Timing Product Replacements under Uncertainty—The Importance of Material–Price Fluctuations for the Success of Products That Are Based on New Materials

Being first to market with new products is one of the most enduring pieces of strategic advice handed to managers. This view also emphasizes the importance of launching new products that are based on new materials as soon as possible. However, when the input costs of products that embody new materials are uncertain because of volatile material prices, the advantage of being an early mover comes along with the risk of paying unexpectedly high material prices. Real‐option theory suggests delaying material substitution under uncertainty even if the new material enables superior product performance. Firms who have created the flexibility to switch between alternative inputs can benefit from responding to opportunities or threats that arise from changes in the environment. The current study formalizes this logic in a switching‐option model and tests it on a sample of material substitution projects from the manufacturing sector. Our findings shed light on how input‐cost fluctuations influence the timing–performance relationship and bring into question the common advice to launch new products as soon as possible. Instead, our results suggest that firms who align the timing of market launch to trends and fluctuations of material prices improve their competitive positions. These insights suggest novel ways for new product development (NPD) managers how to successfully use external information at the back‐end of the NPD process and how to compete in an era defined by volatile material prices and technological change.     

Marketing in the emerging era of build-to-order manufacturing

Build-to-order (BTO) and lean manufacturing processes are changing the paradigms under which businesses-to-business marketers operate. For example, BTO processes allow marketers to customize products to a greater degree, creating a competitive advantage over traditional manufacturing. Business-to-business (B2B) marketers who take advantage of the operational efficiencies and effectiveness that emerge from BTO are outperforming firms that utilize traditional manufacturing processes in multiple industries, such as office furniture, personal computers, and windows. This paper examines the long-term impact of the adoption of build-to-order manufacturing strategies on the marketing function and identifies marketing strategies associated with successful BTO companies. Throughout, the paper highlights managerial implications and proposes directions for future research.     

Incapability of Technological Capability: A Case Study on Product Innovation in the Japanese Facsimile Machine Industry

Technological leadership in an industry certainly seems like a ticket to ongoing success. However, overemphasis on existing technological capabilities may produce a form of myopia in product development. In other words, by focusing primarily on developing and improving their core technologies, organizations miss opportunities to exploit new technologies and thus create breakthrough products. Ken Kusunoki proposes that problem-solving approaches in a technologically leading firm paradoxically may impede radical product innovation. Suggesting that such firms are inherently oriented toward incremental innovation, he presents a conceptual framework of the dynamic interaction between technological and product development problem-solving in the context of product innovation. He then illustrates this conceptual framework by examining a case of radical innovation in the Japanese facsimile industry. For a technological leader, product innovation typically is driven by technology development. In other words, such a firm quite reasonably relies on the technological advantage it holds over competitors as the basis for its product developments. By refining and enhancing its industry-leading technological capabilities, the firm can successfully introduce incremental innovations in its products. Because of this strong emphasis on exploiting existing technological capabilities, however, the technological leader may fail to capitalize on new technologies that can produce radical innovations. In the race to develop high-speed, digital facsimile equipment during the early 1970s, for example, Matsushita held a decided technological advantage over competitors such as Ricoh. Notwithstanding Matsushita's technological edge, however, Ricoh brought this radical innovation to market two years before Matsushita introduced its first digital machine, causing a serious decline in Matsushita's market share. Ricoh's approach to technological and product problem-solving—an autonomous team structure, with a strong project manager and frequent transfers of engineers among interdependent units—contrasts dramatically with Matsushita's functional structure and strong emphasis on technological problem-solving. Interestingly, Matsushita regained its technological advantage by 1976, thanks to a rapid series of incremental innovations in its product technologies.     

Understanding a Two‐Sided Coin: Antecedents and Consequences of a Decomposed Product Advantage*

This paper investigates the antecedents and consequences of two product advantage components: product meaningfulness and product superiority. Product meaningfulness concerns the benefits that users receive from buying and using a new product, whereas product superiority concerns the extent to which a new product outperforms competing products. The present paper argues that scholars and managers should make a deliberate distinction between the two components because they are theoretically distinct and also have different antecedents and consequences. Data were collected through an online survey on 141 new products from high‐tech companies located in The Netherlands. The results reveal that new products need to be meaningful as well as superior to competing products to be successful. This finding is consistent with the prevailing aggregate view on product advantage in the literature. However, the results also show that the effects of the two components on new product performance are moderated by market turbulence. Although each component is important in that it forms a necessary precondition for the other to affect new product performance under circumstances of moderate market turbulence, meaningfulness is most important for new product performance in turbulent markets where preferences have not yet taken shape. In contrast, when markets become more stable, the uniqueness of meaningful attributes decreases, and new products that provide advantage by fulfilling their functions in a way that is superior to competing products are more likely to perform well. In addition, the study shows that the firm's customer and competitor knowledge processes independently lead to product meaningfulness and superiority, respectively. The findings also reveal that under conditions of high technological turbulence the customer and competitor knowledge processes complement each other in creating product meaningfulness and superiority. This implies that the level of technological turbulence puts requirements on the breadth of firms' market knowledge processes to create a new product with sufficient advantage to become successful. The paper concludes that neglecting the distinction between product meaningfulness and superiority when assessing a new product's advantage may lead to an incomplete insight on how firms can improve the performance of their new products.     

Managing Technology for Competitive Advantage in Inter-industry Markets

The paper deals with the question of how a firm could develop a technological/R&D strategy to help it to maintain the initiative in its markets. The author extends Porter's analysis of competitive strategy to the R&D field and establishes the point that to remain profitable a firm must consciously manage its interfaces with its suppliers as well as its customers; it must take into account the threats and opportunities arising from such factors as the impact of existing competitors, new suppliers and competitors entering the scene and the possible appearance of substitutes for its products. A comprehensive corporate strategy would contain elements such as using technological change and R&D to raise the entry costs facing potential new rivals, inhibiting or anticipating the entry of substitutes, raising exit costs to customer and supplier by, for example, involving them in technological development.
The paper develops these possibilities in detail and concludes with a summarising checklist of practical options open to a firm to act on the conclusions the author draws from his analysis.     

Behind the scenes of digital servitization: Actualising IoT-enabled affordances

Manufacturers are increasingly transforming through servitization, and the Internet of Things (IoT) is a crucial enabler of this transformation. Current literature describes the diverse outcomes from IoT that enable servitization but fails to explain the reasons behind the diversity and the processes manufacturers go through to create these outcomes. This study aims to identify these processes by drawing on affordance theory and its core principles of affordance perception (understanding an opportunity provided by technology) and affordance actualisation (taking advantage of an opportunity provided by technology). By using affordance theory to analyse the case scenarios of six manufacturing firms, the study develops a framework to explain the realisation of the opportunities the IoT provides to manufacturers' servitization efforts. The analysis identifies three types of affordances and actualisation processes that help manufacturers realise the opportunities of the IoT. This framework enables manufacturers to systematically manage the contributions from the IoT and the associated actualisation efforts required to advance servitization. The study adds to the understanding of the IoT's role in a manufacturing servitization context.     

The Mixed Blessings of Technological Innovativeness for the Commercial Success of New Products

This study addresses the contradiction that, although technological innovativeness of new products is often seen as a major driver of competitive advantage and commercial success, empirical research is not always able to show a significant performance influence. In order to find an explanation, the effects of technological innovativeness are decomposed as its influence on the market, the innovating firm, and the firm's environment is considered. The proposed model is tested on a sample of new product development projects. In order to avoid systematic biases, this paper uses a longitudinal survey design with two informants and a sample that includes both incremental and highly innovative projects. The results show that technological innovativeness has both positive and negative effects on the commercial success of new products. On the one hand, technological innovativeness can increase customer value, which in turn has a positive effect on success. On the other hand, incorporating new technologies into new products also implies changes in the innovating firm and potentially in its environment. These changes have a negative impact on commercial success. The positive and negative effects compensate for each other, so that the total effect of technological innovativeness on commercial success is close to zero. The findings imply that firms developing new products through incorporating radically new technologies often seem to underestimate the inherent complexities with respect to both internal and external changes. Developing and introducing new products with a radically changed technology also implies anticipating the need for new competences, processes, structures, and network partners. Social and political resistance against technological changes, large investments in new infrastructures, and the long duration of these changes additionally become frequent features of such innovation endeavors. Hence, firms embarking on a path of exploiting radically new technologies should consider those complexities very carefully when making their new product development decisions.     

A methodology for the construction of dynamic capabilities in industrial networks: The role of border agents

The article presents a methodology for the formation and functioning of industrial networks that favors the development of dynamic capabilities with regard to the creation, integration, transfer and absorption of knowledge. This methodology has been put into practice in a case study: Lignum Facile. The presence of some misalignments between our initial proposal and its implementation helped us reshape and emphasize particular processes and flows associated to the methodology. Beyond the typical localization and agglomeration advantages, the analysis suggests that the success in the formation and functioning of industrial networks is mainly related to their potential to formulate immaterial relationships capable of stimulating learning processes, the dissemination of technological knowledge and innovative activities. Particularly, we found that the inclusion of border agents – intermediaries between the market and industry such as architects, engineers or designers – is fundamental to develop innovations at the intersection of different scientific and technological disciplines.     

Dynamic capabilities and strategic management

The dynamic capabilities framework analyzes the sources and methods of wealth creation and capture by private enterprise firms operating in environments of rapid technological change. The competitive advantage of firms is seen as resting on distinctive processes (ways of coordinating and combining), shaped by the firm’s (specific) asset positions (such as the firm’s portfolio of difficult-to-trade knowledge assets and complementary assets), and the evolution path(s) it has adopted or inherited. The importance of path dependencies is amplified where conditions of increasing returns exist. Whether and how a firm’s competitive advantage is eroded depends on the stability of market demand, and the ease of replicability (expanding internally) and imitatability (replication by competitors). If correct, the framework suggests that private wealth creation in regimes of rapid technological change depends in large measure on honing internal technological, organizational, and managerial processes inside the firm. In short, identifying new opportunities and organizing effectively and efficiently to embrace them are generally more fundamental to private wealth creation than is strategizing, if by strategizing one means engaging in business conduct that keeps competitors off balance, raises rival’s costs, and excludes new entrants. © 1997 by John Wiley & Sons, Ltd.     

Making the Processes of Designing Explicit Within an Information Technology Environment

In this paper, technology is described as involving processes whereby resources are utilised to satisfy human needs or to take advantage of opportunities, to develop practical solutions to problems. This study, set within one type of technology context, information technology, investigated how, through a one semester undergraduate university course, elements of technological processes were made explicit to students. While it was acknowledged in the development and implementation of this course that students needed to learn technical skills, technological skills and knowledge, including design, were seen as vital also, to enable students to think about information technology from a perspective that was not confined and limited to `technology as hardware and software'. This paper describes how the course, set within a three year program of study, was aimed at helping students to develop their thinking and their knowledge about design processes in an explicit way. An interpretive research approach was used and data sources included a repertory grid `survey'; student interviews; video recordings of classroom interactions, audio recordings of lectures, observations of classroom interactions made by researchers; and artefacts which included students' journals and portfolios. The development of students' knowledge about design practices is discussed and reflections upon student knowledge development in conjunction with their learning experiences are made. Implications for ensuring explicitness of design practice within information technology contexts are presented, and the need to identify what constitutes design knowledge is argued.     

INVESTMENT ANALYSIS FOR AUTOMOTIVE ELECTRONICS MANUFACTURING: A CASE STUDY

Investment opportunities for electronics manufacturing can create many challenging components within the standard context of economic analysis theory. First, most of these operations are dependent on significant capital investment with short analysis periods due to technological obsolescence. These problems are compounded with the reality of short product lives and fluctuating consumer demands. Perhaps the most challenging environment for electronics manufacturing is that of automotive electronics. These facilities are typically faced with similar manufacturing issues common in all electronics production but have the added difficulty in meeting very stringent quality and reliability requirements in a globally competitive market. This case study investigates the challenges in evaluating investment options in electronics manufacturing and pays specific attention to those issues that are most common to the automotive electronics market. In addition, the analysis investigates various sensitivity issues related to these investment opportunities and investigates an alternative investment option for a flexible manufacturing process.     

产品空间视角下制造业结构转变研究——以江浙沪为例

本文在产品空间视角下，将产品空间结构理论从国际贸易领域移植到国内区域层面，利用中国30个省份2003～2011年145类制造业3位码细分行业数据和2012～2014年147类制造业3位码细分行业数据，构造中国制造业产品空间，采用固定效应模型和Probit模型检验产品密度对比较优势的影响，并以江浙沪为例，对制造业结构转换目标选择进行了探讨。研究发现：在国内区域层面，产品密度在产业转型中发挥着引领产业创新和阻止产业衰退的双重作用。在产业结构转换中，需要遵循此规律，选择合适的转换目标，避免结构转换中的断档停滞。     

Asset restructuring and business group affiliation in French civil law countries

We examine the relationship of environmental antecedents to asset restructuring in nine French civil law countries in Latin America and Europe. In these countries, business group affiliation helps member firms to access resources, take advantage of environmental opportunities, and neutralize threats. Results indicated that environmental antecedents, such as change in country development, increased competition and deregulation led to increased asset restructuring. More importantly, however, we also found that the influence of environmental factors was moderated by business group membership. The relationship between change in country development and restructuring was stronger for group‐affiliated firms and the effects of increased competition and deregulation on asset restructuring were stronger for primarily independent firms. Our study offers additional evidence that organizations may respond differently to environmental opportunities and threats depending on the institutional setting. Copyright © 2004 John Wiley & Sons, Ltd.     

An investigation of the relationship between behavioral processes, motivation, investments in the service business and service revenue

Despite the established benefits of services in manufacturing companies, very few managers are motivated to invest resources in extending the service business. On the basis of a combination of qualitative and quantitative research approaches, we illustrate that managers cannot be easily motivated. Managerial motivation to extend the service business in manufacturing companies is more like a process that must grow organically. To do so, managers have to overcome some of the typical behavioral processes of manufacturing companies. In greater detail, we explore how the disbelief in the financial opportunities of services risk aversion in exploiting strategic opportunities, setting overambitious objectives and an overemphasis on obvious causalities limit managerial motivation to extend the service business. If manufacturing companies can overcome these behavioral processes, the managerial motivation will increase, leading to more investments in the service business and thus enhancing service revenue and overall profitability.     

The Collaboration of Innovation Intermediaries and Manufacturing Firms in the Markets for Technology

Many manufacturing firms have opened up their product innovation processes and actively transfer knowledge with external partners in the markets for technology. However, the markets for technological knowledge have remained inefficient in comparison with the markets for most products. To reduce some of the market inefficiencies, manufacturing firms may collaborate with innovation intermediaries, which are defined as organizations that act as agents or brokers in the innovation process between two or more parties. These innovation intermediaries comprise different service providers ranging from consulting companies to Internet marketplaces for technology. In light of an increasing importance of intermediary services in the context of open innovation, this paper specifically focuses on the collaboration of manufacturing firms and innovation intermediaries, which may be critical for the success of intermediary services. Based on new interview data from 30 innovation intermediaries and 30 European manufacturing firms, this paper examines the question of how innovation intermediaries and manufacturing firms collaborate concerning the following issues, which emerged as the key themes from the interviews: potential of intermediation, roles of intermediaries, types of intermediation, drivers of intermediation, complementarity of intermediation, compensation of intermediation, and the importance of repeated collaborations. The findings indicate how manufacturing firms may reduce their transaction costs in technology markets by collaborating with intermediaries. However, intermediary services can only be regarded as a complement rather than a substitute of manufacturing firms' internal activities of managing technology transfer. Thus, manufacturing firms need sufficient internal capabilities for managing technology transfer, such as absorptive capacity and desorptive capacity.     

The reference wars: Encyclopædia Britannica's decline and Encarta's emergence

Research summary: The experience of Encyclopædia Britannica provides the canonical example of the decline of an established firm at the outset of the digital age. Competition from Microsoft's Encarta in 1993 led to sharp declines in the sales of books, which led to the distressed sale of the firm in 1996. This article offers new source material about the actions at both Encarta and Britannica, and it offers a novel interpretation of events. Britannica's management did not misperceive the opportunities and threats, and Britannica did not lack technical prowess. This narrative stresses that Britannica's management faced organizational diseconomies of scope between supporting lines of business in the old and new markets, which generated internal conflicts. These conflicts hindered the commercialization of new technology and hastened its decline . Managerial summary: An established and leading firm, such as Encyclopædia Britannica, would seem to have enormous advantages over its competitors in a new market. Why would a successful firm come to have severe difficulties organizing for a new market? Of particular importance for explaining Britannica's decline are theories that stress its inherited capabilities, especially inherited technological (in)abilities and inherited (mis)perceptions about the potential for new market opportunities. This article argues that Britannica's management did not misperceive the opportunities and threats, and Britannica did not lack technical prowess. This narrative stresses that Britannica's management faced organizational diseconomies of scope between supporting lines of business in the old and new markets, which generated internal conflicts. The narrative directs attention at managing commercialization activity around new products using new technologies . Copyright © 2016 John Wiley & Sons, Ltd.     

Auditing product innovation activities in manufacturing firms

Increasing numbers of large firms are splitting themselves into self-standing businesses for the purpose of targeting opportunities more accurately. Based on the findings of an empirical study of product development procedures in leading UK and US manufacturing firms this article provides R&D and other managers with a checklist of the processes involved in developing products speedily and efficiently. Businesses which use product innovation successfully as a competitive weapon are shown to approach development work in a way which is far more comprehensive than aiming only at efficient technical project management. In such businesses supportive top management and efficient interfunctional teamwork emerge as key factors concerned with running a total business both now and in the future.     

Integrated Market-Immersion Approach To Teaching New Product Development In Technologically-Oriented Teams

This article presents a market immersion methodology for teaching NPD in technologically-oriented teams. This methodology was developed during the early 1990s at the Lally School of Management and Technology of Rensselaer Polytechnic Institute. Since then, it has been successfully utilized to train in excess of one hundred MBA-level student teams. The NPD course is taught by a 5-member cross-functional team of faculty with backgrounds in marketing, manufacturing operations, and accounting. The course is modeled on Cooper's stage gate process, and the course is designed to provide a combination of classroom and apprenticeship experiences. The 6-credit, year-long course requires students to work in self-directed teams of approximately 5 to 6 members. Each student team chooses its own industry or technology domain in which to concentrate its efforts, and students undertake intensive market and field research in order to assess any existing market opportunities. Once a specific target market and market need have been identified, students are then required to design a product and an organization to meet that need. In specific, students must produce a detailed marketing, manufacturing, operations, advertising, distribution, and financial plan that can bring their product to market. During the process, students create multiple potential product designs, build mock-ups of their products, and field test the mock-ups. At every phase of the course, the teams are continuously immersed in real customer markets. As a result, teams must struggle to incorporate new market information and learning into their project in a consistent and holistic manner. The following article presents the curriculum content and tools, lessons learned, and student reactions to this original pedagogical approach to teaching NPD. Due to the length of the course, particular attention is paid to the teaming issues that naturally arise when teams work together on long-run projects. © 2002 Elsevier Science Inc. All rights reserved.     

External linkages and innovation in small and medium-sized enterprises

While small and medium-sized enterprises (SMEs) can enjoy a number of behavioural advantages over their larger counterparts in the innovation process (e.g. rapid response to external threats and opportunities; efficient internal communication; interactive management style), they can also suffer from a number of mainly material disadvantages (e.g. inability to spread risk over a portfolio of new products; difficulties in market start-up abroad; problems in funding longer-term R&D). One area in which SMEs can suffer a marked disadvantage is that of establishing the appropriate network of contacts with external sources of scientific and technological expertise and advice. This paper addresses the issue of SMEs’ external linkages and presents data from a number of studies showing the importance of in-house technical skills to linkage activity; the importance of complementary between in-house and external know-how accumulation; and the importance of technology strategy in guiding the accumulation process. SME-oriented public technology policies should be adapted to the specific needs of SMEs in that they should focus on facilitating vertical (supplier-manufacturercustomer) linkages and offer support throughout the innovation chain from pre- competitive research through to product development. Numerous studies testify to the importance of firms extensively ‘networking’ in order to improve innovation potential (for example, Mowery, 1988; Contractor and Lorange, 1988; CEST, 1990). The majority of these studies focus on formal technology agreements, such as R&D joint ventures,; tend to feature large firm collaboration rather than that undertaken by small and medium-sized enterprises (SMEs); and while they often refer to the management problems involved in collaboration, few examine their management in any depth. This paper will describe the extensive collaborations of innovative SMEs, and will emphasise how the employment of key personnel affects the range and scope of linkages. It will highlight the broad diversity of linkages used by SMEs for technological development. And, by means of a case study of a highly technologically advanced SME, it will examine some of the most important management problems facing the collaborative process.     

The food industry in Ireland

The 1970s saw a transformation in the economic position of the food and agricultural sector of the Irish economy. Prior to membership of the EEC, the development of Irish agriculture had been severely curtailed by the limited market opportunities that faced food exports from Ireland. The prospect of membership of a large and prosperous European Community brought a new era for the food sector. These new market opportunities coincided with, and gave incentive to, a technological revolution in food processing in Ireland. The extent of this change can be most graphically seen from a comparison of the small local creameries which played a major role in dairy manufacturing in the 1960s with the large, sophisticated plants of the 1970s.