{"id":6511,"date":"2014-11-17T14:05:00","date_gmt":"2014-11-17T12:05:00","guid":{"rendered":"http:\/\/blog.zhaw.ch\/icclab\/?p=6511"},"modified":"2014-11-17T14:10:50","modified_gmt":"2014-11-17T12:10:50","slug":"the-market-clock-and-innovation-cube-part-1","status":"publish","type":"post","link":"https:\/\/blog.zhaw.ch\/icclab\/the-market-clock-and-innovation-cube-part-1\/","title":{"rendered":"The market clock and Innovation Cube – Part 1"},"content":{"rendered":"

Introduction<\/strong><\/p>\n

Understanding how innovation works continues to be a significant agenda item for many researchers. Innovation, however, is generally recognised to be a complex and multi-dimensional phenomenon. Classificatory approaches<\/a> have been used to provide conceptual frameworks for descriptive purposes and to help better understand innovation. Furthermore, classificatory approaches also attempt to elevate theorising from the specific and contextual to something more abstract and generalisable. In last decades, researchers have sought to explain variance in innovation activities and outcomes in terms of these different \u2018types\u2019 of innovation. The innovations are targeted to invent, or increment as we will see, new solutions that will be introduced in the market. Therefore in the methods for classifying the innovations are often utilized or customized to classify the products to specific market momentum or to classify the simply the markets. In the next sections, this part-1 blog introduces at high level the Gartner Market clock classification (for the products) and the innovation cube approach for the classification of the innovations. The second one is mainly a method to identify winning innovation strategies for the market and for the industries.<\/p>\n

The part-2 of this blog will be dedicated to practical example to classify the ICT innovation and in particular the ecosystem of products dealing with virtualization an cloud computing.<\/p>\n

<\/p>\n

1.0 Market Clock<\/strong><\/p>\n

The market introduction of new offers (product, service, application etc.., let’s call it products) often is associated with unknowns, uncertainties, and frequently unknowable risks.
\nThe market analysts help to assess the target market sectors to reduce and clarify the uncertainties and mitigate the risks. There are several methodologies to classify the various phases crossed by a product during his market life. Generally, this includes an initial phase when the demand is initially \u201ccreated\u201d till the phasing-out of the product which correspond to end of its life in the market. A way to evaluate the position in the market is to analyze for example the relative sales associated. But in every phase that we are going to introduce there might be different ways to determine the market position, it depends on the side companies need to evaluate the product from a market point of view.<\/p>\n

An initial concept of product lyfe cycle<\/a> was developed by Theodore Levitt<\/a> on 1965 . It is articulated in four intuitive stages: Stage-1 Market Development, Stage-2 Market Growth, Stage-3 Market Maturity and Stage-4\u00a0 Market Decline when <\/span>products begin to lose consumer appeal and sales drift downward. Another modern terminology adopts the following naming:customized, mass-customized, commoditized and disfavored. <\/span><\/p>\n

There are of course situation where a product will directly jump in a particular phase due to its starting maturity (feature level and offer compared to the competitors) when created. Product strategies of provider normally define market introduction strategies based on indicators that may take into account the demand size in various life cycle stages. For example it can be decided to attack commodity market for desk-top storage.<\/p>\n

Today, an interesting approach, which is more oriented to classify the maturity of existing products in the market, is the Market Clock<\/a> . <\/span><\/p>\n

Using this methodology you may find tables reporting products, in particular from the IT sector, classified with hours and minutes like\u00a0 03:15, 06:30 etc.. and level of commodity.<\/p>\n

This is also decision framework that helps IT and business leaders evaluate and prioritize their IT investments across items within any given technology asset portfolio. Although the mechanisms described here are focused on technology assets (products and services), the same approach can be applied to any class of business asset.<\/span><\/p>\n

This Market Clock uses a clock-face metaphor to represent relative market time (see Figure 1). Each point positioned on the IT Market Clock represents an IT asset or asset class \u2014 for example, Desktop PCs, Fault-Tolerant Servers, 3G Wireless Networks, Packaged Maintenance and Support Services, or Learning Management Systems.<\/span><\/p>\n

\"market<\/a>Fig.1 – Source: Gartner (August 2012)<\/span><\/p>\n

The quadrant allows classifying a product by its rotation (angle) which represent the maturity of the product and by the distance from the center which is the commoditization of the product. Typically, a new product will start from the center with a spiral shape to the last quadrant.<\/p>\n

The Market clock<\/em><\/strong> <\/a>defines from 00:00 to 3:00 the<\/span> Advantage \u2014 <\/span><\/strong>new products with levels of demand low. It also indicates the possibility to take advantages for being first <\/a>in the introduction in the market for the product. <\/span><\/p>\n

From 3:00 to 6:00 <\/span><\/span>Choice \u2014 <\/span><\/strong>This is the phase of highest demand growth, during which supply options should grow and prices fall at their fastest rate. <\/span><\/p>\n

From 6:00 to 9:00 <\/span>Cost \u2014\u00a0<\/span><\/strong> commoditization is at its highest level, and costs battles will be the strongest motivator.\u00a0 <\/span><\/p>\n

From 9:00 to 12:00 <\/span>Retirement \u2014 <\/span> <\/strong> From 9:00 to 12:00, the market moves from mature mainstream status, through legacy and to “market end”. Procurement and operating costs will steadily rise, and enterprises should seek alternative approaches to fulfilling the business requirement.\u00a0 <\/span><\/p>\n

Commoditization<\/strong><\/em> is shown on the IT Market Clock as the (radial) distance from the center of the clock: The further toward the outside of the clock an asset class is, the more commoditized it is. The hatched concentric circles help to relate the degrees of commoditization from one asset class to another. Commoditization is evaluated on a scale of four to 20, with 20 being the maximum level of commoditization. Commoditization is the sum of three measures: <\/span>The level of standardization \u2014 <\/span> (<\/strong>product\u00a0 can be interchanged ),<\/span>The number of suppliers \u2014(<\/span> <\/strong>the range of choice available to buyers) and <\/span>Access to appropriate skills (<\/span><\/strong>level of internal capability to use it).<\/span><\/p>\n

For example, the following table shows how some vendor’s technologies are classified using the market clock approach.<\/p>\n

\"table\"<\/a><\/p>\n

Table1 –\u00a0 example – Source: Gartner (September 2012) <\/span><\/p>\n

There are relationships (Figure 2) between the market clock graph and well known Hype Cycles.<\/span><\/p>\n

Gartner Hype Cycles <\/a>highlight the expectations of technologies as they evolve following <\/span>the progress of technologies from their first appearance to the maturity. The IT Market Clock highlights the progress of IT products and services from the time they first become viable to deploy and use to the time when they must be retired.\u00a0<\/span><\/p>\n

\"market<\/a>Figure – 2 – Source: Gartner (August 2012)<\/span><\/p>\n

2.0\u00a0 Innovation Cube<\/strong><\/p>\n

The approach introduced above is strongly oriented to the market classification of product and services, in other words to industrialised innovations.\u00a0 Before the development of a product and its creation, there is a phase where the product idea is incubated and developed. This phase normally ends with pre-competitive solutions and prototypes far from the final product configuration to be introduced in the market. During this period,\u00a0 specific strategy for the innovations is proposed.\u00a0 On this innovation side, as well, there are several methods to arrive at the classification of the innovation which is progressing in the Labs. An interesting approach is the innovation cube<\/a> (page 7) which provides a method to classifies the innovations.<\/p>\n

The graphical representation utilise a cube referred to three axes: X, Y and Z (Fig.3)<\/p>\n

\"innocube\"<\/a><\/p>\n

Figure – 3 – Source – <\/span>A.D.Narasimhalu (Singapore Management University, 2010)<\/p>\n

\u00a0X)\u00a0 Drivers – It indicates the type of consumer motivation that requires to the market new products. Low values indicate drivers due to solve pain \/ needs requirements and higher values indicate pleasure \/ entertainment etc. In other words: a context dependent response to a need<\/div>\n
\n
\u00a0Y)\u00a0 Triggers – It is related more to the type of event triggering the innovation. Low values indicate a transformation , incremental approach of the technology and higher values indicate a revolutionary approach or a market shift. This is the grade of innovation: a successful creative effort that introduces a novelty<\/div>\n
\u00a0 Z)\u00a0 Enablers – This is related to the market motivation and speed. Low level (niche) indicate that innovation are progressing low at high prices and low demand. High value (commodity)\u00a0 indicate that the speed of the variation of the price is high and that the market is progressing with high competition – This is the market axe that describe the need for changes in the current demand-offer scenario.<\/div>\n
<\/div>\n
\n
The author provides a methods which lays the innovations down on the planes X-Y,\u00a0 Y-Z and X-Z.<\/div>\n
<\/div>\n
3.0 Industrial view of the Innovation Cube<\/strong><\/div>\n<\/div>\n
I try to have a focus now more on the research that is oriented to the creation of new applications, services or product in the medium term. In other words, to concentrate the analysis to applied research and to industrial view on this innovation cube.<\/div>\n
An industry, or an applied science University, is always looking at the business model adopted in the in-house research. In particular to evaluate: if a research is strategic and if the associated costs would generate revenue by future product sales in the market or technology transfer.<\/div>\n
<\/div>\n
The references, at the end of this blog, made strong analysis of the industrial behavior and directions for applied research. In particular how to fruitfully convey the resources allocated to the research towards market profiles. Adopting the market clock approach: to evaluate a convenient quadrant to be addressed.<\/div>\n
<\/div>\n
For example in the rich quadrant 06:00 – 09:00 the adoption of disruptive research to beat the competition would be winning. In the last quadrant 09:00 – 12:00 would be more opportune to have an incremental approach for the research. A different choice will deal with risks and sacrifice of R&D resources. (fig. 4)<\/div>\n
<\/div>\n
\u00a0\"high<\/a><\/div>\n
\u00a0 Fig. 4 Strategy<\/a> for applied research<\/div>\n
<\/div>\n
Starting from these two axes, a new innovation cube (almost related to the figure 3) was proposed by Jeong H.Kim<\/a>\u00a0 before 2010. (Figure 5). In this case the X represents the planned time to market for the innovation. This information takes into account several aspects like the minimum time required to complete the research or when the market will be mature to accept such a kind of innovation.<\/div>\n
<\/div>\n
\"ind<\/a><\/div>\n
Figure. 5 Innovation cube for applied research.<\/div>\n
<\/div>\n
The axes Y and Z correspond to the table in fig. 4 .\u00a0 The innovations which are laid down on the red plane are characterised by low impacts now and in the future with different type of analytics. On the other side, innovations on the green plane will address high impacts in the market because are always related to disruptive innovations [5] with changes into the market. This new industrial version of the innovation cube has many analogies with the one in figure.3. I let the reader, especially students,\u00a0 to comment on this before publishing the part-2 of this blog post.<\/div>\n
<\/div>\n
The cube identifies eight corners dealing with the priority and importance of having such a kind of research resources dedicated to the innovations. The following table shows the meaning of these corners.<\/div>\n
<\/div>\n
\"mars\"<\/a><\/div>\n
Table 2 – High and low impact innovations.<\/div>\n
<\/div>\n
The corners marked in black color are most likely defining a region of the cube in which many industrial research organisations will not position their research. The areas around Mars, are topics for basic research, space research\u00a0 and innovation in academies which in the future may make a technology transfer to the industry. Several regions of the cube can be instead addressed by innovators and specific research can be “measured”\u00a0 by their position. The reader can write comments on this pages to start a discussion or propose possible approach.<\/div>\n
<\/div>\n
Conclusion<\/strong><\/div>\n
<\/div>\n
With this post I have tried to review methodologies which have been proposed or currently utilised to classify the market, products and innovations. There are methods that will be more useful for fast markets like IT and cloud computing and other more generic that can be applied to any type of innovation and product.<\/div>\n
<\/div>\n
The second part will be dedicated to clarify the similarities between the market clock approach referred to the innovation classification made with the cube and practical examples on product and inventions positioned on the cube. There are regions of the cube that are specific to certain types of research institutions and sectors of the market. The next blog will also have a focus on this aspect.<\/div>\n
<\/div>\n
<\/div>\n
Antonio Cimmino ZHAW<\/a><\/div>\n
References<\/div>\n
[1] D’Aveni, Richard A. 1994: Hypercompetition. Managing the Dynamics of Strategic Maneuvering. New York: The Free Press.<\/div>\n
[2] Caves, Richard E. and Porter, Michael E. 1978: Market structure, oligopoly, and stability of market shares, Journal of Industrial Economics, 26(4) (June): 289-313.<\/div>\n
[3] Gort, Michael 1963: Analysis of stability and change in market shares, Journal of Political Economy, 71(1) (February): 51-63.<\/div>\n
[4] http:\/\/blog.gardeviance.org\/<\/a><\/div>\n
[5] Companies to Engage in \u2018Disruptive Innovation<\/a>\u2019<\/div>\n
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