Technology-related Diversification of Companies with Narrow Market Scope

Abstract

Background: Many technology-driven companies are highly specialised and often focused on only one business segment. Therefore, they are faced with a narrow market scope and have to ask themselves, how to develop new profit potential in the future (Kim/Mauborgne, 2005; Zook/Seidensticker, 2004). Technology-related diversification and the Lead User Method: With technology companies especially, the idea creation process of the diversification is technology-driven. Involving lead users (von Hippel, 1986; Eisenberg 2011; Lilien et al., 2002) very early in the diversification process, might help to meet potential customer needs, and thus, market acceptance. Research questions: Therefore, the aim of this project is to answer two questions: 1. How can technology-intensive companies, based on their core competencies, identify and select appropriate new target markets and customer segments in line with their diversification strategies (objectives)? Moreover, what is needed to overcome related barriers? 2. In which way can lead users be integrated into the process, to ensure future product-market combinations with a perceptible comparative advantage for all customers in the target market? Methodology: This study followed a mixed-method approach, combining qualitative multi-case study with action research. Four industrial partners were selected to explore the diversification and lead user process. The entire research process lasted over two years and was funded by the Swiss government (Commission for Technology and Innovation CTI). Findings: The tools employed in the process proved to be useful for all companies. In all four cases, working with lead users was a premiere. Feedback from all four firms suggests, that the value of engaging lead users has been highly appreciated and that outlook of the diversification project's future looks much more promising com-pared to diversification attempts taken in the past. In sum, a clear competence based search for new busi-ness fields, combined with the lead user engagement, offer a very promising path to technology-related di-versification for SMEs. However, it’s very important that the decision makers have the power of authority to invest in the new market and to release resources for the project. Contribution and implication for theory and practice The research project shows three main contributions: • first, it offers insights into the identification of core competencies as a starting point in the search for diversification fields (via the job-to-be-done perspective); • second, it clarifies the early stage of the diversification process by integrating the lead user method into the fuzzy front end of innovation (Gassmann/Schweitzer, 2014; Cooper, 2001); and • third, it delivers an empirically and practically approved process (with tools and instruments) that can be used by more or less experienced SMEs and consulting firms.