Thursday, April 20, 2006

Market Knowledge: Part 2 - Smarts Alone Don’t Count for Much

In my last entry, I discussed research conducted at Case Western Reserve University and published in the Journal of Marketing that explored how a company’s market knowledge and strategic actions drive its innovation and performance over time. I have one more point to make before we leave this study.

Knowledge is interpreted information — beliefs, understandings, commitments, etc. We create meaning by distinguishing and valuing information.

In the research, decision makers’ knowledge about customer preferences was assessed through a series of questions that they answered immediately after they had made decisions but before they had seen the performance outcomes. They marked the location of various customer segments' ideal points on a perceptual map. The accuracy of their knowledge was judged by the distance between the points they specified on the map and the ideal points for each customer segment, provided by a simulation tool.

The results confirmed that if there is little shared knowledge in a firm, an increase in an individual’s overall market knowledge has no impact on innovation effort. On the flip side, more dynamic shared knowledge environments act as catalysts for higher individual levels of market knowledge, generating significantly greater levels of innovation.

The results also suggest that innovation effort takes shape over time under the influence of opposing forces: market knowledge diffusion, which propels innovation, and a “complacency” with past performance, which hinders it.

For the whole story, check out "Actualizing Innovation Effort: The Impact of Market Knowledge Diffusion in a Dynamic System of Competition" by Detelina Marinova from the July 2004 Journal of Marketing at

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