Successfully commercialising technology requires a basic decision

However, that ambition took a different turn when Steve Jobs and Wozniak created the first personal computer in 1976, the Apple I. With its successor, Apple II, Apple became the pioneer in the personal computer industry. So much for being a seller of circuit boards.

A new Journal of Marketing study explores the ‘what to sell’ question that companies and investors need to answer regularly. 

Before they decide how to position products or services relative to competitors, managers at both established firms and new ventures must consider whether their innovations should be sold as:

1. know-how (intellectual property),
2. components (intermediate goods), or
3. a system (final goods).

This product-form strategy (PFS) decision is deeply embedded within many firms’ product development and commercialisation processes. The PFS decision is linked to other fundamental questions of interest to marketers, including ‘Who is our direct customer?’ and ‘Who are our direct competitors?’

For early-stage ventures seeking to enter a market for the first time, getting their go-to-market strategy right in terms of the product-form and the associated revenue model may be their best chance for survival.

Using data from various sources, the researchers found that the resulting choice of PFS is due to three primary drivers:

• the difficulty of technology mix-and-match,
• the availability of marketing capabilities to sell the technology to end users, 
• the difficulty of safeguarding the know-how against imitation.

“Our research discovers that when technology is difficult to mix-and-match and safeguard, decision-makers will choose to sell systems over components and components over know-how,” explain the researchers from the American University and universities of Arizona, Texas-Arlington and Texas Tech.

Assessing the firm’s marketing capabilities is a crucial element

“Marketing capabilities will also increase the likelihood of marketing systems over components and components over know-how. We also find key interactions among these drivers on the product-form decision,” they add.

The findings suggest that considering the technology market and the firm’s ability to protect its technology (against theft by supply chain members and competitors) is critical and that strategic deliberations about what to sell must include examinations of the wider environment and the firm’s own capabilities. 

Unlike much of the literature about business models that often conflates the ‘what to sell’ and ‘how to sell’ questions for business strategy, this study finds that PFS is a unique decision that comes before the ‘how to sell’ question is answered.

Product managers, entrepreneurs, and angel investors need to consider how these alternative product forms may increase the costs associated with selling one product form over another. 

Additionally, established firms mulling a market entry decision for a new technology should have commercialisation discussions at the technology level and choose the product-form that is the most desired for that technology, regardless of how their other product lines are strategically positioned.

You can find out more about the research A Theory of Product-Form Strategy: When to Market Know-how, Components, or Systems? here.