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Microsoft powerpoint - ei 2011 presentation (27-5-2011).ppt [compatibility mode]

THE ROLE OF STRATEGIC NICHES IN CREATING LARGE-
SCALE APPLICATIONS FOR HIGH-TECH PRODUCTS
Learning from other industries and previous telecommunication
systems how a market can be created
J. Roland Ortt
Faculty Technology, Policy and Management
Delft University of Technology
(The Netherlands)
14th International Conference Economics of Infrastructures
27th May 2011
Intro Focus RQ+method Scientific relevance Theory Results Conclusion
Focus: Strategic niches
A niche is a combination of a specialized product for a small group of customers.
• A strategic niche is a niche prior to large-scale application of high-tech products.
• Contrast with a niche in mature market.
Example: Contraceptive pill first introduced to treat skin irregularities Managerial relevance
What to expect when introducing a high-tech product? (IAMOT 2007 paper; Ortt & Shah, 2007) For managers it is important to realize that targeting niche applications can be an important initial step to create a mass market. Niches can form a transition path to reach a large-scale application (DeBresson, 1995).
14th International Conference Economics of Infrastructures
27th May 2011
Intro Focus RQ+method Scientific relevance Theory Results Conclusion
Goal: To explore strategic niches, to explain their emergence and to indicate how to
choose the proper niche strategy by analyzing the market. Research questions and method:
(1) How often do strategic niches appear? (2) How often do specific types of strategic niches appear? (3) Do the number and type of strategic niches depend on the industry? Historical perspective: analysis 37 cases in 3 industries (quantitative analysis) (4) What are the main causes that make strategic niches appear (in general)? (5) What are the factors indicating when to apply a particular niche strategy? Managerial perspective: case-study, conceptual model (qualitative analysis) (6) Niche-strategies and implications for telecom (radio) technologies 14th International Conference Economics of Infrastructures
27th May 2011
Intro Focus RQ+method Scientific relevance Theory Results Conclusion
Scientific relevance
• Management lit: Different sub-disciplines theoretically describe niches • Management of sustainable technologies • Management lit: Case-studies empirically describe niches • Case-studies give anecdotal evidence about niche applications • Skewed sample of cases (electronics) in the literature 14th International Conference Economics of Infrastructures
27th May 2011
Intro Theory literature categorization Results Conclusion
Author(s) Product
Market Applications
Literature
Business data processing for limited corporate customerGeneral business application* Categorization of niches
Replacement tires for mainstream car owners*OEMs market of automobile manufacturers* Broadcasting industryIndustrial and commercial usersMass consumer electronic market* Business with low-intensity computing Designers/artists/musicians that demanded high quality graphics and multimedia)Individual/ordinary users* 14th International Conference Economics of Infrastructures
27th May 2011
Intro Theory Results Sample RQ1-2 RQ3 RQ4 RQ5 RQ6 Conclusion
Sample: heterogeneous in time and industry
Industry
Chemicals,
Pharmaceutical &
Telecommunication
materials & metals
healthcare
& media
14th International Conference Economics of Infrastructures
27th May 2011
Intro Theory Results Sample RQ1-2 RQ3 RQ4 RQ5 RQ6 Conclusion
RQ1a: How often niches?
27 of 37 high-tech products (73%) first introduced in (strategic) niches10 (27%) directly introduced in a mainstream application RQ1b: How many niches (per case)?
On average 2 niche applications prior to mainstream application. (we tracked 72 successive niche applications for the 37 cases) RQ2: How often specific types of niches?
14th International Conference Economics of Infrastructures
27th May 2011
Intro Theory Results Sample RQ1-2 RQ3 RQ4 RQ5 RQ6 Conclusion
RQ3: Industry effect? (number and type of niches)
Industry Type
Chemical,
Telecom & media
Niche category
material &
ceuticals &
health care
Government
Business
Consumer
72 (100%)
Main outcome
Number of niches differs significantly for industries Type of niches differ significantly for industries•Chemical & materials are introduced in government and business niches•Pharmaceuticals & healthcare are introduced in the consumer niches (if in niches)•Telecom and media are introduced in all three types of niches 14th International Conference Economics of Infrastructures
27th May 2011
Intro Theory Results Sample RQ1-2 RQ3 RQ4 RQ5 RQ6 Conclusion
RQ4: What causes the emergence of strategic niches?
Niches appear when large-scale diffusion is blocked somehow.
What are the necessary conditions for large-scale diffusion (that, if not present, will block large-scale diffusion)? Factors based on findings reported in IAMOT 2008 (Ortt & Delgoshaie, 2008) 14th International Conference Economics of Infrastructures
27th May 2011
Intro Theory Results Sample RQ1-2 RQ3 RQ4 RQ5 RQ6 Conclusion
RQ4: What causes the emergence of strategic niches? (Cont’d)
Instititional aspects (laws rules standards) 14th International Conference Economics of Infrastructures
27th May 2011
Intro Theory Results Sample RQ1-2 RQ3 RQ4 RQ5 RQ6 Conclusion
RQ4: What causes the emergence of strategic niches? (Cont’d)
1. For case where niches appeared we identified the combination of factors Dyneema (Chemicals, materials & metals)
Product was incomplete (Production)
Dyneema, an ultra strong fiber, was first created in 1964. The production was rudimentary (stirring with a stick in a solution). Knowledge how to produce the fiber on an industrial scale was lacking until 1976-78. Before that time, the fiber was spun in small quantities in a Supplier considered product as outside mission
The ultra-strong fiber Dyneema was outside the mission of the Dutch chemical company DSM. The company was powerful and big but the commercialization of the fiber was delayed because of a lack of interest of the company. Sources: Mulder (1992); Hongu and Phillips 14th International Conference Economics of Infrastructures
27th May 2011
Intro Theory Results Sample RQ1-2 RQ3 RQ4 RQ5 RQ6 Conclusion
RQ4: What causes the emergence of strategic niches? (Cont’d)
2. For each case where large-scale diffusion appeared after first intro we checked whether all necessary factors were in place Paracetamol (Pharmaceutical & healthcare)
All necessary conditions were in place at time of first market introduction. But,
Accidents during trials because of mistakes rather than inherent unsafety of the medicine, did cause a blockade in the innovation process for more than half a century (Bertolini et al., 2006)! Polio medicine (Pharmaceutical & healthcare)
All necessary conditions were in place at time of first market introduction. But,
One batch of vaccine (for trial) was produced wrongly, causing the death of several children in the US (McGrew, 1985; Drutz and Ligon, 2000; Blume, 2005). The powerful organization managed to have multiple batches of vaccine produced by different factories. Only one batch caused problems and that observation helped explaining the accident and prevented the blockade of large-scale Learning points
Accidents or unexpected events have a hardly predictable effect on patterns.
Factors blocking large-scale diffusion can also lead to extension of the innovation phase and a delay of the first intro in stead of strategic niches.
14th International Conference Economics of Infrastructures
27th May 2011
Intro Theory Results Sample RQ1-2 RQ3 RQ4 RQ5 RQ6 Conclusion
RQ5: What are factors indicating when to apply a particular niche
strategy?
Necessary conditions for large-scale diffusion do not suffice to indicate the particular niche strategy that should be adopted! Product Complementary products and services Different causes for a lack of customers environment  Reformulated: What are the underlying causes that affect necessary conditions 14th International Conference Economics of Infrastructures
27th May 2011
Intro Theory Results Sample RQ1-2 RQ3 RQ4 RQ5 RQ6 Conclusion
RQ5: What are factors indicating when to apply a particular niche
strategy? (Cont’d)
What are underlying causes that affect necessary conditions for large-scale diffusion? 3. Socio-cultural aspects (norms and values) 4. Economic aspects, resources and strategic interests of stakeholders These causes do affect a limited number of necessary conditions e.g. Lack of knowledge of technology primarily affects the availability of products Each combination of underlying cause affecting particular necessary condition can be tackled with a specific niche strategy e.g. Lack of knowledge of technology primarily affects the availability of complementary products and services requires a niche strategy in which product is used in standalone mode without complementary products and services.14 14th International Conference Economics of Infrastructures
27th May 2011
Intro Theory Results Sample RQ1-2 RQ3 RQ4 RQ5 RQ6 Conclusion
RQ5: What are factors indicating when to apply a particular niche
strategy?
What are the underlying causes that affect necessary conditions
14th International Conference
Economics of Infrastructures
27th May 2011
Intro Theory Results Sample RQ1-2 RQ3 RQ4 RQ5 RQ6 Conclusion
RQ5: What are factors indicating when to apply a particular niche
strategy? (Cont’d)
Conditions: knowledge of technology to make industrial product is lacking 1. Apply product to demonstrate the technical principle (as a toy or scientific marvel) 2. Apply incomplete product for high-need niches (e.g. medical app) Conditions: knowledge of technology to make complementary prod/services is lacking 3. Apply product in stand-alone mode (e.g. telecom) Conditions: knowledge of application is lacking among (potential) customers 4. Apply product in knowledgeable lead users niche (e.g. scientific community) Conditions: knowledge of application is lacking among (potential) suppliers 5. Explore alternative niches in a deliberate niche exploration strategy 14th International Conference Economics of Infrastructures
27th May 2011
Intro Theory Results Sample RQ1-2 RQ3 RQ4 RQ5 RQ6 Conclusion
RQ6: Typical telecom niche-strategies
Stand-alone or local
niche strategy
Emergency first niche Radio telegraphy (military, police)
strategy
Demo principle niche
strategy
Explore the market
niche strategy
Hobby niche strategy
Exploit unexpected
niche strategy
14th International Conference Economics of Infrastructures
27th May 2011
Intro Theory Results Conclusions discussion implications future research
Limitations:
Discussion effect of the sample on results

Pharmaceuticals & healthcare cases are atypical: This effect of this industry is (probably) overweighted actual length of adaptation phase and no of niches is probably larger 14th International Conference Economics of Infrastructures
27th May 2011
Intro Theory Results Conclusions discussion implications future research
Scientific and managerial implications:
Niches are an important step towards large-scale production/diffusion (75% cases). On average 2-3 niches are explored in the market prior to large-scale prod/dif Type and number of niches are highly industry-specific.
Strategic niches emerge when one or more of five necessary conditions are not met. The type of niche strategy that should be adopted to create a large scale market depends on the combination of five underlying causes and their effect on the necessary factors Several niche strategies can be distinguished, each of which is appropriate in specific conditions (i.e. particular underlying cause has an effect on particular necessary factor) Telecom is one of the most difficult industries to introduce an innovation!
14th International Conference Economics of Infrastructures
27th May 2011
Intro Theory Results Conclusions discussion implications future research
Future research:
1. More cases (49, including electronics) 2. Quantitative models relating the characteristics of the market to 3. Qualitative assessment of the different niche-strategies 14th International Conference Economics of Infrastructures
27th May 2011
Thank you!
14th International Conference Economics of Infrastructures
27th May 2011

Source: http://www.crplatform.nl/Documentation/Docs/11/RoleOfStrategicNiches-Ortt-2011-05-27.pdf

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