Download Factors Leading to Marketing`s Limited Role in Many High

Factors Contributing to Marketing’s Limited Role in Product Development
in Many High-Tech Firms
John P. Workman, Jr.
Assistant Professor, Marketing Dept.
Kenan-Flagler Business School
CB# 3490, Carroll Hall
University of North Carolina
Chapel Hill, NC 27514
Phone: (919) 962-3143
Fax: (919) 962-7186
Email: [email protected]
July 1997
Forthcoming in:
Journal of Market-Focused Management
The research reported in this paper was partially supported by funding from the Junior Faculty
Development Fund at the University of North Carolina and by the summer research support fund of the
Business Foundation of the Kenan-Flagler School of Business.
Factors Contributing to Marketing’s Limited Role in Product Development
in Many High-Tech Firms
Abstract
While case-based research, books by insiders, and anecdotal evidence suggests marketing often has a
marginal role in product development in many successful high-tech firms, there has been little systematic
comparison across high-tech firms which identifies factors leading to this limited role. This paper draws
on taped and transcribed interviews with marketing and/or R&D managers in thirty-four high tech firms
and argues that three factors contribute to marketing’s limited role in many high-tech firms: (1) the need
for technical expertise to understand business opportunities, (2) the development of technology-oriented
organizational cultures, and (3) the way in which marketing is defined in many high-tech firms. The
paper then assesses key contributions that people in marketing and product management can play and
develops propositions concerning antecedents and consequences of the degree of marketing’s role in
product development decisions.
Keywords: High-tech marketing, marketing’s role, market orientation, new product development
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What are the means by which high tech firms understand market opportunities and make decisions on
new product opportunities? What is the contribution of people in marketing to this process? Kohli and
Jaworski (1990) use the term “market orientation” to mean the implementation of the marketing concept
and identify three elements of market-oriented firms: organization-wide information acquisition,
dissemination, and responsiveness. However, neither they nor Slater and Narver (1994) address the issue
of which functional groups within the firm take the responsibility of understanding and interpreting
market opportunities. Implicit in their work is the assumption that marketing managers play a central
role in the definition and development of new products.
Similarly, much of the research within marketing on “boundary spanning” has assumed that the
marketing unit plays a key role in linking the capabilities of the firm with the business environment
(Lysonski 1985, Singh 1993, Singh and Rhoads 1991). However, case-based research in small samples
of high-tech firms has often shown that marketing may not be the primary group which interprets the
organization’s environment (e.g., Bucciarelli 1988, Conway and McGuinness 1986, Dougherty 1992,
Dubinskas 1988, Nonaka and Kenney 1991, Workman 1993). Much of the information about the market
and the needs of key customers may bypass the marketing group and go directly to R&D managers or to
senior managers who often have technical backgrounds. While other researchers have documented the
limited role of marketing in specific industry contexts such as biotechnology (Dubinskas 1988) or in
specific firms (Workman 1993), there has been little effort to understand the factors leading to this
limited role or to develop propositions concerning when marketing will have a greater or a less role in
product development decisions. This paper is based on interviews done with marketing and R&D
managers in a variety of high tech firms and seeks to understand why marketing often has a limited role
in product development in high tech firms.
Literature Review
While start-ups and small firms may have a handful of people that simultaneously handle product
development, marketing, manufacturing, and sales, as firms grow they typically expand into a range of
environments and allocate these tasks to groups that are more specialized. With this specialization and
differentiation of tasks across groups, comes the need for “integration” and communication between the
groups (Lawrence and Lorsch 1967). In this section we will consider two streams of research which have
considered cross-functional interactions and the role of marketing in new product development.
One stream of research has taken the product as the focal point and has then examined communication
patterns between marketing and engineering and how they correlate with product success (e.g. Cooper
1993, Cooper and Kleinschmidt 1987, Moenaert and Souder 1990, Souder 1987). While the
methodologies vary, these studies have typically compared successful products with unsuccessful
products, and have examined various aspects of the projects, including the relationship between
marketing and R&D. A general finding is that projects where marketing and engineering work together
typically have higher success rates than those where they don't. However, these studies are limited in
that they collect responses after the success or failure of the product is known and they typically do not
explore detailed aspects of communication patterns over the life of the project.
A second stream of research has focused on marketing as one constituency, among many, and has
sought to prescribe the role of marketing in the firm -- that is, what activities should they carry out, and
how these might logically vary across situations (e.g. Anderson 1982, Hutt and Speh 1984, Kohli and
Jaworski 1990, Ruekert, Walker, and Roering 1985, Ruekert and Walker 1987). According to Anderson,
the goal of marketing is “to satisfy the long-term needs of [the firm's] customer coalition” (p. 22) and he
notes the strategic conflicts that will occur among the various functional groups in the firm as they
compete for financial and other resources:
“Against this backdrop marketing must realize that its role in strategic planning is not
preordained. Indeed, it is possible that marketing considerations may not have a significant
impact on strategic plans unless marketers adopt a strong advocacy position within the firm. On
this view, strategic plans are seen as the outcome of a bargaining process among functional areas.
Each area attempts to move the corporation toward what it views as the preferred position for
long run survival, subject to the constraints imposed by the positioning strategies of the other
functional units.” (Anderson 1982, pp. 23-24)
Using such a constituency or coalitional perspective inevitably brings up the question of what is
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meant by marketing. Researchers have agreed that marketing can be thought of as either a functional
group within the firm or as a set of activities (e.g., advertising, product management, market research,
sales, customer service) whose placement will vary across organizations (Glazer 1991; Piercy 1985;
Varadarajan 1992; Webster 1992). In this paper, we focus on a functional group perspective and explore
the involvement of the marketing sub-unit (as defined by informants) in product development activities.
While people in marketing have recognized that product development in high-tech firms represents
some uniquely different challenges (Davidow 1986, Glazer 1991, Moriarty and Kosnik 1989), there has
been little systematic research to understand the factors leading to marketing’s limited role in product
development in high-tech firms. Rather, more of the effort within marketing has been devoted to
developing tools and techniques which can better assess customer needs when technical capabilities are
not fully understood. One of the more widely referenced approaches is the identification and utilization
of market information from “lead user” (von Hippel 1986) who are defined as “users whose present
strong needs will become general in a marketplace months or years in the future.” Another approach is
to educate potential buyers up to a state of knowledge they will presumably have when the new product
enters the market (Urban, Weinberg, Hauser 1996; Wilton and Pessemier 1981).
This paper adopts a coalitional perspective of the firm which views the firm as being composed of
subunits which have differing levels of influence over various types of decisions (cf. Anderson 1982,
Cyert and March 1963, Enz 1986, Pfeffer 1981). In contrast, a large amount of the new product literature
has focused on topics such as factors affecting product success and failure (e.g., Cooper 1993, Cooper
and Kleinschmidt 1987, Johne and Snelson 1990, Souder 1987), and techniques for collecting and
analyzing market information (e.g., Urban and Hauser 1993, Urban, Weinberg, and Hauser 1996),
without considering which functional groups within the firm have responsibility for or influence over
which tasks. As advocates of a coalitional perspective have pointed out, viewing the firm from a
coalitional perspective draws attention to organizational processes and the ways in which goals for the
firm are established and the process by which decisions are reached. However, as we point out later in
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the paper, there is significant variety in how marketing is defined across the firms we interviewed. With
this background on the theoretical orientation adopted in the paper, we now describe the field research.
Methodology
This paper is based on thirty-four field interviews done by the author with managers in a range of high
tech firms. The interviews were tape recorded and transcribed and a systematic analysis of the
transcriptions provide the primary basis for the development of the claims presented in this paper. While
the line separating “high-tech firms” from other firms is somewhat ambiguous, in this article we define
high tech firms as those in industry sectors with relatively high levels of R&D spending (over 4% of
sales) compared to other industry groups1.
The interviews were done as a part of three separate projects. All of these projects were inductive and
focused on various aspects of the new product development process and the role of marketing and R&D
in this process. While the set of questions varied across the three projects, they were all open ended and
typically asked the informant to pick a recently introduced product, discuss where the idea came from,
discuss how people in the firm sought to understand what customers wanted, and explain the role of
marketing and R&D in this process. Nineteen of the interviews were with people in marketing and
fifteen were with people in R&D. The typical person interviewed was a manager with responsibility for
product development, marketing, R&D, or product management. The most common title prefixes were
VP, Director, or Manager. In eight of the firms interviews were scheduled with two people while single
informants were used in the remaining eighteen firms.
The categories of factors which contribute to marketing’s limited role were inductively derived by a
systematic analysis of the transcripts. Initially incidents and quotes were sorted by the author into
analytical categories. The author then reviewed all of the categories and looked for commonalities and
underlying factors which could be combined. This led to a more parsimonious set of factors which
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Four of the firms had an R&D/Sales ratio between 4% to 6%, and the remaining 30 had an R&D/Sales ratio over
6%.
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contribute to marketing’s limited role. This general approach to the analysis of qualitative field data is in
accord with the approaches advocated by Eisenhardt (1989), Bonoma (1985), and Yin (1989).
From a knowledge development perspective, this paper is inductive and descriptive, seeking to better
understand the factors which can lead to people in the marketing function often having a limited role in
new product development. Given the descriptive nature of this paper, future research is needed to
develop measures of marketing’s role and to empirically examine variations in marketing’s role in new
product development in different contexts. With this background on the methodology, we first consider
factors which contribute to people in marketing having a limited role in product development.
Factors Which Contribute to Marketing’s Limited Role in Product Development
While it was not the case that marketing had a limited role in all of the high-tech firms, in general
marketing did not have as much power over product development decisions as the people in R&D. Based
on our field interviews, we identify the following three factors which contribute to marketing’s limited
role in product development decisions: (1) the need for technical expertise to understand opportunities,
(2) the technology-oriented cultures within many high tech firms, and (3) the way in which marketing is
defined within many high-tech firms.
The Need for Technical Expertise to Understand Opportunities
In high-tech firms, it is typically necessary for managers to have technical expertise in order to
understand the potential capabilities of their products and to understand how these technologies can be
applied in potential customer businesses. In this section we consider three reasons why technical
expertise is needed to understand business opportunities: (1) technical customers and distributors, (2) the
need to explain capabilities and applications which are not yet on the market, (3) the need for
interpretation of market information, competitors actions, and market developments.
Technical customers and distributors: High-tech products are frequently sold to business customers
rather than to final consumers. For example, most of the output of the top three high-tech sectors
mentioned above is to business customers. Studies of industrial purchasing have typically found that
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members of industrial “buying centers” desire technical information and often use information sources
other than product brochures and information from sales reps when buying complex technical equipment
(e.g., Bunn 1993, Moriarty and Spekman 1983). Additionally, many high-tech products have relatively
small customer bases (e.g., aerospace products, defense electronics, medical equipment, and instruments)
or are sold to OEMs (e.g., jet engines, semiconductors) who embed the products in their products and
resell them. In these cases, potential customers typically have a high level of technical knowledge and
want to interact with technical personnel on the seller side. For example, one person in marketing for a
nuclear power services firm said:
“We frequently brought engineers out on sales calls. As marketing people we were expected to
talk intelligently about what we were selling, but we were not expected to really get into any of
the details. So if there was any kind of a technical presentation going on, you'd bring at least one
engineer.”
In other cases managers mentioned the need to have sales reps with engineering degrees, sending key
technical personnel to industry trade shows, and direct interaction between technical customers and R&D
personnel on visits to corporate headquarters.
Explaining applications and capabilities not yet on the market: A second reason technical expertise
is needed is to be able to explain to potential customers or middlemen the applications for which a new
technology can be used. In high-tech markets new technologies and new product capabilities are
continually being developed. While it is frequently possible for less technical personnel to explain basic
applications, in many cases more extensive interaction between customers and suppliers are required to
appreciate how a new product or technology can best be utilized. The following quotation is from an
R&D director of a firm providing equipment to telephone companies:
“We are both creating a market at the same time that we are developing the product and many
times, our customers think they know what they want, but they don't necessarily know what is
going to make them successful. So, both in trying to establish what it is that we are going to
actually build, a lot of times we're selling concepts to them as well, and we're trying to show
them the benefit of one approach over another. ... We're establishing a market with our product
and you need to find a melting of a whole lot of ideas. Some of them are good ones and some of
them are bad ones and sometimes we think farther out than other people do.”
This firm is one of the first entrants in the market for equipment to make “video on demand” possible.
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Their potential customers are the Baby Bells and other phone companies, but they have to help these
customers understand the potential end market for video on demand services and the advantages and
disadvantage of various technical approaches to providing these services.
Interpreting Market Information and Predicting Technology Development: In high-tech markets
there is often a need for technical expertise in order to interpret information from the marketplace and to
understand the factors affecting the development of the technology. At one telecommunications firm,
one of the key designers of the original system headed a small group of engineers called “Advanced
Engineering” and reported directly to the CEO. The Director of R&D spoke of the role of this group:
“The Advanced Engineering group does a lot of marketing - like technical marketing. They
spend an awful lot of time with sales people in the field ... This was a nucleus of people who
created the concept for the product and are sort of technical visionaries of the company. And, so
they're always looking at next generation ... they do a lot of studying technologies ...they're sort
of looking out and saying, this kind of technology is going to be available 9 months from now, a
year from now, 2 years from now. Anything you do should allow for that to be integrated or
incorporated because you'll get cost savings or performance enhancements”
In cases where new products have to work with or interconnect with other products (which is common
of many electrical, computer hardware and software, and telecommunications products), the development
of standards for such interconnections is critically important. It is common for technical personnel to be
on standards-making bodies or when de facto standards are important, for technical personnel to assess
the approaches and probabilities of various alternatives becoming the accepted standard. The R&D
manager at a different telecommunications spoke of the importance of understanding likely standards:
“The decisions on what the base product looks like was done in close cooperation with [a
European national telecommunications company]. [Our parent company] and [National Telco]
historically had a very close relationship, but they knew there were other places they would sell it
as well. Over here, it was pretty obvious that we needed a set of U.S. interfaces, there are some
industry bodies that put out some standards. So it was a matter of looking at those and guessing
which of these interfaces that were being defined were probably most important to the U.S. and
getting some of that work started.”
In other situations it is necessary to understand the underlying science and probabilities of various
capabilities becoming available. For example, the VP of R&D (who had a M.D. degree) at a drug
company noted:
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“In our environment, what you really need to have is a vision of where medicine is going to be in
the future. And, there's much more R&D input for that than marketing input. ... for new product
development, should we be in gene therapy or should we not. That's 95% an R&D issue.”
Similarly, at another drug company a director of R&D (with a Ph.D. in biochemistry) explained the low
importance of marketing input in the earlier stages of drug development:
“We obtain a wide funnel of opportunity to examine very quickly - to define what the key
checkpoints are for that compound for us to consider taking it to become a product, and we will
drive forward with a minimal development program to reach these key checkpoints. The
marketing input usually at that stage, is minimal - ... because most decisions are based on
scientific rationale and medical need.”
Finally, a VP of R&D at a large telecommunications equipment firm spoke of the need to get direct input
from key customers in order to avoid losing information:
“You want to get people like in my systems engineering organization, even from my R&D
organization to talk to them. Technical people in the company. Otherwise you just get too many
layers of interpretation between what the customer asks for. You get the product manager’s
interpretation and then the systems guys’ interpretations and the software guy’s interpretation of
what the system guys asked for. And you’re really lucky if you’re any place close when you get
done.”
Technology-Oriented Cultures
In addition to (or perhaps because of) the need for technical expertise in order to understand business
opportunities, high-tech firms often develop organizational cultures which place a high value on people
with technical skills. In this section we first document the high status of R&D personnel in many high
tech firm. We then consider two factors which may contribute to and support such a culture: the
identification of many people in the firm with the professional community of which they are a part and
the need for technical expertise in the start-up and early growth phases of many high tech firms.
High Status of Technical Personnel in High Tech Firms: It is common for the founders of high-tech
start-ups to have technical backgrounds and for marketing and sales to have a secondary status in the
early developmental stages of the firm (Kazanjian 1988, Dubinskas 1988). For example, the marketing
manager for the nuclear power services firm said:
“Everyone at {my firm}, except maybe the human resource people, are all engineers. All but one
person in my marketing organization had an engineering degree. ... It's partly a credibility issue.
An engineer will be more willing to talk to you if they think that you'll understand it. They
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wanted the word engineer in our job title.”
In another case, a marketing manager at a telecommunications company indicated that an engineering
degree was required to be a product manager. It is common for people in sales and marketing positions
in high-tech firms (especially in computer and electronics-based industries) to have job titles using the
word ‘engineer’ (e.g., product marketing engineer, systems engineer, applications engineer, field sales
engineer.) In another case, a marketing manager with an MBA from a Top 20 school spoke of his
inability to work in the product marketing group at his firm:
We're an engineering-driven firm, culturally and so you have engineers in the marketing position.
It's a requirement actually. In fact there are open positions right now and I'd consider it except I'm
not an engineer and I've no interest in doing product marketing under that guise.
In this case, the product marketing group reported to the R&D manager and primarily were involved in
product development issues while the marketing people primarily did marketing communications
activities (e.g., advertising, trade shows, brochures, training) for products after they were introduced.
Identification with the Professional Community: In many high-tech industry sectors, it is common for
top managers in the firm to feel a strong identification with their professional communities (e.g., IEEE,
American Association for Clinical Chemistry, American College of Cardiology). Particularly when a
large number of potential customers are members of the same professional community, there can be
strong institutional pressures for firms to have sales and marketing personnel as well as R&D personnel
who are members of this professional community. Van Maanen and Barley (1984) use the term
“occupational communities” to capture professional ties to communities beyond the firm’s boundary and
argue that people with professional training may identify more closely with the profession than with the
firm for whom they work. This close identification with the profession can lead to most of the firms in a
given industry sector being organized in similar ways with R&D personnel having a higher status and
more power over product development decisions than marketing personnel.
In organizational fields with strong profession ties, it is common for people who switch jobs to stay
within the same industry sector. Additionally, people often move from being users or buyers of a
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technology to being an employee of the supplier of the technology. For example, the R&D manager of
an instrument company explained:
"The president of the company worked for a number of years at Oak Ridge National Laboratory
and then worked for [another firm] when they were doing a NASA project -- a weightless
chemistry analyzer for use in the Space Lab. So he was very familiar with what clinical chemists
were dealing with as far as what kinds of tests they wanted to have”
This “revolving door” is also observed in Washington, D.C. (particularly in military procurement) where
many former governmental officials who understand decision making processes move to the other side of
the negotiating table when they leave their governmental positions. As proponents of institutional theory
have argued, this job rotation and identification with a professional community can lead to a similarity
among firms within an industry sector of job titles, organizational structures, task allocation to
organization units, and organizational cultures, even if it is not completely rational and may no longer
meet the demands of the environment (e.g., Meyer and Rowan 1977, Powell and DiMaggio 1991, Scott
and Meyer 1994).
To survive in such an environment, marketing and sales people often play up any ties they have to this
professional community in order to be perceived as being more credible. For example, one sales
representative at a computer company said:
"When engineers came to the field, the first thing I would do to build rapport would be to let
them know that I was an EE [Electrical Engineer]. That would bring a real different perspective.
It would let them know, ‘Oh, you're one of us.’ .. You'll never be considered as bright or as
capable if you're not an engineering-type."
Additionally, it is common to hire people with the relevant professional degrees to serve in key marketing
and sales positions in companies competing in high tech industries.
A Need for Technical Skills in the Start-Up and Growth Phases: An additional factor which can lead
to technology-oriented cultures in high-tech firms is the need for technical skills in the earlier phases of
the development of the business. Before sales are made, it is necessary to develop prototypes and prove
that the technology will work. In some industries like biotech, there can be a delay of as much as ten
years before significant revenues are achieved, due to the prolonged clinical trials phases mandated by
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governmental agencies. Due to this need to first establish feasibility and performance, it is common in
the start-up phase of many high-tech firms for a high percentage of the employees to have technical
backgrounds. For example, in one biotech start-up, there were over 150 people in the R&D side of the
business but only one person in “business development” who handled the marketing and sales tasks. In
another case, the six founders of an instrumentation company consisted of two people with Ph.D.s in
ElectroChemistry, two mechanical engineers, one electrical engineer, and one person with a sales and
marketing background.
While such an emphasis on technical skills early in the life cycle of a new firm or a new
organizational sub-unit may make sense, there may be a need for a transition to more of a commercial or
business perspective as products enter the market. Kazanjian (1988) and Roberts (1992) have found that
more successful firms tend to have a change in emphasis from R&D to marketing as products enter the
market or as firms expand beyond their original niche in the market. A VP of marketing at a software
firm spoke of the need for such a transition:
“{Our firm} has a desire to be market-oriented, but right now it’s very technology-oriented. It’s
partly because of the CEO’s background and partly because you put a product in a market and
you can take a company from 0 to $75 Million [in sales] solving one problem with one particular
type of buyer. But then our CEO wakes up and says, ‘OK, we made it past that hurdle, now
we’ve got to keep moving forward so now is the time to invest a lot more into marketing and see
how we might broaden our market.’ So we’re kind of at a crossroads now.”
While these transitions may be necessary, in some cases it can take a very long time to change the
technical culture. A VP of strategy at an established telecommunications firm spoke of the difficulty in
changing the organizational culture:
“We were in business for twenty years before we hired our first marketing person. And he got
here and had no one to talk to. They were all engineers. And still today, there are very few
marketing and sales-oriented people here. It's very engineering-driven. So what you had was a
place, like I think many of these technical places are, that are optimized for technical people to
go off and do innovative things.”
The Way in Which Marketing is Defined in High-Tech Firms
A third factor limiting marketing’s role within the firm is the way marketing is frequently defined
within high-tech firms. While most textbook definitions of marketing emphasize activities and processes,
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there is a common assumption that tasks such as understanding customer needs, interacting with
customers, doing market research, and managing products are marketing activities. However, in many
high-tech firms it is common that many traditional marketing tasks may be performed in other groups.
No doubt the allocation of tasks to functional groups is influenced by the two factors discussed above -the need for technical expertise and the technology-oriented cultures. Thus, in many high-tech firms the
product management function is not part of marketing but rather part of the R&D organization.
Customer service and support units are typically part of the sales organization and the primary tasks of
marketing in many high-tech firms consists primarily of marketing communications. The term ‘marcom’
is commonly used in high-tech firms and refers to such communication activities as doing trade shows,
developing and placing ads in trade journals, coordinating direct mail and lead generation, developing
brochures and literature, training the sales force, and doing press relations activities. In this section we
briefly consider the low status of marketing and reasons for having product managers outside the
marketing organization.
Low Status of Marketing: One of the more important concepts which has been discussed in the
strategic literature is the concept of core competencies. Managers in many high-tech firms are more
likely to identify R&D as a core competency than marketing and sales. Due to the reasons discussed
above, this can lead to a “dominant logic” (Prahalad and Bettis 1986) around R&D which leads to
marketing having a relatively low status in the firm. As Leonard-Barton (1992, p. 117) has argued, “A
business generally recognized for certain core capabilities attracts, holds, and motivates talented people
who value the knowledge base underlying that capability.” This can lead to a reinforcing cycle where the
best engineering students go to work for high-tech firms while the best marketing students do not desire
to work at these firms.
Examples and quotations of the low status of marketing abound in the interviews. For example, one
person who used to work as a project manager at Sun Microsystems said:
“My impression was that marketing was as low, as far as respect goes, as human resources. I
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think its because at Sun Microsystems, everything is very engineering-driven.. I don't remember
marketing people coming to a whole lot of meetings in the early stages of project I worked on.
They didn't even call marketing until later on in the process, until they actually had products that
worked. Then they'd say, ‘Oh I guess we'd better get marketing in here.’”
Another person who had worked in marketing at a chemical firm spoke of the difficulty in getting access
to people in R&D:
"This company was very technical. Always been technical, not very marketing-oriented. .. R&D
people, all the way up to the VP, saw R&D as a haven to create new products, for themselves, in
a vacuum, without marketing. R&D was a 10 minute car drive away. They were inside the
factory, whereas marketing was outside the factory. We had a difficult time getting access to
them.”
Given this relatively low status of the marketing functional unit, it is common in high-tech firms that
“marketing tasks” that are more closely related to R&D such as product management may be shifted out
of the marketing unit. Similarly, astute managers may realize that they may be more effective doing such
activities as customer service, applications development or support, or marketing research if they are not
part of the marketing unit. We now consider the case of one of the functions that is frequently moved out
of marketing, the product management function.
Product managers outside of marketing: In many of our interviews, managers mentioned that product
managers were part of R&D rather than marketing. In some cases there was a division of responsibility
for product management with product managers in R&D responsible for products under development and
product managers in marketing responsible for products which had been introduced. However, in other
cases there was no such shift of product management functions to marketing once products were
introduced.
One reason for having product managers in R&D is the short product life cycles of many high-tech
products and the fact that a high percentage of the product managers time is devoted to working with
R&D in product development and introduction. For example, in one computer firm a marketing manager
said:
“We have traditional product marketing and they're in the plant ... there are a lot of engineers
who are in product marketing which makes sense because they understand the engineering
schematics and diagrams and they know [the technology] and things that I wouldn't know as a
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non-engineer.”
In contrast, in many consumer packaged goods firms, the largest percentage of the product manager’s
time is devoted to advertising and promotion (Quelch, Farris and Olver 1987, p. 51), activities which are
not as critical to a product’s success in high-tech firms.
A second reason for having the product management function in R&D is that many high-tech products
are modular systems which are then adapted to specific applications and types of customers by marketing
and sales groups. In these cases, the focus is on coordinating the parts of a complex system. One
manager of a telecommunications firm spoke of the complexity of systems products:
“When you're talking about products that have to communicate with other products and work as a
system rather than a box, they must have the same syntax or interaction and it must all be
managed centrally. They have to have protocols among them with flow control, and they know
where each other are, and it gets very, very complex.
By being in R&D, product managers can better help R&D make trade-offs of what aspects of the product
should be “hard-wired” and common to all market segments and which aspects should be left to be
adapted by sales and marketing groups for specific industry sectors or specific types of applications.
In a third case, program or project managers rather than product managers are used, report to R&D or
engineering managers and manage the overall business aspects of a project. For example, at one
pharmaceutical firm, a program manager explained:
“The scientists are called upon to do more than just go into their cubicle and think about clinical
development. As project leaders, you're in charge of your budget basically and you've got to
meet the bottom line in your budget or you're going to hear about it.”
Such project-based structures has also been historically used in the aerospace and automotive industries.
Thus far in the paper, we have considered factors which can lead to marketing having a limited role in
product development decisions. We now consider contributions marketing can make.
Contributions Marketing Can Make to Product Development
As was discussed above, there are a variety of ways to organize the groups responsible for traditional
marketing activities. In this section we use the general label ‘marketing.’ However, we are concerned
14
with the contributions of people who are responsible for spanning the boundary between “the market”
(broadly defined) and R&D groups. The types of groups which may be responsible for all or portions of
this boundary spanning activities include marketing, sales, product management, market development,
strategy, business development, and commercial development. We now consider three of the key
contributions marketing can make to product development: (1) market assessment and development, (2)
interpretation and synthesis of market feedback, and (3) adaptations of the products and explanation of
benefits for specific market segments.
Market Assessment and Development
One of the more important tasks of marketing is to assess the size of a market opportunity. As
Dougherty (1992) has noted, R&D people are much more concerned with what the product should do and
what customers want and often fail to consider whether there are enough potential customers and whether
they will value the product enough to make it a viable business opportunity. Market assessment is an
iterative process of understanding what types of capabilities might be delivered at various price points
and estimating market size for various product concepts. A market development manager in a drug
company discussed this task:
“Marketing begins to get involved at the disease state. Once you define a compound, there may
be an opportunity for it to be used in Alzheimer’s, for dementia, for emesis - here's your
possibilities and usually they're very broad ... at that point, you can say well here's the
marketplace and the greatest opportunity is here. This disease area has 12 million people, this
disease area has 500 people and the one with 12 million, it kills people - so it's a matter of unmet
needs.”
Related to market assessment is market development which entails working with potential partners
such as distributors, potential joint venture partners, and suppliers of complementary products to develop
an infrastructure which will facilitate the product’s acceptance (Rosen, Schnaars and Shani 1988, Van de
Ven 1993). For example, an R&D manager at a telecommunications firms discussed the need for
business development activities:
“Business development basically goes out and tries to dig up new opportunities to utilize the
technology. An ideal thing would be the ‘cinema of the future’ project we’re working on right
now. There was no market there that we could go market to. So what they did was they
15
developed a market, worked it, and now we’re into the point of almost establishing that the
market exists. Then we can actually go and market to it and have different people buy it.”
Because many high-tech products are (a) embedded in products which are resold, (b) part of an
interconnected system or (c) depend on complementary products, there is also a need to work with
providers of the other products. While many of the technical details may be handled by R&D personnel,
it is common for marketing people to manage these external partnerships and engage in the activities
which help facilitate the development of the market. A marketing manager at a telecommunications firm
said:
“Everybody in the world wants to get into ‘Video on Demand.’ However, the conglomeration of
partners that are necessary is extensive. In VOD, Bell Atlantic is arguing right now with AT&T,
they’re not going to be the systems integrator. They’re going to get maybe NYNEX or somebody
else to work as a system integrator. Well, if you do that, what does that mean to a project when
you try to do a set-top, access, some control mechanisms, some video information providers, plus
the switch fabric in the middle of it somehow. And get them all to build to the specifications
that’s going to deliver a true product at the end.”
Given this need for a whole set of companies to work cooperatively to define standards and develop parts
of a larger system which must interconnect, it is commonly the responsibility of people in marketing to
facilitate the development of these external partnerships. This is in line with Webster’s (1992) argument
that the role of marketing is changing from optimizing marketing mix components at the product level to
a role of managing relationships with external companies in the value chain.
Interpretation and Synthesis of Feedback from Customers, OEMs, and Distributors
For the reasons discussed earlier in this paper, it is common in high-tech firms for R&D personnel to
receive direct feedback from key customers, from OEMs, and from distributors (we will use the term
‘business partners’ in this section to refer to current and potential customers, OEMs, resellers, agents,
distributors, etc.). However, marketing can play a key role in helping to facilitate and interpret this
exchange of information. In many cases marketing managers help set up forums which provide for the
interaction between R&D and business partners. This can include having R&D people go along on visits
to customers, taking key R&D people to trade shows, and having organized feedback forums with groups
of business partners. However, as Dougherty (1992) and others have noted, one of the risks of such
16
direct interaction is that R&D people often think in concrete terms (‘the customer said he wants this’)
and often do not consider whether this customer is typical or whether there are enough of them to make a
viable business. A director of product management at a telecommunications firm brought up this issue:
“I don’t like putting R&D people with customers. Because they get the idea that this particular
customer is the only customer that there is. Rather than thinking of a solution that fits many sets,
they think of the solution that fits that set.”
In spite of this resistance, the R&D director in this firm insisted on having direct contact with key
customers in order to not lose information.
Another key role marketing can play is to synthesize feedback from a range of accounts, identify the
common needs for specific market segments, and help prioritize features and help in design trade-offs.
An R&D director at a different telecommunications firm talked about the prioritization and trade-off
process:
“Marketing comes to Engineering with a wish list - this is the ideal product that they would like
to have. And, typically they want more than technology can deliver at a lower cost than we
think we're able to build it at. So, you then get into a negotiation phase -- We think this feature
costs X dollars and that one Y dollars and the combination does this. This is how much
flexibility costs you and this is how much performance costs you. Recently we had to line those
numbers up and go into a room and try to talk about it. But, we ended up with our CEO helping
us -- because there's going to be some tough decisions and so we very often end up with our
CEO, our VP of Sales, our VP of Marketing, and our VP of Technology involved.”
In other cases marketing and R&D managers talked about trade-offs and decisions about schedules as
well as functionality, product cost, and development budget. As one manager phrased it, “Performance,
Cost, Schedule - you can have two out of the three.” One strategy in software firms is to group various
features in different releases of the software, with marketing input often being used to decide which
features are more important and must be included in the next release and which can wait.
Explanation of Benefits and Adaptations of the Products for Market Segments
Finally, for many high-tech products, one of the key contributions of marketing is on the ‘outbound’
side of taking a new product to market. This can involve the typical marketing communications activities
with an emphasis on explaining the benefits of the new technology or product for customers. Since hightech products are often products which are pushing the state-of-the-art, there is frequently a need to
17
educate potential customers and explain the benefits of the new technology. In one case, the marketing
manager at an instrumentation firm spoke of the educational effort for a new product they developed:
"The product line evolved because we looked at what the customer was actually doing. They
were looking for electrolyte measurements and blood gas measurements in the same
environment. But when you asked them, would you like a blood gas analyzer that also does
electrolytes, they universally said no. Because those two things are so separated in the clinician's
mind. However, when we actually gave them an analyzer that did that, they suddenly found that
that was a major benefit ...now it takes four instruments from our competitors to make a
comparison with our one.”
In addition to translating features into benefits, for many products which are new to the market,
marketing often has a key role in helping determine the value to the customer, helping to set the price
level, and then explaining the value of the product to customers. On several occasions in biotech and
pharmaceutical firms, marketing managers spoke of helping design clinical trials which would not only
get FDA approval but would also provide data to show the value of the drug to managed care providers.
A marketing manager at one such firm spoke of the need to quantify the value of the drug:
“When you go to an HMO, they want to know ‘If I give this patient the drug, what is the outcome
and what are the costs associated with that outcome?’ So, pharmaco-economics is an evolving
science which tries to describe those two pieces. We have a drug that's used in surgery and it has
a very rapid recovery profile. Now, anesthesiologists like that - the patient comes to quicker.
What we tried to characterize is the value of that in dollars and cents. Because if you can move a
patient out of intensive care areas into less intensive care areas, that is a cost savings for the
system.”
Since many high-tech products are modular and flexible and can be applied in different configurations
to different applications, another role of the marketing groups is to adapt the products to the needs of
different market segments. This may involve working with other business partners to be sure the product
works with components, software, peripherals from other firms which are needed to apply the product to
a given application. If the needs of different market segments are significantly different, this may also be
information which can help R&D design a more modular or flexible product which can then be
customized through value-added activities of sales and marketing personnel (or by resellers and
distributors) at later points in time.
18
Antecedents and Consequences of Marketing’s Limited Role
With this background on factors affecting marketing’s role in the firms we studied, we now develop
propositions of antecedents and consequences of marketing having a limited role in product development
decisions. We groups these propositions by class of independent or dependent variable.
Project characteristics
The first set of antecedents we consider are characteristics of the project itself. There has long been a
distinction between radical and incremental innovations and there has recently been greater interest in
“really new products” and the ways in which this affects the product development activities (Wind and
Mahajan 1997). Based on our observations, we propose that:
P1: The more radical the innovation, the less significant is marketing’s role in new product
development
A second project level characteristic is the time the product will take to develop before it enters the
market. Some projects may take a matter of months while others may take as long as a decade (e.g., new
drugs) . It has been noted by Lawrence and Lorsch (1967), Dougherty (1992), and others that marketing
tends to have a shorter time horizon than R&D. The importance of this varying length will be more
significant for projects with long development times:
P2: The greater the length of the time before a new product will enter the market, the less significant
is marketing’s role in new product development.
Firm characteristics
In addition to the project specific factors, there are also factors common to all projects within a firm
which can affect marketing’s role in product development decisions. One of the more widely studied
firm level characteristics is the composition of the top management team and the effect this may have on
various aspects of organizational decision making (cf. Hambrick and Mason 1984, Gupta and
Govindarajan 1984). Based on our earlier discussion of the technology-oriented cultures in many high
tech firms, we propose:
P3: The greater the technical experience of the members of the top management team, the less
significant is marketing’s role in new product development.
19
Related to the overall culture is the life cycle stage of the firm. Empirical research by Kanzanjian
(1993) and Roberts (1990) has noted that high tech start-ups tend to be dominated by managers with
technical backgrounds, with marketing and sales taking on a greater role as products are commercialized
or as the firm expands beyond its initial market. We thus propose:
P4: Marketing’s role in new product development will be less significant in the earlier stages of the
life of a high tech start-up firm.
Finally, based on our earlier discussion that marketing often has a limited role because of the way in
which marketing is defined within high tech firms, we propose:
P5: The greater the dispersion of responsibility for marketing activities, the less significant is
marketing’s role in new product development.
Business environment characteristics
Thus far we have considered antecedents within the boundary of the firm and thus presumably under
control of managers within the firm. We now consider business environment characteristics which will
affect all firms operating within that business environment. There has been extensive debate, yet
relatively little empirical testing of whether “high tech marketing” really is all that different (e.g.
Davidow 1986; Moriarty and Kosnik 1989; Workman 1993). One indication that marketing may play a
smaller role in product development decisions in high tech firms is reported by Piercy (1986) who found
that new product development was more likely to be controlled by R&D when new product development
was one of the top two critical success factors in the firm. Conversely, marketing was more likely to
control new product development when it was not one of the top two success factors. One characteristic
of high tech environments is the rate of technical change within the industry. We propose:
P6: The greater the rate of technical change in the business environment, the less significant is
marketing’s role in new product development.
An additional environmental factor which has been shown to affect organizational structuring is the
nature of the customer’s buying process. To be successful, firms must adapt to provide the types of
information desired by their customers and must listen to and make trade-offs among the concerns of
different members within the customer “buying center.” In some sense, suppliers’ organizations must
20
mirror those of their customers in order to facilitate inter-organizational information and physical product
exchange. We thus propose that:
P7: The greater the extent to which purchasing decisions are influenced by technical personnel, the
less significant is marketing’s role in new product development.
Finally, in industrial marketing situations it is common that technical personnel within the supplier’s
organization play a greater role in interacting with key customers and directly learning of market
requirements (Hutt and Speh 1992; Workman 1993). In a survey of 252 large U.S. manufacturing firms
which focused on marketing and R&D interactions during new product development, Hise, O’Neal,
Parasuraman and McNeal (1990) found that marketing had a greater role in development decisions in
consumer firms than in industrial firms. Thus, we propose that:
P8: Marketing’s role in new product development is less significant when selling industrial products.
Consequences
While we did not extensively consider consequences of varying marketing involvement in our
interviews, we believe that researchers empirically examining marketing’s role in product development
should also consider various outcomes. We thus offer two illustrative propositions concerning
consequences in order to highlight the importance of considering outcomes in empirical research.
First, we observed that in many cases technical personnel desire to interact with technical personnel in
key customer accounts. However, as we indicated in our discussion of marketing’s contributions, R&D
personnel often have a difficult time looking across customer accounts and market segments and making
the trade-offs essential to developing products which can serve a variety of customers. This has also
been noted by Dougherty (1992), who noted that technical personnel tend to think in a more literal sense
and not at the level of abstraction more common of marketers. We thus propose that:
P9: The more highly involved R&D is with customers, the more narrow the scope of needs satisfied
by the new product.
Second, we consider an interaction effect where higher levels of marketing involvement in product
development leads to success in lower tech markets but not in high tech markets. Many of our
21
informants rationalized the lower involvement of marketing by claiming that in high tech markets, R&D
should play a greater role in product development. This is also the argument put forth by Workman
(1993) based on ethnographic study in one high tech firm. We thus propose:
P10: The greater the extent of technology change in the business environment, the lower the
relationship between marketing role in new product development and new product success.
Discussion and Implications
The goals of this article were to identify factors which may contribute to marketing’s limited role in
product development in high tech firms, to explore key contributions marketing can make to product
development, and to develop propositions identifying antecedents and consequences of marketing having
a limited role in product development decisions. One theme which ties together the three factors which
can contribute to marketing’s limited role (technical expertise needed to understand opportunities,
technology-oriented cultures, the way in which marketing is defined) is that the issues are organizational
and cultural. While some scholars may argue that it doesn’t matter what firms call the activities as long
as they do the right activities (“they don’t have to call it marketing as long as they are doing marketing”),
we would claim that it has important implications for how we study high-tech firms and how we train and
prepare students who will work in such firms. To the extent that our theories and textbooks are out of
step with organizational reality in many high-tech firms, we may be doing a disservice to our students
who are not prepared to work within a technology-oriented cultural environment.
One implication following from this research is that marketing’s role in product development can be
expected to vary based on how marketing is defined within the firm. Prior research on the role of
marketing (e.g., Achrol 1991, Johne and Snelson 1988, Webster 1992) has not really addressed the issue
of varying definitions of marketing across firms. To the extent that the firm has a technology-oriented
culture, many of the key “marketing tasks” may be done outside of the marketing department, since
people in these firms realize they may be more effective and have more power if they are in groups
outside of marketing. At a conceptual level, it is important to keep distinct terms such as market
22
orientation vs. marketing-orientation and being market-led vs. marketing-led. While most of the research
on market orientation has been careful to avoid linking market orientation to power or status of
functional groups, it is very common for managers to speak of firms being marketing-oriented,
technology-oriented, or technology-driven. We must recognize that many high tech firms may be close
to their customers and doing the right activities, but that many of these activities may take place outside
of the marketing department. From a normative perspective, an understanding of the culture and
decisions processes is important in order to provide guidance to managers in how they should act. A
marketing manager with a background in consumer packaged goods moving into a marketing position in
a high tech firm may be unprepared for the challenges of operating in an organizational environment
where marketing may have a very different role in product development. Rather than leading the process,
it may be necessary to adapt to an environment where influence is exerted indirectly.
A second implication is that in many high-tech firms, the most effective managers may be those who
have a good grasp of both the technology as well as marketing and business issues. However there has
been relatively little study of how to best develop these dual-skill sets. Firms have taken a number of
approaches in developing these skills. One is to simply hire people with technical backgrounds for the
sales and marketing positions. However, these people are often forced to learn the basics of sales and
marketing on the job. Some firms have developmental programs, where people are hired into marketing
or sales positions, but spend an internship period in R&D or a training period with rotation through
several job positions. The goal is often to learn the basics of the technology but an important side benefit
is the establishment of interpersonal ties to the people on the technical side of the business. Another
option is to recruit students which what Business Week (1994) has called “techno-MBAs” - MBAs with
undergraduate degrees in technical fields or with a combined masters degree in business and engineering.
Finally, it may be desirable to encourage people to rotate through job positions in both engineering and
marketing over their careers. While this approach has been successful in many large Japanese firms,
some people have noted that this approach may be less appropriate in U.S. firms where there are no life23
time employment commitments and the investment in job rotation training may be lost if people leave the
company.
Finally, this research points to the need to have more in-depth studies of how marketing activities are
organized within high-tech firms and the role of various groups in product development decisions. If the
issues are primarily cultural and organizational, then qualitative research methods may be most
appropriate for describing the organizational cultures, the ways in which tasks are allocated to
organizational groups, the meaning of terms to people, and the subtle ways in which groups influence
product development. Deshpande and Webster (1989) have recognized the need for a greater attention to
cultural issues in marketing and identify several topics that may best be studied through qualitative
research which seeks out ‘native views’:
"Among the many interesting issues that marketing researchers might examine using this 'native
views' concept of culture are conflict between sales and marketing departments, cooperation
between R&D and marketing departments in the development of new products, and assignment of
sales representatives to customers on the basis of ethnic, regional, or professional background
similarity.” (Deshpande and Webster 1989, p. 6, italics added)
While there have been qualitative studies which have examined cross-functional interactions in product
development (Ancona and Caldwell 1992, Bucciarelli 1988, Dougherty 1992, Dubinskas 1988, Workman
1993), most of this research has been done outside of the marketing field and the insights have not been
well integrated into theories about marketing’s role in product development in high-tech firms. This
paper has taken a first step toward developing a more general theory about marketing’s role in high-tech
firms by identifying factors which can contribute to marketing having a limited role in product
development in these firms.
24
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