Zooming In or Zooming Out: Entrants' Product Portfolios in the Nascent Drone Industry

Abstract

Faced with demand uncertainty and heterogeneity in a nascent industry, entrants often consider how many customer segments to serve by tailoring the usage breadth of their product portfolios. Portfolio usage breadth is the extent to which products in a portfolio collectively span distinct customer segments. We suggest that when entrants have use experience in contexts that are potential users of the new product, their portfolios exhibit low usage breadth, due to demand-oriented cognition and knowledge. The relationship is stronger for diversifying entrants relative to startups. The empirical context is the U.S. commercial drone industry, wherein entrants need to adapt their product portfolios for five robust and distinct customer segments of photography, short-distance inspection, long-distance surveying, agriculture, and aerial supply chain management.

Keywords: nascent industries, pre-entry experience, user innovation, product portfolios, drones