Finding & Learning From Waldo

1. Finding & Learning From Waldo Caltech E102 Guest Lecture Chris Halliwell January 2010 Halliwell@technologymarketingcenter.com

2. Early Majority Late Majority Early Adopters Rate of Adoption Innovators Laggards Time The Diffusion Model Describes & Orders Market Targets A measure of the rate of adoption of a cluster of new technologies within ordered communities over time — not a sales curve or a product life cycle curve

3. Dynamics: Leader and Follower Reference & Community Characteristics Are Very Different TheChasm Early Market Leaders Mainstream Market Followers vs. Early/Late Majority, Laggards Innovators, Early Adopters • Listen to and evaluate vendor claims • Reference community is visionary customers across segments, typically through professional association • Rely on others to validate vendor claims • Reference community is specific: industry, application, geography

4. Innovation Adoption Communities: Late 1960’s State Adoption of New Laws South Dakota North Dakota • Stage 3: • Rapid regional deployment (indirect communication only) • Stage 2: • Regional opinion leader adoption (direct and indirect communication) • Gap of several years • Stage 1: • Early adoption (rely on direct communication with suppliers) • Large • Urban • Industrial resource-rich Iowa Minnesota Nebraska Wisconsin Michigan Massachusetts New York New Jersey California Michigan Source: Analysis of J. Walker 1971 Research

5. Opinion Leadership • Opinion leaders are viewed as “just like me, only better” (e.g. share leaders) by others in the community • Early adopters are opinion leaders when the entire segment is early adopting, but are different than opinion leaders within mainstream segments • Supplier market development and leadership requires opinion leader market insight and market access

6. Early Market Adoption Characteristics MAINSTREAM MARKET The “L-Shaped” Early Market EARLY MARKET Vertical Market: Early AdoptingSegment “I see the competitive advantage!” “ I see the ROI!” “I see the possibilities!” • Heavy sales concentration in both horizontal and vertical early adopter dimensions • Predominance of early market opportunity in “corner” account – the early adopting opinion leader • Innovator accounts point to the future, but do not generally lead to broad market opportunity • As standards solidify over time, horizontal market opinion leaders will adopt and will spawn further vertical market opportunities Horizontal Market: Early Adopter Account From Each Segment … Early Adopting Opinion Leader Innovators

7. Example: Early L-Shaped Networking Markets Vertical Market: Early Adopting Segment, i.e., Financial Services/New York E.g. 00’s Early RFID Market Vertical Market: Early Adopting Segment, i.e., Retail ACCOUNT NAMES ACCOUNT NAMES Horizontal Market: Early Adopter Account in Each Industry Segment/ Arpanet Node Location, e.g. Horizontal Market: Early Adopter Account in Each Manufacturing Industry Segment, e.g. ACCOUNT NAMES … Electronics Ford Boeing Gov’t Fidelity Banks Media Transport CPG ACCOUNT NAMES … E.g. 90’s Early IP Router Market Ford Boeing DOD Wal-Mart FMCG HLC Electronics Food Apparel

8. 3COM Texas Instruments Lucent IBM Example: Large Part Surface Mount Manufacturing Equipment Adoption Map Rapid Segment Adoption Second Tier Contract & Asian Mfrs. US Robotics Ericsson Nokia Avex SCI Opinion Leader Adoption Motorola 2 Compaq Solectron Gap of Several Years Early Adoption Motorola 3 Motorola 1 Mobile Communications Devices Computer Modems Computer Motherboards

9. Exercise: Camera Component • Situation • The intellectual property leader is living comfortably off research projects and angel investors • Many potential applications, geographies, customers • Two-year effort to recruit, train and provide demos to worldwide rep network has not resulted in even one volume order • Early adopters initially enthralled with this supplier, but as supplier diverts resources to research projects and wide distribution, they lose early production orders and perceived leadership in the new technology • Process • Management team visits to early adopting and/or opinion leading accounts • Results • Team agrees on application priorities and limited customer focus, so that development and sales resources can be realigned • Receive first volume order in early adopting segment

10. DSC Market Share Security (1996) Biometrics/Fingerprint Market Share 1998 % Mkt Panasonic Burle / Philips Sony Ikegami JVC Olympus Kodak Sony Fuji Film Casio Epson Ricoh Panasonic Canon Sanyo Others Total 700,000 450,000 440,000 350,000 300,000 290,000 120,000 85,000 80,000 65,000 320,000 3,200,000 21.7% 14.1% 13.8% 10.9% 9.4% 9.1% 3.8% 2.7% 2.5% 2.0% 10.0% 100% 1998 % Mkt Omron Mitsubishi Sony Techno Image Fujitsu NEC Others Total 20,000 4,000 3,600 2,000 1,000 1,000 110,600 142,000 14.1% 2.8% 2.5% 1.4% .7% .7% 77.8% 100% Source: Strategies Unlimited PC Cameras Market Share 1998 % Mkt Source: TSR Logitech Intel Xirlink Kodak Creative Labs US Robotics Others Total 375,000 145,000 130,000 98,000 59,000 54,500 438,740 1,300,240 29% 11% 10% 8% 5% 4% 33% 100% Source: TSR PC Cameras Market Share Endoscope Market Share 1998 % Mkt 1998 % Mkt Logitech Phillips NEC Konica Others Total 180,000 150,000 80,000 80,000 510,000 1,000,000 18% 15% 8% 8% 51% 100% Olympus Fuji Film Asahi Optical Toshiba Medical Others Total 17,200 2,400 1,900 300 200 22,000 78.2% 10.9% 8.6% 1.4% 0.9% 100% Source: In-stat Source: TSR Source: TSR Camera Component Customers By Segment Plus…Cell phones & portables?

11. Camera Component:Who’s Waldo & Why? New Technology Existing Technology • + Integration / lower function cost • + Lower power • + Address random pixels (sub-sampling) • Noise / sensitivity + Known / familiar / “simple” + Recent price reductions (almost a wash) + Resolution Note Top 5: Sony, Matsushita, Toshiba, Sharp, Phillips New Technology 1998 Penetration DSC 90 KU of 3 MU = 3% PC Camera 120 KU of 1 MU = 12% Security 220 KU of 5 MU = 4.4%

12. You Sell Core technology Ancillary hardware/software Pre-sales services Post-sales services They Buy Your reputation, track record Relationships Technical expertise Their reputation, growth Customer’s Point of View : The Source of Sustainable Competitive Advantage

13. Never Ask a Customer What They Want Isle de Technology Problem Island You live here They live here

14. Getting to “Why?” • Creative, effective whole product strategy • Get ahead • Get across • Get around • Barriers to “why” • Proprietary design or manufacturing process information • Relationship/culture • Lack of asking!

15. Recruiting Issues: Get to the Right Customers • Common Obstacles • Supplier not “strategic” to target customer • NDA issues • New segment, so supplier doesn’t have direct contacts • Sales “timing not right” • Getting to competitor’s customers • Discussion • What are your obstacles? • What is your pitch? • What is the single best way to get to your targets?

16. System View(Market & Technology Trends & Metrics) Process View (Time, Cost & Skills Trends) Application View(Performance, Integration and Partitioning Trends) Purchasing View (Cost of Use) Chief Technology/Information Officer General Management Marketing Management Engineering Management Project Management Component Engineering Management Project Management Sr. Engineer (Hdwr/Swr) Application/Systems Engineer Component Engineering Management Purchasing Management Manufacturing Management Recruiting Issues: Get to the Right Customer Titles Buying Influence Organizational Role, e.g.

17. Write A Discussion Guide • Looking to Understand Their Processes & Problems • Select 4 or 5 key topics very general questions • Always follow-up with “why?” (or some form of that query) • Dig: for each topic ask for definitions, measurements, trends, priorities/tradeoffs, then summarize back, asking for “correction” • Be prepared with specific open-ended probes, but never lead with them • What insight allows you to validate tech, market, business assumptions? • Does Not Use Closed Questions (or seek reaction to our ideas) • Don’t you think if…? Would you like it if…? Black or white, yes or no…? We think, what do you think? If we do this, will you do that? What do you want? What will you pay for it? What should we do? • This is absolutely not a presentation, asking for reaction

18. Formal Roles Facilitate Open Exchange • Moderator • Asks most of the questions (from discussion guide) • Clarifies extensively • Controls flow and timing • Leads post-visit process (feedback on moderation/discussion guide) de-brief • Note Taker • Primary stenographer • Leads post-visit content debrief -- The Three Main Points • Compiles, distributes notes within 5 working days and sets up database • Observers • Note body language and “emotional” quotes • Time permitting, remind moderator of specific probes • Provide customer thank you email and tracks promised follow-up • Provide formal follow-up letter, summary and give back presentation