Factors Contributing to Marketing’s Limited Role in Product Development

in Many High-Tech Firms

John P. Workman, Jr.

Assistant Professor, Marketing Dept.

Kenan-Flagler Business School

CB# 3490, Carroll Hall

University of North Carolina

Chapel Hill, NC 27514

Phone: (919) 962-3143

Fax: (919) 962-7186

Email:

July 1997

Forthcoming in:

Journal of Market-Focused Management

The research reported in this paper was partially supported by funding from the Junior Faculty Development Fund at the University of North Carolina and by the summer research support fund of the Business Foundation of the Kenan-Flagler School of Business.


Factors Contributing to Marketing’s Limited Role in Product Development

in Many High-Tech Firms

Abstract

While case-based research, books by insiders, and anecdotal evidence suggests marketing often has a marginal role in product development in many successful high-tech firms, there has been little systematic comparison across high-tech firms which identifies factors leading to this limited role. This paper draws on taped and transcribed interviews with marketing and/or R&D managers in thirty-four high tech firms and argues that three factors contribute to marketing’s limited role in many high-tech firms: (1) the need for technical expertise to understand business opportunities, (2) the development of technology-oriented organizational cultures, and (3) the way in which marketing is defined in many high-tech firms. The paper then assesses key contributions that people in marketing and product management can play and develops propositions concerning antecedents and consequences of the degree of marketing’s role in product development decisions.

Keywords: High-tech marketing, marketing’s role, market orientation, new product development

2


What are the means by which high tech firms understand market opportunities and make decisions on new product opportunities? What is the contribution of people in marketing to this process? Kohli and Jaworski (1990) use the term “market orientation” to mean the implementation of the marketing concept and identify three elements of market-oriented firms: organization-wide information acquisition, dissemination, and responsiveness. However, neither they nor Slater and Narver (1994) address the issue of which functional groups within the firm take the responsibility of understanding and interpreting market opportunities. Implicit in their work is the assumption that marketing managers play a central role in the definition and development of new products.

Similarly, much of the research within marketing on “boundary spanning” has assumed that the marketing unit plays a key role in linking the capabilities of the firm with the business environment (Lysonski 1985, Singh 1993, Singh and Rhoads 1991). However, case-based research in small samples of high-tech firms has often shown that marketing may not be the primary group which interprets the organization’s environment (e.g., Bucciarelli 1988, Conway and McGuinness 1986, Dougherty 1992, Dubinskas 1988, Nonaka and Kenney 1991, Workman 1993). Much of the information about the market and the needs of key customers may bypass the marketing group and go directly to R&D managers or to senior managers who often have technical backgrounds. While other researchers have documented the limited role of marketing in specific industry contexts such as biotechnology (Dubinskas 1988) or in specific firms (Workman 1993), there has been little effort to understand the factors leading to this limited role or to develop propositions concerning when marketing will have a greater or a less role in product development decisions. This paper is based on interviews done with marketing and R&D managers in a variety of high tech firms and seeks to understand why marketing often has a limited role in product development in high tech firms.

Literature Review

While start-ups and small firms may have a handful of people that simultaneously handle product development, marketing, manufacturing, and sales, as firms grow they typically expand into a range of environments and allocate these tasks to groups that are more specialized. With this specialization and differentiation of tasks across groups, comes the need for “integration” and communication between the groups (Lawrence and Lorsch 1967). In this section we will consider two streams of research which have considered cross-functional interactions and the role of marketing in new product development.

One stream of research has taken the product as the focal point and has then examined communication patterns between marketing and engineering and how they correlate with product success (e.g. Cooper 1993, Cooper and Kleinschmidt 1987, Moenaert and Souder 1990, Souder 1987). While the methodologies vary, these studies have typically compared successful products with unsuccessful products, and have examined various aspects of the projects, including the relationship between marketing and R&D. A general finding is that projects where marketing and engineering work together typically have higher success rates than those where they don't. However, these studies are limited in that they collect responses after the success or failure of the product is known and they typically do not explore detailed aspects of communication patterns over the life of the project.

A second stream of research has focused on marketing as one constituency, among many, and has sought to prescribe the role of marketing in the firm -- that is, what activities should they carry out, and how these might logically vary across situations (e.g. Anderson 1982, Hutt and Speh 1984, Kohli and Jaworski 1990, Ruekert, Walker, and Roering 1985, Ruekert and Walker 1987). According to Anderson, the goal of marketing is “to satisfy the long-term needs of [the firm's] customer coalition” (p. 22) and he notes the strategic conflicts that will occur among the various functional groups in the firm as they compete for financial and other resources:

“Against this backdrop marketing must realize that its role in strategic planning is not preordained. Indeed, it is possible that marketing considerations may not have a significant impact on strategic plans unless marketers adopt a strong advocacy position within the firm. On this view, strategic plans are seen as the outcome of a bargaining process among functional areas. Each area attempts to move the corporation toward what it views as the preferred position for long run survival, subject to the constraints imposed by the positioning strategies of the other functional units.” (Anderson 1982, pp. 23-24)

Using such a constituency or coalitional perspective inevitably brings up the question of what is meant by marketing. Researchers have agreed that marketing can be thought of as either a functional group within the firm or as a set of activities (e.g., advertising, product management, market research, sales, customer service) whose placement will vary across organizations (Glazer 1991; Piercy 1985; Varadarajan 1992; Webster 1992). In this paper, we focus on a functional group perspective and explore the involvement of the marketing sub-unit (as defined by informants) in product development activities.

While people in marketing have recognized that product development in high-tech firms represents some uniquely different challenges (Davidow 1986, Glazer 1991, Moriarty and Kosnik 1989), there has been little systematic research to understand the factors leading to marketing’s limited role in product development in high-tech firms. Rather, more of the effort within marketing has been devoted to developing tools and techniques which can better assess customer needs when technical capabilities are not fully understood. One of the more widely referenced approaches is the identification and utilization of market information from “lead user” (von Hippel 1986) who are defined as “users whose present strong needs will become general in a marketplace months or years in the future.” Another approach is to educate potential buyers up to a state of knowledge they will presumably have when the new product enters the market (Urban, Weinberg, Hauser 1996; Wilton and Pessemier 1981).

This paper adopts a coalitional perspective of the firm which views the firm as being composed of subunits which have differing levels of influence over various types of decisions (cf. Anderson 1982, Cyert and March 1963, Enz 1986, Pfeffer 1981). In contrast, a large amount of the new product literature has focused on topics such as factors affecting product success and failure (e.g., Cooper 1993, Cooper and Kleinschmidt 1987, Johne and Snelson 1990, Souder 1987), and techniques for collecting and analyzing market information (e.g., Urban and Hauser 1993, Urban, Weinberg, and Hauser 1996), without considering which functional groups within the firm have responsibility for or influence over which tasks. As advocates of a coalitional perspective have pointed out, viewing the firm from a coalitional perspective draws attention to organizational processes and the ways in which goals for the firm are established and the process by which decisions are reached. However, as we point out later in the paper, there is significant variety in how marketing is defined across the firms we interviewed. With this background on the theoretical orientation adopted in the paper, we now describe the field research.

Methodology

This paper is based on thirty-four field interviews done by the author with managers in a range of high tech firms. The interviews were tape recorded and transcribed and a systematic analysis of the transcriptions provide the primary basis for the development of the claims presented in this paper. While the line separating “high-tech firms” from other firms is somewhat ambiguous, in this article we define high tech firms as those in industry sectors with relatively high levels of R&D spending (over 4% of sales) compared to other industry groups[1].

The interviews were done as a part of three separate projects. All of these projects were inductive and focused on various aspects of the new product development process and the role of marketing and R&D in this process. While the set of questions varied across the three projects, they were all open ended and typically asked the informant to pick a recently introduced product, discuss where the idea came from, discuss how people in the firm sought to understand what customers wanted, and explain the role of marketing and R&D in this process. Nineteen of the interviews were with people in marketing and fifteen were with people in R&D. The typical person interviewed was a manager with responsibility for product development, marketing, R&D, or product management. The most common title prefixes were VP, Director, or Manager. In eight of the firms interviews were scheduled with two people while single informants were used in the remaining eighteen firms.

The categories of factors which contribute to marketing’s limited role were inductively derived by a systematic analysis of the transcripts. Initially incidents and quotes were sorted by the author into analytical categories. The author then reviewed all of the categories and looked for commonalities and underlying factors which could be combined. This led to a more parsimonious set of factors which contribute to marketing’s limited role. This general approach to the analysis of qualitative field data is in accord with the approaches advocated by Eisenhardt (1989), Bonoma (1985), and Yin (1989).

From a knowledge development perspective, this paper is inductive and descriptive, seeking to better understand the factors which can lead to people in the marketing function often having a limited role in new product development. Given the descriptive nature of this paper, future research is needed to develop measures of marketing’s role and to empirically examine variations in marketing’s role in new product development in different contexts. With this background on the methodology, we first consider factors which contribute to people in marketing having a limited role in product development.

Factors Which Contribute to Marketing’s Limited Role in Product Development

While it was not the case that marketing had a limited role in all of the high-tech firms, in general marketing did not have as much power over product development decisions as the people in R&D. Based on our field interviews, we identify the following three factors which contribute to marketing’s limited role in product development decisions: (1) the need for technical expertise to understand opportunities, (2) the technology-oriented cultures within many high tech firms, and (3) the way in which marketing is defined within many high-tech firms.

The Need for Technical Expertise to Understand Opportunities

In high-tech firms, it is typically necessary for managers to have technical expertise in order to understand the potential capabilities of their products and to understand how these technologies can be applied in potential customer businesses. In this section we consider three reasons why technical expertise is needed to understand business opportunities: (1) technical customers and distributors, (2) the need to explain capabilities and applications which are not yet on the market, (3) the need for interpretation of market information, competitors actions, and market developments.

Technical customers and distributors: High-tech products are frequently sold to business customers rather than to final consumers. For example, most of the output of the top three high-tech sectors mentioned above is to business customers. Studies of industrial purchasing have typically found that members of industrial “buying centers” desire technical information and often use information sources other than product brochures and information from sales reps when buying complex technical equipment (e.g., Bunn 1993, Moriarty and Spekman 1983). Additionally, many high-tech products have relatively small customer bases (e.g., aerospace products, defense electronics, medical equipment, and instruments) or are sold to OEMs (e.g., jet engines, semiconductors) who embed the products in their products and resell them. In these cases, potential customers typically have a high level of technical knowledge and want to interact with technical personnel on the seller side. For example, one person in marketing for a nuclear power services firm said:

“We frequently brought engineers out on sales calls. As marketing people we were expected to talk intelligently about what we were selling, but we were not expected to really get into any of the details. So if there was any kind of a technical presentation going on, you'd bring at least one engineer.”

In other cases managers mentioned the need to have sales reps with engineering degrees, sending key technical personnel to industry trade shows, and direct interaction between technical customers and R&D personnel on visits to corporate headquarters.

Explaining applications and capabilities not yet on the market: A second reason technical expertise is needed is to be able to explain to potential customers or middlemen the applications for which a new technology can be used. In high-tech markets new technologies and new product capabilities are continually being developed. While it is frequently possible for less technical personnel to explain basic applications, in many cases more extensive interaction between customers and suppliers are required to appreciate how a new product or technology can best be utilized. The following quotation is from an R&D director of a firm providing equipment to telephone companies: