A High-Tech Market Expansion Strategy Model - Strategy and Implication

Helsinki University of Technology Department of Industrial Management Institute of Strategy and International Business TU-91.167 Seminar in Business S...
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Helsinki University of Technology Department of Industrial Management Institute of Strategy and International Business TU-91.167 Seminar in Business Strategy and International Business

A High-Tech Market Expansion Strategy Model Strategy and Implication

Ming Niku, Spring 2000, Otaniemi TU-91.167 Seminar in business Strategy and International Business

A High-Tech Market Expansion Strategy Model - Strategy and Implication

Table of Contents ABSTRACT

4

1.

INTRODUCTION ....................................................................................................................... 9

2.

BRIEF LITERATURE REVIEW REFERRING MARKET EXPANSION STRATEGY ...... 10

3.

THE LIFE CYCLE CONCEPTS.............................................................................................. 14 3.1

DEMAND/TECHNOLOGY LIFE CYCLE................................................................................... 14

3.2

THE PRODUCT LIFE CYCLE ................................................................................................. 16

3.3

MARKETING STRATEGIES THROUGHOUT THE PRODUCT LIFE CYCLE ..................................... 19 3.3.1 Introducing Stage................................................................................................... 19 3.3.2 Growth Stage ......................................................................................................... 20 3.3.3 Maturity Stage ....................................................................................................... 21 3.3.4 Decline Stage......................................................................................................... 24

4.

3.4

MARKET EVOLUTION LIFE CYCLE AND STRATEGIES AT EACH STAGE ................................... 25

3.5

THE TECHNOLOGY ADOPTION LIFE CYCLE AND STRATEGY ................................................. 26

STARTING THE HIGH-TECH MARKET PENETRATION ................................................ 30 4.1

LANDSCAPE OF HIGH-TECH ADOPTION LIFE CYCLE ............................................................. 30

4.2

CROSS THE CHASM............................................................................................................. 33 4.2.1 The Chasm ............................................................................................................. 33 4.2.2 Strategy of Crossing the Chasm ............................................................................. 35

4.3

IN THE BOWLING ALLEY .................................................................................................... 37 4.3.1 The Bowling Alley Niche Market............................................................................ 37 4.3.2 The Impact of Market Leadership........................................................................... 39 4.3.3 The Bowling Pin Model.......................................................................................... 43 4.3.4 Principles and Rewards in Bowling Alley ............................................................... 46

5.

HIGH-TECH MARKET EXPANSION.................................................................................... 48 5.1

INSIDE THE TORNADO ........................................................................................................ 49 5.1.1 Causes of the Tornado ........................................................................................... 50 5.1.2 Some Essential Principles of Tornado Marketing ................................................... 52 5.1.3 The Tornado vs. The Bowling Alley........................................................................ 53

5.2

ON MAIN STREET .............................................................................................................. 55 5.2.1 The Fundamentals of Main Streets ......................................................................... 55 5.2.2 The Whole Product +1 Strategy on Main Street ..................................................... 58

Ming Niku, Spring 2000, Otaniemi TU-91.167 Seminar in business Strategy and International Business

A High-Tech Market Expansion Strategy Model - Strategy and Implication

5.2.3 Tornado vs. Main Street......................................................................................... 59 6.

IMPLICATIONS AND DISCUSSIONS.................................................................................... 62 6.1

IMPLICATIONS FOR STRATEGY FROM THE MODEL ................................................................ 62 6.1.1 Strategic Partnership ............................................................................................. 62 6.1.2 Competitive Advantage .......................................................................................... 64 6.1.3 Positioning............................................................................................................. 65

6.2 7.

DISCUSSIONS ..................................................................................................................... 67

CONCLUSIONS........................................................................................................................ 71

REFERENCE ..................................................................................................................................... 74

Ming Niku, Spring 2000, Otaniemi TU-91.167 Seminar in business Strategy and International Business

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Abstract How can a company with leadership in one market expand successfully into new area? This requires the company having a proper market expansion strategy. Market expansion strategy has attracted great deal of attentions from both academic society and industrial practices, ever since the market strategy concept emerged. The research and studies on this topic have been taken from different perspectives. Some were related to the expanding areas, both business areas and geographic area. Some discussed strategies from a life span of either a product, technology, or market. Many took the approach of the characteristics of market players - market leaders, challengers, followers, or nichers. Expanding successfully to other new area is vital to survive for companies in high-tech industry. The special characteristics of high-tech require some special models to explain the market and give appropriate expansion strategies. Moore Geoffrey’s Chasm-Tornado model presented an applicable approach. Moore updated the life cycle concept into his Technology Adoption Life Cycle model, presented a market expansion model for high-tech industry. The landscape of the Technology Adoption Life Cycle model includes 6 zones – the Early Market, the Chasm, the Bowling Alley, the Tornado, the Main Street, and the End of Life. -

The forces that operate in the Bowling Alley argue for a niche-based strategy that is highly customer-centric.

-

Those in Tornado push in the opposite direction toward a mass-market strategy for deploying a common standard infrastructure.

-

Then on Main Street market forces push back again toward a customer-centric approach, focusing on specific adaptations of this infrastructure for added value through mass customization.

This model has significant implications on strategies. The drastic changes in market require companies form right strategic partnership at different market stages, develop righteous competitive advantage, and position themselves into the rightful place in the market. This model introduced in this study is very applicable in many other industries when considering expanding business into new area.

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1. Introduction Market expansion strategy has attracted great deal of attentions from both academic society and industrial practices, ever since the market strategy concept emerged. The research and studies on this topic have been taken from different perspectives. Some were related to the expanding areas, both business areas and geographic area. Some discussed strategies from a life span of either a product, technology, or market. Many took the approach of the characteristics of market players - market leaders, challengers, followers, or nichers. Both theoretical and empirical methods have been used in deepening the research findings. While many of these theories, models, and studies have concentrated on general issues of expansion strategy, many pay attentions to particular industries, and specific business phenomena. Especially recent decades high-tech industry, and related sectors played a very important role in the development of business world. Expanding successfully to other new area is vital to survive for companies in high-tech industry. The special characteristics of high-tech require some special models to explain the market and give appropriate expansion strategies. Moore Geoffrey’s Chasm-Tornado model presented an applicable approach. The object of this research is to discover this model, discuss its implication on general strategic aspects, and its applicability to other circumstances, industries, industrial goods, services, etc. The research will be restricted to refer to general business area of expansion, regardless of local, national, or international, global areas. Research is conducted by combining methods of literature review, information survey in ABI database. This study will first give a brief review of searched literature related to market expansion strategy. Then the high-tech market expansion strategy model will be introduced, after a short discussion on the model’s foundation theory - technology adoption life cycle model. Finally the implication for strategy of the model and limitations of the model to other circumstances will be presented.

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2. Brief Literature Review Referring Market Expansion Strategy How can a company with leadership in one market expand successfully into new area? This requires the company having a proper market expansion strategy. The research and studies on this topic can be taken from different perspectives. A company’s present competitive position in the market defines the coverage of the expansion action and the tactics company can apply, such as Lanchester Strategy describes (Terry, 1999). F. W. Lanchester developed the Lanchester laws during WWI. It was about a series of mathematical calculations developed to compare the relative strengths of opposing forces and how effective aircraft may be when utilized in war. W. Edward Deming, and Dr. Nobuo Taoka developed Lanchester’s formulas to the lanchester Strategy for the business world. The Lanchester Strategy looks primarily at the acquisition and retention of market share to guide a company’s marketing plan. The strategy provides a series of tactics to employ, depending on whether a company is a market leader or a smaller company. The strategy provides for a variety of definitions of a company’s position in the market, the types of market shares: monopoly, premium, oligopoly and polyopoly. The basic contention of the strategies for smaller companies is that they are not in a position to offer a broad-reaching market plan. The key is to put together a sequential plan to move toward a position of market dominance, such as differentiation, local battles, hand-to-hand combat, and pin-point concentration. For market leaders, they can play all the strategies suitable for smaller companies, in addition of broadreaching market plan, such as mass-market plan. In considering competition, the characteristics of market plays, i.e. merket leaders, challengers, follower, or nichers, defined the expansion strategy a company will apply. A product entry strategy is the kernel part of a expansion strategy: the timing of entry, the magnitude of investment at entry, and the area of competitive emphasis at entry - affects longterm performance in the marketplace (Green, el., 1995). Referring to timing of entry, imitation strategies can be used when expanding business to other areas. Three types of generic imitation strategies that allow later entrants to overcome pioneering advantages that may accrue to first entrants (Schnaars, 1994): 1. offering lower prices than the pioneer; 2. Selling a product that is better than the pioneer offering in some way

7 and/or uses superior technology; 3. using superior market power (particularly in terms of branding and distribution) to overcome any advantages enjoyed by the first entrants. From the view point of life cycle concept, a product, a technology, or the market of a particular product, all have their life cycle of emerging, growing, maturing, declining, until death – disappearing. Some have long life cycle, some short, but all follow similar life cycle pattern. At different stages of life cycle, different marketing strategy should be used correspondingly. The life cycle concept is the base of the high-tech market expansion model described in this study.

3. The Life Cycle Concepts 3.1 Demand/Technology Life Cycle A product exists as one solution among many to meet a need of human being, and the changing need level is described b a demand life cycle curve, with 4 stages: emergence, accelerating growth, decelerating growth, and maturity. The need is satisfied by some technology, some serve the need better than others. Usually each new technology is better than previous one. Each exhibits a demand/technology life cycle, with stages of emergence, rapid growth, slower growth, maturity and decline. Within a demand/technology life cycle, a succession of product forms will emerge to satisfy the specific need (see Figure 3-1).

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Figure 3-1

Life Cycle Concepts

Demand Life Cycle

Demand/Technology Life Cycle

Product Life Cycle

Each product form contains a set of brands with their own brand life cycles. Companies must not only concentrate on its own brand life cycles, then it is missing bigger picture of what is happening to the product life cycle. Companies must decide what demand technology to invest in and when to move to a new demand technology. Facing many changing technologies, companies must bet on which demand technology will win and then to bet heavily on one or few new technologies. The pioneering firm that bets heavily on the winning technology is likely to capture leadership - which required very careful choice of the strategic business areas.

3.2 The Product Life Cycle The product life cycle concept asserts 4 things: -

Products have a limited life.

-

Product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller.

-

Profits rise and fall at different stages of the product life cycle.

-

Products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each stage of their life cycle.

A product sales and profit life cycle exhibits a bell-shaped curve (Figure 3-2), which is typically divided into 4 stages: 1) introduction, a period of slow sales growth, no-profit; 2) growth, a

9 period of rapid market acceptance and substantial profit improvement; 3) maturity, a period of a slowdown in sales growth and stable or decline profits; 4) decline, a period of sales downward drifting and profits erode.

Product Sales and Profits Life Cycle

$

Figure 3-2

Sales/Profits

Sales

Profits

Introductioon

Growth

Maturity

Deline

Time

Besides of bell-shaped PLC curve, there are 6-17 different PLC patterns identified. Among them, there are 3 common alternate patterns: 1) a growth-slump-maturity pattern, often characteristic of small kitchen appliances; 2) a cycle-recycle pattern often describes the sales of new drugs; 3) a scalloped pattern, often a succession of life cycles related to the discovery of new product characteristics, uses, or users. The product-oriented perspective of demand/technology life cycle can be used to analyze a product category (liquor), a product form (white liquor), a product (vodka), or a brand (Smirnoff). Product categories have the longest life cycles. Product forms follow the standard PLC more faithfully than do product categories. Products have standard PLC and other variant shapes. Branded products can have a short or long PLC.

3.3 Marketing Strategies Throughout the Product Life Cycle 3.3.1 Introducing Stage At this stage the sales growth is slow. Profits are negative or low because of the low sales and heavy distribution and promotion expenses. Buzzell identified several causes for the slow growth

10 of many new products: delays in the expansion of production capacity; technology problems (“working out the bugs”); delays in obtaining adequate distribution through retail outlets; customer reluctance to change established behaviors; and small number of buyers to expensive new products such as digital video camera. In launching a new product, marketing management can set a range for each marketing variable. In terms of only price and promotion, there are 4 strategies at selection: 1) rapid-skimming: high price - high promotion, 2) slow-skimming: high price – low promotion, 3) rapid-penetration: low price – high promotion, 4) slow-penetration: low price – low promotion. To be first in the market as pioneers can be highly rewarding, but risky and expensive. Most studies indicate that the market pioneer gains the most advantage, such companies like CocaCola, Eastman Kodak, Xerox, etc., and enjoys a substantially higher market share than do early followers and late entrants. To come in later would make sense if the firm can bring superior technology, quality, or brand strength. 3.3.2 Growth Stage The firm’s strategies are to sustain rapid market growth as long as possible, and strengthen its competitive position: -

improve product quality and adds new product features and improved styling

-

adds new models and flanker products (i.e., products of different sizes, flavors, and so forth that protect the main product.)

-

enters new market segments

-

increases its distribution coverage and enters new distribution channels

-

shifts from product-awareness advertising to product-preference advertising

-

lowers prices to attract the next layer of price-sensitive buyers

The firm in the growth stage faces a trade-off between high market share and high current profit. By spending money on product improvement, promotion, and distribution, it can capture a dominant position.

11 3.3.3 Maturity Stage This stage normally lasts longer than the previous stages. Most products are in the maturity stage of the life cycle, and therefore most of marketing management deals with the mature product. The maturity stage can be divided into three phases: growth maturity (sales growth rate starts to decline), stable maturity (sales flatten on a per capita basis - market saturation), decaying maturity (absolute level of sales starts to decline, customers switch to other products and substitutes.) The slowdown in the rate of sales growth creates overcapacity, further leads to intensified competition. The industry is full of aggressive competitors just driving to gain competitive advantage. These competitors are of two types. Few giant firms, dominating the industry, produce a large proportion of the industry’s output. They serve the whole market, profit mainly through high volume and lower costs. They are volume leaders, they can also be a quality leader, a service leader and a cost leader. Surrounding these few giant firms are a multitude of market nichers, including market specialist, product specialists, and customizing firms. They serve and satisfy their small target markets very well and command a price premium. The issue facing a firm in a mature market is whether to struggle to become one of the “big three” and to achieve profits through high volume and low cost, or to pursue a niching strategy and achieve profits through high margin. Marketers should systematically consider strategies of market, product, and marketing-mix modification. -

Market modification.

Sales volume = number of brand users x usage rate per user

There are 3 strategies to expand the number of brand users: convert nonusers, enter new market segments, and win competitors’ customers. There are 3 strategies to convince current brand users to increase their annual usage of the brand: more frequent use, more usage per occasion, new and more varied sues. -

Product modification

This can be achieved by 3 strategies: quality improvement, feature improvement, and style improvement. Quality improvement aims at increasing the product’s functional performance - its durability, reliability, speed, taste. A strategy of feature improvement aims at adding new features (for example, size, weight, materials, additives, accessories) that expand the products’ versatility, safety, or convenience. Style improvement aims at increasing the product’s aesthetic appeal, give the product a unique market identity and win a loyal following.

12 -

Marketing-mix modification

The modification includes decisions on which tools are most effective in the mature stage, and by what means to modify them to stimulate sales: prices, distribution, advertising, sales promotion, personal selling and services. 3.3.4 Decline Stage Sales decline for a number of reasons, including technology advances, shifts in consumer tastes, and increased domestic and foreign competition, all lead to overcapacity, increased price cutting, and profit erosion. Unless strong reasons for retention exist, carrying a weak product is very costly to the firm. The biggest cost might well lie in the future. Failing to eliminate weak products delays the aggressive search for replacement products. Harrigan identified five decline strategies available to the firm: -

increasing the firm’s investment level (to dominate the market or strengthen its competitive position)

-

maintaining the firm’s investment level until the uncertainties about industry are resolved

-

decreasing the firm’s investment level selectively, by dropping unprofitable customer groups, while simultaneously strengthening the firm’s investment in lucrative niches

-

harvesting (“milking”) the firm’s investment to recover cash quickly

-

divesting the business quickly by disposing of its assets as advantageously as possible

3.4 Market Evolution Life Cycle and Strategies at Each Stage Market-oriented life cycle is considering what is happening to the overall market. Firms need to anticipate a market’s evolutionary path as it is affected by new needs, competitors, technology, channels, and other developments. Like products, markets evolve through 4 stages: emergence, growth, maturity, and decline. Emergence stage exists as a latent market before a market materializes. Strategies like singleniche strategy, multiple-niche strategy and mass-market strategy can be used at this stage. For small firms a single-niche strategy makes the most sense. A large firm might go after the mass market.

13 Growth stage assumes sales of the new product are good, thus new firms will enter the market. When the first firm positioned itself in the market, the second firm has three options: singleniche strategy, mass-market strategy and multiple-niche strategy. Maturity stage assumes the competitors cover and serve all the major market segments, eventually the market will go through high market fragmentation to a market consolidation, and swing between the two. The market fragmentation is brought about by competition, and the market consolidation by innovation - by the emergence of a new attribute that has strong market appeal. At decline stage the market demand for the present products will decrease, or disappear. New technology will replace old technology.

3.5 The Technology Adoption Life Cycle and Strategy The technology adoption life cycle is a model grew out of social research begun in the later 1950s about how communities respond to discontinuous innovations. Truly discontinuous innovations are new products or services that require the end user and the marketplace to dramatically change their past behavior, with the promise of gaining equally dramatic new benefits. Applied to marketing, the model postulates that when a marketplace is confronted with the opportunity to switch to a new infrastructure paradigm, customers self-segregate into 5 groups - innovators (technology enthusiasts), early adopters (visionaries), early majority (pragmatists), late majority (conservatives) and laggards (skeptics), distributing as a bell curve. Each of the segments in the bell curve represents a standard deviation from the norm. See Figure 4-1.

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Figure 4-1

Innova tors

The Technology Adoption Life Cycle

Early Adopte rs

Early M ajority

Late M ajority

Lagga

rds

According to the Technology Adoption Life Cycle, the idea of developing the market by working from one profile to the next provided the basis for high-tech marketing strategy: -

begin by seeding new products with the technology enthusiasts so they can help to educate the visionaries.

-

Once captured the visionaries, do whatever it takes to make them satisfied customers so that they can serve as good references for the pragmatists.

-

Gain the bulk of the revenue by serving pragmatist, ideally by becoming the market leader and setting the de facto standards.

-

Leverage success with the pragmatists to generate sufficient volume and experience so that products become reliable enough and cheap enough to meet the needs of the conservatives.

-

Ignore the skeptics.

Unfortunately, as logical and attractive as this strategy appeared in theory, in actual practice it did not work very often. Moore blends Rogers’ work with his experience to offer an “updated” version of the adoption cycle suited for high-tech markets (Moore, 1991, 1995). To succeed, Moore stresses that firms must understand and respond to the needs of different consumer groups at different stages of the adoption cycle. From now on, high-tech companies at this moment will face the problem of how to expand their products to mainstream market. Geoffrey presented this high-tech market expansion strategy

15 model in 4 sequential phases presented in following Chapters: crossing the chasm, on the bowling allay, inside the tornado, and on the main street.

4. Starting the High-Tech Market Penetration 4.1 Landscape of High-Tech Adoption Life Cycle

Figure 4-1

The Landscape of the Technology Adoption Life Cycle Main Steet

The Tornado

The Early Market

The Bowling Alley

The Mainstream Market

End of Life

The Chasm

Innova Earl to Techn rs/ V y Adopters/ ology isiona ries Enthru siasts

Early M Pragm ajority/ atists

Late M a Conss jority/ servati ves

Lagga rds Skepti / cs

The landscape of high-tech adoption life cycle contains 6 zones, as illustrated in Figure 4-1: 1. The Early Market, a time of great excitement when customers are technology enthusiasts and visionaries looking to be first to get on board with the new paradigm. 2. The Chasm, a time of great despair, when the early-market’s interest wanes but the mainstream market is still not comfortable with the immaturity of the solutions available. 3. The Bowling Alley, a period of niche-based adoption in advance of the general marketplace, driven by compelling customer needs and the willingness of vendors to craft niche-specific whole products. 4. The Tornado, a period of mass-market adoption, when the general marketplace switches over to the new infrastructure paradigm.

16 5. Main Street, a period of aftermarket development, when the base infrastructure has been deployed and the goal now is to flesh out its potential. 6. End of Life, which can come all too soon in high tech because of the semiconductor engine driving price/performance to unheard of levels, enabling wholly new paradigms to come to market and supplant the leaders who themselves had only just arrived. Geoffrey stressed that business strategy must change dramatically as marketplaces move through these stages. -

The forces that operate in the Bowling Alley argue for a niche-based strategy that is highly customer-centric.

-

Those in Tornado push in the opposite direction toward a mass-market strategy for deploying a common standard infrastructure.

-

Then on Main Street market forces push back again toward a customer-centric approach, focusing on specific adaptations of this infrastructure for added value through mass customization.

4.2 Cross the Chasm 4.2.1 The Chasm Specifically, companies kept stumbling every time it came to making the transition from the visionaries to the pragmatists. The problem was that these two groups, although adjacent on the adoption life cycle, are so different in terms of underlying values as to make communication between them almost impossible, as the following comparison illustrates: Table 4-1

Comparison between Visionaries and Pragmatists

Visionaries

Pragmatists

Intuitive

Analytic

Support revolution

Support evolution

Contrarian

Conformist

Break away from the pack

Stay with the herd

Follow their own dictates

Consult with their colleagues

17 Take risks

manage risks

Motivated by future opportunities

Motivated by present problems

Seek what is possible

Pursue what is probable

As a result, visionaries, with their highly innovative projects, do not make good references for pragmatists. Instead of gliding across this transition point, market development stalls. Unfortunately, by the time that high-tech firms were getting this far into the market, they were so highly leveraged financially that very often they fall into the chasm. The idea of chasm says that whenever truly innovative high-tech products are first brought to market, they will initially enjoy a warm welcome in and early market made up of technology enthusiasts and visionaries, but then will fall into a chasm, during which sales will falter and often plummet. If the products can successfully cross the chasm, they will gain acceptance within a mainstream market dominated by pragmatists and conservatives. Cross the chasm becomes an organizational imperative. 4.2.2 Strategy of Crossing the Chasm The fundamental strategy for making a successful “crossing” is based on a single observation: the main difference between the visionaries of the early market and the pragmatists in the mainstream is that the former are willing to bet “on the come” whereas the latter want to see solutions “in production” before they buy. Specifically, what pragmatists want, more than anything else, is a 100 percent solution to their problem - the whole product. The whole product is defined as the minimum set of products and services necessary to ensure that the target customer will achieve his or her compelling reason to buy. The key to a winning strategy is to identify a single beachhead of pragmatist customers in a mainstream market segment and to accelerate the formation of 100 percent of their whole product. The goal is to win a niche foothold in the mainstream as quickly as possible - crossing the chasm. Documentum successfully incorporate these ideas into their plans. Documentum is in the document management software business with high-end systems that were originally designed at Xerox. It had spent the early part of the 1990s in the chasm, but in 1994 it came out of nowhere to become the overwhelmingly dominant supplier of systems to the pharmaceutical industry,

18 beginning with the specific niche of Computer Aided new Drug Approval (CANDA). It is the unquestioned market leader in this segment, which gives them far more influence than their size warrants. They can never be dislodged from this marketplace, indeed cannot, from the pharmaceutical industry’s point of view, be allowed to go out of business. As such, they are now set up to attack the market from a position of strength and have strong prospects for market expansion. So is the powerful impact on market development of gaining one’s first niche in the mainstream.

4.3 In the Bowling Alley 4.3.1 The Bowling Alley Niche Market The bowling alley represents that part of the technology adoption life cycle in which a new product gains acceptance from niches within the mainstream market but has yet to achieve general, widespread adoption. The goal of bowling alley marketing is to keep moving toward the tornado, to progress from niche to niche developing momentum. Each niche is like a bowling pin, something that can knock over in itself but can also help knock over one or more additional pins. The bowling alley is a leveraged approach to niche marketing. There are two reasons to focus on niches in the first place than just leap into the tornado. First, for many customers, they have no compelling reason to move. There is still plenty of life in the old paradigm the new product is replacing. During bowling alley stage, the general populace does not actually adopt the new paradigm, but it does get exposure to it. Second, the whole product from crossing the chasm, for at least one niche, can displace the old paradigm, has to prove to be generalizable. The tornado market requires a general purpose whole product, which requires considerable additional work, both insider the company and in recruiting a much larger set of partners and allies to develop a more complex and rich solution set. To truly secure a segment, company must expel all other competitors and establish itself as the dominant market leader. By doing so, word of mouth mechanism works not only for company getting all the business in that niche, but also ward off any late-coming competitors because the company is labeled as the “right” vendor, a status the company will keep for long. This is how the graphic arts community responded to Apple’s desktop publishing offering, how Wall Street has responded to the trader workstations supplied by Sun and Sybase, how the banking

19 community responded to Tandem Computer for Automated Teller Machines, how the film industry responded to Silicon Graphics. 4.3.2 The Impact of Market Leadership In the niche markets of the bowling alley it is really the customer’s market. The niche-market customers are pragmatist customers. They are sponsoring and protecting the company because they perceive the company in bowling alley as their market leader. Pragmatists value foundations of order and stability on top of which they can erect and evolve continuously improving systems. Markets without clear leaders lack such foundations and thus are inherently unstable. Lacking a clear leader, markets have no point of reference for standards, architectures, or vision. As a result these customers sit on the fence. Once a clear market leader is established, order naturally emerges in a free-market system. The third parties realign themselves to be compatible with and complementary to the market leader’s products and interfaces, because the leader has created a market for them. As these third parties sell their products, an increasingly complete and valuable whole product grows up around the architecture specified by the market leader. Customers in turn are able to leverage this increasingly rich infrastructure to accomplish more and more buying objectives, thereby magnifying the return on their initial investment manyfold, which in turn drives more sales, attracting still more contributing elements to an ever-expanding whole product family. Because less successful platform does not afford the same kind of leveraged opportunity like market leader does. Most pragmatists not only buy from market leaders but are willing to encourage and reward these leaders with highly favorable treatment. Pragmatist-dominated markets give the market leader an extraordinary set of competitive advantages. Market leader enjoy premium price, highest shipping volumes, lowest cost per unit, and lower cost of sales because pragmatist customers expect to buy the market-leading product. The market leader is creating a burgeoning aftermarket for third parties, it does not have to pay to win their support, in fact can often charge these parties a fee, as Oracle does, to port its database to any computer platform. The advantages are leveraged. So the market leader gets demonstrable, bankable advantages over its competitors in distribution, publicity, recruiting, or customer access. In the bowling alley, becoming a market leader is a faxation. It is time to focus on winning niches of the marketplace made up of customers who are marginalized under the old paradigm, not well served by it, and who find themselves under pressure to reengineer their businesses to

20 become more competitive. These segments are very susceptible to conversion, a place where company can make rapid progress immediately, and gain strategic advantage for the upcoming tornado market battle. Niche market leadership can be an extraordinary strategic asset as one moves out into broader market expansion, because it establishes a strong base of operations. The idea is not to settle down in the niche but to leverage it forward, to use it to bowl over additional niches, with the ultimate “strike” being a tornado-market victory. PeopleSoft, a client/server software company, entered the market initially through the niche of Human Resources systems. Within a short time, It was able to establish itself to a clear position of market leader in client/server HR systems, winning more than 50% market share. Because its focus on this niche’s compelling reasons to buy, it was able to charge a premium price - making a highly profitable business for it, allowing it to fund additional product and market initiatives. It is also a high-growth business. Because its HR applications leading the first major breakthrough in client/server systems adoption, the company gained a reputation as a market leader in the entire client/server market - a huge amount of publicity. Later, from this bastion of strength, PeopleSoft has ventured out into the broader client/server business systems marketplace with financial and manufacturing products. In this larger market, there are very big players such as Oracle or SAP, billion-dollar companies. As a small player in terms of small investment capability and distribution channel size, however, PeopleSoft cannot be dislodged from the competition. Its foothold as the unquestioned market leader in client/server HR affords them permanent access to the larger client/server marketplace, and no one can block it. Any company that is actively interested in both human resources and financials will actively see out a proposal from PeopleSoft. What PeopleSoft must do is focus intelligently on one or more classes of customers for whom a combined HR and financials solution, with strong HR capabilities, is the winning choice. 4.3.3 The Bowling Pin Model The purpose of the bowling pin model is to approach niche market expansion in as leveraged a way as possible, to bowl toward the tornado. Each niche requires its own whole product to be fully complete before it can adopt the new paradigm. At the same time, it finds it much easier to buy in if vendors can supply references from an “adjacent niche”, one within which it already has established word-of-mouth relationships. If going after niches at random, driven solely by sales

21 opportunity, there is no such leverage at all. Each whole product must be built from scratch, and it is only chance if some prior customer is referenceable. Figure 4-2 shows the bowling alley market development.

Figure 4-2

Bowling Alley Market Development

Seg 3 App 1

Seg 3 App 3

Seg 2 App 2

Seg 2 App 1

Seg 1 App 2

Whole Product

Customer References

Seg 1 App 1

Beachhead

The head bowling pin in this model corresponds to the beachhead segment, the one that was the complete focus of the crossing-the-chasm effort. Every other pin is “derived” from this head pin. Niche marketing is the discipline defining the bowling alley. Niche markets simplify the whole product challenge, and earn pragmatist customers immediately instead of having to wait for another round of development. Niche markets are inherently profitable, allow companies selffund, more control. Niche markets represent capturable territories of loyal customer constituencies. They can be leveraged so that victory in one segment cascades into victories in adjacent segments, long enough to generate the tornado. Finding additional leverage is critical to high-tech strategy for the simple reason that whole product creation is an expensive and time-consuming process. But if one can take small investment, with modest additional work, secure entirely new niches, then one has a terrifically profitable proposition. This is the goal of bowling pin strategy. Companies expanding by bowling pin strategy, as long as they can continue to find new applications for their sustainable whole product leverage, they are virtually undefeatable. It is too hard for a competitor to match their whole product’s total value, given that market standards and third party support have already formed around the architecture of the incumbent leader.

22 4.3.4 Principles and Rewards in Bowling Alley There are two principles of bowling alley strategy. The first principle: Never attack a segment whose current expenditures on your category of product exceed your current annual revenue. In the bowling alley, looking forward to the tornado, the primary goal is to get your architecture adopted as the market leading standard in as many niches as possible. There are two key bowling pin target criteria ensure one can open a field: The segment has a compelling reason to buy, and the segment is not currently well served by any competitor. Then how big a field one can handle is a very critical for the successful selection of this strategy. Creating demand for the new category of solution but not fulfilling it, will create a market for some other competitors. So one of the key criteria to use when selecting target segments in the bowling alley is whether they are small enough to serve the strategic ends. Too big segment is not the target niche toward a generalizable market leadership, but can be treated as opportunitic sources of revenue. The second principle: To focus market development efforts on the end-user community, not on the technical community. Technical community does not have interests on the new paradigm, which means extra work and exposes their mission-critical systems to additional risk. The bowling alley requires the sponsorship of the economic buyer to overcome the technical buyer’s - and potentially the endusers’. Taking a vertical marketing approach accomplishes this objective, whereas taking a horizontal approach defeats it. The purpose of the bowling pin model is twofold - make money now and accumulate credits toward being declared a market leader in a future tornado. To the immediate goal, the priorities are to grow business, increase profits, and further develop whole product. Vertical market niches are great places to make money. The market focus is niche, the selling style is consultative (typically via a direct sales force or a well-educated indirect one), and differentiation is segment-specific expertise. Company is a true partner to the customer, and the customer knows this. Besides, bowling alley niche markets represent profitable repeatable business, and entrepreneurial enterprises can therefore fund themselves for the first time out of working capital, focusing on the discipline of making a profit and continuing to enhance and cost-reduce their offerings for future expansion. Bowling pin model accumulates lots of credits. By focusing on a target niche to a degree that competing companies in your product category are either unwilling or unable to match, thus

23 exclude even the toughest competitor. The true dynamics of a particular niche’s value chain enable a company to successfully transform the potential in high-tech solution into actual realized profits - for customer first, then by extension for itself. This in turn makes niche markets value-based pricing. Each vertical market supports its own highly efficient communications infrastructures, including a strong work-of-mouth channel. Furthermore, once a niche settles in on its market-leading solution, its loyalty lasts to the least level.

5. High-Tech Market Expansion Tornado phase is the real market expansion era. At Main Street Market expansion has different features.

5.1 Inside the Tornado The Tornado is a period of mass-market adoption, when the general marketplace switches over to the new infrastructure paradigm. In the previous two decades there were two great tornadoes that fundamentally changed the balance of power in the computer industry: midrange computer tornado, and the PC market. In the first phase of the former tornado, it developed around a minicomputer architecture set by DEC and Oracle, with the former company providing the requisite large-scale infrastructure, and the latter the driving energy. In the second phase, Oracle continues to play a key role, a client/server architecture based on Unix replaced minicomputer’s proprietary operating systems. It is Hewlett-Packard rising to prominence. The later tornado, the PC market, is even greater. In its first phase IBM provided the requisite large-scale infrastructure while Lotus’s 1-2-3 provided much of the initial driving energy. In its second phase, Microsoft and Intel have emerged as the dominant companies, with no hardware single vendor playing a comparable role, although Compaq and Dell have gained new prominence. 5.1.1 Causes of the Tornado Three principles operating in conjunction that create the tornado. -

When it is time to move, let us all move together. Pragmatists want to all move at once to minimize the risk of moving either too early or too late. Once the whole industry moved, no one gets caught out lacking support.

24 -

When we pick the vendor to lead us to the new paradigm, let us all pick the same one. Picking a common vendor, will drive that company to becoming the market leader, ensures a clear reference point for the de facto standards. Market leaders are always the safe buy, always get the best third-party support, and always find people who have experience with that technology.

-

Once the move starts, the sooner we get it over the better. In this way the transition time of any infrastructure swap-out can be collapsed in order to minimize the disruption for end users and the stress of having to maintain parallel infrastructures, or having to build temporary bridges between them.

The principle of moving together causes a massive number of new customers to enter the market all at once, swamping the existing system of supply. This in turn causes some pushing and shoving as companies jockey to get their share of vendor attention. That they all want the same product creates a further intensification of demand around a single vendor, along with more pushing and shoving. That they all want to get this over with as soon as possible just drives the heat much higher. Finally, because they feed off each others behavior, there is feedback loop operating that whips the entire market up into a frenzy, so that what started out as an orderly migration quickly degenerates into a stampede. The market consequence of this stampede is that, virtually overnight, demand dramatically outstrips supply, and a huge backlog of customers appears. The backlog not only represent a massive sales opportunity in and of itself, it also represents an even larger follow-on market opportunity. That is, since switching costs in high tech are so high, once customers settle on a particular vendor, they rarely switch. So each sale gained in a tornado really should be looked at as an annuity. In sum, the tornado is a hugely significant time. In tornado, the power shifts from the service leaders to the product leaders and eventually to the distribution channels. The entire order of business set up during the bowling alley is blasted away, and a new order is created in post-tornado market. One company has emerged as the dominant market share leader, referred as “gorilla”, earning a dramatically dis-proportionate share of the total profits. It will enjoy this advantage for the rest of the life of the market. One or two other companies, referred as “chimpanzees”, have emerged as strong competitors, earning uneven proportional share of the total profits. Chimpanzees are candidate gorillas that didn’t get picked. Finally a whole lot of other companies, referred as

25 “monkeys”, opportunistically seek a small portion of sales, and even smaller share of total profits. Monkeys come to the market only after the tornado has started, their strategy is cloning the gorilla product and sell it cheap. 5.1.2 Some Essential Principles of Tornado Marketing -

Attack the competition ruthlessly, the goal of marketing is market share.Expand distribution channel as fast as possible, extend the reach to customer.

-

Ignore the customer, high customer service content will drag company’s goal down.

-

Just ship, to try to cover as by market space as possible.

-

Drive to the next lower price point, attract more customers.

-

Recruit partners to create a powerful whole product, take out-sourcing advantages.

-

Institutionalize this whole product as the market leader, market leader benefit from its status in that business.

-

Commoditize the whole product by designing out your partners, the whole product is more generalizable.

5.1.3 The Tornado vs. The Bowling Alley The critical success factors for tornado strategy are diametrically opposed to those for the bowling alley (see Table 5-1). As a consequence, companies who have won great victoreis in the bowling alley and persist in their to-date successful mode of operation doom them selves to become second-tier players in the tornado and play increasingly marginalized roles as the market goes forward. Table 5-1

The Tornado vs. The Bowling Alley

Bowling Alley

Tornado

Focus on the economic buyer and the end user; Ignore the economic buyer and the end user; approach the infrastructure buyer late in the focus exclusively on the infrastructure buyer sales cycle Emphasize return on investment as the Ignore return on investment, focus on timely compelling reason to buy

deployment of reliable infrastructure

26 Differentiate your whole product for a single Commoditize your whole product for generalapplication

purpose use

Partner with a value-added distribution channel Distribute through low-cost, high-volume to ensure customized solution delivery

channels to ensure maximum market exposure

Use value-based pricing to maximize profit Use competition-based pricing to maximize margins

market share

Avoid competition to gain niche market share

Attack competition to gain mass market share

Position your products within vertical market Position your products horizontally as global segments

infrastructure

5.2 On Main Street 5.2.1 The Fundamentals of Main Streets Main Street is a period of aftermarket development, when the base infrastructure has been deployed and the goal now is to flesh out its potential. The typical transition to Main Street begins catastrophically, displaying one or more of the following characteristics: -

Dramatic shortfalls in projected revenues and profits

-

Restatements of earnings that go back one or two years

-

Massive exodus of the executives responsible

-

Drastic downturns in stock price

-

A shareholder lawsuit, to be settled out of court, which further drains an already abused stock of capital

The Main Street markets begin when the waves of frantic infrastructure replacement begin to subside, the new paradigm begins to settle in. Consumption of the core commodity continues at a prodigious rate, but supply has once again got ahead of demand - it has accelerated ahead of demand. With supply exceeding demand, buying power returns to the customer, and vendors must once again compete for their business. This competition takes on two forms - a price-based competition, focused on the infrastructure buyer, and a value-based competition focused on niches of end users (Figure 5-1).

27

Figure 5-1

Main Street Market Opportunities

Niche Market Extensions

On the commodity side, unit volume continues to grow but price erosion makes net revenues flat. The two groups of the infrastructure buyer for Main Street appeared as conservative economic buyers and purchasing agents. Purchasing agents are compensated for securing commodities at the lowest price. Main Street for them begins whenever the product category in question is sufficiently standardized that it can be let out for lowest bid. Conservative economic buyers also seek low prices because they have trouble getting value from anything technical. To serve these customers, vendors must develop a whole series of low-cost disciplines. For niche market extensions’ side, to be able to get margin relief from value-based pricing, vendors need to gain sponsorship for value from someone, namely end users, in the buying organization. The end users are the ones who define the lucrative niche markets on Main Street. 5.2.2 The Whole Product +1 Strategy on Main Street The strategy on the Main Street is focusing on end users, fulfilling their personal satisfaction from using the product, leveraging their preferences into higher margin returns. The idea behind +1 extensions to the whole product is to leverage the commoditized whole product created in the tornado, creating differentiation through secondary characteristics rather than through driving up its primary performance vectors. The goal is to win the sponsorship of a specific category of end users, justifying a higher price based not on a higher cost but rather on a higher value received. Although niche marketing is the guiding principle behind both bowling alley and Main Street marketing, the critical success factors for delivering value to the customer differ considerably. Main Street offers supporting infrastructure. Companies should deliver +1 value to marketplace

28 within the constraints of the high-volume, low-cost distribution system that was brought into being by the tornado. Customers will expect to buy +1 offers from the same tornado phase of the market. So +1 offer must not require more services than the tornado distribution channel can provide. Retail channels would not have channel-provided services at all. It provides only additional shelf space in return for higher margin sales. Thus many +1 programs have migrated to mail-order, telesales, catalog-based selling. The goal on Main Street is to maximize the financial yield from the installed base. In terms of competition, +1 programs do not compete against other +1 programs as much as they do against the low-cost core commodity. 5.2.3 Tornado vs. Main Street Main Street success factors run counter to those of the tornado, much as the key success factors for the tornado ran counter to those of the bowling alley. See Table 5-2. Table 5-2

Tornado vs Main Street

Tornado

Main Street

Sell to the infrastructure buyer

Sell to the end user

Focus on need for timely deployment of Focus on the end user’s experience of the reliable infrastructure

product, seeking to gratify their individual needs

Commoditize your whole product for universal Differentiate the commoditized whole product deployment

with +1 campaigns targeted as specific niches.

Distribute through low-cost, high-volume Continue to distribute through the same channels and advertise heavily to ensure channels, but now focus on merchandising to maximum market exposure

communicate + 1 marketing messages

Drive price points ever lower to maximize Celebrate + 1 value propositions to gain market share

margins above the low-cost clone

Attack other competitors to gain market share

Compete against your own low-cost offering to gain margin share

Position yourself horizontally as standard Position yourself in niche markets, based on

29 global infrastructure

the individual preferences of end users

It is critical that companies should carefully define where they are in the Technology Adoption Life Cycle before they set about formulating any plan of action on marketing. Marketing strategy changes dramatically at every major inflection point in the Technology Adoption Life Cycle. Successful strategies reverse themselves several times during the life cycle of a single technology.

6. Implications and Discussions 6.1 Implications for Strategy from the Model 6.1.1 Strategic Partnership Open systems business strategy puts a premium on partnerships to ensure rapid development of new technology markets. At the same time, the evolution of the whole product makes all such relationships transient. Learning how to partner, how to make and keep commitments, in such an environment is very challenging. 6.1.1.1 The Change of Partner Relationship and Evolution of the Whole Product The whole product evolves and integrates along the technology adoption life cycle. At Early Market, Technology product enveloped in a lot of custom service. Service content in whole product is very high, typically outweighs the product investment by several times. Companies recruit partners. Service content in whole product decreases through tornado and Main Street stage. Whole product standardization to drive costs down and reliability up pushes companies eliminating partnership, while in Main Street stage partner relationship reopens because + 1 marketing is needed to differentiate low-margin commodity. At the end of life, service content reasserts itself in the form of the caretaker role. 6.1.1.2 Partner Power Distribution within a Market -

The early market: Power lies with the technology provider and the systems integrator. Technology provider has the bait that brings visionary customers into range, system integrator has the tackle necessary to hand them.

30 -

The Bowling Alley: In the bowling alley, as well as when crossing the chasm, power centralizes into the hands of the ringleader of the niche market attack.

-

In the Tornado: Power in the tornado centralizes in gorilla companies and their crones.

-

On Main Street: Power, which has already been stripped away from the service vendors, now begins to be stripped from the product vendors as well. The beneficiary of this shift is the distribution channel. Power relationships within partnerships have a propensity to become dysfunctional.

6.1.2 Competitive Advantage Three value disciplines of market leaderships construct companies’ competitive advantage; product leadership, operational excellence, customer intimacy. Achieving superiority in any of these domains typically involves compromising the other two. No one can excel in all three areas. Companies should determine in which of these three lies the company’s core competency and develop a strategy focused on excelling in the single dimensions that plays most to your strength. Bowling Alley:

Product leadership, customer intimacy

Tornado:

Product Leadership, operational excellence

Main Street:

operational excellence, customer intimacy

-

In the bowling alley, one differentiates form the status quo solution through technology leverage (product leadership) and differentiates from similar technical products whtrough segment focus (customer intimacy).

-

In the tornado, competitive advantage is a function of whether one is a gorilla, a monkey, or a chimpanzee. Gorillas use operational excellence to ship in high volume, gaining the maximum amount of new customers possible and also driving their costs per unit down. They use a stream of new product releases (product leadership) to keep customers engaged and their competitors off balance. Monkeys compete on low price. Their form of operational excellence is based on reducing overhead to an absolute minimum. Chimpanzees compete with the gorilla using their own version of product leadership – revert to bowling alley strategy, carving out niches of market leadership by using customer intimacy to create segment-specific whole products.

31 -

Main street offers two grounds for sustainable competitive advantage, the low-cost commodity provider and the niche-oriented premium brand. Monkeys are well suited to the former, chimps to the latter, while gorillas can and should do both.

6.1.3 Positioning

Figure 6-1

New Market

Established Market

Market-Maker’s View of the Marketplace

Imperialists vs. Natives

Old Guard: Gorillas, Chipmanzees, Monkeys

Established Product

Explorers & Forty-niners

Bargarians vs. Citizens

New Product

Companies can position itself to identify which archetype fits them best, see the archetypes in Figure 6-1. The goal of positioning within a market infrastructure is to take one’s rightful place and no other. The place is determined by the ability to create or enhance a value chain or preempt another company’s current position in on. To have a credible presence in a market, companies must present themselves as playing a familiar role within a familiar plot. Each role implies different power relationships, seeks out different allies, and aligns against different competitors.

6.2 Discussions Even though Goeffrey’s market expansion strategic model generated for high-tech industry, it is essentially derived from the technology adoption life cycle, and general strategic concepts. The strategies and tactics presented by him are widely applicable for other high-change industries, where discontinuous forces are driving reengineering to their infrastructures. These include financial services, insurance, health care, utilities, pharmaceuticals, retailing, publishing, broadcasting, etc. For example, pharmaceutical companies are forming more and bigger strategic

32 alliances to leverage their competitive advantage. Utilities complement their traditional strategic focus on generation, transmission and distribution of electricity with consideration of growth prospects and opportunities for innovation and expansion (Boschee, 1998), some expand to telecommunication sector (Boxer, el., 1997; Carter, 1997). Regardless of whether there is a tornado foreseen, Bowling Alley model provides the successful strategy for companies expanding their business to the new business areas. Niche market is one of the most common strategy to expand market. Of course, high-tech industry does have its very special characteristics compared with other industries. The model may not applicable in a particular business, such as bowling alley model in consumer market. The structure of consumer markets does not support bowling alley strategy. First, consumer markets are wedded to low-cost, commodity-oriented distribution channels. These channels cannot field the focused expertise needed to penetrate a niche market with a brand-new whole product. Second, consumer markets cannot support scaling down from initially high introductory prices via a series of gradual price reductions over several generations of product, whereas industrial markets can, due to the scalability of customers. One way out of this dilemma, suitable for some products, is to cross the chasm in the business marketplace and then “go consumer” after the price point gets down to consumer levels. This is what HP’s ink-jet printer business did. However, in many other industries, the market practices do resemble somehow the pattern of the high-tech market expansion strategy. For every stage of the Technology Adoption Life Cycle, there is an optimal business model, professional services for Early Market, application products for Bowling Alley, infrastructure products for Tornado, and transaction services for Main Street. Same principals apply to other industries along their product life cycle, or brand life cycle, etc. Even in the high-tech industry, there can be exceptions. Whole product development is a key factor expanding the market from niches to mass market, to the tornado. Internet market tornado is so powerful that it has sucked all four models into its vortex. This phenomenon cause some exceptions that company did not follow up the Bowling Alley – Tornado strategy rules. Amazon.com jumped into the consumer e-commerce tornado almost over night, without a distinct Bowling Alley stage. It has done a superb job at reinventing the consumer buying experience for the on-line world by leveraging the existing inventory, distribution and returns

33 systems for book buying and selling. Most of companies need to carefully develop their own whole products to make sure the transition from Bowling Alley to Tornado. When apply this model for market expansion strategy, some limitations of the model should be paid attention. -

Bowling alley strategy is not the only strategy companies can achieve high-tech marketing successes, so to other industry. Niche marketing is the key of this strategy. However, even when these is no tornado foreseen in one industry, vertical marketing can actually increase the chances of becoming the market leader.

-

Companies in Bowling alley stage sometimes lock themselves into this model. Some fall in love with their first few niches and settle down in them for life. Some get trapped by the lure of recurrent service revenues and never design a pared-down product that could break free form the need for value-added service support.

-

The characteristics of high-tech market grant the additional leverage from niche marketing strategy, avoiding high money-, time-consuming whole production creation process. In the industries that do have such distinct characteristics, the additional leverage will not be obtained so high as in high-tech industry.

-

The attributes of an innovative product category may affect its potential (Boyd, 1999). The model underscored the importance of this knowledge by implying that attractiveness – “crossing the chasm”, must be achieved through deliberate marketing strategies before rapid market growth can occur (Moore, 1991). In fact, by assessing the impact of the entry on perceived attractiveness and adoption and understanding the factors that affect attractiveness, a firm can better predict the likelihood of success of their products, managers can improve an innovation’s chance of success by influencing the level of those factors they can change and knowing the implications of factors they cannot change.

7. Conclusions Life cycle concepts is widely used in strategic analysis on a demand, a technology, a product. Moore updated the concept into his Technology Adoption Life Cycle model, presented a market expansion model for high-tech industry. The landscape of the Technology Adoption Life Cycle model includes 6 zones – the Early Market, the Chasm, the Bowling Alley, the Tornado, the Main Street, and the End of Life.

34 -

The forces that operate in the Bowling Alley argue for a niche-based strategy that is highly customer-centric.

-

Those in Tornado push in the opposite direction toward a mass-market strategy for deploying a common standard infrastructure.

-

Then on Main Street market forces push back again toward a customer-centric approach, focusing on specific adaptations of this infrastructure for added value through mass customization.

-

Given this dramatic reversals in strategy, it is imperative that organizations be able to agree on where their markets are in the life cycle.

-

The power structure in the market changes so rapidly, understanding who is friend who is foe becomes a challenge. Within the newly emerging market structure, companies must compete for advantage based on their status within it. Positioning in this context consists of a company taking its rightful place in the hierarchy of power and defending it against challengers.

This model is applicable for other high-change industries, where discontinuous forces are driving reengineering to their infrastructures. These include financial services, insurance, health care, utilities, pharmaceuticals, retailing, publishing, broadcasting, etc. Of course, high-tech industry does have its very special characteristics compared with other industries. The model may not applicable in a particular business, such as bowling alley model in consumer market. The structure of consumer markets does not support bowling alley strategy. However, in many other industries, the market practices do resemble somehow the pattern of the high-tech market expansion strategy. Even in the high-tech industry, there can be exceptions, such as Amazon.com in internet consumer e-commercial tornado. When apply this model for market expansion strategy, some limitations of the model should be paid attention.

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