Wharton Chapter 7

Chapter 7 is titled Technology Strategy in Lumpy Market Landscapes. Another possible name could be where are our research and development dollars going to give us the most bang for our buck. This chapter gives some guidelines on how to determine just that. To figure this out you need to understand a couple of different constraints and how they interact with one another. The first constraint is technology barriers. Another way of saying this might be what are we prevented from doing by the current limits of our technology. The second constraint is the different product attributes that customers find attractive. How these 2 sets of constraints interact can tell you where you should invest your money in order to improve your product so you can move into new market segments.

The chapter goes on to describe how segmented markets are 'lumpy'. Different product attributes attract different groups of prospective customers. These groups can be thought of as submarkets. Examples given in the book for laptop computers are portability which attracts executives and ruggedness which attracts service technicians. It is possible that there could be a lumpy segment that is attracted to a combination of attributes as in the example of sales people who are attracted to both portability and ruggedness though not the same extreme. All of this assumes price remains constant.

The next thing you need to consider is the current limits of your technology. Given price constraints (you can spend an infinite amount of money to make your product) there are upper limits to what you can build. Using the example of laptops again, you can only make it so light given current components or you can only make your battery last so long given size and technology limits. If you plot both the lumpy market segments and the current limits to your technology on the same graph you can see what markets you are competing in now and what markets you could be competing in if you invested in certain technologies. For instance, right now you may make the most rugged laptop available but it is heavier than what most executives want to carry around. If you invest in component technology, making your laptop lighter, you will be able to compete in a market segment that you had previously been locked out of. If you move the correct constraint you may be able to open up multiple markets at once.

Companies can identify market lumps you need to understand three sets of conditions. First what attributes differentiate one offering from the next. Second, how attributes appeal to different markets. And third, how technology barriers influence interaction between segments. Customer research and internal analysis can give insights into all three of these areas. You should also consider what your competitors are doing as well.