Launching Multiple Products Key to High-tech Success

High-tech firms should aggressively market multiple product versions at the same time, the way Apple did with the iPhone and iPod Touch, both to attract early adopters and to build a network of application developers, according to research by Professor Hemant Bhargava.

Bhargava and co-authors Byung Cho Kim from Sogang University and Daewon Sun from the University of Notre Dame studied high-tech platform products launched over the past 20 years, including the Xbox, e-readers and the iPhone. The study, forthcoming in the journal Production and Operations Management, looks at products that operate in a two-sided market. Video game consoles, for example, serve game-playing consumers who can play their complex video games, but also game developers, who in turn get a platform to reach potential buyers.

To be successful, companies must overcome many obstacles with new platform products. “Often, entrepreneurs and firms are unable to successfully commercialize their innovation despite having technologically sophisticated products,” said Bhargava.

Start-ups often roll out a minimal product line during initial launch to avoid design complexity and higher fixed costs, and wait for substantial developer participation before expanding the product line. However, two versions of a product—basic and premium—could resolve the growth versus profitability conflict, especially when the value of the new platform product increases with the number of people using it.

For example, after launching the relatively expensive iPhone at the end of June 2007, Apple quickly added the iPod Touch, which does not have the calling feature and offers a less-expensive alternative for consumers. The iPod Touch had the effect of increasing the overall installed base of devices running iPhone applications, which made the platform even more attractive to potential application developers.

“Our research is founded on the proposition that growth and profitability need not necessarily operate in conflict,” Bhargava said.

In February, Bhargava was honored with the Jerome J. and Elsie Suran Chair in Technology Management. The endowed chair was established in 1999 by a generous gift from Senior Lecturer Emeritus Jerome Suran and his then wife, Elsie Suran.