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MARKETS, MARKETING AND NANOTECHNOLOGICAL OUTPUT
Marketing is often perceived as a market study – the study, which is certainly intended to ensure the highest possible volumes of goods sales. You either try to position your commodity as an “isolated” one at the existing market or you try to capture a new market niche. However, this marketing perception is not quite accurate. In fact, there is probably no precise definition everybody would agree to – except for the most common and insipid one, such as, for example, the definition that has become classical “…the type of human activity aimed at satisfying needs and demands by means of exchange”1. Along with that, there exist multiple amounts of marketing definitions that put special emphasis on certain aspects, which are most typical particularly for “here and now” of investigated market segment – the segment to which the manufactured commodities belong to. For some markets, these are pricing aspects, for other markets – advertising, for the third type of markets, as mentioned above – ascertainment (isolation from a number of substitutes) of the given commodity or creation of an independent commodity niche. The common thing is that solution of these problems is based on studying existing and potential markets. But the markets are very different.
If nanotechnological output marketing is under discussion, it is necessary first of all to designate peculiarities, which single out respective markets among others, if any. Or we need to agree that there are no such peculiarities. But even such a position is not a subject of antecedent discussion. A respective study is required.
Unfortunately, as of today more common is a different approach to nanotechnologies in whole and to nanotechnological output as to the object of marketing study. Marketing as a system of scientific and practical views is considered to be a given entity, nanotechnologies being only one of objects of its application.
This position, in the authors view, is in principle contradiction to the ideas that nanotechnologies are the source and a basis for formation of the new, sixth, technological setup. The technological setup replacement means, among other things, re-arrangement of the entire market mechanism, which requires different approaches to marketing.
This article is devoted to search and analysis of such approaches. Along with that, the authors do not claim to completeness of marketing analysis of nanotechnologies and nanotechnological output as a whole. Practical experience of conducted marketing studies2 shows that it is impossible as of today.
NANOTECHNOLOGICAL OUTPUT AS A SUBJET OF STUDY
An important peculiarity of nanotechnologies is their expected penetration into all sectors of the world and national industries. As of today, such interference has been demonstrated and continues to be vividly demonstrated by example of IT and telecommunication technologies, and all their aspects: from computering up to information communications.
It is nanotechnologies penetration into all areas of human activity poses a question: what products should be referred to nanotechnologocal output and what reasons are for that attribution. Is an aircraft considered the ITC-output on the grounds that the share of avionics makes more than a half in the airplane cost?
Similarly to nanotechnologies: what should be related to nanoproducts: nanotubes, used during production of aviation prepregs3, or prepregs themselves, or the wing or the fuselage for the plane made of these prepregs?
There is simply no correct answer to such kind of questions. This is the case of definition. But – and this should be taken into account – the amount of nanoproducts will be produced or more exactly factored in as such depends directly on the definition4.
Fundamental documents of nanoindustry development of Russia – President’s initiative “Nanotechnology Development Strategy”, “Nanotechnology Development Program till 2015” – define that the quantity of nano-containing output should make 900 billion Rubles in 2015. If the quantity is calculated in “planes”, the amount will not be too high. A classical example of such calculation was the attempt to factor in the cost of LADA automobile, its engine management sensor comprising a nano-component.
If we produce a nanopowder, everything seems clear. If we sold the powder – which is a nano-product for sure – and there are no doubts about existence of the nanomarket, nanoindustry and … But at this point it is better to cut short the potential list that finishes by a flattering word “nano-power”. Firstly, if the “planes” were not produced by you, you are simply a primary producer, even with a proud prefix “nano-“. Has it anything to do with high technologies if you purchased equipment for nanopowder production, which principally identifies its quality abroad? No, the mill is manufactured by the national economy, the raw material is domestic. But you have to buy the sensor, which controls dimensions of nano-particles, as well as its pre-assigned range (this particularly determines nanopowder quality) in the countries with highly-developed nanotechnologies. Then how do such nanotechnologies differ from traditional grinding production?
If attention is only paid to geometry of componenets5, then tires and tubes, deodorants and any other gels can be safely attributed to nanoproducts (the particles size of soot used for car tire production well corresponds to them).
When we say nano, we imply something different than dimensions. The authors of the article happened to participate in formation of the Criteria for attributing products to nanotechnological output. The following definition of output was suggested: produce of nanoindustry (nanotechnological produce) is the output (commodities, work, services) produced with the use of nanotechnologies and consequently possessing previously unachievable technical and economic characteristics.
In other words, not only dimensions are important but also availability of new properties caused specifically by nanoelements utilization. This does not only determines nanoproduct markets but also differentiates them into two fundamentally different groups.
The first group. You have managed to produce a substitute of an existing commodity via impairing new properties. The substitute is better, probably less expensive but it replaces an already existing product. The car or the plane has become more reliable, economical and safe. The skies slide not only on the snow. The cutting tool enables to process not only metals and their surfaces with lower expenditure. Bridges or pipes of a gas-transport system are more solid and lasting.
There are multiple examples of nanotechnologies application, which results in improving properties of already existing commodities. This is the current day of nanotechnologies. The markets for such goods can be considered already formed. The seller simply offers the commodity better that it used to be, the buyer has an opportunity to and is striving to buy the commodity with the best qualities. However, everything is not that simple here. The “price/quality” ratio question is of principle importance. It is appropriate to give two examples here.
Thus, if you know how to produce nanocomposite nanomaterials of aviation quality (the quality being fundamentally necessary in aircraft building), it does not save you from economic necessity to have less expensive and less “pretentious” materials for vehicle production. Is it reasonable to use nanomaterials (пусть и с менее выраженными качествами, полученными за счет применения нанотехнологий) in this segment of the market – this is a matter of economic analysis, which takes into account, for example, population’s purchase ability decrease under economic crisis conditions.
The second example is from the area of power efficiency, which is so pressing at present. The world-wide pursuit for LED luminosity per unit of power consumption has acquired features of sporting competition. Luminous efficacy (lm/W) of contemporary LEDs has exceeded not only luminous efficacy of electric incandescent lamps, fluorescent lighting and gas-discharge lamps but also that of the Sun. However, in chase of lumens we have lost the main thing. First of all, the light of such diodes does not fit for utilization6. A special term has been even thought out – “landscape lighting”, i.e.., such lighting, for which neither color rendition nor your eye health is important. Secondly, the price (in terms of expenditures) per such a LED is rather high to doubt any saving from their “power efficiency”. However, if another problem is posed: to obtain not so highly power efficient LED (up to 90% of the “standard”), but at the same time a less expensive one (by 90% of the “standard” LED price), giving normal warm white light due to traditional luminophor utilization, then there is an urgent market niche for such a LED7. But even in that case, its limitedness should be kept in mind. Probably, it is fun to see how flowers are warmed up in a glass kiosk in winter conditions with the help of power efficient lamps, – probably so: if there were no greenhouses and pigsties8.
Besides this, briefly discussed first group of nanotechnological output, there is the second group – commodities, production of which was previously impossible without applying nanotechnologies. Examples from the area of nanotechnologies are multiple but often incomprehensible. It is appropriate here to resort to already used analogy. Thus, before duralumins (and later – titanium9 and its allows) became available as aviation material, aviation development was principally limited by small airplanes.
It should be kept in mind that the boundary between the two groups is indistinct. Thus, the A.A. Bochvar All-Russian Research Institute of Inorganic Materials (VNIINM) has developed the Cu-Nb-nanostructure-based conductor-nanomaterial with unique properties. The material is at the same time solid almost like steel and is a good conductor almost like copper (Fig. 1, red curve).
Figure 1. Comparative electromechanical characterisitics of a new Cu-Nb-based nanostructured material (according to the A.A. Bochvar All-Russian Research Institute of Inorganic Materials (VNIINM) data)
Utilization of this material as wires of high-voltage lines is limited by high price of the material10. But it is already determined by established mass demand for it, which should be expected for a new nanostructured conductor.
Nowadays, the above material finds its application to build contact network for future Russian railway superhigh-speed electric trains. When trains move at the speed of 350 km/h and more, contact network solidity requirements become a fundamental factor, limiting the opportunity per se for moving at such high speed.
Thus, an example of “intermediate” product is in place – the product, which has or may have application in traditional market niches and at the same time creates fundamentally new markets (high-speed traffic of railway trains).
Another example of nanomaterials that create fundamentally new opportunities and are also applicable in traditional areas are nanostructured superconductors. It is superconductor nanostructure11 that makes possible its application in industrial power industry, power units, superpower magnets and contemporary medical devices, such NMR-diagnostics devices.
Production of such nanostructured conductors is an independent subindustry of the national industry (Fig. 2).
Besides these “borderline” cases, there are opportunities, consequences of which are difficult to imagine today.
Thus, opportunity for appearance of the personified medicine market aimed at peculiarities of a specific organism is connected with expected nanobiochip appearance. Nanobiochips enable proteomic analysis of a person’s level of health judging simultaneously by 200 thousand parameters and even more via the standard laboratory analysis method. The point is that it is not only possible to precisely diagnose what the patient has fallen ill with: it is possible to diagnose what the patient may or will definitely fall ill with, and to prevent the disease. The opportunity to cure cancer prior to appearance of cancerous tumor or even malignant cells seems almost unreal today, but taking into account development of nanobiotechnologies, proteomics and genomics this is not the matter of a distant future as it may seem, given that the Russian Federation participates in the international project “Human proteome”.
What will be the goods and services markets connected with development of nanotechnologies in the areas where the latter do not replace traditional technologies but create fundamentally new opportunities? For example, how can we analyze their potential capacity, what prices should be taken into account? To understand complexity of the issue, it is useful to give an example from the past. Before the PC era started, there existed electronic computers, the cost of a single operation by them was incomparably higher than it is today12. If we convert into the 1975 prices, for example, the cost of computing operations fulfilled nowadays only on the computers at the disposal of children who use them as toys, we shall get a breathtaking result. Is it possible to discuss the market capacity at the moment when its rapid development is possible? What should be kept in mind?
This is not an idle question for nanotechnologies. Expectation is connected particularly with nanotechnologies that expenses on production of necessary goods and services will be drastically reduced, that we shall get new opportunities that were previously inaccessible, without increasing dramatically the consumption of available basic resources. “Key problems of civilization - power, ecological safety and food security, quality of life, education and public administration, struggle against poverty, diseases and terrorism - can be solved in the future with the help of achievements in nanotechnologies”13.
So, we have two types of nanotechnological output markets: traditional markets, where nanotechnological output, possessing relative advantages, forces out its traditional substitutes; and new emerging markets, for which appearance of new goods and services (which were previously feasible or probably imaginable) is typical.
The first type of markets may be and is the subject of marketing analysis, these markets can be estimated and analyzed to a reliable extent. The second type are the markets “hidden” from our analysis in the framework of traditional marketing. However, these “hidden” markets determine the future already in the medium-term.
NANOTECHNOLOGIES MARKETS AND THE END PRODUCT
But nanotechnological markets are hidden from us, from our analysis not only because they are in the making, not only due to their fundamental novelty. There is a common aspect typical of high technology markets, which is connected with their institutional structure. This is vertical integratedness of the markets.
What is the subject of traditional marketing analysis? Open markets, i.e., the markets where (even within established rules and limitations) the players freely offer competing goods14. Such a market looks like that: today, I have bought the commodity from one seller at a certain price, tomorrow I shall buy it from another seller at a different price. Such markets comprise commodity exchanges, consumer markets and many others. However, there are no “markets” among them based on contracting and subcontracting. The latter are particularly typical of the high technology output production process, they “mediate” the production cycle.
Of course, we can try to refuse vertical integration when producing and operating high technology output, but such “experiments”, as experience showed, lead to disastrous effects: if a “component” goes wrong in the upper-stage rocket of a launch vehicle, civil aviation flight safety falls below the permissible level, etc.
Of course, we can proceed from the notions that nanotechnologies are something “simple”, “accessible to everybody” and “safe”. This is indeed true for a number of nanotechnologies.
Thus, for example, creation of special nanocoatings for metal processing cutters partly meets these “criteria”. Consequences of low-quality tool-tip processing may be compensated in the course of production, for example, via establishing stricter final checking, rejection.
But if we produce a powerful turbine, reactor vessel, we shall have to “reject” the product as a whole: in this way more than a year-long labor of a whole plant will probably be “rejected”.
There is the only way out – to control the quality of purchased cutters throughout the entire production cycle, starting from raw material (nanopowder) supply and compliance with technology.
It comes down to vertically-integrated quality control, which allows for a complicated contract system of production process participants: contractor and subcontractor.
Foreign literature has called market organization of this kind clusters since the time books by Michael Porter5.were published. This particular name is included in documents (and their drafts) stipulating foundations for research and engineering development of the Russian Federation, namely the Concept of the long-term social and economic development of the Russian Federation till 2020, “Innovative Russia – 2020” (Strategy of innovative development of the Russian Federation till 2020 (Draft)) and Program of nanoindustry development in the Russian Federation up to 2015.
Along with that, a more distinct term was previously in place – vertically-integrated structures. This term reflects essential peculiarities one of two types of clusters, which is most typical of high-technology industries.
Markets of vertically integrated companies, based on long-term contracting, are not open for marketing analysis from outside. The most vivid examples of such markets (companies) may be markets of Boeing, EADS (Airbus), Lockheed and a number of electronic industry companies.
Such companies’ activity is normally visible from the outside only by the end product: nanotechnological (as well as other high-technological) components are hidden by patents, know-how and other intellectual property protection instruments.
At the same time, access to such market is limited in principle – access means signing a long-term contract subject to contractor’s terms after preliminary evaluation/certification procedures, etc. In other words – these markets (intermediate commodities in the course of end product manufacturing) and access to them is strictly controlled by the contractor.
Information about these markets is disclosed by the contractor only to the extent it is to his immediate interests.
In these circumstances, a comprehensive marketing study of respective markets can be performed on behalf of and upon consent of such contractor or a group of them.
Under Russian conditions, the role of vertically-integrated structures with different level of success are currently often played by government entities: agencies and government corporations such as ROSCOSMOS (Federal Space Agency of the Russian Federation) and Rosatom (Russian Federal Atomic Energy Agency). Along with that, a task is posed to set up 5–7 high-technology companies that are able to successfully enter by 2020 international markets of high-technology output (in the areas where the Russian Federation upholds technological leadership in the world).
The marketing study goal therefore is the question about precise positioning of such areas and definition of scopes of activity of such companies. Conditions of their establishment should, in the authors opinion, make them more open from a technological perspective, which will enable to analyze their contract markets at least in the medium-term.
NANOTECHNOLOGIES AND GOVERNMENT STATISITCS
The state of government statistics, which is so needed for marketing study purposes, has been most accurately and concisely reflected in the position of the RF Ministry of Economic Development:
“A separate problem is the government statistics system is unadapted to management goals of innovative development. Statistical data reflecting key parameters of innovative development become accessible wit a several-year lagging behind. The statistical indicators structure per se reflects to a large extent the tasks of public management in industrial era. It does not fully meet the current-day tasks. Urgent ideas about the state and trends of development in innovative sphere can be compiled mainly now based on outcomes of inquiries and investigations, which are performed unsystematically upon the initiative of civic organizations and private companies”.16
Thus, two objective problems of “secretiveness” in the nanotechnological output markets: their fundamental novelty and institutional “closure”, are added by the third problem – a subjective one: lack of appropriate government statistics.
It is not even the matter of delaying such statistics. As is generally known, appropriate classifiers make the foundation of statistics. These classifiers enable to correctly attribute certain products to respective markets, which, in turn, afford ground for correct economic procedures and assessments. However, the contemporary classifier does not meet these requirements even to a partial extent. It is sufficient to state that at least 90% of all nanotechnological markets are classified under the “Others” section.
Development of such classifier both in the interests of government statistics and of national marketing is a critical task. Unfortunately, the authors believe that it is impossible to consider successful the attempts, which have taken place so far.
Along with that, formation of appropriate statistics is quite traceable outside the scope of government statistics (or at least it passes ahead government statistics). The national nanotechnological network could become such an instrument, where each participant would voluntary take up an obligation to to provide statistical information about its own activity in the sphere of nanoindustry. Besides developing forms and classifiers for appropriate statistics, quick fundamental growth in the number of the National Nanotechnological Network (NNN) participannts is required.
* * *
So, the task of marketing research in nanoindustry hinges on resolution of three aspects of “hidden” nanotechnological output markets. At least two aspects – market novelty and formation, and contractual character - are apparently of principle nature, thus requiring development of new instruments for marketing analysis, which will be rather based on expert judgments than on statistics and econometrics. Economic procedures should also be based on new approaches, such as evaluation of nanotechnological output volume via penetration factors and end product (nano-containing product) volumes. A simultaneous process of establishing respective statistics and instruments – first of all, appropriate classifiers – is needed.
Solution of these problems will enable marketing researches to become really useful for national nanoindustry growth, given multiplicity of interests of its participants: government – for strategic planning purposes; contractor corporations – for the purpose of their positioning in external markets; the National Nanotechnological Network participants – for the purpose of efficient business in high technologies area.
1 Kotler P. Marketing Essentials. M.: Rosinter. 1996. p. 9.
2 See for example: Nano Market: from nanotechnologies towards nanoproducts // G.L. Azoyev [et al.]; edited by G.L. Azoyev. – M.: BINOM. Laboratory of knowledge. 2011. 319 p.: illustrations + 1 CD-ROM. – (Nanotechnologies).
3 Prepregs – nanocomposite materials - semi-processed goods.
4 The penetration factor method to factor in nanotechnological output was suggested by the authors in the course of developing Criteria for attributing the output to nanotechnological products.
5 Nanoobject – the object, linear dimension of which is (at least in one measurement) about 1–100 nm.
6 We are talking about the so-called white LEDs used for lighting. Bright, power efficient LEDs of red and green color have found a market niche – traffic lights and similar devices.
7 For example, LEDs being developed by a group of companies “Nitrid Crystals”, St. Petersburg.
8 It should be reminded here that electric incandescent lamps of more than 100 Watt have already been prohibited by law.
9 A good marketing example: it is erroneous to consider titanium only as part of aviation material: according to the 2005 Titanium Corporation data, annual titanium consumption in the world was as follows: 60 % – paint; 20 % – plastic; 13 % – paper; 7 % – mechanical engineering, including aircraft construction! Similar mistakes seem to be also typical of new nanomaterials.
10 It should be noted here that the outstanding Russian scientist D.I. Mendeleyev was awarded a medal made of aluminum– the material more precious than gold.
11 Without such nanostructure, superconducting will be destroyed by magnetic field.
12 Moore’s law affirms that computer power doubles every 18 months. Since 1975, computer power has increased by more than 16.8 million times.
13 President’s initiative “Nanotindustry Development Strategy”.
14 With reservations given at the beginning of the article.
15 Porter Michael E. On Competition: Translated from English – M.: “Williams” publishing house. 2005. 608 p. Porter Michael E. Competitive Strategy: Techniques for Analyzing Industries and Competitors / Michael E. Porter; Translated from English – M.: Alpina Business Books. 2005. 454 p.
16 Innovative Russia – 2020 (Стратегия инновационного развития Российской Федерации на период до 2020 года). Проект.исследования и разработки
S.B. Taranenko, K.V. Ivanov
“Kurchatov Institute” National Research Center
Akademika Kurchatova Sq, 1123182, Moscow,
"Russian Nanotechnologies" Journal # 9-10, 2011, published by The Russian Nanotechnologies journal.