Innovation – Lead Times and after Sales Service

Lead times and after sales service are considered by practitioners a major source of protection against imitation especially for product innovations. Taken together with a strong commitment to product development they can establish brand loyalty and credibility, accelerate the feedback from customer use to product improvement generate learning curve cost advantages and therefore increase the cost of entry for imitators. Based on the survey of large European firms, table shows that there are considerable differences amongst sectors in product development lead times, reflecting differences both in the strength of patent protection and in product complexity.

The learning curve in production generates both lower costs, and a particular and powerful form of accumulated and largely tacit knowledge that is well recognized by practitioners. In certain industries and technologies (e.g. semiconductor, continuous processes) the first comer advantages are potentially large, given the major possibilities for reducing unit cost with increasing cumulative production. However, such experience curves are not automatic and require continuous investment in training and learning.

Complementary assets: the effective commercialization of an innovation very often depends on assets (or competencies) in production marketing and after sales to complement those in technology. As we have seen above, EMI did not invest in them to exploit its advances in electronic scanning. On the other hand, Teece argues that those strong complementary assets enabled IBM to catch up in the personal computer market.

Product complexity: However Teece was writing in the mid 1980s and IBM’s performance in personal computers has been less than impressive since then. Previously, IBM could rely on the size and complexity of their mainframe computers as an effective barriers against imitation given the long lead times required to design and build copy products. With the advent of the microprocessor and standard software, these technological barriers to imitation disappeared and IBM was faced in the late 1980s with strong competition from IBM clones made in the USA and in East Asia. Boeing and Airbus have faced no such threat to their positions in large civilian aircraft since the cost and lead times for imitation remain very high (See table below). Product complexity is recognized by managers as an effective barrier to imitation.


Inter Industry differences in product development lead times:

Industry % of the firms for developing and marketing of alternative to a significant product innovation

All 11
Pharmaceuticals 57.3
Aerospace 26.3
Chemicals 17.2
Petroleum 13.6
Instruments 10
Automobiles 7.3
Machinery 5.7
Electrical 5.3
Basic metal s 4.2
Utilities 3.7
Glass cement
and ceramics 0
Food 0
Telecommunication 0
Computers 0
Fabricated metals 0

Standards: the widespread acceptance of a company’s product standard widens its own market and raises barriers against competitors. Carl Shapiro and Hal Varian have written the standard (so far) text on the competitive dynamics of the Internet economy, where standards compatibility is an essential feature of market growth and standard wars are an essential feature of the process. However, they point out that such wars have been fought in the adoption of each new generation of radically new technology: for example over the width of railways gauges in the nineteenth century, the provision of electricity through direct or alternating current early in the twentieth and rival technical systems for color television more recently. Amongst other things they conclude that the market leader normally has the advantage in a standards war. But this can be overturned through radical technological change, or a superior response to customers needs. Competing firms can adopt either evolutionary strategies, minimizing switching cost for customers (e.g. backward compatibility with earlier generations of the product) or revolutionary strategies based on a greatly superior performance, price characteristics such that customers are willing to accept higher switching costs. Standard wars are made less bitter and dramatic when the costs to the losers of adapting to the wining standard are relatively small.