accepted to license the
underlying technology to Zenith only more than one year after launch, when the incoming
success of the VHS by JVC was already undisputable).
It also emerges as a critical approach to win the support of the critical members of the adoption
network to enter into long-term, strategic partnerships with them. This allows firms to share the
risks and the costs they incur when supporting a systemic innovation (e.g., developing and
manufacturing ad hoc, specialized, complementary devices or pieces of software). This is what
Palm did, in 1996, when commercializing its Pilot: it decided to sign a € 20 million agreement
with Circuit City to ensure adequate shelf space and customer education services for its new
product. Similarly Apple, to streamline the acceptance of the iPod and the associated iTunes
Music Store service, was able to convince a number of record labels (e.g., Sony Music
Entertainment, BMG, EMI, Universal and Warner) to endorse the new service provision model
ensuring a 65% compensation for each song sold through iTunes. In a similar vein, Nintendo
invested heavily in order to obtain the full support for its NES from the most important game
developers (e.g., Taito, Bandai, Capcom). This required the Japanese firm to grant above the
average money compensation for each game sold. Sometimes the innovating firm instead refuses
to establish any partnerships with the members of the adoption network, or simply sets up arm’s-
length, commercial relationships with them, with the aim of maximizing its potential profits from
the innovation. This is evident in the case of 3DO, which failed to establish any forms of
relationship with the developers of software titles and the manufacturers of consoles for its new
Interactive Multiplayer. A similar phenomenon is clear in the commercialization of the Betamax,
where Sony refused to partner with video rental channels and film producers (with the exception
of Paramount Home Video, with which a Joint Venture was established).
A critical member of the adoption network for content-based innovations is the community of
small and highly creative software and application developers. In order to secure their support, it
is especially critical to develop an easy to use software authoring kit that is made available for
free or at a very low price. This is what Palm did when it released for free the application
development kit for its Pilot. 3DO, on the other hand, decided to sell the authoring system for the
Interactive Multiplayer for several thousand dollars.
Besides the form of the inter-firms relationships with the critical members of the adoption
network, it seems that the timing with which they are established is important in determining the
degree of support they ensure to the innovation. The analysis indicates that sometimes firms
deliberately postpone the establishment of strategic partnerships with the adoption network on
the assumption that, once the innovation has taken off in the market, its critical players will
support it of their own accord. However, it often happens that, after an initial, unexpected growth
of the new product’s sales, the innovation never diffuses in the largest part of the target market.
This is what happened in the commercialization of the MiniDisc: Sony refused to partner with
consumer electronics outlets (which played a critical role in ensuring a wide availability of
recorded music albums) in the belief that the new format would diffuse into the mass market and,
as a result, force outlets to provide the required shelf space. This phenomenon is due to the fact
that the bulk of a high-tech consumer innovation’s target market is made of people who resist
new products and experience a high level of uncertainty when evaluating the opportunity to buy
them. Although early adopters might be willing to purchase the new product whilst it is not
backed up by the critical members of the adoption network (because they are mainly attracted by
the technical content and degree of sophistication of the innovation and are able to more
objectively assess its advantages), this represents an important signal to later adopters of the
value of the innovation, which helps reduce their resistance and customer uncertainty.
Therefore, although a high-tech innovation may experience an unexpected sales growth
immediately after launch without support from the critical players of the adoption network, it is
of paramount importance to rapidly secure this support, through the establishment of long-term,
strategic partnership, if large-scale adoption is to be achieved. All firms whose innovations had
experienced a relevant and rapid diffusion in the bulk of their target market started very early
indeed to work with the adoption network’s critical players. This is clear in the cases of the Pilot
by Palm, the NES by Nintendo and the iPod by Apple.
It often happens that firms rush to market their high-tech innovations in an attempt to establish
them as technological standards and to quickly recover their R&D investments. This sometimes
leads to the launch of an incomplete product, with some functionalities not working perfectly, as
a result of the acceleration of development and testing activities. This seems to have a very
negative effect on the attitude developed by early adopters. Companies sometimes prefer
shortening time to market at the expense of product completeness on the assumption that the
potential technical problems will not affect the purchasing decision and the satisfaction of the
average member of the target market. In doing so they overlook that the innovation is adopted
immediately after launch by those customer segments that are most sensitive to the new
product’s technical content and sophistication, and whose opinion about the new product is key
in affecting subsequent purchases. This erroneous conduct is clear in the commercialization of
the IBM PC-Junior and the Apple Newton, while there is no sign of new product acceleration for
the successful radical innovations in the sample (e.g., Tom Tom GO, Sony Walkman and RIM
It should be noted that the negative impact of the launch of an incomplete product is exacerbated
by an overblown pre-announcement campaign, which raises the expectations of early adopters
and leaves them disappointed when a deficient version reaches the market: their attitudes to the
innovation as a whole are thereby negatively affected. This happened with the Apple’s Newton,
which was announced 18 months before the actual launch and was known as one of the most-
hyped and postponed products for years. Similarly, the PC-Junior was pre-announced about 12
months before the launch, which fueled the curiosity, rumors and enthusiasm that accompanied
the new product. Analysts started referring to the PC-Junior by the nickname ‘Peanut’.
Interestingly, IBM itself contributed to nurturing these expectations by drawing a thick curtain of
secrecy over the new product after having pre-announced it.
Targeting and Positioning
Especially for content-based innovations, it seems that a firm more easily succeeds in
orchestrating the behavior of the adoption network’s players and in securing their support if the
positioning of the new product is unambiguous. The experience of 3DO in the commercialization
of the Interactive Multiplayer is paradigmatic in this respect. The new, revolutionary console
always lacked a library of software titles that were able to fully exploit its graphic capabilities.
This was partly due to its unclear positioning: the Multiplayer was sold as a gaming platform
with advanced interactive, learning and educational capabilities, enabled by its CD-Rom support,
that caused confusion in the developer’s community about the exact applications that were
required for its commercial success. On the other hand, the NES by Nintendo was
unambiguously positioned as a gaming system, and the Palm Pilot as a substitute for personal
The incapability to understand that an incomplete new product is likely to elicit a very negative
reaction in the first market segments that adopt it is also due to a lack of pro-active targeting of
these early adopters. The firms in the sample that failed to raise a positive post-purchase attitude
of early adopters had not targeted the innovation at any specific market segments after launch.
This is clear in the cases of Apple’s Newton and IBM’s PC-Junior that were aimed at a broadly
defined market made of mass consumers and families with children. It was only after the first
months of sales that managers realized the new products were being purchased by people with a
very different profile than the average target customer (namely, executives and companies
looking for sales force automation applications, and managers used to working with a traditional
PC at the office who wanted to bring some work at home). On the other hand, when
commercializing the Walkman, Sony realized that it was going to be initially purchased by
young men fond of sport and outdoor living, and that the ‘near CD quality’ of sound
reproduction associated with advanced portability of the device was key in affecting their post-
purchase attitude. Similarly, RIM targeted its BlackBerry immediately after launch to top
executives (e.g., Chief Information Officers, Chief Financial Officers) or sales agents who had a
compelling reason to receive e-mail messages in real time while travelling for work, and ensured
that this functionality was working perfectly from a technical point of view.
The aforementioned lack of targeting of the innovation’s early adopters is detrimental also
because it often prevents firms from devising a configuration of the whole product at launch that
meets early adopters’ expectations, which are usually very different from the intended average
target customer’s. For instance, the IBM PC-Junior was not compatible with many of the
applications available for the traditional PC, and the Apple Newton lacked connectivity with PC
and Macintosh at launch. It is noteworthy and seemingly nonsensical that both IBM and Apple
had sponsored these capabilities of the new products during the pre-announcement campaign,
which exacerbates the negative effect of an inappropriate product configuration at launch over
early adopters’ satisfaction. This might be the result of the attempt to anticipate the launch of the
innovation without a clear targeting of the early customers.
On the other hand, the successful innovations in the sample do not seem to have missed any
critical functionalities to satisfy early adopters’ expectations. How could this be achieved? The
analysis suggests that an effective commercialization strategy could need to include a limited
number of simple functionalities in the configuration of the new product at launch, designed to
satisfy the compelling reason to purchase of early adopters. The product configuration is
enriched with additional functionalities as long as the innovation diffuses in the less innovative
segments of the target market. An essential prerequisite for successfully adopting this approach,
which increases the likelihood that the new product is complete at launch despite a firm’s
attempt to rush it to market, is a careful targeting of the innovation’s early customers. This
approach was for instance adopted by RIM in the commercialization of the BlackBerry. In order
to improve the chances of satisfying the new product’s early customers, RIM decided to design
and launch a simplified version of the BlackBerry, called Desktop Redirector, that could work
using as a mail server any PCs or laptops and only featured the revolutionary ‘push’ approach to
mail delivery. Agenda, address book, and synchronization with PC were added as long as the
BlackBerry diffused in the market. On the other hand, Apple tried to include as many complex
functionalities as possible in the first version of the Newton (e.g., infrared communication,
advanced handwriting recognition, contact manager, organizer, synchronization with both PC
and Macintosh, traditional and wireless phone connectivity), some of which were absent or did
not function perfectly at launch, resulting in a very negative attitude from early adopters.
Advertising and Promotion
The role of the pre-announcement campaign in influencing the post-purchase attitude of early
adopters has already been discussed in this section of the chapter. In particular, it has emerged
that an early pre-announcement of the new product generates great expectations in the
innovation’s early adopters. If the new product at launch fails to fulfil these expectations,
because it is incomplete as a result of a rush to market, or because it lacks some functionalities
that are critical for early adopters, the latter turn out to be highly dissatisfied with the innovation,
and their opinion about it freezes any further diffusion of the new product. Therefore, if a firm
chooses to pre-announce early a high-tech innovation, it must be sure to arrive on the market
with a complete product having the few, critical functionalities that are necessary to satisfy the
compelling reason to buy of early adopters. This is consistent with literature on New Product
Pre-announcements (NPPAs), which indicates that pre-announcing and then missing introduction
dates for new products is not detrimental per se in terms of customer acceptance. It becomes
problematic only in the case when the new product, once it reaches the market, fails to fulfil the
expectations of early adopters nurtured by the pre-announcement campaign. This is exactly what
happened with the commercialization of the Apple Newton and the IBM PC-Junior.
1. What are the respective roles of early adopters and network development in the market
acceptance of innovations?
2. What are the critical differences in the timing and positioning of successful versus
3. Product and Promotion are standard parts of the ‘Marketing Mix’. How do these contribute
to market acceptance of an innovation?
Source: Federico Frattini (2010) Achieving adoption network and early adopters acceptance for technological
innovations, in Tidd, J. (ed.) Gaining Momentum: managing the diffusion of innovations. Imperial College Press,
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