TECH
SIZE OF THE
CUSTOMER
PORTFOLIO
THERE ARE PROS AND CONS IN HAVING A NUMBER OF
CUSTOMERS IN A FIRM. PROS ARE,
The above mentioned pros could be effectively utilized to develop
products rapidly and cost effectively. But, if the number of customers grows beyond a certain threshold level (as depicted in figure
below), new product development impedes since costs involve
with managing relationships increase with each addition of new
customer beyond the threshold level.
MAJOR CONSTRAINTS ARE,
•
High transaction cost
•
Limited available managerial attention.
For customer driven NPD / Innovation, if a firm is in its threshold
level it is advisable to further strengthen existing relationships
rather than establishing new customers at a higher cost.
NEW PRODUCT OUTPUT
•
Wide range of external information available to the firm
•
More customer settings – to test the applicability, validity
and functionality of the product
•
More ideas – for development products.
MODERATE PORTFOLIO
CUSTOMER PORTFOLIO
If a firm cannot handle many customers (due to limited resources,
inefficiency, inexperience, etc...), having too many can lead to
information overload and confusion since management is looking
at several customer information sources. This is particularly
relevant in for new technology firms.
Therefore, it is proposed that there is an inverted U-shape relationship between number of customer portfolio and a firm’s new
product output.
REVENUE CONCENTRATION WITHIN
THE PORTFOLIO.
According to Helena & Ramkumar (2008),
resource dependence theory states, the manner
in which a company depends on others (e.g.
customers) in NPD / innovation process with
regard to capital, materials, know-how and
reputation. For a company to carry out NPD /
Innovation, it depends on a third party who
supplies necessary requirements; that is, being
dependent on another party results in the
partner having more bargaining power.