A Methodological Approach to the Marketing Process
in the Biotechnology-based Companies
Carla Costa1 *, Margarida Fontes2 and Manuel V. Heitor1
1. Center for Innovation, Technology and Policy Research, Instituto Superior
Técnico, Lisboa Portugal
2. INETI, Lisboa Portugal
* corresponding author, carla.rcosta@netcabo.pt
Paper accepted for publication in the “ Industrial Marketing Management
Journal”, Elsevier
July 2003
Page 1 of 50
BIOGRAPHICAL NOTES:
Carla Costa
MSc in Engineering Policy and Management of Technology and with a Business
Administration Degree at ISCTE – Instituto Superior de Ciências do Trabalho e da
Empresa, Lisbon, she is a researcher at Center for Innovation, Technology and Policy
Research, IN+, associated to the entrepreneurship promotion programme Green-wheel
at Instituto Superior Técnico, in Lisbon.
Margarida Fontes
Researcher at Departamento de Modelação e Simulação de Processos/Instituto Nacional
de Engenharia e Tecnologia Industrial (INETI) with a PhD in Management of
Innovation and an MSc in Management Sciences from the Manchester School of
Management, University of Manchester Institute of Science and Technology, UK. Her
main research interests are: management of technological innovation, academic- industry
relationships and technological entrepreneurship.
Manuel V. Heitor
Professor of Mechanical Engineering at the Instituto Superior Técnico in Lisbon, and
director of the Center for Innovation, Technology and Policy Research, IN+, he is coeditor of several books and author of several scientific papers in the area of energy and
environment and related fields, with emphasis on fluid mechanics and combustion. He
is a Senior Research Fellow of IC² Institute, The University of Texas at Austin and, in
this context, he has led the Organizing Committee of a series of International
Conferences on “Technology Policy and Innovation,” which began in 1997 in Macau.
Page 2 of 50
ABSTRACT:
The paper addresses the commercialisation activities of biotechnology-based companies
in a European context and discusses whether these companies are able to gain adequate
market perceptions and set adequate marketing processes, taking into account three
analytical steps: strategic marketing definition, marketing implementation, and
evolution of strategy and implementation. A methodological approach was developed,
considering the specific nature of the technology and the companies. The case of
Portuguese companies was used to test this methodology.
The findings support the hypothesis that marketing issues constitute a problem for these
companies, since most of them had serious difficulties in going through the marketing
process. Marketing deficiencies were largely connected to the access to human
resources with relevant management and marketing capabilities and were particularly
felt by companies introducing discontinuous innovations.
The research confirms that this methodology is useful in the assessment of the
marketing management process in biotechnology-based companies.
KEYWORDS:
Biotechnology-based companies, marketing of innovation, marketing of technology
Page 3 of 50
1. Introduction
The emergence of a biotechnology industry has been a motive for much discussion and
both the business and the academia worlds envision a life-science revolution emerging
from the knowledge-based economy of the 21st century [ EuropaBio 1997, Enriquez
2000, EC 2001].
History shows that the emergence and development of industrial biotechnology has very
particular characteristics [Orsenigo 1989]. Its most remarkable feature is the strong
influence of science, which represents a fundamental source of progress in this new
technological paradigm [Orsenigo 1989, Dosi 1984, Pavitt 1987]. A further
differentiating feature was the role played by new biotechnology-based companies, that
stem from a spontaneous division of labour in the research and productive activities
[Orsenigo 1989, Nelson and Winter 1982, Teece 1988]. Small dedicated biotechnology
companies are recognised to be the most efficient available organisational solution for
the development of innovative activities in biotechnology [EC 2001]: they have better
access to new scientific developments [Walsh et al 1995] and a remarkable capability
for creative development [Sharp and Galimberti 1993], being particularly effective in
identifying and exploring the emerging technological and market opportunities of the
new scientific paradigm [Orsenigo 1989]. Thus, these companies act as intermediates in
the process of transferring biotechnology from the research laboratories to industry,
representing an institutional innovation motivated by technological change [Orsenigo
1989].
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However, even science-based companies do not subsist solely due to research and
development activities aiming to create new products and services: it is essential to take
these to the ma rket and turn them into successful innovations. In the case of
biotechnology, companies may adopt different commercialisation routes: either take
their technology directly to the market as a final product or channel it through the large
established companies that will then apply their know-how and resources to
commercialise it [Cetindamar and Laage-Hellman 2000]. Alternatively, they may
follow a hybrid model, combining research services and licensing with research for own
product development, in order to survive while aiming for an integrated activity in the
future [Pfirrmann 1999]. But, whichever strategy companies adopt, the marketing
process is an unavoidable step. Yet, biotechnology-based companies may face particular
marketing problems, due to the combination between the nature of the technology being
commercialised and the characteristics of the companies that developed it. In fact, these
are often young, highly innovative SMEs created by entrepreneurs with a research
background and, therefore, they may lack the resources and competences required to
define a market strategy and to implement an adequate marketing process. Thus, one
hypothesis to explore is that marketing process deficiencies are often present and raise
critical obstacles to business development, particularly in the case of companies
introducing more radical innovations.
2. The Biotechnology Industry and High-Technology Marketing
2.1 The Nature of the Biotechnology Business
Much has been said about the somehow disappointing results obtained by most lifesciences pioneer companies, if compared to the initial expectations [Enriquez and
Page 5 of 50
Goldberg 2000]. This is especially the case in Europe, which has been lagging behind
the US in this field [EC 2001, Storey and Tether 1996, Orsenigo 1999]. Factors like
financing shortages, technological problems, legislation barriers and low public
acceptance have been pointed out as causes for company failure in this area [EC 2001,
Sharp and Senker 1999]. It is possible that the marketing-related deficiencies are also
responsible for lack of business success in biotechnology.
In order to succeed in the market, companies have to address the marketing issues and
tackle them adequately. Biotechnology-based companies are a particular case, because
the strategic decisions and the marketing issues to handle may not be ordinary. In fact,
due to the science based nature of biotechnology, most biotechnology-based companies
are
technology
intensive,
being
often
involved
in
the
development
and
commercialisation of highly innovative products. However, high technology marketing
can be very complex, requiring companies to adopt counterintuitive strategies and to
possess good management competencies and, in some cases, enough resources to sustain
a delayed market entry processes.
The development of new technologies/products in biotechnology has been mainly
conducted by small science-based companies due to the division of labour between the
new technology- intensive companies and the existing companies, which possessed a
number of complementary assets in the production and marketing areas [Teece 1986].
As a result, although some companies can become fully integrated and grow, they
usually start as SMEs and the majority remain small and specialised [Orsenigo 1989,
Sharp and Senker 1999]. Thus, most of the new biotechnology developments – which
often involved radical innovations – were introduced by young science-based SMEs. It
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is recognised that the objectives and flexibility of small firms are more compatible with
this type of innovative business project [Christensen 1997]. However, they have a
number of limitations concerning resources and competencies that may constrain their
capacity to handle the requirements of high technology marketing. One such limitation
concerns their competence base, since they are often created by technical entrepreneurs
with a strong technological orientation but without formal management training.
Another limitation concerns their lower level of financial resources and the financing
problems they ha ve to solve in order to invest in long-term research and lengthy
commercialisation processes. As a result they often do not possess and may find
difficulties in accessing the necessary skills, especially in the strategic management and
marketing areas.
The typical company profile described above has implications for the internal
management process, since management procedures tend to be less formal and strategy
may not be formally expressed. On the other hand, companies are frequently unaware of
the specific nature of the marketing process in the case of radical innovations. In
conclusion, these features may cause additional difficulties and thus raise strong
obstacles to the development of the new biotechnology-based companies, which are
critical elements of the biotechnology system [EC 2001, Orsenigo 1989, Walsh et al
1995].
Because Europe's institutional set- ups, history, traditions and skills are different from
those of the US the creation and development of European biotechnology companies
followed a path that differs from that of their US counterparts [EC 2001]. As a result,
European companies are known to be, in general, smaller, less active in the global
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network of collaborative relations and in the markets for technology, being mainly
present in platform technologies and maintaining diversified strategic portfolios [EC
2001, Brandys 1998]. They are also more often integrated companies, selling products
and services, while American (and to some extent British) ones predominantly sell
patents or contract research [Mangematin et al 2001]. Marketing management may be
more complex but at the same time more critical for the integrated companies that
actually have to take the final products or services to the market. Nevertheless, most
existing research focuses on the commercialisation route linked to patents and research
contracts, especially in the pharmaceutical industry, where this business model is used
extensively. Given the weight in Europe of integrated and hybrid companies, that follow
a different business model [Mangematin et al 2001], research about the
commercialisation process should consider both types of companies, taking into account
the different marketing implications.
2.2 High Technology Marketing
The marketing management process in high technology companies requires the use of
basic marketing techniques, founded on the same philosophy and principles as applied
to any other product, guiding the company's offer according to market needs [Moriarty
and Kosnik 1987]. Therefore, the traditiona l concepts of strategic planning and
marketing management, as defined by Kotler [1991], are valid in such cases.
Consequently concepts like market selection, marketing- mix and differentiation are also
critical for high technology products [Moriarty and Kosnik 1987].
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Moreover it has been argued that the marketing of high-technology products may face
different challenges from the low-technology ones, particularly when the technology
has a disruptive or discontinuous nature [Brandys 1998, Moore 1995a, Lynn et al 1996].
The basis for this argument is the long period of time that precedes the dissemination of
major innovations and the list of marketing defeats related to high-technology products.
Indeed, there are many examples of well- managed firms that registered cases of failure
in the introduction of new technologies. According to Christensen [1997], the reason
behind such failures is the fact that their managers followed the widely accepted
management principles in conditions that were not `normal'. This author maintains that
a company attempting to introduce disruptive technologies should not strictly follow the
marketing rules that apply to sustaining innovations. By the time a disruptive
technology emerges, it results in products that have a worse performance, at least in the
near-term, although they have a very different value proposition that is valued by a few
fringe customers. Only on a later stage will this technology clearly become an
advantageous substitute for the existing technology. The problem, or the innovator's
dilemma, is that although the level of information about the market potential is low, the
advantages of a first-mover are very strong. This calls for investment decisions in a low
information situation. Hence, it is recognised that the best strategy definition cannot be
known in advance: it requires managers to develop plans for learning along the way,
creating a discovery-based planning through an iterative process of trial, learning and
trial again. With respect to entry strategies, the most appropriate strategy seems to be
using a new market niche, populated by customers that appreciate the product's
distinctive features. This author considers that small companies have more incentives
than large ones to introduce disruptive innovation, since their dimension is more
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compatible with the initial low returns, which is consistent with the role played by
biotechnology-based SMEs.
Other research present similar conclusions: Moore [1995a] and Lynn et al [1996]
explain the market difficulties of innovative products through the concept of
discontinuous innovation, which is similar to that of disruptive technologies.
Innovations can be classified in a continuum that goes from continuous innovation to
discontinuous innovation, passing through dynamically continuous innovation.
Continuous innovations are small improvements introduced over time, while
dynamically continuous innovations involve some change in technology, although the
product is used in the same way as its predecessors. Discontinuous inno vations involve
fundamental changes in the customers' attitude and behaviour and in the infrastructure.
A discontinuous innovation is more difficult to market, since greater changes are
required in the way things are done, but the rewards can be more significant.
Lynn et al [1996] point out that, in the case of discontinuous innovations, the product
development process should place less emphasis on analysis and more on probing and
learning from the experience. This probing process consists of experimenting potential
markets with early versions of the product, learning from the probes and probing again
with an improved version. This process should be seen as experimental design and
exploration, rather than blind trial and error. The authors also conclude that unless the
opportunity for a discontinuous innovation is a strategic imperative to the business,
management will fail to persist the probing and learning process.
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Moore [1995a] added insights from the Technology-Adoption Life-Cycle Model
[Rogers 1962] to the classical discussion on innovation discontinuity. According to this
model, when a company introduces a new technology in the market, the customer
adoption process follows a specific path in terms of the type of customer profile
reached, because people differ strongly in their readiness to try new products and new
technologies.
Figure 1 - The Technology Adoption Life Cycle
Source: Moore, Geoffrey [1995a]
The model is represented by a Bell Curve, with five segments representing groups of
customer psychographic profiles in terms of the relative adoption time: Innovators or
Technical Enthusiasts, Early Adopters or Visionaries, Early Majority or Pragmatists,
Late Majority or Conservatives, and Laggards or Sceptics. Moore [1995a] argues that
the explanation for the difficulties faced by many companies lies in the fact that there is
a major gap in the transition between Early Adopters and Early Majority. This is
because these two groups of customers are totally different in terms of underlying
values and thus communication between them is almost impossible. The main
difference is that the former are willing to bet on prototypes whereas the latter want to
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see whole product finished solutions before they buy. To cross the Chasm between the
early market and the mainstream, a company must therefore change the market strategy
[Moore 1995a]. The failure to cross this Chasm in the progression of the adoption cycle
has driven many technologies and companies to oblivion. The fact that the Chasm
typically goes unrecognised makes it even more dangerous. According to Moore
[1995a], a company that becomes aware of being caught in the Chasm must target a
very specific niche market that it can easily dominate and use as a base for broader
operations. It must identify the niche that presents the most compelling reason to buy
the technology and invest all its efforts and resources in becoming the niche leader. To
reach this market niche it must transform the prototype under development into a whole
product that has the characteristics that appeal to the chosen niche. When the company
wins four or five niche customers, the word-of- mouth effect will spontaneously start,
creating a very effective and inexpensive communication campaign that will help the
company achieve niche leadership and cross the Chasm. Once a company manages to
leave the Chasm behind and is settled as leader of a market niche, it will find itself in
the “Bowling Alley” stage [Moore 1995a and 1995b], when it must strive to gain
leadership in additional market niches. If the company implements a successful
“Bowling Alley” strategy, it will soon find itself in the “Tornado” phase, climbing to
conquer the pragmatists’ market. When this demand flow calms down, the company
finds itself on the mo re stable “Main Street“. If the company does not adapt its strategy
it will lose the opportunity to become market leader.
The evolution along the Technology-Adoption Life-Cycle for discontinuous innovations
requires companies to change market strategies at the various stages, often to opposite
approaches [Moore 1995a and 1995b]. This can be counterintuitive and confusing for
Page 12 of 50
the companies, making it a difficult path to follow. The challenge is likely to be greater
for companies with limited business and marketing competencies, as is often the case
with new biotechnology-based SMEs. Therefore, the problems typically faced by the
technology-based companies could be related with the difficulties to manage the
marketing process for discontinuous innovations, especially while crossing the Chasm.
Other problems could be related to their business definition, for instance, since it is
recognised that some technology-based companies tend to possess too many different
strategic business areas because of their high tendency for diversification. This tendency
reflects a research-oriented strategy that is found in companies whose entrepreneurs or
key people had research backgrounds, since the inquisitive spirit of a scientist often
drives him from problem to problem, diversifying the areas of research and crossing
barriers between different subjects. This tendency to over-diversify, especially in an
early stage, is often prejudicial to the company's development and success [Plaut and
Ilan 1987, Mustar 1998] since it does not allow the company to concentrate its scarce
resources and efforts in the same market-learning path.
Biotechnology-based companies may also face financial difficulties while they search
for venture capital or corporate investments. In the cases where this process is lengthy
or unsuccessful, companies may be unable to afford hiring managers and marketing
managers. In these situations, or when the entrepreneurs with research background do
not recognise the need for professional marketing staff, companies may lack the
necessary competencies for the marketing process.
Page 13 of 50
Therefore, it can be suggested that, while this type of company shows some advantages
regarding the process of biotechnology development and commercialisation, it is also
likely to face specific marketing problems. These may be particularly serious when the
companies are introducing discontinuous innovations and do not possess or are not able
to access or acquire the competencies necessary to address this process adequately.
The above discussion allows us to conclude that the commercialisation process of the
biotechnology-based companies should not be analysed through the same perspective as
for companies operating in less technology- intensive fields. The specific characteristics
of both the technology and the organisations developing it bring critically different
features to the marketing process that should be taken into account.
3. Methodology
3.1 Research Approach
This research aimed to understand the process by which the biotechno logy-based
companies take biotechnology products to the market, in an European context: the case
of Portugal. Assuming that the specific nature of biotechnology influences the
marketing process, requiring companies to set up marketing strategies and practices
adequate to the technological and organisational context where they operate, the
objective is to investigate whether these biotechnology-based companies are being able
to handle the specificities of their marketing process, considering both the
characteristics of their technological and organisational profiles.
Page 14 of 50
The basic research question is, therefore, whether and how do biotechnology-based
companies gain adequate market perceptions and set an adequate marketing process? In
order to answer this generic question, the following issues were addressed: a) Are the
companies able to go through the process of defining an adequate marketing strategy
and of adequately implementing such strategy?; b) Do companies engage in a learning
process, acquiring marketing competencies and dynamically adjusting their marketing
strategy ?; c) Is companies' ability to pursue an adequate marketing process, affected by
the type of innovation in presence (discontinuous or non-discontinuous)?.
Taking into consideration the arguments put forward in the previous section, the
working hypothesis was that marketing process deficiencies constitute relevant obstacles
to the development of biotechnology-based companies. Additionally the following
derived hypothesis were also tested: a) These marketing deficiencies are connected with
the absence or difficulty to access human resources with the relevant management and
marketing capabilities; b) Companies introducing discontinuous innovations reveal
additional marketing difficulties. The analysis was therefore centred on the strategies
devised by companies to reach the market and on the procedures adopted to handle the
marketing process and the research approach followed the traditional basic strategic
planning decisions and the marketing process. Given the characteristics of the actors
involved, aspects known to pose difficulties to this type of company, such as business
definition, market “probing and learning” and marketing of discontinuous innovations
were addressed in greater detail. Similarly, the impacts on the marketing process of
some typical characteristics of biotechnology-based companies, such as lack of
resources (human and others) and excessive technological focus were also given
particular attention.
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Using this research approach it will be possible to verify if the biotechnology-based
companies are in fact defining and implementing adequate marketing processes and if
these respect the specific needs of this type of company and products (technology) or if,
as proposed, their marketing difficulties may be responsible for their lack of success.
3.2 Research Methodology
In order to address this research problem, a methodological approach was defined that
takes into consideration the specificities of the marketing process in this particular
technological field and the characteristics of the companies that conduct it. The research
looked into the marketing process developed by each company, assessing its ability to
follow the steps that lead to the establishment of a strategy and its implementation, as
well as its capacity to learn and adjust to a changing environment. The methodology
adopted combined insights from generic marketing management theory and hightechnology marketing theories with knowledge about the behaviour of young
technology- intensive
companies,
being
specifically
designed
to
address
the
biotechnology case.
This methodology was based on the notion that companies must take the necessary steps
to ensure adequate strategic planning and marketing planning (or definition) and
implementation. This implies that they should become engaged in recurrent analysis of
the market, products, competition, etc., and decision making on the company's strategy
and implementation. Thus the approach consisted of investigating whether the
companies were following the basic procedures assumed to be involved in an adequate
marketing process [Kotler 1991], and additionally if they made adequate options
Page 16 of 50
considering their organizational and technological profiles, including the analysis of
whether the companies acknowledged the nature of the innovation in presence
(continuous/dynamically
continuous/discontinuous)
and
conducted
the
market
assessment process accordingly. When the companies were not performing an adequate
marketing approach and considering the specificities of their profile, efforts were made
to identify probable causes and consequences of this behaviour. Because the analysis
would not be complete if referring only to the present situation, it was also necessary to
look at the companies' ability to learn and adapt their strategy as the basis of the
evolution of marketing strategy and the changes introduced to it. The manager's
perceptions regarding companies' learning through time was also taken into account.
The analysis focused on the identification of deficiencies in marketing as a process or
mistakes in terms of strategy or implementation, rather than on assessing companies'
activity against a `perfect' marketing strategy.
The methodological approach to the marketing process was divided into three analytical
steps: strategic marketing definition; marketing implementation; strategy and
implementation evolution. These steps separate the strategy and its implementation in
order to facilitate the task of understanding the company's overall strategy and then
verifying if that strategy was adequately implemented. This separation also allows the
identification of the nature of problems in presence.
Strategic marketing definition: analyse if the companies are making a clear and correct
strategic definition of their business and of their market approach. This phase
comprehends strategic and marketing planning therefore it is critical for the marketing
process, since it provides the companies with a market orientation and a set of principles
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that will guide the implementation phase. Therefore it is crucial to go through the
marketing definition steps appropriately. The analysis was divided in stages. The first
concerned an evaluation of the level of clarity of the companies' business definition,
considering three dimensions: customer groups to be served, customer needs to be met
and the technology that will satisfy these needs [Abell 1980]. There is also an
assessment of the level and adequacy of the market research performed and the
companies' awareness in terms of the market segmentation and competition was
analysed, leading to the identification of the target market. In a second stage companies'
strategic decisions regarding competitive position and geographical market scope were
assessed. In a last stage an attempt was made to evaluate the overall strategic marketing
definition that would be adequate to the each company's characteristics and the market it
aims to serve.
Marketing implementation: analyse and evaluate companies' capacity to implement an
adequate marketing strategy, verifying if they consider the relevant information and
follow the strategy defined, going through the necessary steps, making the adequate
decisions and reaching out for the crucial resources. The analysis was also divided in
stages. The first involved the identification of the customer profile, in terms of their
level of attraction for discontinuous technology, considering the type of innovation in
presence, and also the evaluation of how companies introducing discontinuous
innovations were managing the evolution along the Technology Adoption Life Cycle
and, in particular, if they are being able to cross the Chasm. In a second stage the way
the companies differentiate and position their products, services or patents was analysed
and the third stage looked at the corresponding marketing mix. On the fourth stage, an
attempt was made to evaluate the companies' overall strategy implementation process.
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Strategy and implementation evolution: evaluate the changes in the marketing strategy
definition and/or implementation in order to identify adjustments due to a learning
process. Since the definition of the companies' strategy should be a dynamic rather than
a static process, of shaping and reshaping the business and products in order to match
their objectives and resources with the changing market opportunities [Kotler 1991], it
is important to analyse how the companies adapt their strategy through time, responding
to external changes or attempting to better fit the market. A further critical issue is the
extent to which companies are able to learn and accumulate knowledge in order to
reshape their strategy. This analysis was performed in five stages. The first concerned
the identification of areas of more intense learning. A second stage uncovered the
changes of marketing strategy that occurred during the companies' lifetime. Such
information was expected to provide some evidence on a learning process and on its
impact upon company's behaviour. A third stage focused on the competencies possessed
by the companies, to determine whether they met their needs and which skills deficits
existed that could hinder the learning process. The fourth stage was centred on the
learning process, addressing the mistakes identified by the companies and the new
capabilities created. The last stage reviews and evaluates the companies' ability to
engage in the learning process.
The three steps follow a logical marketing sequence but in practice strategy definition
and implementation are not necessarily distinct phases: there is a strong and continuous
interaction and they are sometimes developed simultaneously. Particularly in the case of
research-based companies, it has been noted that strategy is not always defined up-front,
rather it evolves over a period of time [Mustar 1991]. Nevertheless, for operational
Page 19 of 50
reasons, each step was addressed separately, evolution and interactions being
considered in the final step.
Having in mind the characteristics of the companies, a classical approach to the
marketing process and to market assessment would not be appropriate and might not
fully seize the desired information. The objective was to achieve an understanding of
the market perceptions and marketing strategy concepts underlying the company's
decisions. Being aware that small firms often do not have formal documents or even
explicit statements concerning strategic issues, although they still carry out some form
of “strategic thinking” [Kazanjian 1988, D'Amboise and Muldowney 1988], they were
not simply inquired about formal plans or documents. Rather, the method used was
speaking at length with the managers about their strategic views and their marketoriented activities, in order to gain an insight about the actual strategy. Also, marketing
technical terms were avoided when the interviewees were not familiar with this
language.
The strategies and practices adopted by biotechnology-based companies to
commercialise their technologies in a wide range of application fields (namely beyond
the pharmaceutical field) are still under-exploited areas of research. Therefore, this
research was largely exploratory and based in less formalised research methods [Miles
and Huberman 1984]. It had as starting point the literature about the development of a
biotechnology industry, the characteristics and problems generally faced by the
biotechnology-based companies and the specificities of high- technology marketing, but
adopted an inductive and interactive approach, in order to allow confrontation of the
empirical data obtained with the concepts present in the literature. On the other hand, it
Page 20 of 50
relied on qualitative methods to obtain in-depth information on the companies'
behaviour in the marketing field. Thus, the research instruments chosen were direct
interviews, based on a semi-structured questionnaire. The questionnaire included open
questions, with a natural conversation flow around a common set of issues, closed
questions about specific topics, questions using Likert scales and relevant quantitative
data gathering.
3.3 Empirical Setting
The empirical setting chosen to test the hypothesis and also the validity of the
methodology was the process followed by Portuguese biotechnology-based companies
to take their products to the market [Costa 2001]. A biotechnology-based company was
defined as a company that bases a significant part of its products or services on third
generation biotechnologies, or on second generation biotechnologies [Faulkner 1989,
Walsh 1993], when the technology is non-traditional and the company assumes an
active part in its development and/or specification. Sixteen companies were interviewed
comprising 85% to 90% of the population at the time of the interviews (1999). Two
companies were value-added resellers (VARs) that were introducing biotechnology
products and services that did not exist in the Portuguese market. They were included in
the analysis because their initial intention was to develop their own products or services
and because they perform the important role of new market openers for other
companies.
Page 21 of 50
4. The Marketing Process in the Portuguese Biotechnology-based Companies
4.1 Characterisation of the Companies
All the companies analysed were SMEs, half of them created before 1996 and the other
half created between 1996 and 1999. Six companies were classified as science-based
and eight as engineering-based [Autio 1997]. Nine companies were created by
entrepreneurs (average age of 37) and the remaining resulted from corporate
investments. Six entrepreneurs had previous occupational backgrounds linked to
research Jones-Evans [1995] and the most frequent motivations behind the
entrepreneurial act were the exploitation of market opportunities and the possibility of
working in their field of specialisation.
Concerning the initial resources of the companies, both the financial and human levels
were considered. In what refers to financing, in addition to equity funds, twelve
companies received some form of small grant, subsidy or prize that contributed to
complement the internal investment. Nevertheless, in order to finance the heavy
investments in research or to support market introduction, six companies had to obtain
additional resources, through service or commercialisation activities or the production
of an unrelated traditional product. This was often detrimental to companies'
development, since entrepreneurs had to devote time and resources to areas that brought
no knowledge accumulation in the relevant area. Other financial sources used by
biotechnology companies elsewhere, like bank loans and especially venture capital, had
a very low incidence. With respect to human resources, the majority of the companies
had, at start-up, management experienced staff, with only four companies mentioning
very limited or no experience in this area. Marketing skills were the scarcest: only
corporate investments had trained and experienced people in this area. Five companies
Page 22 of 50
employed people without marketing training but having previous market experience,
four companies had no marketing experience but had benefited from short specific
training courses and two companies recognised to lack marketing skills or experience.
The products, services or technologies offered by the companies were characterised
according to their development stage, type of innovation in presence, degree of
innovation, type of market and stage of the life-cycle achieved. Table 1 summarises
some generic characteristics of the companies and presents their main product features.
For confidentially reasons each company is identified by a letter of the alphabet (from A
to P, attributed according to a random order). Having provided a general overview of
the companies under analysis, the marketing process analysis will follow.
Page 23 of 50
Table 1 – Products, Services and Patents’ Characteristics
ID
Age
E/C*
Product/Service/
Patent
Develop. Stage
Type of Innovation
Life -Cycle Stage
A
1998
E
Patent
Testing
Dynamically Continuous
Introduction
B
1996
E
Patents
C
1986
E
Discontinuous
Dynamically Continuous
Discontinuous
Introduction
Growth
Growth
D
1999
C
Product (with a
service component)
Pure product
R&D
Testing
On the market
Dynamically Continuous
Growth/Maturity
E
1997
E
Product (with a
service component)
Discontinuous
Introduction
F
1995
C
Pure product
G
H
1998
1984
C
E
Pure product
Pure product
Dynamically Continuous
Dynamically Continuous
Dynamically Continuous
Discontinuous
Maturity
Introduction
Maturity
Introduction/Growth
I
J
K
L
M
N
1989
1992
1999
1998
1984
1995
C
C
C
E
C
E
Waiting for approvals
Product design
R&D
Testing
Product design
Market prospecting
Waiting for approvals
On the market
R&D
Waiting for approvals
(for certified product)
On the market
On the market
On the market
Product design
R&D
On the market
On the market
Dynamically Continuous
Dynamically Continuous
Discontinuous
Discontinuous
Dynamically Continuous
Discontinuous
Maturity
Maturity
Introduction/Growth
Introduction/Growth
Growth/Maturity
Introduction
On the market
Discontinuous
Introduction
On the market
Discontinuous
Introduction/Growth
O
P
Pure product
Pure product
Pure product
Pure product
Pure product
Product
with
a
strong
service
component
1997
E
Product
with
a
strong
service
component – VAR
1994
E
Product
with
a
strong
service
component – VAR
* E – Entrepreneurial investment
C – Corporate investment
4.2 Marketing Strategy Definition
The analysis of the three stages here included allowed to conclude that, although
exhibiting some difficulties in what refers to the business definition, 10 out of 16
companies appeared to have defined appropriate strategies. Nevertheless, six companies
defined inappropriate strategic marketing plans (A, E, I, J, K, M). The main problem
faced by the underperforming companies appears to be a tendency to over-diversify the
activities at a too early stage of the company's development, precluding the
concentration of scarce resources and efforts in the same market- learning path. Two
Page 24 of 50
such companies were facing technological blockages that limited the marketing strategy
spectrum. Companies that revealed greater difficulties in the basic steps of the
marketing definition process had no or low marketing competencies.
The results of each stage of analysis that lead to the above conclusions are as follows:
Stage 1 – The analysis of each company's business definition was expected to provide
an insight on how the companies view themselves presently and in the future. Table 2
shows that the majority of the companies were able to offer clear business definitions,
the exception being companies that denoted an excessive tendency to diversify their
business activity, loosing sight of their core competencies (A, E, K, M). According to
some authors, small and young companies should not invest in diversification but in
specialisation [Mustar 1998 , Plaut and Ilan 1987]. A strategy based on diversification is
riskier, since it requires the dispersion of the investment and resources throughout
several areas. In fact, the tendency to diversify does not allow the companies to totally
profit from the accumulated knowledge (both on market and technology) requiring them
to develop new learning processes every time they switch to a different technology or
market.
Page 25 of 50
Table 2 – Strategy Definition Steps
ID
Business Market
Definition Research
Segmentation
User Needs
Target
Market
Competitors
A
Unclear
Inadequate
Well prepared
Identified
In accordance
Believes to have none
B
C
D
E
F
G
H
I
Clear
Clear
Clear
Unclear
Clear
Clear
Clear
Clear
Adequate
Adequate
Adequate
Inadequate
Adequate
Adequate
Adequate
Inadequate
Identified
Identified
Identified
Identified
Identified
Identified
Identified
Unidentified
Clear
Inadequate
K
Unclear
Adequate
L
Clear
Adequate
Well prepared
Identified
In accordance
In accordance
In accordance
In accordance
In accordance
In accordance
In accordance
Pre-defined
without analysis
Pre-defined
without analysis
In
accordance
but hesitating
In accordance
Believes to have none
Knows who they are
Knows who they are
Knows who they are
Knows who they are
Knows who they are
Knows who they are
Knows who they are
J
Well prepared
Well prepared
Well prepared
Well prepared
Well prepared
Well prepared
Well prepared
Random or no
segmentation
Random or no
segmentation
Well prepared
M
Unclear
Inadequate
Identified
N
O
Clear
Clear
Adequate
Adequate
Random or no
segmentation
Well prepared
Well prepared
Identified
Identified
Pre-defined
without analysis
In accordance
In accordance
P
Clear
Adequate
Well prepared
Identified
In accordance
Unidentified
Unidentified
Knows who they are
Knows who they are
Knows vaguely of their
existence
Knows vaguely of their
existence
Knows who they are
Knows vaguely of their
existence
Knows who they are
An assessment of whether companies went through the necessary steps to define the
company's marketing strategy (Table 2), allowed us to conclude that: a) While most
companies seemed to be able to perform a minimum level of market research
(sometimes in quantitative terms, but more often in qualitative terms), it was not
necessarily an easy task and five companies failed to achieve it (A, E, I, J, M); b)
Market segmentation, was well prepared in most cases – in spite of some information
deficits – with the companies being able to indicate the main market segments and their
relative importance (exceptions being companies I, J and M); c) Only three companies
revealed clear difficulties in identifying unmet user needs that they would try to satisfy
(I, J, K), one of them being a very young company, without close contact with the
market; d) All but four companies (I, J, K, M) were able to give a clear notion of their
target market, coherent with the previous analysis; the ones that were unable to do so,
did not base their choices on an adequate analysis and were not conscious of the profile
Page 26 of 50
of the potential customers; e) The majority of the companies were able to clearly
identify the main competitors and their products, being also able to compare them with
their own products. Two companies that intend to sell patents (A, B) claimed to have no
direct competitors, but their analysis missed the potential indirect competitors. Three
companies (L, M, O) did not make an effort to identify their competition although they
were aware of their existence.
Stage 2 – This stage looked at the strategic decisions regarding the competitive position
and the market scope. Regarding competitive position, Table 3 presents results showing
that companies divided themselves mostly between those that prefer to serve niches and
those that choose to be market leaders or challenge the leaders. Only three companies
chose the less innovative, although not forcefully less profitable, role of market
followers. Regarding the geographical scope of their strategies (Table 3), there were
eight companies planning for international coverage, although some of them did not
know how and when they would implement it (D, E, G, I, K). Companies that had
already devised internationalisation strategies based them on agreements with
multinational companies, either to license patents (A, B) or to distribute products (C).
One company started with international focus but was forced to shift to the national
market (J). The remaining companies – mostly those with niche strategies – focused
primarily on the national market, although two would resort occasionally to the
international market, for excess production (H, J) and four were willing to
internationalise in the future (F, L, M, N).
Page 27 of 50
Table 3 – Marketing Strategy
ID
Strategy
National/International
A
Leader
International from the beginning
C
Leader
National but already expanded
F
Leader
National but expecting to expand
H
Leader
National from the beginning
D
Challenger
International from the beginning
E
Challenger
International from the beginning
G
Challenger
International from the beginning
M
Challenger
National but expecting to expand
B
Nicher
International from the beginning
L
Nicher
National but expecting to expand
N
Nicher
National but expecting to expand
O
Nicher
National from the beginning
P
Nicher
National from the beginning
I
Follower
National from the beginning
J
Follower
International in the beginning but shifted to national
K
Follower
International from the beginning
Stage 3 – In this stage an attempt was made to evaluate the degree of appropriateness of
the companies' strategic marketing definition. This evaluation was based on the way the
companies developed the marketing process, therefore the focus was more on the
procedures than on the content.
Considering that six companies were unable to adequately define a marketing strategy,
it can be concluded that the strategy definition phase presents relevant difficulties to the
biotechnology companies' development.
Page 28 of 50
4.3 Marketing Implementation
Considering the four stages analysis it can be concluded that only three companies were
found to have an inadequate behaviour (I, J, M), although several showed deficiencies
in their marketing implementation. There was one success story for crossing the Chasm,
but the remaining companies do not seem to be following the appropriate steps to
address this stage. On the other hand, the underperforming companies had
undifferentiated products with limited distribution and poor promotion. Two were
facing technological problems due to the rupture of alliances with foreign parent
companies. All of them had low marketing skills.
Because a few companies were not yet on the market (D, E, G, K, L), the analysis in
those cases considered the outline definition for future implementation. The results for
four stages of analysis are as follows:
Stage 1 – In this stage the companies' customer profiles were established, considering
the type of innovation in presence (Table 4). For companies introducing discontinuous
innovations (half of the sample) the company was also located in the respective stage of
the Technology-Adoption Life-cycle [Moore 1995a] (on the basis of the customers'
profiles and life-cycle stage). This allows for an analysis of their situation in terms of
Chasm crossing and for an evaluation of whether companies introducing discontinuous
innovations were being able to cope with the associated market problems. Only
company C had already crossed the Chasm (Table 4), while five other companies are
starting to face the problems related to the Chasm, and three others are still starting to
access their Early Market.
Page 29 of 50
Taking advantage of strong market knowledge and assistance from technical support
and regulatory bodies and benefiting from strong word-of- mouth communication,
company C quickly managed to prevail over the initial resistance of the consumers and
became leader in several niches. The present need to change the strategy in order to
create a wave of acceptance from the customers was understood and thus the company
was preparing to consolidate leadership in the Tornado stage. One company (N) had
identified the relevant market niche and was beginning to approach it. However, it was
preparing itself to move forward to other market niches and to a higher production
scale, ignoring the possible delays motivated by the Chasm. Two companies (E, H) are
starting to approach the market but did not identify the primary market niche. Company
H, opted for trying to reach the largest market segment – which is the one with lower
resistance to change and more capacity to absorb the technology – adopting a
“demonstration strategy” that may be appropriate for the agricultural market it targets.
But its progress may be undermined by the negative role played by public regulatory
bodies which unduly delay product certification. The VARs (O, P) are expanding the
customer base beyond the innovators, benefiting from word-of- mouth communication.
Even so, company O was not able to select a market niche to privilege and was trying to
reach several segments, while company P identified a primary target, but maintained
interest in other segments. However, both companies have limited influence upon their
products and thus may be unable to adapt the products to specific niche requirements
and cross the Chasm. Finally, Company B will not be required to cross the Chasm
because it adopted a patent selling strategy, transfering the problem to the buyer.
Companies K and L did not enter the market yet and have not identified a target market
niche.
Page 30 of 50
Table 4 – Customers Profile
ID
Customer Profile
Type of Innovation
Stage of the Technology
Adoption Life Cycle
C
E
N
O
P
H
K
L
B
Late majority
Innovators
Innovators
Innovators and Early-adopters
Innovators and Early-adopters
Innovators and Early majority
Will be Innovators and Early adopters
Will be Innovators
Will be Early majority
Will be Innovators
Will be Innovators, Early adopters and
Early majority
Will be Late majority and Laggards
Late majority and Laggard
Will be Late majority and Laggard
Late majority
Late majority
Late majority and Laggard
Discontinuous
Discontinuous
Discontinuous
Discontinuous
Discontinuous
Discontinuous
Discontinuous
Discontinuous
Dynamically continuous
Discontinuous
Dynamically continuous
The Bowling Alley
Early Market – Chasm
Early Market – Chasm
Early Market – Chasm
Early Market – Chasm
Early Market – Chasm
Will be Early Market
Will be Early Market
Will be Early Market
-
Dynamically continuous
Dynamically continuous
Dynamically continuous
Dynamically continuous
Dynamically continuous
Dynamically continuous
-
A
D
F
G
I
J
M
Stage 2 – The decisions on differentiation, positioning and product design process were
analysed, considering: effectiveness of differentiation, ability to define and
communicate a clear positioning and degree of customer involvement in the product's
development. Almost all companies included customer participation or consultation in
technological development, in order to direct the product to their needs (exceptions
being D, F, I, J M) (Table 5). Most companies were able to base their strategies in
effective differentiation, although in the case of companies E and K such differentiation
was only achieved towards traditional products and not in relation to advanced
competitors using a comparable technology. This problem was being addressed by
company E through the introduction of clearly differentiated new products. Finally,
some companies (D, M) compensated lack of product differentiation with low price
positioning, adopting a market challenger position (Table 3). The effectiveness of a
product's positioning is not easy to assess. Nevertheless an attempt was made to identify
the companies' perspective and the customers' perception about the product, for the
companies with products on the market. Most companies were able to determine a clear
Page 31 of 50
positioning strategy (exceptions were E, I, J and D), although some had difficulties in
expressing it in adequate terms and might not be fully aware of its importance. A
positioning based exclusively on lower price arguments (D, M, B), may be difficult to
maintain in a global market.
Page 32 of 50
Table 5 – Implementation Steps
ID
Product
Design
Differentiation
Positioning
A
Incorporating
customer needs
Incorporating
customer needs
Effective – Fast technical performance
C
Incorporating
customer needs
D
Technical
development
Incorporating
customer needs
Effective – Performance (quality) and Image
For the national market also Conformance to
local products and additional service assistance
Non-existing – the product is similar to its
competitors
First product: Effective – Reliability (compared
to traditional products); Non-existing if
compared to modern competitors
New products: Effective – Performance
(specificity), Reliability and added service
First products : Effective – Image
New products: Effective – Performance,
Reliability and Image
Effective – Timing advantage (produced in a
period with lower offer) and Quality (to be
achieved yet)
Effective –
Performance (quality and
productivity), Reliability. For the national
market also Conformance to local products
Non-existing – Quality is superior but only to a
small extent
Effective – Superior quality if compared to the
main competitors (not very valued by the
market)
Intended: Clear – Scientific/technical advantage
Obtained: Unknown*
First patents: Intended: Clear – Lower price (for the
final product); Obtained: Clear – Lower price (for the
final product)
New patents: Intended: Clear – Scientific/technical
Intended: Clear – High perceived quality
Obtained: Clear – High perceived quality (high price
and full support service)
Intended: Clear – Lower price
Obtained: Unknown*
First products: Intended: Clear – Reliability and Lower
price; Obtained: Unclear – Similar to competitors
New products: Intended: Clear – Performance,
Reliability and Lower price
B
E
F
Technical
development
G
Incorporating
customer needs
H
Incorporating
customer needs
I
Technical
development
Technical
development
J
Effective – Performance and other technical
aspects
K
Incorporating
customer needs
L
Incorporating
customer needs
M
Technical
development
Incorporating
customer needs
Non-existing – the product is similar to others
O
External
–
developed by
the suppliers
P
External
–
developed by
the suppliers
Effective (if compared to traditional products) –
Performance (quality, safety and added service
– customer training, consulting service, etc.)
Effective if compared to modern competitors
(performance)
Effective – Performance (effectiveness and
environmental impact) and Service (delivery,
customer training, consulting service)
N
Effective (if compared to traditional products) –
Superior performance and control. Non-existing
if compared to modern competitors
Effective – Performance (security and
flexibility) (to be achieved yet)
Effective – Performance
superior safety)
(effectiveness and
First products: Intended: Clear – Quality and Reliability;
Obtained: Clear – Quality and Reliability
New products: Intended: Clear – Effectiveness
Intended: Clear – Timing advantage, Lower price and
Quality
Obtained: Unknown*
Intended: Clear – Productivity, High perceived quality
Obtained: Clear – but could be reinforced by the product
certification
Intended: Unclear – none
Obtained: Unclear – product seen as equivalent to others
Intended: Clear – Quality and Low Price
Obtained: Unclear – no conscious effort to communicate
the positioning (also the price is not low compared to
new competitors)
Intended: Unclear – not defined yet (possibly it will be
based on strong image and fast delivery)
Obtained: Unknown*
Intended: Clear – Safety, High quality, Flexibility and
Low price (directed to SMEs)
Obtained: Unknown*
Intended: Clear – Lower price
Obtained: Unclear – Lower reliability and efficiency
Intended: Clear – Low price (with maintenance),
Effectiveness and superior safety
Obtained: Clear – Low price, Effectiveness and safety
Intended: Clear – Superior Performance and Safety
Obtained: Not very clear for the market since it is
difficult for the company to inform and do the
awareness effort for the technology
Intended: Clear – Time utility (delivery), Service, and
Quality perception
Obtained: Clear – Quality perception, Service
* Unknown because it is too soon for an evaluation.
Stage 3 – With respect to the marketing mix established by the companies in order to
implement their strategy, two main features were identified: a) While communication
Page 33 of 50
strategy was absent in three companies (I, J, M), three others (C, O, P) were able to
create a word-of- mouth effect, which emerged as a very effective communication tool
in their restricted market; b) A mix of distribution strategies was used by most
companies (distributor, influencers or distribution centres, exclusively or in addition to
direct shipping), with only four relying exclusively on direct distribution (F, H, K, O).
Stage 4 – The global evaluation was not conducted for companies whose market
implementation strategy was still in an early stage of development (D, E, G, K, L).
From the above analysis it can be concluded that the strategy implementation phase also
presents relevant difficulties to the biotechnology companies' development, remarkably
in the case of the companies introducing discontinuous innovations that are, in most
cases, unaware of the specificities of their situation.
4.4 Strategy and Implementation Evolution
The results from this five stages show that most companies felt the need to change or
adapt, in order to adjust to changing environments, to respond to modifications in the
internal conditions, or as a result of a learning process about their business. Past
mistakes identified by the companies are above all related to management and
marketing decisions and this area accounts for the most intense capability development.
The results from each of the five stages are as follows:
Page 34 of 50
Stage 1 – This stage addresses the importance of marketing and management learning.
Marketing was an important learning area for almost all companies. Those who did not
mention it either had not yet reached the market (D), or had not been able to maintain a
consistent market path, which resulted in low market knowledge accumulation (I, M).
Management learning occurred more intensely in the companies founded by
entrepreneurs, who did not have previous business experience. One company also
reported the accumulation of knowledge in the intellectual property rights area.
Stage 2 – With respect to changes in the marketing strategy, it may be concluded that
most companies that already had some contact with the market, did in fact introduce
more or less radical modifications to their initial strategy, in order to adapt to the actual
market conditions or to respond to other significant factors that affected them. Only
three companies believed their initial strategy remained adequate (C, F, H). Main
reasons for change included: closer contact with the market or contact with business
experts that helped them gain a better market perception (A, B); adoption of a “probe
and learn process” to find the adequate product and market for the technology
developed (E, N); loss of a major foreign shareholder whose input was critical in
technological and market terms (I, J). In the particular case of the two VARs, which
planned to later develop their own products, the inability to establish alliances and
obtain funds for research forced them to readjust their strategy and remain solely
resellers.
Stage 3 – Regarding the competencies balance between what companies recognise to
need and what they could effectively access (internally or externally), it can be
concluded that the most problematic area is management, and particularly marketing.
Page 35 of 50
Seven companies face serious insufficiencies in terms of management skills (A, E, I, J,
L, M, P). The main reasons mentioned to explain this deficit include difficulties in
finding people with management experience who are willing to work in small
companies and/or lack of financial resources to pay them, although there were also
some companies that did not recognise the need to recruit. These problems were
particularly critical to companies that were unable to build and retain a pool of people
with sufficient skills in most areas (J,M), and implied, in the most serious cases, the
impossibility of accumulating both technical and management competencies (I, P).
Stage 4 – Concerning the companies’ own assessment of the capabilities developed
along time, one possible approach is to see whether they identified mistakes derived
from lack of competencies and the learning process achieved from correcting them.
Only three companies considered not to have made mistakes, two of them because of
their youth (D, G) and another one because of its inability to reconstitute the past, due to
high staff turnover (M). Mistakes were frequently related to lack of management
competencies (in many cases in the marketing area) and only in one case to inability to
build technological capabilities (J). The inability to deal with public authorities was also
problematic for some firms (F, H). Regarding the new capabilities that the companies
claim to have gained along the process, all but one said that the market and marketing
were important areas of capabilities development. Most companies also mentioned
development of technological capabilities. Furthermore, it is also possible to conclude
that most companies – particularly the companies created by entrepreneurs – changed
significantly their initial market perception to adapt it to the market specificities.
Page 36 of 50
Stage 5 – Overall analysis of companies' ability to learn, acquire capabilities and
consequently adapt their marketing strategy.
It can be concluded from the analysis that the companies went through important
learning processes, above all in terms of market and that limitations in those processes
were due to human resources problems. The marketing and even management
competencies possessed by the companies seemed to have a major impact on their
marketing process performance, but not all companies saw them as a priority.
4.5 Marketing Management Process – Overall Evaluation
As a result of the analysis and comparison of the biotechnology companies' strategic
marketing process, it was possible to identify four groups, according to the adequacy of
the overall marketing process: 1, 2, 3 and 4, considering a descending order of adequacy
(Table 6).
Page 37 of 50
Table 6 – Skills and Competencies Balance
ID
1 C
Market
Strategy
Appropriate
Marketing
Implementation
Appropriate
D
Appropriate
Under development
F
Appropriate
Appropriate
G
Appropriate
Under development
B
Appropriate
Appropriate
H
Appropriate
Appropriate
L
Appropriate
Under development
N
Appropriate
Appropriate
3 A
Inappropriate
Appropriate
E
Inappropriate
Under development
K
Inappropriate
Under development
O
Appropriate
Appropriate
P
Appropriate
Appropriate
4 I
Inappropriate
Inappropriate
J
Inappropriate
Inappropriate
M
Inappropriate
Inappropriate
2
Marketing Learning
Innovation
/Chasm*
D – Bowling Alley
Marketing
Skills
Sufficient
Management
Skills
Sufficient
DC
Sufficient
Sufficient
No major changes
Product line improvements
No major changes (too soon)
DC
Sufficient
Sufficient
DC
Sufficient
Sufficient
Radical change
Support of external experts
No major changes
Major regulatory obstacles
No major changes (too soon)
DC
D – Early Market
D – Early Market
Chasm
D – Early Market
Insufficient
Sufficient
Sufficient
Sufficient
Insufficient
Insufficient
Strong change
Probing and learning
Radical change
Support of external experts
Radical change
Probing and learning
No major changes (too soon)
D – Early Market
Chasm
DC
Sufficient
Sufficient
Insufficient
Insufficient
D – Early Market
Chasm
D – Early Market
Insufficient
Insufficient
Sufficient
Sufficient
Strong change
Less ambitious strategy
Strong change
Less ambitious strategy
Strong change
Less ambitious strategy
Radical change
Less ambitious strategy
Radical change
Probing with low learning
D – Early Market
Chasm
D – Early Market
Chasm
DC
Insufficient
Sufficient
Insufficient
Insufficient
Insufficient
Insufficient
DC
Insufficient
Insufficient
DC
Insufficient
Insufficient
No major changes
Building market knowledge
No major changes (too soon)
* D – Discontinuous innovation
DC – Dynamically Continuous innovation
Companies that reached Group 1 in the marketing process were able, so far, to define
and implement an adequate strategy. With an adequate approach defined at an early
stage, companies C and F had no need for major changes and evolution was smooth.
Companies D and G are very young and not yet on the market and for that reason there
were only minor adaptations to the initial strategy, which seemed consistently designed.
Only one Group 1 company was introducing a discontinuous innovation and managed
to overcome Chasm crossing difficulties. All Group 1 companies possessed sufficient
management and marketing skills.
Page 38 of 50
Group 2 companies were those which somehow managed to define and implement
strategy appropriately, but denoted difficulties in that process. Company B benefited
from the support of external experts in strategy definition, learning from this experience
and acquiring capabilities at this level, in spite of insufficient marketing skills.
Company N went through an important probing and learning process that enabled
market adjustment, but with high costs in terms of time to the market. Company L did
not introduce major strategy changes because it did not reach the market yet,
nevertheless the difficulties it is likely to face to introduce a discontinuous innovation,
associated to a lack of marketing and management skills, predict some problems.
Company H faced problems regarding regulatory issues and the inability to deal with
them delayed the expected results. All Group 2 companies are introducing
discontinuous innovations and facing Chasm related difficulties and all were created by
entrepreneurs.
The majority of companies classified in Group 3 were not able to define adequate
marketing strategies and had very weak marketing processes (A, E, K, O and P).
Companies A and E were engaged in profound marketing changes, based on counselling
with experts and probing and learning. Nevertheless company A still shows a tendency
to loose focus and therefore it is not clear whether it absorbed the required knowledge.
Company E radically changed the market approach while probing the market, but with
high financial and time costs. Moreover, because the company also changed business
area, learning was limited. The majority of Group 3 companies were introducing
discontinuous innovations and faced difficulties in recognising and handling their
requirements. The majority lacked marketing and management skills. The exception
was company K, but even so it was unable to focus on one of two very different market
Page 39 of 50
segments. Companies O and P also faced technological constraints that hindered their
market approach.
Finally, all three companies classified as Group 4 were unable to define and implement
an acceptable marketing strategy, even though they were working with nondiscontinuous innovations (I, J and M). The reasons behind their inability to handle the
marketing
process
are
twofold:
technological
deficiencies
blocked
product
improvements, with negative consequences for their marketing strategy; and the lack of
human resources with adequate management and marketing skills keep the companies
from learning and evolving. Although their marketing strategies went through strong
changes, there was no significant learning or business refocusing in less ambitious
paths.
It was interesting to notice that the companies with the weakest performance (Group 4)
were corporate investments, created before 1995, which may be surviving artificially
with support from the parent company. They were unable to define and implement
adequate business strategies and obtain the relevant competencies. The two VARs, that
also have weak evaluations, are trapped by their technological limitations and if they
remain unable to cope with this problem, they will never become integrated companies
developing their own products. Finally, there was a group of companies that faced a
number of difficulties regarding business strategy and/or have some limitations
regarding management competencies, but their problems appear to be manageable, if
the companies reassess their business orientations and make some adjustments.
Page 40 of 50
5. Conclusions
This research intended to understand the process by which the biotechnology-based
companies take biotechnology products to the market. The objective was to investigate
whether these companies are being able to handle the specificities of their marketing
process, considering both the characteristics of their technological and organisational
profiles. The working hypothesis was that marketing process deficiencies constitute
relevant obstacles to the development of biotechnology-based companies. These
deficiencies are particularly felt by companies introducing discontinuous innovations
and are largely related to the absence or difficulty to access human resources with
releva nt management and marketing capabilities. A methodological approach for this
analysis was proposed and was tested using the case of the Portuguese biotechnologybased companies. The methodology considered three phases of the marketing process:
strategic marketing definition, marketing implementation and evolution of strategy and
implementation.
The research findings confirm that the methodological approach used is useful in the
assessment of the marketing process management in biotechnology-based companies.
The methodology fulfilled the objectives of respecting the specific characteristics of the
technology and of the companies commercialising it, allowing us to draw conclusions
regarding the research question and to verify the research hypothesis.
Concerning strategic marketing definition, the empirical research revealed that most
companies managed to get through the relevant phases of strategy definition: only five
failed to do so. But several experienced difficulties along the process, particularly
science-based companies whose entrepreneurs or directors had a research background.
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Deficiencies were found at the following levels: performing or acquiring market
research, market segmentation, identification of customer critical needs or identification
of competitors. But the main problem was the attainment of an adequate business
definition, neither too broad nor too narrow. Indeed, some science-based companies
revealed a tendency to over-diversify their business activity, following a typical
research-oriented behaviour, less adequate to the business world. Hence, the strategy
definition phase also presented some difficulties for the biotechnology-based
companies, especially in what refers to the critical stage of business definition.
A similar conclusion can be reached regarding the phase of marketing implementation.
Although only three companies were unable to describe conceptually acceptable plans,
several showed some deficiencies. These included: neglecting customers' involvement
in product development process, absence of product differentiation, risky low price
strategies, unclear positioning, no communication strategy. Nevertheless, it should also
be pointed out that three companies performed quite well, having such positive impact
on the market that they benefited from a strong word-of- mouth communication.
Because companies introducing discontinuous innovations face particular challenges,
their case was analysed in more detail. So far, only one out of the 9 companies had a
success story for crossing the Chasm. The remaining companies seemed unable to
recognise the problems associated to their situation, having difficulties in defining and
implementing Chasm crossing strategies. Their main problem was the incapacity to
identify or focus on the critical market niche to privilege, followed by inadequate
pricing and regulatory problems. For companies offering dynamically continuous
innovations, the market access process is usually less demanding in terms of marketing
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expertise and effort. In fact, in average, this type of companies (seven cases) faced more
straightforward paths to market, although some of them experienced other types of
problems. It can thus be concluded that the strategy implementation phase also
presented some difficulties to biotechnology companies' development, remarkably in
the case of the companies introducing discontinuous innovations that were, in most
cases, unaware of the specificities of their situation and unprepared to deal with it.
In what concerns the companies' capacity to modify their market strategy, most
companies felt the need to adapt their strategies, in order to adjust to external or internal
change and/or as a result of a learning process about their business. The most commonly
mentioned causes behind significant changes were: the counsel of external experts, the
results of probe and learn processes aiming to identify the market receptivity, and the
inability to develop or sustain alliances. The main mistakes identified by companies
concern management and marketing decisions and this area also accounts for the most
intense learning. In fact, most companies mentioned intense learning related to the
market and the strategies to access it, which enabled them to identify past mistakes and
to reorientate their strategies accordingly. Strategic changes, resulting from these
learning processes, occurred more frequently in entrepreneurial companies, possibly due
to their lower access to specialised marketing competencies at an early stage.
Exceptions to this trend were a few companies that appeared to lack the capacity to
absorb new knowledge, due to the absence of the necessary skills and competencies or
lack of ability to access them. Although this was particularly evident in the management
and marketing areas, it also occurred in technological areas, with a very serious impact
on companies' performance.
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An overall analysis of the adequacy of companies' marketing process enabled us to
define and characterise four groups: Group 1 – companies able to define and implement
an adequate strategy from an early stage and possessing the required competencies;
Group 2 – companies introducing discontinuous innovations that somehow managed to
define and implement a strategy appropriately, but that mentioned difficulties in that
process and experienced intense learning; Group 3 – mostly companies introducing
discontinuous innovations, unable to define adequate marketing strategies, having a
very weak marketing processes and experiencing profound changes; Group 4 –
companies introducing non-discontinuous innovations, unable to define and implement
an acceptable marketing strategy, as well as to learn from mistakes, mostly due to
incapacity to overcome competence deficiencies. In conclusion, only 4 companies
(Group 1) were able to straightforwardly handle the marketing process without
significant problems.
Summing up, it can be considered that, in addition to the generic difficulties that the
Portuguese biotechnology companies face in terms of technology, finance and other
non- market related issues, the market assessment factors also place relevant problems to
the companies, confirming the initial research hypothesis. Although most companies
had adequate perceptions about the market and the manner to reach it, most of them still
struggled to achieve an adequate management of their marketing process and, despite
their learning processes, several are still far from dealing adequately with this area.
Companies introducing discontinuous innovations experienced particular difficulties in
becoming aware of the obstacles in their path and in finding strategies to overcome
them, which also supports the hypothesis.
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It is equally relevant to point out that the biotechnology-based companies have been
able to evolve, learn and adapt. Most companies, especially the entrepreneurial ones,
introduced changes in their market strategy in an attempt to adjust their market
perceptions. They engaged in intense tacit learning processes, particularly in the
management and marketing areas, in order to reorient or refine their business strategy.
Starting- up with limited management and marketing competencies, many companies
underwent trial and error processes, along which they strived – with greater or lesser
success – to acquire or obtain elsewhere missing skills and develop new competencies.
The fact that companies with skills deficits had more problems supports the hypothesis.
This discussion brought some light to the market behaviour of biotechnology-based
companies, uncovering some of the problems they face and identifying the main
obstacles in their path to the market. However, because it used the case of Portuguese
companies as empirical setting, the results may be influenced by the environmental
factors relative to the Portuguese context, which influence the nature and performance
of the companies analysed. Nevertheless, this analysis enabled us to develop and test a
methodology that was found to be adapted to address this problem and could therefore
be applied to analyse marketing strategy behaviour of the biotechnology-based
companies in other settings.
Page 45 of 50
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