COMP 7880 E-Business Strategies Exploring new market spaces

COMP 7880: E-Business Strategies Exploring new market spaces Dickson K. W. Chiu Ph. D, SMIEEE, SMACM, Life MHKCS Jelassi & Enders: Chapter 7 1

Our Roadmap Mobile e-commerce strategy E-business strategy Strategy implementatio Strategy formulation n 12 Strategic analysis 3 External analysis 9 5 Internal organisation Strategy options Opportunities/ threats Strengths/ weaknesses 4 Internal analysis 6 Sustaining competitive advantage 8 7 Exploring new market spaces Creating and capturing value 10 13 Interaction with suppliers Implementation 11 Interaction with users/customers COMP 7880 -EN-2

Value curve provides insights into new market spaces High Performance Value curve of traditional bookstores Value curve of Amazon. com Price Speed Convenience Selection range Dimensions of benefit Face-to-face interaction Source: Adapted from C. Kim and R. Mauborgne, (1999). COMP 7880 -EN-3

The first step leading to value innovations is the ‘visual awakening’ n Assignment for team exercise Activities Objective Draw the value curve of a specific offering and compare it with competitors • Pick a specific company offering • Each team member writes down what he/she considers to be the key product/service elements • As a group discuss and reach consensus on the key elements • Rate the offering's level on each key element against the main competitors • Do you see other competitors with radically different value curves? COMP 7880 -EN-4

Display the current situation of the offering selected n Value curve of. . . Very high High Offering level Average Low Very low Non existent Key elements COMP 7880 -EN-5

Value innovations focus on customers rather than competitors Characteristics of conventional and value innovation logic Conventional logic Value innovation logic Assumption An industry's value curves follow one basic shape. New value curves can be shaped that solve traditional trade-offs. Strategic focus Build a competitive advantage and beat the competition. Pursue a quantum leap in customer value. Competition is no benchmark. Customers Resources Offerings Target the mass of buyers. Let some existing customers willingly go. Focus on key commonalities in what customers value. Retain and expand customer base through segmentation and customization. Focus on the Ask what we would do if we were differences. starting anew? Utilize existing assets and capabilities. Offer the products and services of your industry. Offer the total customer solution exceeding industry boundaries. COMP 7880 -EN-6

The second step leading to value innovations is the ‘visual exploration’ n Assignment for team exercise Activities • Adopt the perspective of a new industry entrant and reconsider the existing value curves Objective Create a new value curve for a specific offering • Use one or two of the paths to experiment with the creations of a new value curve – Industry: Ask which elements of substitute industries are un/important to target buyers? – Strategic groups: Ask which key elements of the offer compel buyers to buy up or buy down? – Buyers: Ask who are the decision makers and how would changing buyer focus affect the key elements? – Scope: Ask how is the offer currently used and what activities/services might be valuably incorporated? – Appeal: Ask how we can change the polarity of appeal? – Time: Ask what trends are impacting our industry and how do the key elements match • Plot a new value curve. Indicate which key elements are eliminated, reduced, raised or created COMP 7880 -EN-7

Display possible changes to the existing value curves n Value curve of. . . Very high Offering level High Average Low Very low Non existent Key elements COMP 7880 -EN-8

Six paths framework: creating value innovations in e-business 6 1 Looking across substitutive industries Looking across time/ trends Factors to be reduced? 2 5 Looking across functional Factors or emotional appeal to be eliminated? 4 Looking across complementary offerings Looking Factors across strategic to be groups created? Factors to be raised? 3 Looking across the chain of buyers Source: Based on C. Kim and R. Mauborgne (1999), pp. 83– 93. COMP 7880 -EN-9

Pinpointing possibilities for new value creation Does what we do really create consumer benefit? If not, which components or features of our product or 1 service should we Eliminate eliminate? 4 Where can we reduce our range of offerings? What costs us a lot of money but does not create benefit? 2 Reduce 3 Create What can we do that has not been done so far? Source: See also W. C. Kim and R. Mauborgne (1997), pp. 103– 112, and (1999), pp. 83– 93. Raise Where should we raise the standard of products or services? Where can we increase benefit by expanding our existing offering? COMP 7880 -EN-10

Value innovation shifts from head-to-head competition to creating new market Six path framework to create value innovations Head-to-head competition Creating new market space Industry Strategic group Focuses on rivals in its industry Looks across substitute industries Looks across strategic groups within its industry Focuses on competitive posi. Buyer group tion within strategic group Redefines the buyer group Focuses on better Product scope serving the own buyer group Looks across complementary offerings beyond the bounds of its industry Focuses on maximising Rethinks the functional/emo. Appeal value of the industry's products/ tional orientation services Adopts the results of future Time/trends Focuses on improving the trends today given appeal Focuses on adapting to trends as they occur COMP 7880 -EN-11

Finding the right timing for market entry in e-business is critical Early-mover advantages Learning effects Brand reputation Switching costs Early-mover disadvantages Market uncertainty Technological uncertainty Free-rider effects Network effects COMP 7880 -EN-12

Entrepreneurship process n Entrepreneurship and creativity is a process! n n n Identify an Opportunity Develop a Concept Determine the Required Resources Acquire the Necessary Resources Implement and Manage Harvest the Venture The Environment The Organizational Context Entrepreneurial Process The Concept The Entrepreneur The Resources Source: Morris et al. Entrepreneurship & Innovation 13

Entrepreneurship – How to find opportunities Types Methods Sources Detractors Perennial Deliberate search vs. Discovery The rules change Demographics change No need present Window is not yet open Occasional Market pull vs. Resource or capacity push Underserved markets Social trends Strong loyalties High switching costs Multiple Causes New customers to the market Satisfied customers Multiple Effects Increase in usage rates Shortages Easy for others to enter with alternatives Intense competition New knowledge Customers hard to reach Source: Morris et al. Entrepreneurship & Innovation 14

Entrepreneurship: Types of Innovations n n n n New to the world products or services New to the market products or services New product or service line that at least one competitor is offering Addition to existing products or service lines Product/service improvement, revision, including addition of new features or options New application of existing products or services, including application to a new market segment Repositioning of an existing product or service Source: Morris et al. Entrepreneurship & Innovation 15

Entrepreneurship - Entry Wedges Source: Morris et al. Entrepreneurship & Innovation 16