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Marketing Innovative Software Products ANALYSIS & RECOMMENDATIONS BASED ON COMPANIES OF THE GERMAN SOFTWARE-CLUSTER Dace Shafi (Hochschule Darmstadt) 1 Executive Summary This study is concerned with ways how innovative software companies can increase their ability to bring software products to market and thus secure and increase their competitive advantage and gain greater market share. The data were collected from the enterprises in the German Software-Cluster (www.software-cluster.org), which are highly innovative and have joined their research and development efforts in large cooperative projects with the aim of developing the next generation of business software. This study follows three main objectives: To assess the opinion of companies of the Software-Cluster regarding the changed market environment due to new trends in the IT industry (e.g. Internet of Things, Internet of Services, in-memory computing, and big data). The results show that a lack of rich knowledge regarding new IT trends on the customer-side has led to an increased know-how gap between software vendors and buyers where early customer integration in product development is increasingly important. To investigate determinants in innovation marketing. The main challenges and success factors are: communication of the added value, customer integration, clarification of complex terms, short innovation cycles, finding case studies, and the correct estimation of innovation potentials. The main reasons for product market failures are: insufficient presentations of the added business values, wrong estimation of market penetration, and a wide gap between research and market. To examine the levels of market orientation and innovation-related capabilities in the Software-Cluster companies. The results indicate that they are highly innovative and acknowledge the role of market orientation as an important resource of the company. However, regarding marketing capability and marketing practice in general, there is room for improvement. Several recommendations are derived from the results obtained in this study regarding innovation-related capabilities, market orientation, and innovation communication for the software companies and are elaborated in detail in the study. The main practical implications are that software vendors must involve marketing at the stage where technological ideas are generated, pay increased attention to the product’s design and usability, and increase the speed of their innovation cycles. Furthermore, they have to ensure knowledge transfer from vendor to customer, increase their technology foresight, place high value on customer cocreation, and make their marketing instruments more social, interactive, and user-driven. 2 Contents Executive Summary ................................................................................................................. 2 1 Objectives and Methodology of this Study ........................................................................ 5 2 Results of the Survey ........................................................................................................ 7 3 2.1 Key Informants ........................................................................................................... 7 2.2 Software Market Environment .................................................................................... 8 2.3 Determinants in Innovation Marketing ....................................................................... 9 2.4 Resource and Capability Analysis ........................................................................... 10 Recommendations for Marketing Innovative Software Products .................................... 13 3.1 General Recommendations ..................................................................................... 13 3.2 Innovation-related Capabilities ................................................................................. 14 3.3 Market Orientation ................................................................................................... 15 3.4 Innovation Communication ...................................................................................... 16 4 Overview of the Recommenations .................................................................................. 18 5 Appendix ......................................................................................................................... 19 5.1 Detailed Results of Resource and Capability Analysis ............................................ 19 5.2 References............................................................................................................... 23 3 Figures Figure 1: Existence of marketing or sales department ............................................................. 7 Figure 2: Employees in marketing department ......................................................................... 7 Figure 3: Marketing budget in the last financial year (in percentage of net sales) ................... 7 Figure 4: Revenue in the last financial year ............................................................................. 7 Figure 5: Changed market environment due to new IT trends ................................................. 8 Figure 6: Research framework for resource and capability analysis ...................................... 11 Figure 7: Recommendations for the software enterprises ...................................................... 18 Figure 8: Innovation capability................................................................................................ 19 Figure 9: Opportunity exploration capability ........................................................................... 19 Figure 10: Marketing capability .............................................................................................. 20 Figure 11: Market orientation ................................................................................................. 21 Figure 12: Market performance .............................................................................................. 22 Tables Table 1: Determinants in innovation marketing ...................................................................... 10 Table 2: Means and standard deviations for research measures .......................................... 12 Table 3: Product innovation.................................................................................................... 22 4 1 Objectives and Methodology of this Study Software vendors face increasing challenges when developing and launching their innovative products (Shafi, 2013, p. 4). This is a result of the fast pace of technological change, globalization, saturation trends in markets, increasing customer demands (Dang, Mortara, Thomson, & Minshall, 2011, p. 52; Filiaster, 2007, pp. 1, 2; Steinhoff & Trommsdorff, 2011, p. 105) and the fact that the market environment for software enterprises in general has become even more complex over the past few years (due to new technological developments in IT, e.g., Internet of Things, Internet of Services, in-memory computing, and big data) (Shafi, 2013, p. 4). As it is essential for a software company to constantly secure and increase the competitive advantage by bringing new products and services to the market and gain what is called the “competitive innovation advantage” (Baaken, 2010, p. 3; Kliche, 1991, p. 51; Nevens, Summe, & Uttal, 1990, pp. 5, 8; Steinhoff & Trommsdorff, 2011, p. 106) the purpose of this study was to develop recommendations for software companies regarding the marketing of innovative software products. These recommendations were drawn from the analysis of: the current software market environment, determinants in innovation marketing (challenges, success factors, and reasons for product market failures), and resources and functional capabilities within software companies. The data were collected from 23 enterprises in the Software-Cluster, which represent highly innovative software companies that are cooperating in large joint research and development projects with the aim of developing the trend-setting enterprise software of the future and are current and future marketers of the results of these cooperative research activities. The data were collected via an e-mail questionnaire which was sent out on November 5, 20121 to the marketing executives of the Software-Cluster companies. The 17 usable questionnaires that were returned yielded a response rate of 74%. This is quite a satisfactory result considering that the response rate for online surveys is usually between 2-20% (Hofte-Frankhauser & Wälty, 2011, p. 70). Due to the relatively small number of respondents the results regarding the mean scores of market orientation and innovation-related capabilities are not applicable to the whole German 1 Questionnaire can be obtained at [email protected]. 5 software industry. However, since these companies are highly innovative, include large as well as small and medium-sized enterprises and are increasingly dealing with the marketing of innovative software products in the age of new IT trends, they can serve as reference point regarding mean score of, e.g., innovation capability for other software companies. Furthermore, they offer helpful insights regarding changed software market environment and determinants in innovation marketing. Thus, recommendations developed in this study are relevant for software enterprises in general that are currently facing the challenge of successfully marketing their innovative products. Due to the fact that innovation diffusion is a very complex process with a large variety of influencing factors and many still uncertain and unknown determinants, the suggestions developed in this study serve only as guidelines. These guidelines are flexible and software companies must evaluate whether a particular suggestion is relevant and achievable individually. All that considered, implementation of these suggestions will likely lead to the development of software products that are in line with actual practice and increase the likelihood of successfully bringing them to market. 6 2 Results of the Survey 2.1 Key Informants In this study marketing and sales managers in the Software-Cluster enterprises were used as key informants. However, several responses also came from the top-level managers. As the figures below show, the great majority of the companies in the Software-Cluster (94%) had their own marketing or sales department. Only one company did not have such a department. Almost half of the surveyed companies (44%) employed three to five workers in their marketing department. Regarding marketing budget in the last financial year, 50% of the enterprises reported that they had financial resources in the range of 1-3% of net sales. 1-2 employees 6% Companies with marketing/sales department n = 17 19% n = 16 Companies with no marketing/sales department 94% 12% 3-5 employees 6-10 employees 19% 44% 10-20 employees 6% > 20 employees Figure 1: Existence of marketing or sales department Figure 2: Employees in marketing department < 2 Mio. Euro 1-3% 13% 19% 6% 25% < 10 Mio. Euro 4-6% n = 16 50% n = 16 12% 31% 7-10% > 10% Figure 3: Marketing budget in the last financial year (in percentage of net sales) 44% < 50 Mio. Euro > 50 Mio. Euro Figure 4: Revenue in the last financial year Moreover, almost half (44%) of the cluster companies had a revenue up to €50 million. One quarter (25%) of the companies had revenue below €2 million and could therefore be classified as very small software vendors. Further 12% stated that their revenue was up to €10 million and 19% had revenue of more than €50 million and, therefore, constitute large 7 enterprises2. Software vendors of the cluster operate on B2B markets and are world leaders in the following fields: industry-specific standard software, software for enterprise infrastructures, mapping of industry and customer-specific business requirements and processes, innovative solution integration with existing systems as well as continuous improvement of business processes in the companies. SMEs in the Software-Cluster offer competitive, industry-specific approaches that complement the standard solutions (SoftwareCluster, 2009, p. 4). 2.2 Software Market Environment The following figure represents the answers to six questions that investigate whether the companies in the Software-Cluster feel that the market environment for software is changing due to new IT trends. To begin with, 47% of the companies surveyed disagreed with the statement that software buyers have rich knowledge regarding the new IT trends. 0% 20% Software buyers (SMEs in particular) have rich knowledge of new IT trends 24% 60% 80% 100% 30% 23% 47% Know-how gap between software vendors and buyers has increased due to higher technology complexity Market research must be increasingly supplemented with innovation market research (technology foresight) 40% 53% 23% 82% 12% 6% n = 17 In the age of new IT trends software vendors must change their marketing strategies Innovation strategies in software companies are shifting from technology push to market pull 76% 12% 12% 12% 35% 53% It is increasingly important to integrate customer 6% throughout the entire value chain 94% Disagree Neutral Agree Figure 5: Changed market environment due to new IT trends 2 According to the classification of the European Commission (Thommen & Achleitner, 2006, p. 67). 8 The majority of the Software-Cluster companies (53%) reported that the know-how gap between software vendors and buyers has increased due to higher complexity of new information technologies. Furthermore, regarding the changes in market environment, enterprises of the SoftwareCluster also strongly agreed (82%) that it is increasingly important to supplement the market research strategies with innovation market research. Moreover, 76% also agree that nowadays software vendors are often forced to change their marketing strategies, since the products based on new information technologies must be positioned with different (or adjusted) marketing instruments. The statement that innovation strategies might be shifting from technology push towards market pull gets a little less affirmation by the cluster companies, since only 35% agree with this statement. The majority (53%) has chosen the option “neutral”, suggesting that in their opinion such a shift is not present or is present only in a very moderate manner. And as can be seen in the figure above, 94% of companies surveyed agreed that customers must be more and more involved in the product development and design. 2.3 Determinants in Innovation Marketing The Software-Cluster enterprises were also asked to state the most important challenges as well as critical success factors that software vendors face when marketing new software products. Moreover, they also noted factors that, in their opinion, were mostly responsible for new product market failures. In this part of the study, open ended questions were used to better integrate individual viewpoints. Software-Cluster companies see that the communication of the added value, provable ROI, the overall marketing strategy, customer integration and practice-oriented products are the main critical success factors in innovation marketing. Furthermore, the greatest challenges that software companies face are finding useful case studies, the correct estimation of innovation potential and a fitting sales strategy. Also knowledge transfer from vendor to customer is seen as a challenging task. Moreover, the reasons that are mostly responsible for innovation market failures are the large gap between research and market as well as ill-defined value added for the customer or poor presentation of it. 9 Critical success factors (n = 15) Challenges (n = 15) Reasons for failures (n = 14) Communication of the added value, provable ROI (4) Finding use cases (4) “Valley of death” – gap between research and market (4) Marketing strategy (3) Correct estimation of innovation potential (3) Ill-defined use for customer or poor presentation of it (4) Innovation must reflect customer demand (2) Sales strategy (3) Inaccurate estimation of market penetration (2) Customer integration (2) Knowledge transfer from vendor to customer (1) Not enough partner networks (1) Market research (1) Gaining the first adopter (1) Lack of sustainability (1) Explanation of hype topics to the customer (1) Low marketing budget (1) No well-considered business model (1) Short innovation cycles, agile development methods (1) Winning attention of potential customers (1) Wrong timing for market entrance (1) Market access (1) Customer integration (1) Legend: Number of namings is given in the brackets Table 1: Determinants in innovation marketing 2.4 Resource and Capability Analysis The third part of the analysis adopted the resource-based view (RBV) of a firm, which tries to explain the differences between companies and their profitability in high-tech markets with the differences in their resources and capabilities. Whereas the competitors of a company can acquire the same resources, functional capabilities are much harder to imitate or transfer and therefore the possession of these superior capabilities bestows the competitive advantage upon a company (Dutta, Narasimhan, & Rajiv, 1999, p. 548). A strong market orientation has been recognized as one of the most important sources of ideas for innovations and is therefore a very important resource of a company (Dutta, Narasimhan, & Rajiv, 1999, pp. 547-551). Yet a strong market orientation without the development of innovation-related capabilities, or conversely the generation of inventions alone without the ability to commercialize these inventions, will not lead to successful market performance. Therefore, a combination of effective marketing and superior innovation capability is necessary in order to achieve great success in high-tech industries (Dutta, Narasimhan, & Rajiv, 1999, pp. 547-551) (see Figure 6, p. 11). 10 There are numerous scholars that have carried out an extensive research in order to determine which capabilities are specifically relevant for successful commercialization of new products and services. Capabilities that have proven to be significant determinants for the success of an innovation are marketing (Dutta, Narasimhan, & Rajiv, 1999; Engelen, Kemper, & Brettel, 2010; Morgan, Vorhies, & Mason, 2009; Ramaswami, Srivastava, & Bhargava, 2009; Weerawardena, 2003) innovation (Akman & Yilmaz, 2008; Cakar & Ertürk, 2010; Ellonen, Jantunen, & Kuivalainen, 2011), and exploration (Wei, Hou, Wang, & Wang, 2011; Yalcinkaya, Calantone, & Griffin, 2007) capabilities. This part of the questionnaire adopted input-output perspective of a firm and was developed by drawing on previous research studies examining the positive influence of innovationrelated capabilities and market orientation (consisting of customer and competitor orientation and interfunctional coordination (Deng & Dart, 1994; Gray, Matear, Boshoff, & Matheson, 1998; Narver & Slater, 1990)) on market performance and product innovation. There exists a substantial body of research in this field supporting the positive impact of market orientation and innovation-related capabilities on firm’s outcomes and their particular relevance in hightech commercialization (Atuahene-Gima & Ko, 2001; Carbonell & Escudero, 2010; Ellonen, Jantunen, & Kuivalainen, 2011; Engelen, Kemper, & Brettel, 2010; Kumar, Jones, Venkatesan, & Leone, 2011; Morgan, Vorhies, & Mason, 2009; Taghian, 2010; Voola & O'Cass, 2010; Zahra & Nielsen, 2002; Zhang & Duan, 2010). Some have also focused on the software industry (Akman & Yilmaz, 2008; Cakar & Ertürk, 2010; Nambisan, 2002; Ruokonen, Nummela, Puumalainen, & Saarenketo, 2008; Seager & Gorda, 2009). capabilities related Innovation- Innovation capability + Exploration capability Productinnovation Marketing capability + orientation Market + + Customer orientation + Market performance Competitor orientation Interf. coordination + Figure 6: Research framework for resource and capability analysis 11 These constructs were measured using multi-item scales that have already been used and validated in previous research studies. Since the positive relationships between these constructs have extensively been examined in previous studies, this research study does not concentrate on finding support for these positive influences but rather examines the levels of innovation-related capabilities, MO, market performance, and product innovation among enterprises in the Software-Cluster to draw conclusions and give recommendations. The mean scores and standard deviations of all research variables are displayed in the following table. According to the table, cluster enterprises reported higher-than average levels of innovation, exploration, and marketing capabilities3. However, the level of marketing capability (3,22) is much lower than that of innovation capability (4,11). Regarding the three components of market orientation, customer orientation (4,13) had the highest result, followed by the interfunctional coordination (3,93) and competitor orientation that showed a level of 3,3. Taken together, these components constitute a market orientation score of 3,78, which is above average but is still lower than, for instance, the mean score of innovation capability. Generally, companies in the Software-Cluster do quite well regarding their market performance (3,87), suggesting that most of the cluster companies performed better than expected and better than their competitors in the last financial year. On average every cluster company has introduced 8,62 products that were either new only to the market, new only to their company or new to both. Detailed overview of answers to each of these constructs is contained in Appendix 5.1, p. 19. Research measure Mean SD Research measure Mean SD Innovation capability 4,11 0,96 Competitor orientation 3,30 0,90 Exploration capability 3,87 0,59 Interfunctional coordination 3,93 0,62 Marketing capability 3,22 0,75 Market performance 3,87 1,04 Market orientation 3,78 0,53 Product innovation 8,62 1,44 Customer orientation 4,13 0,91 Legend: Measured on a scale from 1 to 5, product innovation measured with a metric scale (ranging from zero to infinite), SD = standard deviation. Table 2: Means and standard deviations for research measures 3 Average being three according to the five-point Likert scale (1 - disagree, 2 - disagree slightly, 3 - neutral, 4 agree slightly, 5 - agree). 12 3 Recommendations for Marketing Innovative Software Products These recommendations are based on the analysis of the current software market environment and of determinants for new product commercialization. Moreover, they are derived from the resource and functional capability analysis within software companies. These suggestions address not only the 4Ps of marketing-mix (product, place, price, and promotion) but also refer to other critical factors that are particularly vital in software innovation marketing. 3.1 General Recommendations There exists a large body of research in high-tech industries that suggests that technologybased businesses often are concentrated on technological developments and lack the needed marketing talent and expertise (Dutta, Narasimhan, & Rajiv, 1999, p. 548; Mohr & Sarin, 2009, p. 85; Tripathi, Guin, & De, 2012, pp. 5-7). Therefore, the importance of marketing in successful innovation commercialization must be acknowledged (especially in SMEs). And since technology-push oriented innovations are primarily oriented toward higher technical performance and only secondarily toward specific market needs (Narayanan, 2001, p. 70), marketing must be involved at the stage where technological ideas are generated. Moreover, in order to be able to better understand current customer requirements, early customer integration in the product development process can be considered a critical success factor that determines innovation success. By listening to the customers and integrating them in the value added chain the gap between research and market can be reduced, the so called “valley of death” can be bridged, and the innovation development process in general can be made more practice-oriented. When the customers participate in the product development, it is less likely that they will delay their purchase of a high-tech product due to technological uncertainty and will perceive such purchase decisions as less risky. Such practice is particularly crucial for more technology-push-oriented innovations. Another recommendation for the software marketing is that products must increasingly be positioned as simple, handy, portable, and visually appealing. Such trends will gain even higher importance in the coming years, since mobile and cloud solutions in particular will increasingly be used by average-users. 13 3.2 Innovation-related Capabilities Software-Cluster companies reported higher-than average levels of innovation capability, however, the ability to reflect changes at market conditions quickly by making improvements in products and processes should be increased (see Figure 8, p. 19). Due to today’s highly competitive environment and high pace of technology development especially in the IT field, such ability constitutes another critical success factor not only for gaining competitive advantage but also for basic survival of the company. Regarding exploration capability, cluster companies have in general already acknowledged the importance of so called “proactive marketing”- market driving (proactive) instead of market driven (reactive) orientation - and reported a higher-than-average score. However, they have also reported that even though the company was driven by the perception of opportunity, they often felt constrained by the resources at (or not at) hand (see Figure 9, p. 19). Limited personnel resources and low marketing budget have also been distinguished as one of the most important challenges that especially small software vendors face (see Table 1, p. 10). Even though it might be a very difficult task to convince a company’s management to increase the marketing budget especially in a SME, they must acknowledge that when the budget is used adequately, return on investment can be much greater than expected. Regarding marketing capability, only 50% of enterprises in the Software-Cluster reported that the effectiveness of their promotional activities in gaining market share is higher than competitor’s (see Figure 10, p. 20). Since company’s promotional activities are responsible for effective communication and the knowledge transfer between vendor and customer, efforts in this field should be enhanced. Moreover, only every second enterprise reported that the speed of new product introduction is higher than competitor’s. Hence, the software enterprises should adjust their organizational structure and implement other necessary measures to increase the speed of new product introduction which is particularly crucial in the age of rapid technological development. Only 50% of the surveyed enterprises agree that their marketing capabilities enable them to successfully compete with their competitors implying that the other half of the companies in the Software-Cluster either disagree or are not entirely convinced that this is the case. Therefore, it can be suggested that software vendors should thoroughly evaluate their marketing activities and define critical factors that can be improved. They should invest more on those marketing capabilities where they most lag their competitors. Furthermore, only 38% of cluster companies agree that their market research efforts were higher than competitors and since poor market research and market analysis has been distinguished as one of the common weaknesses in almost every study of 14 why new products fail on the market (Cooper, 2011, p. 37), software companies should significantly increase their market research efforts. Furthermore, due to the high pace of technological change and developments, software vendors must also educate themselves and constantly be up-to-date in view of newest technologies. This means that they have to increasingly supplement their market research campaigns with innovation market research (innovation intelligence) to gain technology foresight and to be able to develop new products early based on these technologies. 3.3 Market Orientation The analysis showed that customer orientation had the highest score of all constructs assessing market orientation (see Table 2, p. 12). As the additional regression analysis showed, customer orientation had a significant positive influence on innovation capability, underpinning customer’s value in the process of innovation development. Therefore, software companies must make sure that customer focus is deeply embedded in the innovation process to realize promising competitive innovation advantage. The results further indicate that competitor orientation is the least developed and acknowledged construct within MO. Software enterprises should increasingly monitor their competitor’s actions, collect marketing data on them to help direct their marketing plans, instruct their sales people to monitor and report on competitor’s activities, and try to respond rapidly to rival’s actions. Just like gathering and using important information from the customers, information on competitors might help to recognize new technology trends in the early stages and allow to plan marketing activities better. The results from the third component of MO – interfunctional coordination - were in general very satisfactory. Companies shared their marketing information and information about customer needs with all departments and overall did a good job integrating activities of all departments (see Figure 11, p. 21). However, they should also increasingly involve all departments in the preparation of business plans and strategies and have inter-departmental meetings to discuss customer needs more often in order to increase the average levels of interfunctional coordination. 15 3.4 Innovation Communication Cluster enterprises acknowledge that software buyers (SMEs in particular) do not have rich know-how of new IT trends (see Figure 5, p. 8). The higher complexity of new technologies has led to an increased know-how gap between software vendors and buyers. Therefore, one of the greatest challenges software vendors face nowadays is guaranteeing a proper knowledge transfer from vendor to customer. Sufficient presentation of added business value to the customer has been distinguished as one of the critical success factors in innovation marketing. These business cases must entail realistic assumptions that are matched with each customer’s requirements. Following these notions, one of the greatest challenges for the software companies is to educate their customers on the technologies incorporated in the products. They have to communicate the added value of the products based on these technologies as well as show provable ROI to the software buyer. Further, it is especially important for small software buyers to get successful case studies from local references. It reduces the perception of uncertainty at the customer side. One of the greatest challenges for software companies may therefore be to gain the first customer (an early adopter) which then might serve as a case study for other potential buyers. In regard to innovation communication, another suggestion for software companies is to simplify the marketing message. Especially for products that encompass complex technologies or hype topics, the marketing message must be easy-to-understand. Moreover, software enterprises should also follow current marketing trends and make their marketing instruments more interactive, dynamic, social, mobile, and user-driven. They should evaluate the profitability of new media tool usage. These include viral videos, webinars, tutorials, and other methods. These promotional instruments are suitable not only for customer education, but also for entertainment and thus, may help to get customer attention and increase product differentiation. And since products based on new technologies (e.g. cloud, in-memory computing) might actually be more exciting for the customer as compared to robust business software solutions in the past, more creative marketing instruments are often suitable and more effective. Brand management is another marketing field of great importance which software companies should pay increased attention to, especially in the age of new information technologies. It has been argued that in order to effectively mobilize the interest in a new technological idea, communication must take place at two levels – at a mass level to create excitement and general “pull”, and at an individual level to explain what the technology is 16 about and to persuade interested stakeholders of its usefulness (Jolly, 1997, pp. 80, 81). It can be suggested that at first the new IT trend must be promoted and brought to a wider audience. Whereas conferences target more specific audiences like software developers, IT practitioners, and researchers, the use of so called “new media” tools like YouTube videos and Facebook may help to reach wider audiences (e.g. IT students, start-ups, and journalists). It can further be assumed that only when a new technology is of wider recognition, software enterprises should determine whether including the name of a technology in a brand name of a product is a purposeful branding strategy. For instance, Software-Cluster companies face the challenge of marketing emergent software as a new trend in IT. It can be assumed that the term “emergence”, at least on the first encounter, does not raise any particular associations and is generally a term that does not immediately stick to one’s mind. The term requires a lot of clearing-up. Therefore, these companies are increasingly considering whether an alternative term might be required for more sophisticated marketing purposes. It is particularly crucial that marketing managers of the companies are integrated in such decision making processes. 17 4 Overview of the Recommenations GENERAL RECOMMENDATIONS 1 Acknowledge the importance of marketing (especially SMEs) and try to increase your financial and personnel resources in marketing department! 2 Involve marketing at the stage where technological ideas are generated! 3 Place increased value on customer co-creation; integrate customer early in the product development to avoid “valley of death!” 4 Pay increased attention to your product’s design and usability! RECOMMENDATIONS REGARDING INNOVATION-RELATED CAPABILITIES 5 Increase your market research efforts and supplement them with innovation market research campaigns to increase your technology foresight! 6 Increase your ability to adapt to changed market conditions quickly! 7 Increase the speed of your innovation cycles to minimize the change in development target! RECOMMENDATIONS REGARDING MARKET ORIENTATION 8 Measure customer satisfaction on regular basis! 9 Watch your competitor! 10 Involve all departments in your company in preparing business plans and strategies! RECOMMENDATIONS REGARDING INNOVATION COMMUNICATION 11 Make innovation communication an integral part of your overall enterprise communication strategy! 12 Ensure knowledge transfer from vendor to customer; explain complex topics! 13 Ensure sufficient presentation of business value to the customer; provide case studies; demonstrate ROI! 14 Increase the effectiveness of your promotional activities! Make them more personal, interactive, social, mobile, and user-driven! 15 Place high value on your branding strategies! Figure 7: Recommendations for the software enterprises 18 5 Appendix 5.1 Detailed Results of Resource and Capability Analysis 0% 20% 40% 60% Our organizational culture supports and 6% 6% encourages innovation 88% Knowledge from different sources is efficiently and 6% 6% rapidly used in product development 88% Our firm is able to reflect changes at market conditions to own products quickly 12% 12% 80% 100% 76% n = 17 Employees are supported and encouraged to 6% 6% participate in product development New ideas that come from customers, etc. are evaluated and included into product development activities 88% 12% 12% Our firm can adapt to environmental changes quickly by making improvements at ist products 6% and processes 76% 18% 76% Disagree Neutral Agree 60% 80% Figure 8: Innovation capability 0% 20% 40% Our firm continuously explores and exploits new 6% 12% markets and opportunities Our firm is driven by perception of opportunity while not constrained by available (or not available) resources 18% 100% 82% 41% 41% n = 17 Our firm continuously tries to discover aditional needs of our customers of which it is unaware 18% Our firm searches for opportunities in areas where 6% customers have trouble expressing their needs 82% 24% 70% Disagree Neutral Agree Figure 9: Opportunity exploration capability 19 0% 20% Quality of our customer service is much higher 6% Effectiveness of our promotional activities in gaining market share is higher 60% 100% 50% 31% 19% 69% 19% 50% 31% 19% Advertising expenditure as precentage of sales is higher 80% 63% 31% Quality of our sales people is higher 12% Our distribution networks are stronger 40% 25% 62% 13% n = 16 Our market research efforts are higher Ability to differentiate products marketed by the firm 6% is higher Speed of new product introduction is higher 13% 38% 75% 19% 19% Our marketing activities are more often subcontracted to external agencies Our marketing capabilities enable us to successfuly compete with our competitors 12% 50% 50% 31% 63% 25% 37% 50% Disagree Neutral 12% Agree Figure 10: Marketing capability 20 Customer Orientation 0% 20% 18% 76% After-sales service is an important part of our 6% business strategy 18% 76% We have a very strong commitment to our 6% customers We always try to create customer value in our 6% 6% products 23% 30% 24% 12% 41% 41% 65% 82% 12% 23% 23% 12% n = 17 47% 29% 18% We do a good job integrating activities of all 6% departments 47% 41% 12% Our marketing people regularly discuss customer needs with other departments All deparments are involved in preparing business plans and strategies 23% 47% Our top managers often discuss competitor's 6% actions We regularly have inter-departmental meetings to discuss market trends 59% 35% Our sales people are instructed to monitor and report on competitor activities Marketing information is shared with all departments 100% 88% 18% Marketing data on our competitors is collected to help direct our marketing plans We always respond rapidly to competitor's actions 80% 94% We regularly monitor our competitor's marketing efforts Competitor Orientation 60% We encourage customer comments and 6% complaints We measure customer satisfaction on regular bases Interfunctional Coordination 40% 65% 77% 18% 70% 18% 76% Disagree Neutral Agree Figure 11: Market orientation 21 0% Our overall performance last year was greater than 6% expected 20% 40% 60% 19% 80% 100% 75% n = 16 Overall, we outperformed our major competitors last 7% year 20% 73% Disagree Neutral Agree Figure 12: Market performance Product innovation Minimum Number of products introduced by the firm that were not new to the firm but new to the market you serve Number of products introduced by the firm that were new the firm but not to the market you serve Number of products introduced by the firm that were both new to the firm and to the market you serve Maximum Sum Mean SD 0 5 36 2,77 1,45 0 5 30 2,31 1,84 0 14 46 3,54 4,13 n = 13 Table 3: Product innovation 22 5.2 References Akman, G., & Yilmaz, C. 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