How and why does someone decide to start a business? Normally, the entrepreneurial process arises with an innovative idea of a product or service. The first thing that entrepreneurs do is to decide if their idea is worthwhile. Is it really a good idea? Is the product or service viable from the technological point of view? Is it going to sell? What results does market research reveal?
To answer these questions, entrepreneurs conduct feasibility studies and, if the results are encouraging, they make a business plan.
The feasibility study analyzes the product, the industrial sector, the organization and the economic aspect. The business plan investigates in greater detail whether the product will have sufficient demand to make its commercialization worthwhile and which business model is the most attractive for marketing it. It also analyzes the production and organizational aspects, and finally an economic and financial assessment of the business is made to determine the profitability of the enterprise. All those aspects help to have a detailed picture of what the business will be and to minimize the risks involved in creating new businesses.
Today, virtually all cautious entrepreneurs draw up business plans before marketing their product or service. However, the same importance is not given to integrating the market and “non-market” aspects.
Market considerations include the interactions between the company and other private agents, which are voluntary and consist of economic transactions and exchange of property. Non-market factors are those of society – public institutions, beneficiaries, government and the media – and they may be voluntary or involuntary.
Baron (2013) proposes that the non-market environment be analyzed and characterized according to four factors: issues, interests, institutions and information. Issues are the basic unit of analysis and focus. For example, in agricultural biotechnology, the issue is the discussion of regulatory policies for genetically modified food and the public’s reaction to these foods. Interests are the individuals and groups with certain preferences on the issue. Those with the main interests are the agricultural biotechnology companies, such as Monsanto; activists who are concerned about the dangers of biotechnology, like Greenpeace; and the public, which also has certain points of view on the matter. Institutions are those responsible for regulating interests. There may be government institutions, such as regulatory and legislative agencies. In the case of Mexico, there are the Federal Commission for the Protection against Sanitary Risks (COFEPRIS, acronym in Spanish) and the Inter-secretarial Commission on Biosecurity of Genetically Modified Organisms (CIBIOGEM, acronym in Spanish). In addition, there are non-governmental agencies, such as the media, and the public itself, which has certain feelings and resentments that come from their values and culture.
Information comes from the interested parties and from what institutions know and believe about the issues. In the case of biotechnology, much of the information concerns, on the one hand, the dangers to health and the environment of genetically modified products, and on the other, the greater efficiency of food production.
The relevance of the analysis will depend on each sector and the new technology to be marketed. The sectors in which the government plays a key role – because they require more regulation – are those in which it is imperative to analyze non-market strategies.
Graph adapted form Baron, 1995
The task of the entrepreneurs of new technologies is first to identify how important are the non-market factors, and in the event that they are relevant, to formulate and implement strategies that address the non-market issues of the new company.
For example, Google’s self-driving cars appear to have many advantages. According to the experts, these cars will reduce traffic, accidents, energy consumption and air pollution. From the engineering standpoint, they have been proven to work. Undoubtedly, the market demand will be great, and Google will create an innovative business model to market it, because the business plan makes it look like a very attractive business.
However, in order for it to really reach full market potential, it is necessary to analyze the non-market aspects. To market a new technology, it is not enough to know that there is a market and the technology works, but the entrepreneurs need to know what are the opportunities, challenges, public policies and public opinion.
One of the biggest challenges for Google cars is that in the United States, legislation varies by state. Currently, only four states allow self-driving cars on the road; another 11 states are studying the idea, and eight states have discussed it and failed to approve the cars. Discussion has not even begun in the rest of the country.
Another problem is the opinion of the media. In mid 2015, the official U.S. agency responsible for traffic security expressed its concern that hackers might attack self-driving cars and endanger public security. Other media warned that although self-driving cars are safe, they are not programmed to deal with other motorists who do not respect traffic signs. Public opinion has its own impression of the risks and benefits of self-driving cars.
The point is that a good part – if not all new technologies – needs to consider the non-market factors in the first stage, and this can make the difference whether or not they achieve their full market potential.
Entrepreneurs should take into consideration which public policies encourage or discourage the new technology. Many new technology companies develop personal relationships with deputies and senators, and that is a very valuable non-market asset. In addition, entrepreneurs with similar technologies can come together to formulate and implement joint non-market strategies, often through industrial chambers or associations. In this way, information can be provided and studies conducted that demonstrate the benefits (or the problems) of the new technology not only to lawmakers, but also to the media and the public.
In extreme cases, an entrepreneur may be forced to change certain aspects of his product or service to minimize the vicissitudes of the new technology.
Understanding non-market factors can give leadership to the company, and thus, higher profits, a better impression among future investors and more elements to face the competition. It is also important to analyze the non-marketing strategies of the competition. If the competition is very active in the media or among legislators, it will surely have the market leadership, even though its new technology is not the best.
Adapted from Deborah Stine, Carnegie Mellon University
In summary, for a product to be successful on the market, in addition to knowing if it works technically and if it has a large potential market, it is also necessary to know what non-market aspects are crucial and may be an opportunity or a challenge for the new technology. To do this, the four factors of the non-market environment must be analyzed and an appropriate strategy be developed.
References
Baron, D. (1995). “Integrated Strategy: Market and Nonmarket Components”. California Management Review. 37 (2) 47-65.
Baron, D. (2013). Business and Its Environment. Pearson.
Nonmarket Factors and the Commercialization of New Technology
ITAM
How and why does someone decide to start a business? Normally, the entrepreneurial process arises with an innovative idea of a product or service. The first thing that entrepreneurs do is to decide if their idea is worthwhile. Is it really a good idea? Is the product or service viable from the technological point of view? Is it going to sell? What results does market research reveal?
To answer these questions, entrepreneurs conduct feasibility studies and, if the results are encouraging, they make a business plan.
The feasibility study analyzes the product, the industrial sector, the organization and the economic aspect. The business plan investigates in greater detail whether the product will have sufficient demand to make its commercialization worthwhile and which business model is the most attractive for marketing it. It also analyzes the production and organizational aspects, and finally an economic and financial assessment of the business is made to determine the profitability of the enterprise. All those aspects help to have a detailed picture of what the business will be and to minimize the risks involved in creating new businesses.
Today, virtually all cautious entrepreneurs draw up business plans before marketing their product or service. However, the same importance is not given to integrating the market and “non-market” aspects.
Market considerations include the interactions between the company and other private agents, which are voluntary and consist of economic transactions and exchange of property. Non-market factors are those of society – public institutions, beneficiaries, government and the media – and they may be voluntary or involuntary.
Baron (2013) proposes that the non-market environment be analyzed and characterized according to four factors: issues, interests, institutions and information. Issues are the basic unit of analysis and focus. For example, in agricultural biotechnology, the issue is the discussion of regulatory policies for genetically modified food and the public’s reaction to these foods. Interests are the individuals and groups with certain preferences on the issue. Those with the main interests are the agricultural biotechnology companies, such as Monsanto; activists who are concerned about the dangers of biotechnology, like Greenpeace; and the public, which also has certain points of view on the matter. Institutions are those responsible for regulating interests. There may be government institutions, such as regulatory and legislative agencies. In the case of Mexico, there are the Federal Commission for the Protection against Sanitary Risks (COFEPRIS, acronym in Spanish) and the Inter-secretarial Commission on Biosecurity of Genetically Modified Organisms (CIBIOGEM, acronym in Spanish). In addition, there are non-governmental agencies, such as the media, and the public itself, which has certain feelings and resentments that come from their values and culture.
Information comes from the interested parties and from what institutions know and believe about the issues. In the case of biotechnology, much of the information concerns, on the one hand, the dangers to health and the environment of genetically modified products, and on the other, the greater efficiency of food production.
The relevance of the analysis will depend on each sector and the new technology to be marketed. The sectors in which the government plays a key role – because they require more regulation – are those in which it is imperative to analyze non-market strategies.
The task of the entrepreneurs of new technologies is first to identify how important are the non-market factors, and in the event that they are relevant, to formulate and implement strategies that address the non-market issues of the new company.
For example, Google’s self-driving cars appear to have many advantages. According to the experts, these cars will reduce traffic, accidents, energy consumption and air pollution. From the engineering standpoint, they have been proven to work. Undoubtedly, the market demand will be great, and Google will create an innovative business model to market it, because the business plan makes it look like a very attractive business.
However, in order for it to really reach full market potential, it is necessary to analyze the non-market aspects. To market a new technology, it is not enough to know that there is a market and the technology works, but the entrepreneurs need to know what are the opportunities, challenges, public policies and public opinion.
One of the biggest challenges for Google cars is that in the United States, legislation varies by state. Currently, only four states allow self-driving cars on the road; another 11 states are studying the idea, and eight states have discussed it and failed to approve the cars. Discussion has not even begun in the rest of the country.
Another problem is the opinion of the media. In mid 2015, the official U.S. agency responsible for traffic security expressed its concern that hackers might attack self-driving cars and endanger public security. Other media warned that although self-driving cars are safe, they are not programmed to deal with other motorists who do not respect traffic signs. Public opinion has its own impression of the risks and benefits of self-driving cars.
The point is that a good part – if not all new technologies – needs to consider the non-market factors in the first stage, and this can make the difference whether or not they achieve their full market potential.
Entrepreneurs should take into consideration which public policies encourage or discourage the new technology. Many new technology companies develop personal relationships with deputies and senators, and that is a very valuable non-market asset. In addition, entrepreneurs with similar technologies can come together to formulate and implement joint non-market strategies, often through industrial chambers or associations. In this way, information can be provided and studies conducted that demonstrate the benefits (or the problems) of the new technology not only to lawmakers, but also to the media and the public.
In extreme cases, an entrepreneur may be forced to change certain aspects of his product or service to minimize the vicissitudes of the new technology.
Understanding non-market factors can give leadership to the company, and thus, higher profits, a better impression among future investors and more elements to face the competition. It is also important to analyze the non-marketing strategies of the competition. If the competition is very active in the media or among legislators, it will surely have the market leadership, even though its new technology is not the best.
In summary, for a product to be successful on the market, in addition to knowing if it works technically and if it has a large potential market, it is also necessary to know what non-market aspects are crucial and may be an opportunity or a challenge for the new technology. To do this, the four factors of the non-market environment must be analyzed and an appropriate strategy be developed.
References
Baron, D. (1995). “Integrated Strategy: Market and Nonmarket Components”. California Management Review. 37 (2) 47-65.
Baron, D. (2013). Business and Its Environment. Pearson.
Stine, D. Non Market Analysis. Video https://www.youtube.com/watch?v=oiDsFNC6VCI&feature=youtu.be