Superior technology doesn’t always win
Superior technology doesn't always win
The product marketing team for a protein analysis instrument were seeing sales numbers stagnate and increasing competition drive down price. The company had been first to market and had been highly successful for over a decade. They were technically superior to the competition and had been considered market leader for almost a decade. However, multiple competitors had entered the market in the last 2 years and one company in particular was eating their lunch.
 
We started to talk to customers and found that most also owned a competitor instrument (or two) and many non-customers owned the cheaper, less superior competitor instruments. Customers shared with us the fact that they found the market leader’s instrument very complex to use which meant that the operator needed to be technically very knowledgeable; something that often took years to learn as an apprentice to a master user. The competitor’s instrument on the other hand had been developed to be extremely quick and easy to use. While the data was not always as robust, it did give accurate relative scores. This meant that customers used the instrument to do screening and quick exploratory experiments to define assay conditions which they then transferred on to the more sophisticated instrument to do the final assay.

The competitors had effectively captured a much larger market while the leader’s technology remained niche serving those tech savvy few who had the know-how and disposition to master the complex technology. This proved to be a classic case of Disruptive Innovation*

Simply dropping the price would only help in the short term as a large proportion of the market would never buy the instrument because of its usability issues. Our recommendation was to look at a range of short term options to keep the company in business (e.g. price repositioning, software upgrades to improve usability, free training etc.) while developing a long term strategy which needed to consider whether to redesign the instrument, acquire a competitor or exit the business. 

Taking no action meant facing a slow and lengthy decline. Even market leaders need to stay in close contact with customers to anticipate changes in their needs and fend off competitors who can redefine a market place very rapidly. 

Even market leaders need to stay in close contact with customers to anticipate changes in their needs and fend off competitors who can redefine a market place very rapidly."

* “Disruption” describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses. Specifically, as incumbents focus on improving their products and services for their most demanding (and usually most profitable) customers, they exceed the needs of some segments and ignore the needs of others. Entrants that prove disruptive begin by successfully targeting those overlooked segments, gaining a foothold by delivering more-suitable functionality—frequently at a lower price.

HBR Article: What Is Disruptive Innovation? Clayton M. Christensen, Michael E. Raynor, Rory McDonald, DECEMBER 2015