Commercializing Systems

Systems or we call them Complex Products are a separate case in marketing because neither the technology nor markets are well defined or understood. Therefore technology and markets go together over time, as developers and potential users interact. Technological difficulty does not necessarily mean market complexity, or vice versa. For example, the development of a passenger aircraft is complex in a technological sense, but the market is well defined and potential customers are easy to identify. We are concerned here with cases where both technologies and markets are difficult – for example, telecommunications, multimedia and pharmaceuticals.

The difference between consumer and industrial marketing in terms of the nature of users, rather than the products and services themselves, is therefore unhelpful. A new industrial product or process may be relatively simple, whereas a new consumer product may be complex. The commercialization process for complex products has certain characteristics common to consumer and business markets:

  • Products are likely to consist of a large number of interacting components and sub systems, which complicates development and marketing.
  • The technical knowledge of customers is likely to be greater, but there is a burden on developers to educate potential users. This requires close links between developers and users.
  • Adoption is likely to involve a long term commitment, and therefore the cost of failure to perform is likely to be high
  • The buying process is often lengthy and adoption may lag years behind availability and receipt of the initial information.

Systems typically consist of a number of components or sub-systems. Depending on how open the standards are of interfaces between the various components, products that may be offered as a set of systems, or as sub-systems or components. For bundled systems, customers evaluate purchases at the system level, rather than at the component level. For example, many pharmaceuticals firms are now operating managed health care services, rather than simply developing and selling specific drugs. Robot manufacturers offer manufacturing solutions, rather than stand-alone robot manipulators. A set of systems can offer customers enhanced performance by allowing a package of optimized components. In addition the systems package may provide the convenience of a single point of purchase and after sales support.

With the growth of turnkey solutions there is additional value to be gained by developing and marketing systems rather than components.

There is, however, an important exception to this rule. In cases where a particular component or sub system is significantly superior to competing offerings, unbundling is likely to result in a large market. Then increased market is due to additional customers who would not be willing to purchase the bundled system, but would like to incorporate one of the components or sub-systems into their own systems. Intel and Microsoft have captured the dominant market shares of microprocessors and operating systems respectively by selling components rather than by incorporating these into their own PCs.

The development and adoption process for complex products, processes and services is particularly difficult. The benefits to potential users may be difficult to identify and value, and because there are likely to be few direct substitutes available.

The choice of suppliers is likely to be limited.  In the absence of direct competition, price is less important than other factors such as reputation performance and service and support.

The importance of understanding user needs is stressed upon when developing new products, but in the special case of complex products and services potential users may not be aware of, or may be unable to explain their needs. In such cases it is not sufficient simply to understand or even to satisfy existing customers, but rather it is necessary to lead existing customers and identify potential new customers. Conventional market research techniques are of little use, and there will be greater burden on developers to educate potential users. The main issue is how to learn as quickly as possible through experimentation with real products and customers and thereby anticipate future requirements and pre-empt potential competitors.

The relationship between developers and users will change throughout the development and adoption process. However, relatively little guidance is available for managing the interface between the developers and adopters of an innovation.

The interface process can be thought of as consisting of two flows: information flows and resource flows. Developers and adopters will negotiate the inflows and outflows of both information and resources. Therefore developers should recognize that resources committed to development and resources committed to aiding adoption should not be viewed as independent resource. Both contribute to the successful commercialization of complex products, processes and services. Developers should also identify and manage the balance and direction of information and resources flows at different stages of the process of development and adoption. In addition, learning will require the management of knowledge flows, involving appropriate staff.