J PROD INNOV MANAG 2006;23:26–33
r 2006 Product Development & Management Association
Successful Development and Commercialization of
Technological Innovation: Insights Based on Strategy Type
Stanley F. Slater and Jakki J. Mohr
H
ow can market leaders avoid the innovator’s
dilemma and continually develop disruptive
innovations to retain their leadership position? We argue that the capability to successfully develop and commercialize one type of disruptive
innovation—technological innovation—is based on
the interaction between a firm’s strategic orientation
(Prospector, Analyzer, Defender) and (1) its selection
of target market; and (2) the way it implements its
market orientation. The insights offered by this
framework assist in predicting whether a firm’s strategic orientation enhances or thwarts its ability to
successfully commercialize disruptive innovations and
also suggests the development of critical, yet contradictory, skill sets in order to remain successful over
time.
How can industry leaders reinvent themselves by
developing and successfully commercializing disruptive innovations that challenge their existing business
models? Known as the innovator’s dilemma, Christensen (1997) argued that market leaders have difficulty
diverting resources from the development of sustaining innovations, which address known customer needs
in established markets, to the development of disruptive innovations, which often underperform established products in mainstream markets but offer
benefits some emerging customers value.
Christensen’s (1997) initial research focused primarily on technological innovations, broadly defined as
those that introduce a different set of features, performance, and price attributes relative to existing
products and technologies. In other words, technological innovations create new products based on new
underlying technological underpinnings. Over time,
Address correspondence to: Stanley F. Slater, College of Business,
Colorado State University, Fort Collins, CO 80523-1275. Tel: (970)
491-2994. Fax: (970) 491-5956. E-mail: [email protected].
further developments improve the new technology’s
performance on the attributes mainstream customers
do value, to a level where the new technology begins
to cannibalize the existing technology. This progression reflects the classic S-shaped curve prevalent in the
study of technological discontinuities (e.g., Chandy
and Tellis, 2000; Shanklin and Ryans, 1987). The
focus of this article is on these technological innovations, though distinctions exist between other types
of innovations and their dimensions. For example,
Govindarajan and Kopalle (2004) distinguish disruptive innovations further based on their radicalness, or
new products based on a new technology relative to
what already exists in the industry. Their empirical
research shows that all disruptive innovations are not
necessarily radical (e.g., Schwab’s discount brokerage
business model), nor are all radical innovations
necessarily disruptive (e.g., cordless phones relied on
substantially new technology relative to wired phones
but were not disruptive to the industry). Some can be
both radical and disruptive (e.g., cellular phones).
Through his studies of disruptive innovations,
Christensen (Christensen, 1997; Christensen and
Bower, 1996; Christensen and Raynor, 2003; Christensen, Scott, and Roth, 2004) has spawned a substantial stream of research investigating many aspects
of the innovator’s dilemma (e.g., Danneels, 2004).
One component of Christensen’s arguments is that
because incumbents listen too carefully to their customers, they are disrupted by industry newcomers
that serve emerging customer segments. For example,
Christensen and Bower (1996, p. 198) state that market-oriented firms cannot create disruptive innovations since ‘‘firms lose their position of industry
leadership . . . because they listen too carefully to their
customers.’’ At its heart, this issue ties to both the selection of a firm’s target market (emerging customer
segments versus existing customer segments) as well as
SUCCESSFUL DEVELOPMENT AND COMMERCIALIZATION OF TECHNOLOGICAL INNOVATION
the way a firm implements its market orientation (e.g.,
listening to current customers’ articulation of existing
needs or conducting proactive research on potential
customers’ unarticulated needs; see also Henderson,
this issue).
For those who study the successful commercialization of technological innovation, a logical question
arises as to the overlap between Christensen’s work
and the influential work of Geoffrey Moore in Crossing the Chasm (1991, 2002). Moore’s work highlights
the difficulties firms face in commercializing new technologies, focusing on (among other things) the choice
of the initial market segment to target and how to
modify the initial marketing approach that was successful with early adopters of the product so that
mainstream customers will also embrace the new technology. These issues were also identified in Danneels’s
(2004) critique of Christensen’s (1997) work. For example, Danneels discusses the complexities in forecasting when mainstream customers will actually
embrace the new technology and in selecting a target
market for the new innovation when the firm has not
previously served customers in that target market.
Given the commonalities between Christensen’s
(1997) and Moore’s (1991, 2002) works in understanding the successful development and commercialization
of technological innovations, one purpose of this article is to build links between Christensen’s influential
work on the innovator’s dilemma and Moore’s work
on crossing the chasm. A second purpose is to explore
whether or not a customer–market orientation is a
liability in developing disruptive innovations.
The common thread in this article binding these
two somewhat distinct purposes together is our belief
that a firm’s strategic orientation (in particular, based
on the Miles and Snow [1978] typology of prospectors,
analyzers, and defenders) offers useful insights for understanding why some firms are more successful at
commercializing technological innovations than
others. This typology is well validated and continues
to receive quite a bit of empirical attention (e.g.,
DeSarbo et al., 2005; Hambrick, 2003; Vorhies and
Morgan, 2003).
In particular, we examine how firm strategy (i.e.,
prospector, analyzer, defender) can explain success in
commercializing technological innovations with respect to (1) the customer groups the firm targets;
and (2) its approach to being market oriented. For
clarity, it is important to realize that we are not
offering a new classification of Christensen’s disruptive-sustaining innovation typology. Rather, we are
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2006;23:26–33
27
suggesting that by overlaying the Miles and Snow
(1978) typology of firm strategy onto the disruptivesustaining innovation typology, additional insights
regarding which firms are more likely to develop
and benefit from sustaining or disruptive innovations
may be gleaned.
Market Strategy and Success with
Disruptive Innovations
Market strategy is concerned with how businesses
achieve competitive advantage. Miles and Snow
(1978) developed a comprehensive framework that
addresses the alternative ways organizations define
and approach their product-market domains and construct structures and processes to achieve success in
those domains. They identified three archetypes of
how firms address these issues. Prospectors seek to
locate and exploit new product and market opportunities, whereas defenders attempt to seal off a portion
of the total market to create a stable set of products
and customers. Analyzers occupy a position between
the two extremes by combining the strengths of both
the prospector and defender to cautiously follow prospectors into new product-market domains while protecting a stable set of products and customers.
In conjunction with Moore’s (1991, 2002) and
Christensen’s (1997) work, we draw on the market
strategy implementation literature (e.g., Matsuno and
Mentzer, 2000; Olson et al., 2005; Slater and Olson,
2001) and market orientation literature (e.g., Kohli
and Jaworski, 1990; Narver and Slater, 1990; Slater
and Narver, 1998) to refine our understanding of success in developing and commercializing technological
innovations, as illustrated in Figure 1. Our argument
is that, based on their specific strategy type, firms develop skill sets associated with success for some—but
not all—types of situations in commercializing technological innovations. For example, firms that are
adept at satisfying needs in the innovator and early
adopter segments are most likely to possess the resources and capabilities to develop disruptive innovations. Moreover, these firms’ specific approach to
being market oriented allows them to use innovative
research techniques to discover customer knowledge
that becomes the foundation for disruptive innovation. Conversely, firms that are successful at satisfying needs in mainstream markets are more likely to
develop sustaining technologies or incremental innovations. Their more traditional approach to market
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S. F. SLATER AND J. J. MOHR
We first examine the relationship between selection
of target market and strategy type and then explore
the relationship between market orientation and
strategy type.
Market Strategy:
Prospector
Analyzer
Defender
Market Segments:
Innovators
Early Adopters
Early Majority
Late Majority
Laggards
Performance
Customer Orientation
Responsive
Proactive
Figure 1. Successful Development and Commercialization of
Technological Innovations
orientation is to listen to customers and to develop
innovations based on customer feedback.
However, to be successful across a range of innovations (both sustaining and disruptive), firms must
also develop skill sets of other strategy types. For example, a firm that tends to be more successful with
late majority customers may need a more proactive
approach to developing customer knowledge; new
techniques of market research may help it avoid focusing myopically only on existing customers and may
facilitate the development of disruptive technological
innovations. In essence, the capability to develop contradictory skill sets is vital.
Selection of Target Customer Group
A widely adopted perspective on the success of new
innovations is the adoption and diffusion cycle, based
on the work of Rogers (1995). The basic premise of
the adoption and diffusion process is that there are
different categories of adopters, each with unique
characteristics and buying needs (see Table 1). These
categories of adopters fall along a normal, bell-shaped
curve, such that the bulk of the marketplace falls
within the early-majority and late-majority adopter
categories. Successful diffusion implies a smooth progression from one category of adopters to the next,
which is necessary for a firm to create leadership in its
industry.
Moore’s (1991) work built on research by Rogers
(1995) and identified the existence of a chasm, or a
gulf, between the visionaries (innovators and early
adopters) and the pragmatists (early-majority,
mainstream market). The idea of a chasm has been
Table 1. Segments of Innovation Adopters
Segment
Early Market
Innovators
Descriptive
Label
Characteristics
Technology
Enthusiasts
Appreciate innovation for its own sake
Motivated by the idea of being a change agent in their reference group
Interest in new ideas leads them out of narrow circles of peers into broaders circles of innovators
Willing to tolerate initial glitches and problems that may accompany any innovation just coming
to market and are willing to develop makeshift solutions to such problems
Early Adopters
Visionaries
Look to adopt and use innovation to achieve a revolutionary improvement
Attracted by high-risk, high-reward projects
Because they envision great gains from adopting innovation, not very price sensitive
May demand personalized solutions and quick-response, highly-qualified sales and support
Mainstream
Market
Early Majority
Pragmatists
Rather than looking for revolutionary changes, motivated by evolutionary changes
to gain productivity enhancements
Averse to disruptive change; want proven applications, reliable service, and results
Want to reduce risk in the adoption of the innovation
The bulwark of the mainstream market
Late Majority
Conservatives
Risk averse and technology shy; price sensitive
Need completely preassembled, bulletproof solutions
Adopt innovation just to stay even; often rely on a single, trusted adviser to help them make
sense of technology
Laggards
Skeptics
Want only to maintain the status quo
Tend not to believe that innovation can enhance productivity and resist new technology purchases
Buy only if they believe all their other alternatives are worse and cost justification is absolutely solid
SUCCESSFUL DEVELOPMENT AND COMMERCIALIZATION OF TECHNOLOGICAL INNOVATION
empirically validated in work by Goldenberg, Libai,
and Muller (2002). In their study of the pattern of
diffusion of a large number of innovative products in
the consumer electronics industry, they found
that between one-third and one-half of the cases
exhibited a ‘‘saddle’’ (i.e., a lull in sales after initial
market take-off that stymied the steady adoption and
diffusion process). Their work also showed that wordof-mouth effects among categories of adopters
(i.e., cross-market communication) were the critical
factor in determining the size and duration of the
sales slump.
Some firms are able to reach only a small niche
market of technology enthusiasts, whereas other firms
are able to successfully commercialize their inventions
by reaching a broader base of customers in the mainstream market as well. Moore (1991) argued that the
chasm arises because (1) critical differences between
visionaries and pragmatists make cross-market communication extremely difficult for technological innovations (e.g., Goldenberg, Libai, and Muller, 2002);
and, more critically, (2) the marketing strategies firms
use to effectively reach the early market for technology innovations do not speak to the very different
needs of the mainstream market.
The question is to what extent a firm’s strategy type
affects its ability to be successful at marketing to
various categories of adopters, which is where the
intersection of firm strategy and success in commercializing technology innovations becomes relevant.
Insights from Market Strategy
Because market segmentation and targeting are
the foundation of market strategy, firm performance
is determined, at least in part, by the match between
target market selection and market strategy type. The
importance of this match is highlighted in a recent
study of technology-oriented businesses by Slater,
Hult, and Olson (2005), who examined the performance implications of targeting customer adoption
categories by strategy type. For prospectors, they
found a positive relationship between targeting the
innovator and early-adopter segments and performance and a negative relationship between targeting the
early-majority segment and performance. This suggests that prospectors, who excel at exploiting new
product and market opportunities, have a difficult
time reaching out to more mainstream customers
to successfully commercialize their technological
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innovations. Conversely, for analyzers, they found a
positive relationship between targeting the earlyadopter and early-majority segments and performance and a negative relationship between targeting the
innovator segment and performance; this latter finding implies that analyzers may not have the capabilities to develop the innovations that technology
enthusiasts value.
The findings from Slater, Hult, and Olson (2005)
and related studies (Conant, Mokway, and Varadarajan, 1990; Slater and Olson, 2001), which suggest that
different strategy types have resources and capabilities
that enable them to successfully target different market segments, are quite consistent with Christensen’s
(1997) work. Market-share leaders tend to be analyzers and defenders because those strategy types
target the early- and late-majority segments of the
market comprising approximately two-thirds of market demand. Of course, there is variation in the size of
the categories based on the nature of the innovation
and how its benefits are communicated, but the idea
of a normal, bell-shaped distribution is widely accepted and has been confirmed by research using the Bass
model (e.g., Mahajan, Muller, and Bass, 1990). Analyzers and defenders also have the marketing and
operational competencies to succeed in those segments (Slater and Olson, 2001; Slater, Hult, and
Olson, 2005). As Christensen notes, these market
leaders are largely unsuccessful when attempting to
introduce innovations into niche markets. One key
reason for this is that defenders prefer predictability;
as a result, they tend to be neither innovation nor
technology oriented. In contrast, analyzers, though
not as risk averse as defenders, prefer incremental innovation to disruptive innovation.
A critical implication arising from this intersection of strategy type and selection of target
market is the idea that businesses must develop
what are often contradictory resources and capabilities to be successful in appealing to a wide range of
customer types. For example, for prospectors to
appeal successfully to all categories of adopters, they
must develop some of the resources and capabilities of
analyzers. Similarly, for analyzers and defenders to
avoid the innovator’s dilemma by successfully developing and introducing disruptive innovations that
appeal to technology enthusiasts—customers in the
early market—they must develop some prospector
resources and capabilities. More specific insights
related to these ideas are discussed in the conclusion
section.
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Market Orientation
Another key factor determining a firm’s ability to
successfully develop and commercialize technological
innovation is how it comes to understand customer
needs. As noted at the outset, experts have essentially
taken two views in this regard. On the one hand,
Christensen (1997, p. 18) stated that established firms
are ‘‘held captive by their customers’’ (i.e., they listen
too carefully to them). As a result, Danneels (2004)
points out that Christensen’s work has often been cited as an argument against a customer orientation. On
the other hand, Slater and Narver (1998) drew on an
extensive body of research concerning the nature and
benefits of a market-oriented culture to argue that
market-oriented businesses can avoid the innovator’s
dilemma by being committed to understanding both
the expressed and latent needs of their customers
through the processes of acquiring and evaluating
market information in a systematic and proactive
manner and to continuously creating superior customer value. To what extent are these views of the
value of being customer oriented at odds with each
other? And to what extent does understanding of firm
strategy inform this debate?
Recent research (Atuahene-Gima et al., 2005; Narver, Slater, and MacLachlan, 2004) has shown that a
proactive market-oriented culture is more strongly associated with innovativeness and new product success
than is a customer-led culture. A proactive market
orientation involves a set of behaviors through which
a business attempts to discover, to understand, and to
satisfy the latent needs of customers. Atahuene-Gima
(1995, p. 287) concluded that ‘‘market orientation is
more strongly related to new product performance at
the early stage of the product life cycle than at the late
stage . . . Such an environment seems to warrant
greater market intelligence and information sharing
within the firm.’’ Moreover, recent research by Govindarajan and Kopalle (2004) shows that firms able
to develop truly disruptive innovations have a customer orientation focused on emerging customer segments rather than on mainstream customer segments.
Indeed, a customer orientation focused on mainstream customer segments is shown to inhibit the
development of disruptive innovations. Importantly,
these two dimensions of customer orientation are not
on opposite ends of a continuum but are independent
of each other, suggesting that firms can develop both
orientations simultaneously (see also Narver, Slater,
and MacLachlan, 2004).
S. F. SLATER AND J. J. MOHR
One implication from these findings is the need to
distinguish between current and potential customers.
Being customer oriented does not imply an exclusive
focus on current customers. Instead, a customeroriented firm can serve current customers and remain
vigilant for unserved merging markets (see also Day,
1999; Chandy and Tellis, 1998). Further, as Danneels
(2004) notes, if firms had a deep understanding of
their customers’ needs—both expressed as well as latent and unexpressed (Slater and Narver, 1998)—then
the more reactive, narrow notion of customer orientation would be rejected.
Insights from Market Strategy
We suggest that Christensen’s (1997; Christensen and
Bower, 1996) and Slater and Narver’s (1998) positions
are not necessarily in conflict with one another but
rather are on different sides of the same coin and are
resolved by understanding how a firm’s strategy type
informs its specific approach to being market oriented. Defenders and, to a lesser degree, analyzers are
much more likely to be constrained by two factors.
First, the tyranny of the served market (Hamel and
Prahalad, 1994)—or a tendency for firms to focus very
specifically on solving existing customers’ needs with
a current technology—obscures the possibility that
customer needs may change over time and may be
solved in radically different ways. Second, core rigidities (Leonard-Barton, 1992) result in preferences
for information sources and existing views of the market, in turn strangling a firm’s ability to innovate.
Analyzers and defenders listen too closely to customers, which can inhibit innovation, constraining it to
ideas customers can envision and articulate and leading to safe, but bland, offerings. This may be due to a
variety of reasons, such as customers giving marketers
bad information. For example, during a marketing
research project, customers may say they love a newproduct idea but then not buy the product when it
comes out on the market. Marketers may also need to
ignore feedback about what customers say they do
not want. For example, some products that met with
initial customer resistance included fax machines and
overnight express delivery. On the other hand, prospectors, by nature, possess corporate imagination
(Hamel and Prahalad, 1991), which enables them to
replenish their stock of ideas continuously; they
have an ability to create a vision of the future consisting of markets that do not yet exist and based on a
SUCCESSFUL DEVELOPMENT AND COMMERCIALIZATION OF TECHNOLOGICAL INNOVATION
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Table 2. Research Tools for High-Tech Markets
Customer Visit
Program
Systematic process of visiting customers with a cross-functional team to understand customer needs.
Benefits include:
face-to-face communication to facilitate the transfer of complex, ambiguous, and novel information
field research that enables personnel to see the product in use, to talk to actual users of the product, and
to gain a better understanding of the product’s role in the customer’s total operation
firsthand knowledge of customer’s problems and needs
interactive conversation that allows for clarification, follow-up, switching gears, and addressing surprising
and unexpected insights
interaction with multiple decision makers to learn about all of the players’ various needs and desires
Empathic Design
Based on the idea that users may not be able to articulate their needs clearly; focuses on understanding user
needs through empathy with the user world rather than from users’ direct articulation of their needs.
For example, users may have developed ‘‘workarounds’’—modifications to usage situations that are
inconvenient yet so habitual that users are not even conscious of them. Or customers may not be able to
envision the ways new technology could be used.
Based in anthropology and ethnography, empathic design allows the marketer to develop a deep
understanding of the current user environment, to extrapolate the evolution of that environment into the
future, and to imagine the future need that technology can satisfy.
Lead-User Process
Collects information about both needs and solutions from the leading edges of a company’s target market
and from markets facing similar problems. Lead users may have needs months or years before the mass
market and, as such, are positioned to benefit significantly by obtaining early solutions to those needs.
Customers that tend to innovate are lead users—customers that are well ahead of market trends and have
needs that go far beyond those of the average user. In some cases, lead users may have developed a solution
to their needs that marketers can then commercialize for other users.
Research on
Customers’ Customers
Focuses on downstream markets to generate market intelligence; provides understanding of downstream
customers’ preferences, allowing for new insights and avoiding surprises in the market.
Target developing
markets
Provides a unique opportunity to inspire radical innovations with price-performance breakthroughs
(Prahalad, 2004).
For example, a car being developed for the Indian market will sell for $3,000. While it lacks sophistication
demanded by developed markets, the cost structure of parts and subsystems for this car pose a major
disruption to suppliers of the major auto firms.
horizon not confined by the boundaries of the current
business.
Once again, analyzers and defenders must augment
their skill sets with those more characteristic of
prospectors. One means for doing this is to rely on
novel types of market research to provide new types of
insights for innovation. For example, customers may
not always be able to articulate their needs; that is,
they have needs of which they are not aware; the needs
are real but are not yet in the customer’s awareness. If
these needs are not satisfied by a provider, there is no
customer demand or response. They are not dissatisfied, because the need is unknown to them. If a provider understands such a need and fulfills it, the
customer is rapidly delighted. Based on this belief,
useful information can be gleaned through observation of what customers do under normal, natural conditions.
The techniques overviewed in Table 2 offer insights
based on how customers behave rather than on what
they say (Leonard-Barton, 1995; Mohr, Sengupta,
and Slater, 2005). If implemented correctly, customer-visit programs, empathic design, lead-user research, end-user (customers of customers) research,
and targeting developing markets can reveal new pieces of information that may have a direct impact on
developing innovative products or services.
Conclusion
In order to successfully develop and commercialize
disruptive innovations, not only does the firm need to
conceptualize and develop the innovation in the first
place; it must also be successful in reaching more than
just a niche market of innovators–early adopters. In
other words, it must overcome the innovator’s dilemma as well as cross the chasm. These two problems
faced by all firms—but especially those operating in
high-technology markets or driven by technological
innovations—are related in that they both derive from
the underlying skill set the firm brings to its marketing
strategy.
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Firms typically become industry leaders (analyzers,
defenders) by appealing to a broad base of customers
in the marketplace (i.e., the mainstream market) and
by continually meeting their needs for value over time.
These firms are able to develop sustaining innovations
based on customer input to continually hold their
position of market leadership. But, paradoxically,
these very skills put them at risk of being outinnovated by industry newcomers.
The root causes of the innovator’s dilemma are
the tyranny of the served market and core rigidities
most common to analyzer and defender firms. To
solve the innovator’s dilemma, a firm must attack
the root causes of the dilemma by developing new
ways of looking at the world developing proactive
market learning competencies such as the ones we
described.
On the other hand, based on their ability to see
opportunity from a fresh perspective, industry newcomers—or prospectors—are able to develop disruptive innovations that appeal to emerging market
segments and to eventually supersede prior industry
leaders. Whether or not these industry newcomers are
able to successfully establish themselves in any industry depends critically on their ability to augment their
skill set with the capabilities to serve mainstream customers as well. To penetrate the mainstream market,
prospectors must expand their focus from the innovator and early-majority segments and must demonstrate clear advantage over existing solutions (Rogers,
1995). They must develop distribution systems that
reach the mainstream market and offer their products
at a lower price to reduce the financial risk associated
with adopting the innovation (Slater and Olson,
2001). Not every prospector can develop analyzerlike marketing capabilities, nor should they. Often,
it makes more sense for the prospector to ally with
another organization already possessing these
capabilities.
Blending the insights from market strategy with
those from innovation management may illuminate
why some firms succeed with disruptive innovations
and others do not. Importantly, augmenting a firm’s
capabilities based on other strategy types can be critical to ongoing success.
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