Chapter 7: Technology Strategy In Lumpy Markets

The key to this chapter is the concept of lumpy markets. MacMilliam & McGrath describe lumpy markets as those that are, rather than having an even distribution of consumers, are divided by the features that consumers want and are distributed heavily around these features with fewer people at the overlaps resulting in what appears to be a series of lumps when graphed. These lumpy markets are important as they can help guide the selection of technological development on products and can show how to target different markets.

The key to understanding strategy in lumpy markets is understanding the options of how to approach technological development. The authors give three options for development:

1. Single niche domination
2. Niche fusion
3. Creating a new technology envelope

Each of these approaches has advantages and disadvantages associated with it and can be a viable strategy.

Single niche domination is the selection of a specific market with a dedicated focus to the features and attributes that they most desire. This is a powerful selection as it allows the company to have a concentrated focus and most closely meet the needs and desires of the chosen market. However, the disadvantage is the same as the advantage. Since the focus is so fully set on one market the resulting product is often unsuitable or undesirable for the other markets, and a minor change in the needs of a market or the offering of competitors can have a significant impact on current market demand.

Niche fusion is the strategic decision to focus on more than one distinct market, fusing the needs of the markets together and allowing a broader appeal. The advantage to this is that the resultant technology has a broader appeal and is therefore more resilient regarding changes in the market. On the downside this approach takes away much of the focus that a niche player has and resultantly reduces the ability to satisfy the consumers’ needs and demands.

Creating a new technology envelope is perhaps the greatest solution for longer term success, as it ignores the current constraints of the technology and the consumer base and creates a new paradigm of focus that offers a product that can meet the needs of the largest audience and satisfy them very thoroughly. On the downside this approach is very difficult to accomplish and requires a significant departure from current technology, as a result the costs and risks can be enormous. This approach results in what is often considered to be a disruptive technology, which can result in the failure of the incumbent firms and the tremendous success of the new firm that has developed the new approach.