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High-Tech products failure: Lessons learnedChatchai Khunpitiluck
Saturday, September 19, 2009
A car with speedometer
A question from last lecture
Length of the bridge = #ticks on the bridge
#times crossed the bridge
Saturday, September 19, 2009
Moore’s Law
“The number of transistors on a chip will double about every two years”
- Gordon Moore, co-founder Intel
Saturday, September 19, 2009
Hi-Tech Markets
Complex
Under rapidly changing technology (short life cycle)
Need for rapid decisions
Continually evolving expectations of customers
High risk for both customer and producer
Saturday, September 19, 2009
Customer Focus
Saturday, September 19, 2009
Nature of Hi-Tech Markets
Difference between the customer’s perspective and the firm’s perspective
Specific features of high tech markets that are believed to distinguish them from other product categories
Anyone who owns standards win
Saturday, September 19, 2009
“If you build it, he will come”
-Movie “Field of Dreams”
Saturday, September 19, 2009
Adopter Categories
Innovators willing to take risks, impersonal and scientific information
Gatekeeper
Early Adopters
accept new ideas earlyrely on multiple sources of info Opinion Leaders
Early Majorityrisk adverse
rely on company-generated promotional information and WOM
Don’t purchase until late growth stge
Late Majority and Laggards
require early categories to “test-drive” the product
Advantage for companies who enter
during maturity
Saturday, September 19, 2009
Bowling Alley
Main Street Tornado
Source: Moore (1995), Inside the Tornado
Saturday, September 19, 2009
Examples from practice
Technology
Marketing
or both
Saturday, September 19, 2009
Factors of failure ...
Customer expectations not met
No innovative advantage perceived
Information about product is scarce, unclear, difficult
Need for product is not seen
Unique attributes not seen
Poor selection of target market
Poor communication of product benefits
Distribution channel selection
Pricing problemsSaturday, September 19, 2009
Philips’ CD-I (1991)
Saturday, September 19, 2009
CD-Interactive (CD-I), 1991
Entertainment System
Game, TV, Audio as family entertainment system
Philips counted very heavily on this system
Hardware
Joint venture on Software with Polygram
“Family Entertainment of Tomorrow”
Saturday, September 19, 2009
Target Market
Married, with school-aged children, technologically advanced and relatively affluent.
Aimed to push product for holiday season 1991
Recognized importance of “innovators” and “early adopters”
Saturday, September 19, 2009
Product
Not all features included in the system in 1991
Operate with TV, but remote control is (perceived) as not good
Saturday, September 19, 2009
Distribution
Sears
Circuit City
Other game retails
Saturday, September 19, 2009
Promotion
Tag line: “imagination machine”
But many features on the list not available
Specially trained sales force
Saturday, September 19, 2009
Price
Original Retail Price $899
Almost immediately, price dropped to $699
1994: $499
Price skimming
Saturday, September 19, 2009
Lessons learned
Must position CD-I as an innovation, not another Super Nintendo or CD players
Early adopters are necessary to start WOM
Does not appeal to target market
Cost cutting in product design & production
Ad copy did not match up with the functions and confusing
Store selection did not project image of cutting edge
Price skimming confuses innovators and early adoptersSaturday, September 19, 2009
Apple’s Newton (1992)
Saturday, September 19, 2009
Newton, 1992
John Sculley, CEO
Apple wants to enter the PDA market
Sold strongly at first, but fell short
Revamped and Reintroduced in 1994
“Seamlessly Communicate Anywhere”
Saturday, September 19, 2009
Target Market
Strategy Decision: Mass
Techno-philes
Apple Fans
Saturday, September 19, 2009
Product
Competitors: “EO” and “Zoomer”
Compaq, Sony worked on their own versions of PDA
Apple didn’t have a complete prototype in May 1992
PDA: wireless electronic communication + file management + handwriting recognition + pocket size
Saturday, September 19, 2009
Not complete
“75% of what Apple says it can do”
“Not designed to meet the need”
“Technology flaw”
“Very high price”
Apple’s vision of a revolutionary product has not been shared by the customer.
Saturday, September 19, 2009
Price
Sculley set it to $500
Sold at $699
Still too expensive to generate market appeal it wanted
Pricing strategy did not fit in the product strategy
Saturday, September 19, 2009
Promotion
Apple’s new product launches: Promotional mix
One year before launch:
“the beginning of the biggest thing Apple has ever done”
“this is tremendously exciting for the rest of the world”
Apple advertised features prominently and failed to deliver
Saturday, September 19, 2009
Lessons Learned
Long on promise, short on fulfillment
Product not complete
Price point cannot be fulfilled
R&D can’t deliver all features
“it’ll take 2-3 iterations before these are any good”
Saturday, September 19, 2009
Sony’s BetaMax (1975)
Saturday, September 19, 2009
Saturday, September 19, 2009
BetaMax, 1975
InstaVideo (Ampex), 1971
U-Matic (Sony)
1976: Standard Format emerged (JVC’s VHS)
Saturday, September 19, 2009
Target Market
Why it is not a success?
Introduced before competitor more then one year
Market big enough for more than one product
Sony does not conduct “market research”
RCA did, and waited for the right format
Saturday, September 19, 2009
Product
Many experiment with devices to record TV programs
Developed from U-Matic, BetaMax was much better
BetaMax recorded for upto one hour
Technically superior, wider spectrum, higher SNR
VHS, record time is up to 6 hours in LP mode
Saturday, September 19, 2009
Price
Confusing
announcement: $788
before launch: $2,295 Combo set
In Japan: $800
High prices: Luxury Market, Expensive Toys
BetaMax Movie: $79.95 or $89.95
VHS Movie: $29.95Saturday, September 19, 2009
Place
Matsushita, JVC also an alliance of Sony
For Sony, Quality and size is better than playing time
Lack partner
Saturday, September 19, 2009
Promotion
First in the market
Did not go for innovators and early adopters
Shrink from 100% to 28% in 6 years
First mover advantage wiped out by Long-Play
Saturday, September 19, 2009
Lessons Learned
Similar mistake done by U-Matic
Sony introduced Extended Definition Beta
JVC introduced Super VHS
Saturday, September 19, 2009
Sony’s Proprietary Formats
Saturday, September 19, 2009
BetaMax, 1975
Video Cassette Recording (VCR)
Saturday, September 19, 2009
Digital Audio Tape, 1980’s
Digital successor to analog cassette tape
Technologies from video tape + digital encoding
RIAA lobbied to prevent the sell of DAT
Expensive players
RIP 2005
Saturday, September 19, 2009
Minidisc, 1993
Could be successful
Sony added “copy protection”
High media prices
Expensive player/recorder
Saturday, September 19, 2009
ATRAC Audio Compression, 1993
Developed ATRAC for the Minidisc
Near CD-quality, smaller files
Nasty, close-minded move by Sony
MP3 took off as “open standard”
Saturday, September 19, 2009
SDDS, 1993
Sony Dynamic Digital Sound
Dolby Digital 5.1
Digital Theater System (DTS)
SDDS didn’t go very far in home theater segment
Saturday, September 19, 2009
Memory Stick, 1998
Developed for Sony Digital Camerass and Music Players
“Proprietary” format, limited to Sony alone
Designed as an additional revenue stream
Other manufacturers not using it
Saturday, September 19, 2009
Universal Media Disc, 2005
Improving MiniDiscs to a new optical discs
Discontinued 2006
Saturday, September 19, 2009
Blu-Ray?Inferior format (MPEG-2, MPEG-4)
BluRay movies are “Enhanced Definition” and MPEG-2
Expensive player for DVD capability
Problem not on the players, but the discs
Not “High Definition”
Another camp is Toshiba’s HD-DVD, endorsed by DVD forum
BluRay player costs twice as much as HD-DVD’s
PS3
Debatable. To be decided by the Movie studios!!Saturday, September 19, 2009
Blu-Ray!
WalMart stopped carrying HD-DVD
Toshiba withdrew from the battle
Blu-Ray won
The battle in a much longer war
Window of opportunity is short, consumer prolong decision
Saturday, September 19, 2009
Blu-Ray Competitors
Do we really want a High Quality Video?
Digital Downloading
Streaming Video
No true winner? Just temporary survivor
Saturday, September 19, 2009
End notes
You learned more from failure, not success--
A good hockey player plays where the puck is.A great hockey player plays where the puck is going to be.
-Wayne Gretzky
Saturday, September 19, 2009
Assignment
Next Week: Summary & Class Presentation
Saturday, September 19, 2009