A team of researchers from American University, University of Arizona, University of Texas-Arlington, and Texas Tech University have contributed a significant piece to the Journal of Marketing that delves into a critical aspect of business strategy, explicitly addressing the pivotal question of “what to sell” that confronts companies and investors before making decisions on “how to sell.”

The paper, which will appear in the Journal of Marketing, is titled “A Theory of Product-Form Strategy: When to Market Know-How, Components, or Systems?” and features work by Kellilynn M. Frias, Mrinal Ghosh, Narayan Janakiraman, Dale F. Duhan, and Robert F. Lusch. This research spotlights a relatively underexplored area of technology commercialization: deciding how an innovation should be sold in the market.

The narrative of Apple’s evolution from intending to sell circuit boards to launching the Apple I and II, effectively kickstarting the personal computer industry, exemplifies the strategic pivot from selling components to systems. This anecdote underscores the significance of deciding on the product’s form—a decision that has broad implications not just in tech but across sectors.

While plenty of studies have examined the new product development process and how to bring products to market, the optimal form to sell an innovation—know-how, components, or complete systems—has received less attention. A case in point is the current reevaluation within the electric vehicle industry regarding battery design and the potential benefits of modularization, as discussed in a recent Wired article. This rethinking aims at optimizing design to minimize waste and improve efficiency, illustrating the strategic considerations involved in product form decisions.

The Journal of Marketing article extends these discussions by exploring the strategic choice between selling know-how, components, or systems. This decision influences everything from venture funding pitches on shows like Shark Tank to the fundamental approach of established firms entering new markets. The product-form Strategy (PFS) is integral to a firm’s development and commercialization process, impacting revenue models, market positioning, and competitive dynamics.

For instance, a company selling sensor-embedded baseball bats has to consider whether its direct customers are players and clubs or if it should target bat manufacturers by selling the know-how or components. The PFS decision influences how a firm positions itself in the market and its survival, especially for new ventures.

The research findings, derived from interviews with entrepreneurs, investment proposal analyses, and experimental scenarios, highlight that the challenge of technology integration influences the choice of PFS, the ability to market the product to end-users, and the protection of intellectual property. The study reveals a preference for selling complete systems over components and components over know-how when integration and IP protection are concerns and marketing capabilities are vital.

This comprehensive study distinguishes itself by separating the “what to sell” decision from the “how to sell” question, arguing that the former is a foundational strategic choice that must precede considerations of market entry strategy. It advises product managers, entrepreneurs, and investors to carefully weigh the implications of each product form, considering both the costs and the strategic positioning relative to competitors and the broader market.

In sum, this research provides a nuanced understanding of the strategic decisions surrounding product forms, urging businesses to assess their capabilities, market position, and the competitive landscape. It emphasizes that choosing whether to sell know-how, components, or systems is not merely tactical but fundamental to a firm’s strategic orientation and long-term success.

More information: Kellilynn M. Frias, Mrinal Ghosh, Narayan Janakiraman, Dale F. Duhan, and Robert F. Lusch, A Theory of Product-Form Strategy: When to Market Know-how, Components, or Systems? Journal of Marketing. DOI: 10.1177/00222429221149437

Journal information: Journal of Marketing Provided by American Marketing Association