Christophe Haon

Market orientation: synthesis and new theoretical directions

The research devoted to market orientation has multiplied since the seminal works of Kohli and Jaworski (1990) and of Narver and Slater (1990). These were primarily structured around the question of the relation between market orientation and organizational performance, which was largely resolved with the publication of three meta-analyses (Rodriguez Cano, Carrillat and Jaramillo, 2004; Kirca, Jayachandran and Bearden, 2005; Ellis, 2006). Two questions remain under-explored: that of the definition of the concept, and that of its implementation. In relation to the first topic, this article proposes integrating existing approaches to market orientation, currently few in number. As well as providing a more complete definition and a better structuring of the concept, this approach leads to a better understanding of its links with organizational performance. In terms of the second topic, the article offers an assessment of the existing methods, as a basis for future directions of research.

New Product Teams

The development of a new product is a complex task that requires the integration of many different fields of expertise: the product must be designed and manufactured to meet the expectations of potential customers and to do so while being profitable. This implies that many different aspects pertaining to, among others, technology, production, demand, and competition must be considered throughout the development process. Because of the complexity of current technologies and markets, it is highly unlikely that isolated individuals can effectively master all the ins and outs of the development of a new product. Consequently, firms are under pressure and must develop new products at a faster pace because of the increased turbulence of markets that are characterized by shorter product life cycles and increased global competition. This situation leads most firms to make extensive use of cross-functional teams to develop their new products. This way of organizing the new product development process has been frequently highlighted in the literature (Cooper and Kleinschmidt 1994, Griffin 1997b, McDonough 2000).

Internally Versus Externally Developed Technology and Market Acceptance of Innovations: The Complementary Role of Branding

Empiricalstudiesthatrelateinternallyversusexternallydevelopedtechnologytomarketacceptanceofinnovation duringemergentstagesprovidecontradictoryfindings.Wecontendthattheseconflictingfindingsmightbetheresult of a theoretical misspecification in existing models that fail to consider the effect of synergy between a firm’s technology development choice and its branding choice. We use the concepts of value creation and value appropriation to develop our hypotheses relating different combinations of technology development and branding choices to market acceptance. With data on the early history of Internet banking in the United States, we show that internally developed technology leads to greater market acceptance than externally developed technology, but this effect changes with the choice of a brand extension versus a new brand. Specifically, firms that combine internally developed technology with a new brand achieve greater market acceptance for their innovation during emergent stages.

Predicting New Product Acceptance

Understanding the adoption process leading to acceptance and use of a new product or service is fundamental to assessing its potential, not only as the brand gets introduced but also in the long term. The distinction between the short term and the long term is especially critical for radical innovations that create a completely new product category, as it takes time before these innovations get accepted by the majority of the market. It also has many implications for the dynamic marketing mix strategies, whether pricing or communication strategies. We consider the determinants of the acceptance of new products in this chapter and we discuss how this acceptance gets realized over time in the next chapter. Therefore, in this chapter, we discuss the methods for estimating the market potential. In the next chapter, we focus on the prediction of the speed and shape of diffusion.

When to Forge Alliances

The traditional approach to the development of new products and services is to perform research and development (R&D) internally to the firm (Doz and Hamel 1998, Chesbrough 2003). However, in the face of rapid evolution of consumers’ needs as well as the uncertainty of technological change, R&D activities are an area where alliances have been increasingly sought and have even played a dominant role (Shan 1990, Kogut 1991, Hagedoorn and Schakenraad 1994, Raassens, Wuyts and Geyskens 2012). According to Capron and Mitchell (2012), firms choose from among three alternatives, based on the firm’s existing capabilities and partnership characteristics: build, borrow, or buy.1 Indeed, firms do not always have or cannot necessarily acquire the competencies and know-how required for new product development (NPD) (see the discussion on innovation characteristics in Chapter 2). Such competencies may include (Capron and Mitchell 2012): 1. Skills 2. Know-how 3. Technologies 4. Methods 5. Broad competencies 6. Other assets

Fostering Creativity in the Organization

The first step in the new product and service development process is to generate ideas. It is unlikely that a single genial idea comes up by itself. Hundreds of ideas must be generated to allow the best ones to be selected. Methods for screening ideas constitute an important second step. We present these methods, including the recent improvements that have been proposed (e.g., Toubia and Flores 2007) in Chapter 10. In this chapter, we now focus on how to make the firm as a whole more creative for the purpose of developing new products or services in a sustainable fashion over time.

Branding New Products and Services

The choice of a brand name for a new product or service may at first appear more tactical than strategic. However, once the launch is made under a given name, it is difficult to change that name. Therefore, the choice of a brand name has long-term impact. Furthermore, a wise choice may bring opportunities for brand name extensions or alliances with other brands. These are important implications to take into consideration when launching new products and services with critical strategic dimensions.

Strategic and Market Orientations

The ability of an organization to systematically deliver successful innovations is not the result of luck but, rather, of providing a strong impetus for strategic directions that lead the organization to produce high-performing innovations, even given that some uncertainty does remain inherent in the innovation process. This means that the culture of an organization must reflect the values that will foster innovativeness throughout the organization. The second part of this book examines the nature of a culture of innovation and how to establish it throughout an organization in order to build the capacity for sustained delivery of high-performance innovations.

Assessing Innovations from the Technology Perspective

Technological change can have a major impact on organizations and their performance. It is also a key factor in understanding dynamic organizational capabilities. It is therefore critical to have a clear understanding of the nature of innovations. Assessing innovations in terms of technology means that we consider a product or service as the practical application of knowledge, especially because it uses technical processes or methods. This corresponds to the standard definition of “technology” found in today’s dictionaries. Since this definition applies to knowledge in general, the technological perspective is not exclusively reserved for products but can apply equally to services. Indeed, services are often the result of the application of science of a technical nature. This is clearly illustrated by web-based services such as web-shopping. But this is also the case with more traditional services; for example, a hair salon can be considered from the technical point of view as the use of tools, machines, techniques, and, more generally, know-how for delivering an applied benefit.

Technology Sourcing for Website Personalization: A Supply- and Demand-Side Perspective

Literature on website personalization has adopted a demand-side perspective and studied either the direct effects of website personalization or the moderating effect of other demand-side variables on performance of website personalization. In so doing, the moderating effect of crucial supply-side variables, like technology choices for website personalization, has been ignored. To address the interaction between the supply-side and the demand-side, we ask the following question: What is the moderating effect of firm-level technology sourcing choices on the relation between website personalization and sales performance? We use the concepts of information efficiency and adaptability to develop our hypotheses. Using data from 500 US e-retailers, we contend that offering website personalization has a positive effect on sales, and that among firms that offer website personalization, the ones that use both internally and externally developed technology are likely to have greater sales performance than firms that use either internally or externally developed website personalization.