Biz model 3 value proposition, cust selection

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  • People don’t know what they want with respect to many things. We arent very rational in many ways
  • Tell them the old story about shoes. Two marketing analysts went to a poor country to investigated the market for shoes. One reported: no market, nobody wears shoes. The second reported: huge market, nobody wears shoes.
  • Tell story about how people often give reasons why a technology wont succeed even when they don’t know. They feel like they have to say something. Tell story about SUP and indexing
  • And this is easier to read than when u read in full-screen mode. Then u only see one page at a time. Why do we even have pages in electronic documents? Must think critically about products, not just try to use them
  • Anybody hear of kickstarter?
  • Who were the customers for these products?
  • who
  • Why might a consumer want the feeling of texture?
  • These slides focus on the hardware and not the software. Besides developing the software, running it requires computing power. How much?
  • Why would we want a smaller or more flexible light? Who must be involved in order to take advantage of small and flexible lights?
  • Where do we want thinness, response time. How about readability in daylight?
  • How much better are OLED displays for these applications? Will someone pay the extra price?
  • Bio-electronic chip senses electric charges, elasticities, forces and pressures
  • What kinds of products can we make as we combine these different materials?
  • Biz model 3 value proposition, cust selection

    1. 1. Value Propositions and Customer Selection A/Prof Jeffrey Funk Division of Engineering and Technology Management National University of Singapore
    2. 2. Business Model  Value proposition: what to offer and how to differentiate  Customer selection: whom to serve and not serve  Value capture: dominant source of revenues  Scope of activities: what activities to carry out and what relationships to have  Strategic control: how to sustain profitability
    3. 3. Outline  Customer needs  Market segments and customer selection  Definition of value proposition  Examples  Quantitative methods  Conclusions
    4. 4. Simple Definition of Marketing  To determine the NEEDS and wants of target market and deliver the desired satisfaction more effectively and efficiently than competitors
    5. 5. What is a Need?  Understand needs from perspective of: ◦ Economic – what are the costs and benefits? ◦ Functional – what does a product do? ◦ Psychological value – how do I feel and what makes me feel better?
    6. 6. Don’t Assume Everyone is Like You  Common mistake by engineers  Many people emphasize psychological value more than do engineers, who are taught to emphasize economic or functional value  You need to see the world through other people’s eyes
    7. 7. What is a Need? (continued)  Understand needs from perspective of: ◦ Economic, functional, and psychological value  Collecting data on customer needs ◦ Surveys ◦ Focus groups ◦ Analysis of buying patterns  What are the broad trends that impact on customer needs? ◦ Social networking ◦ Mobile lifestyles  But mostly helps us with served and articulated needs
    8. 8. What is a Need? (continued) Today’s Business Customer Needs Unarticulated Articulated Customer Types Served Unserved
    9. 9. Do People Know what they Need?  40 years ago did most people think they needed ◦ Mobile phone ◦ Internet-compatible phone ◦ Computer, digital camera ◦ Foreign vacations  Surveys in early 1980s suggested that users didn’t need/want mobile phones  But they ended up buying one and now, many say they can’t live without one  Part of the problem is that surveys didn’t take into account falling prices of mobile phones
    10. 10. What if we Look at their Purchasing Behavior?  Better than asking them about their needs, but still not perfect  Does a person buying a drill need a drill?  No, they need a hole!  Or maybe they need a way to connect to items with ◦ A screw ◦ A screw and a bolt
    11. 11. What if we Look at their Purchasing Behavior? (2)  Do people need shoes?  Do Westerners only like Western food?  Westerners used to only eat Western food  But now they eat many kinds of foods  How should we have interpreted their purchasing behavior when they only ate Western food?
    12. 12. What if we Look at their Purchasing Behavior? (3)  There are other reasons to be careful when generalizing about countries  Generalizations only reflect “averages” or “medians”  And we are interested in specific needs of specific people  If you can find unserved or unarticulated needs, you can be very successful
    13. 13. It’s not Just Consumers, it’s Firms  Often can’t understand firms by what they say or even what they do  Organizations do things inefficiently because they ◦ have always done them this way or ◦ don’t know really understand what they need  30 years ago, many logistics people didn’t know they needed deliveries to assembly lines or retail floor, and not to loading docks!
    14. 14. It’s not Just Consumers, it’s Firms  Does NUS know that they need cloud computing? Or that Google mail is easier to use than NUS mail?  Part of the problem is that final users have little impact on many organizational decisions (e.g., purchasing computers or furniture)
    15. 15. As a Seller of Products & Services  You need to know who makes decisions  Who are the key decision makers? ◦ Purchasing managers? ◦ Other managers?  Who are the key collaborators? ◦ Retail outlets and other distributors ◦ Suppliers of complementary products  Does your value proposition match their needs?
    16. 16. Another way to look at needs  Empathy Map  From Business Model Generation, Alexander Osterwalder
    17. 17. What does she THINK AND FEEL What really counts Major preoccupations Worries and aspirations What does she SEE Environment Friends What the market offers What does she HEAR What friends say What boss says What influencers say What does she SAY AND DO? Attitude in public Appearance Behavior towards others? PAIN Fears Frustrations Obstacles GAIN Wants/needs Measures of success obstacles
    18. 18. Empathy Maps  Can you define empathy maps for a variety of different segments?  Define a representative user for each segment and define her characteristics, needs, and what she ◦ Says and does ◦ Hears ◦ Thinks and feels
    19. 19.  Different market segments, i.e., users ◦ have different willingness to pay and demand different levels of performance ◦ demand different types of features or performance ◦ make different tradeoffs between performance, features, price ◦ fundamentally want different products  These segments emerge over time ◦ Often difficult to specify them before products begin to diffuse ◦ Some markets have more segments (i.e., sub-markets) than other markets ◦ Understanding the differences and similarities between segments is critical for businesses Market Segments and Diffusion
    20. 20. Segmentation  Categorize customers in groups that have distinct needs ◦ How many types of customers are there? ◦ What differentiates them, how are their needs distinct? ◦ How valuable might they be (size of market and potential profitability)? ◦ Which segments will be the first adopters of the new technology? ◦ How will the definitions of the segments evolve?  Understand the differences between product and market segments (discussed in Session 2)
    21. 21. Different Ways to Segment Markets
    22. 22. Examples of Psychographic Technique Different People like Fast Food for Different Reasons These Different People Represent Different Market Segments Can new entrants target these segments?
    23. 23. Targeting  Select the segment (s) that have the best short and long-term prospects for the firm ◦ If a new technology, they must be early adopters of new technology ◦ have a large potential value (Present/Future) ◦ fit with the company’s core competency ◦ preferably not fit with the competitor’s core competency  You must justify your choice of target segment(s)
    24. 24. Must Connect Customer Needs with Company’s Capabilities Require the effective and efficient reconciliation of any differences Market Pull What the market or segment indicates it needs/wants and is willing to pay for Company Pull What the firm is capable of and willing to provide to the market Voice of the Market Voice of the Firm Market- Based Firm
    25. 25. Ideally, we would select not just a segment, but the first customer in that segment  In addition to whether the technology is appropriate for the targeted segment, ◦ Do you have the connections with the right customers and the decision makers for those customers? ◦ Will these customers tell others about the new technology? ◦ Will other customers listen to the first customers?
    26. 26. This an Iterative Process 1. Segment Market 2. Identify needs in each market existing products in each market strengths and weaknesses of each product where are the opportunities? 3. Select segment (customer) and propose value proposition (and propose more than just a simple and clear statement, more below)
    27. 27. Outline  Customer needs  Market segments and customer selection  Definition of value proposition  Examples  Quantitative methods  Conclusions
    28. 28. Value Proposition Value to the target market Benefits to the target market Price to the target market = Relative to A simple and clear statement of the intended target market, the benefits of the offering, and the price New technologies/products diffuse because they offer a superior value proposition to users
    29. 29. Value Proposition  But what constitutes a great value proposition? ◦ Large benefits and low price ◦ Large economic, functional and psychological value  The definition of value depends on the user  Thus, value proposition and customer selection cannot be separated ◦ You must look at the product as a user not a seller ◦ Put yourself in various users’ situations
    30. 30. Products Must Provide More Value than do Substitutes?
    31. 31. Value Proposition  Hard to explain in words  Must look at examples  Let’s look at some examples (all of them can be defined as discontinuities). For each of them ◦ What is the value proposition? ◦ What enables them to have a great value proposition? ◦ To a lesser extent, what enabled them to be introduced at that time?
    32. 32. Outline  Customer needs  Market segments and customer selection  Definition of value proposition  Examples ◦ Apple’s recent products ◦ What is next for phones ◦ Internet of Things ◦ Lighting and displays ◦ Smart services, Sharing economy ◦ Nano-technology  Quantitative methods  Conclusions
    33. 33. What was initial value proposition? Who were first customers?
    34. 34. What was initial value proposition? Who were first customers? Would the stated value proposition be different now?
    35. 35. What is value proposition? Who were first customers?
    36. 36. These Products Introduced New Types of Value  iPod ◦ first portable MP3 player that actually worked ◦ excellent integration with online music site ◦ easy control with click wheel  iPad and iPhone ◦ better user interface for accessing Internet ◦ touch screen that eliminated need for keyboard ◦ large number of apps, supported by well- designed operating system
    37. 37. Who were the Customers for these Products  iPod ◦ Music lovers ◦ Young people  iPhone ◦ Also young people, why?  iPad ◦ Many young people, but not those that use computers for creating documents, Why?  How about Apple’s laptops?
    38. 38. Are there other customers for iPod, iPhone, and iPad?
    39. 39. But not just final users, there are also other customers  iPod ◦ Music companies: cooperation with them was needed for iPod to succeed  iPhone ◦ Phone companies, application software providers  iPad ◦ Application software providers and also media companies  Multiple types of customers exist for many technologies
    40. 40. Apple’s High Prices Reflect High Value (about same costs) This is why Apple has highest market capitalization
    41. 41. Timing (1)  What kind of changes determined their timing?  Was it social, technological, or regulatory changes?  Why weren’t these products introduced much earlier than they were?  Could they have been introduced years before they were?
    42. 42. Timing (2)  All of these products needed ◦ Large memory storage ◦ Fast processors ◦ But could these products have been introduced without so much memory or processors?  What determined when ICs had sufficient memory capacity and processor speed?  iPad and iPhone needed touch displays ◦ What determined the timing of the displays? For more details: When do new technologies become economically feasible: the case of electronic products. http://www.slideshare.net/Funk98/presentations
    43. 43. Why Did RIM Blackberry (and Nokia and Motorola) Ineffectively Respond  RIM Blackberry has never introduced an effective touch screen smart phone  Why?
    44. 44. Brief History of RIM Blackberry  Began working on mobile e-mail in mid-1980s ◦ Focused on mail services for U.S. service providers in 1990s  Began offering pagers in 1996 and smart phones in 2002 ◦ High security, reliability ◦ Low battery consumption and bandwidth usage  Blackberry phone became one of the most popular products of all time  Market capitalization of $83 Billion in June 2008 Source: Losing the Signal: The Spectacular Rise and Fall of Blackberry, 2015. Jacquie McNish, Sean Silcoff
    45. 45. Blackberry’s Response to iPhone  Released Storm in 2008 and Storm 2 in 2010, with clickable touch screen  Clickable screen added less value than problems  Poor browser and operating system, because they hadn’t needed ones in the past  By the time they gave up on clickable touch screen it was too late ◦ Android phones were emerging ◦ Stock was dropping even as its sales grew outside U.S.
    46. 46. Returning to Apple and Looking to Future  What are limitations of Apple’s products?  What do these limitations tell us about potentially better value propositions, i.e., solutions, in the future?  Can improvements in memory and processor ICs or in touch displays lead to ◦ better products, ◦ those with better value propositions? ◦ Or might other improvements in other technologies enable better value propositions?
    47. 47. Outline  Customer needs  Market segments and customer selection  Definition of value proposition  Examples ◦ Apple’s recent products ◦ What is next for phones ◦ Internet of Things ◦ Lighting and displays ◦ Smart services, Sharing economy ◦ Nano-technology  Quantitative methods  Conclusions
    48. 48. What is Next? Sensitivity? Durability? Flexibility and Conformity? Transparency? Augmented Reality
    49. 49. What is Next for Phones? (2)  New features, perhaps for high-end phones ◦ Health care: phones monitors health (heart rate, brain wave, blood pressure) using sensors ◦ Home automation: use phones to control homes ◦ Better navigation, sharing economy ◦ Engineering assistant: environmental data (temperature, pressure, air and water quality) and maybe data from satellites  Different phones for different applications?  One phone does everything?  Multiple segments each with multiple applications for phone?
    50. 50. What is Next? (3)  New forms of phones/ computers ◦ Belly sensors? ◦ Smart watches? ◦ Wrist displays? ◦ Head computers
    51. 51. What is Next for Phones? (4)  Low-cost option: Wi-Fi only phones?  Many young people only use WiFi ◦ Contracts with service provider become unnecessary ◦ As WiFi becomes more available……..  Could cellular processors (and other components) be eliminated from phones? ◦ If WiFi is main connection and it works good enough, can memory and application processors be eliminated? ◦ What about lower resolution cameras, displays, and other components
    52. 52. Many Efforts to Link WiFi with Cellular for Inexpensive Services  Concept of service ◦ Combine WiFi routers into integrated services ◦ Use cellular network when WiFi isn’t available: purchase network space from cellular operators ◦ Much cheaper than existing cellular contracts ◦ How long will cellular service providers continue selling network space to new entrants?  In U.S., Republic Wireless, Scratch Wireless, FreedomPop, Google, soon cable companies. In France, service called “Free”  But Korea may be the leader – large use of WiFi, great phones from Samsung, and great mobile content and services http://www.wsj.com/articles/google-unveils-wireless-service-called-project-fi-1429725928; http://nyti.ms/1AFMiFW; http://nyti.ms/1HI2BkW; http://www.economist.com/news/business/21654602-wi-fi-first-technology-will-be-great-consumers-disruptive-mobile- firms-change
    53. 53. Outline  Customer needs  Market segments and customer selection  Definition of value proposition  Examples ◦ Apple’s recent products ◦ What is next for phones ◦ Internet of Things ◦ Lighting and displays ◦ Smart services, Sharing economy ◦ Nano-technology  Quantitative methods  Conclusions
    54. 54. Let’s Connect the World
    55. 55. Many Options for IoT  Sensors ◦ Many types of sensors: RFID, MEMS, QR codes, GPS, temperature, pressure  Data Transport ◦ Cellular, WiFi ◦ Zigbee, Bluetooth (iBeacon)  Data Analysis, Interpretation, Control, Automation ◦ Microprocessors ◦ Open source software ◦ Big data algorithms (Big Data is one of the fastest growing recipients of venture capital)
    56. 56. The Big Questions  Where is most value and thus will likely be connected first?  Where is revenue; how should it be obtained?  Should one firm do everything?  Should work be shared among firms (i.e., vertical disintegration)  How can we answer these questions?  Let’s focus on top question, others in subsequent weeks
    57. 57. Where is the Most Value?  Web sites and phones already monitor ◦ Your actions  Manufactures monitor product usage ◦ Amazon Kindle? ◦ How about washing machines?  Insurance companies are monitoring people ◦ Monitor vehicle driving ◦ Monitor health ◦ Monitor home safety (e.g., fire)
    58. 58. Where is the Most Value? (2)  Farms are major users of IoT in U.S.  Equipment is monitored, controlled, and automated with GPS, lasers, and other electronics ◦ Fields must be perfectly level for irrigation ◦ Seeds must be accurately placed ◦ Harvesting must be done at right speeds  Everything depends on the weather!  All of these things will be adopted by the rest of the world (including corporate farms)
    59. 59. Where is the Most Value? (3)  Retailers ◦ Promote products to customers ◦ Enable customers to access product details ◦ Automate check-out process  Owners keep track of products with GPS ◦ Vehicles, medical equipment ◦ Can nurse find equipment with phone app? ◦ For which products does location have most value?
    60. 60. Where is the Most Value? (4)  Consumers can monitor ◦ Valuables (cars, yachts, phones) ◦ Homes (refrigerators, lights, locks, doors, windows, even helpers) ◦ Their movements, health, money……  Transport companies ◦ Want to monitor your movements ◦ Why?
    61. 61. Where is the Most Value? (5)  Manage updates to a product ◦ Phones, Desktop and tablet computers ◦ How about medical equipment?  Provide value adding apps to products ◦ Phones ◦ Televisions? ◦ Medical equipment? ◦ Construction equipment?  Third parties might have more ideas than the manufacturers  Who should be allowed to manage updates and provide apps to products?
    62. 62. Outline  Customer needs  Market segments and customer selection  Definition of value proposition  Examples ◦ Apple’s recent products ◦ What is next for phones ◦ Internet of Things ◦ Lighting and displays ◦ Smart services, Sharing economy ◦ Nano-technology  Quantitative methods  Conclusions
    63. 63. Type of Specs Incandescent Lamp Fluorescent lamp LED OLED Thickness Very Thick Very Thick 6.9 mm (for LED TV) 1.8 mm Flexibility Very inflexible, and breakable Very inflexible, and breakable Some flexibility Most flexible Danger to eyes Can’t stare at them Can’t stare at them Can’t stare at them Okay to stare Lifespan 500-700 hrs >10, 000 hrs 100, 000 hrs 15, 000 hrs Price of 60 Watt bulb <1 USD <5 USD 9 USD Most expensive Efficiency/ Brightness 300 USD/Year for 800 lumens 75 USD per year 30 USD per year Not yet efficient Environmental friendliness Low efficiency Contains mercury Most efficient, no toxic chemical Not yet efficient, no toxic chemical Comparison of Lighting in 2012 Source: Group presentation in MT5016 module and http://electronics.howstuffworks.com/led4.htm http://www.theverge.com/2013/10/3/4798602/walmart-gets-aggressive-on-led-bulb-pricing
    64. 64. Don’t we want a different type of lamp?
    65. 65. Two LED-based Decorative Lights Available in Singapore
    66. 66. The Flexibility of OLED Lighting Creates New Possibilities
    67. 67. Value Proposition: New Displays
    68. 68. OLED Display Applications Customer Types CustomerNeeds UnarticulatedArticulated Served Un-Served Consumers products display, e.g. TV, mobiles, tablets etc. Automotive Lighting & Displays Digital Wall Transparent Monitor Household displays 3D glass Rollable Display
    69. 69. Outline  Customer needs  Market segments and customer selection  Definition of value proposition  Examples ◦ Apple’s recent products ◦ What is next for phones ◦ Internet of Things ◦ Lighting and displays ◦ Smart services, Sharing Economy ◦ Nano-technology  Quantitative methods  Conclusions
    70. 70. Smart Services  Lighting as a Service  Smart water  Smart agriculture  Wireless or wired vehicle charging services  Bicycle sharing (sharing economy)  Smart roads for autonomous vehicles  Overall smart cities
    71. 71. Upgrades lightings at no upfront cost Provides maintenance Provide free energy audits, technical assistance and its new financing option Share Electricity Savings from using LEDs  More than 120 years in lighting business What is Lighting-as-a-Service?
    72. 72. Lighting as Service  Could target ◦ Cities (public lighting) ◦ Factories, Offices  Lighting represents more than 10% of the world’s electricity costs  Use LEDs, motion sensors to reduce lighting costs  Value proposition ◦ No upfront costs ◦ Customers only pay percentage of cost savings from smarter lighting ◦ Great for budget limited cities who are pressured to be more green
    73. 73. Smart Roads and Services: Can We Dedicate Roads to Autonomous Vehicles? Can we move from a parking lot (top) to smoothly flowing traffic that is highly dense (right) through services? Magnetic stripes or RIFD Tags? Cellular networks?
    74. 74. Smart Cities, Smart Services
    75. 75. Outline  Customer needs  Market segments and customer selection  Definition of value proposition  Examples ◦ Apple’s recent products ◦ What is next for phones ◦ Internet of Things ◦ Lighting and displays ◦ Smart services, Sharing Economy ◦ Nano-technology  Quantitative methods  Conclusions
    76. 76. The Sharing Economy Cover of Economist, May 9, 2013
    77. 77. Is this New?  Sharing has always been done  What has changed? ◦ Technology  better mobile phones and apps  these improvements continue to occur ◦ Economic  Recession of 2008 still lingers in people’s minds and continued problems in Greece and elsewhere prevent us from forgetting ◦ Social  Social networking sites facilitate sharing  More concern for environment  How is the value proposition better or different than before?
    78. 78. Sharing Economy (or Demand- Based Economy) in San Francisco  For consumers ◦ Uber provides chauffeurs and logistics ◦ Handy supplies cleaners ◦ SpoonRocket delivers restaurant meals ◦ Instacart keeps your fridge stocked ◦ Medicasts gives you a doctor at your house ◦ BloomThat delivers flowers ◦ TaskRabbit will send somebody out to pick up a last-minute gift
    79. 79. Sharing Economy (or Demand-Based Economy) in San Francisco (2)  For businesses ◦ Elance-oDesk offers companies the services of 10m freelancers ◦ Innocentive gives firms solutions from freelancers ◦ Kaggle gives firms solutions to data problems from freelancers ◦ Amazon’s Mechanical Turk breaks down tasks into smaller activities to be done online  These examples can also be thought of as examples of vertical disintegration (see Session 6)
    80. 80. Outline  Customer needs  Market segments and customer selection  Definition of value proposition  Examples ◦ Apple’s recent products ◦ What is next for phones ◦ Internet of Things ◦ Lighting and displays ◦ Smart services, Sharing Economy ◦ Nano-technology  Quantitative methods  Conclusions
    81. 81. Fullerenes, Graphene, Carbon Nanotubes Fullerenes: specific number of carbon atoms arranged as sphere Graphene: flat sheet of carbon atoms Carbon Nanotubes: flat sheet is rolled so that sides are connected, thus creating tube multiple walled tube contains multiple tubes
    82. 82. Graphene  Very low electrical resistance  high thermal conductivity (4,000 W/m-K)  high mobility (about 200,000 cm2/Vs at room temperature, compared to 1,400 in silicon and 77,000 in indium antimonide)  One of strongest materials, but yet flexible  Unusual optical behavior: equally transparent to ultraviolet, visible and infrared light  But very expensive!  Two current markets (composites for strength and electrodes for conductivity) but also displays, computer chips, and solar cells Source: Segal, Michael (2009). "Selling graphene by the ton". Nature Nanotechnology 4 (10): 612–4 Nature 483, S29 (15 March 2012). Also http://www.azom.com/news.aspx?newsID=11679
    83. 83. Other Ultra-Thin Materials  More than 10 materials that are two- dimensional with complementary properties that could be integrated with graphene to provide extra functionality  Boron nitride also one-atom thick and instead of being a conductor it is an insulator (of heat), the best insulator we know – possible project?  If you go to three atoms thick, molybdenum disulfide is a semiconductor, like silicon, but lighter and stronger.  These materials can then be combined to fabricate completely new material structures Source: CNN Home Page, April 29, 2013. http://edition.cnn.com/2013/04/29/tech/graphene- miracle-material/index.html?hpt=hp_c3
    84. 84. Carbon Nanotubes (1)  Diameters and axes impact on ◦ levels of conduction and thus ◦ whether the carbon nanotube is a conductor, semiconductor, or an insulator  Conducting nanotubes ◦ 1000 times higher conductivities than copper ◦ 100 times higher current densities than superconductors  Strongest materials known in tension  High thermal conductivity  But hard to fabricate (Easier to make long superconductors)
    85. 85. Potential Applications  Composites for structural materials (e.g., racing bikes)  Anti-fouling paint for ships  Printed CNT transistors on polymer film  Transparent electrodes for displays, solar cells  But which ones have the largest need for high performance and the greatest willingness to pay?
    86. 86. How About Environmentally Friendly Materials?  Can use of agricultural waste to reduce use of plastics and other non-bio- degradable products for packaging?  Use “mushroom” material to bind agricultural waste  Fill a mold with this combination  And wallah, we have less trash
    87. 87. How is Mushroom Material made? Agricultural Waste (e.g. Corn Stalks) Root Structure of Mushrooms called MYCELLIUM Mycellium branches out to form a matrix around the agricultural waste and is put into molds Solid, strong mass aka MUSHROOM MATERIAL
    88. 88. More Information on these Technologies  Can be found in many places, but one place is my slideshare account  http://www.slideshare.net/Funk98/presentations  This account has slides with ◦ Time series data on improvements ◦ Drivers of improvements ◦ New “systems” that are emerging from these improvements ◦ Group presentations
    89. 89. Outline  Customer needs  Market segments and customer selection  Definition of value proposition  Examples  Semi-Quantitative methods ◦ Strategy canvas, i.e., Blue Ocean Strategy ◦ Product development specifications  Conclusions
    90. 90. Previous Slides  Provided qualitative descriptions of value propositions for technologies that are now considered far superior to previous ones  We would like to have quantitative data or at least justifications for value propositions ◦ To show how technologies are superior or may become superior to the old technologies ◦ To show this before or during the transition ◦ To also help us understand the niches that many technologies occupy for short and long periods of time
    91. 91. High______________________________________________________ Premium Wines ________________________________________________________________________________________ ________________________________________________________________________________________ Budget Wines Strategy Canvas of U.S. Wine Industry in Late 1990s Low______________________________________________________________________________________ Price Enological terminology Above-the- line marketing Aging quality Vineyard prestige & legacy Wine complexity Wine range Source: W. Chan Kim and Renee Mauborgne, Blue Ocean Strategy, Harvard Business School Press
    92. 92. Many of these factors are related to an elite image  Enological terminology: Tannins and Oak  Above-the line marketing  Wine Complexity  Aging Quality  Wine Range, i.e., Variety
    93. 93. The Four Actions Framework (Blue Ocean Strategy) A New Value Curve Note: factors are price, features, and dimension of performance. You can also think about them as part of a value proposition.
    94. 94. High_______________________________________________________________________________________________ Premium Wines _______________________________________________________________________________________________ _______________________________________________________________________________________________ Budget Wines The Strategy Canvas of Yellow Tail Low______________________________________________________________________________________________ Price Enological terminology Above-the- line marketing Aging quality Vineyard prestige & legacy Wine complexity Wine range Easy Drinking Ease of Selection Fun and Adventure Casella Wines: Yellow Tail
    95. 95. 1. Wine maker or winery: 2. Appellation: The country or region where the grapes for this wine were grown 3. Vintage; 4. Variety 5. Ripeness; 6. Estate bottling and winery information
    96. 96. The Strategy Canvas of Southwest Airline Low Price Meals Lounges Seating Class choices Hub connectivity Friendly service Speed Frequent point- to-point departure (new dimension) High Average Airline Southwest Car Transport
    97. 97. The Strategy Canvas of Cirque du Soleil Low Price Star performers Animal shows Aisle concessions Multiple Show arenas Unique venue Theme Refined Watching environment High Multiple Productions Artistic Music and dance Fun And humor Thrillsand danger Smaller Regional Circuses Ringling Bros. and Barnum &Bailey Value Curve Cirque du Soleil Value Curve New Dimensions
    98. 98. Ringling Brothers
    99. 99. Cirque de Soleil
    100. 100. If the blue ocean strategy and strategy canvas are not understandable, the following slide will clear up everything
    101. 101. ภาพเชิงกลยุทธ์ อุตสาหกรรมไวน์ในอเมริกา ช่วงปลายทศวรรษ 1990 ราคา ใช้ศัพท์หรู ในการ สื่อสาร คุณภาพ การบ่ม ชื่อเสียงของ ไร่องุ่น ความ ซับซ้อนของ ไวน์ ไวน์กลุ่ม ต่างๆ การทุ่ม ตลาด สูง ต่า ไวน์ชั้นพิเศษ ไวน์ชั้นประหยัด
    102. 102. Key Aspects of Strategy Canvas  Identify dimensions of performance (i.e., customer needs) for single market segment  Identify existing products and their levels of performance and price  Quantify performance (and price)  Find dimensions of performance that are currently being ignored ◦ see four action framework  Conceptualize new types of products that can provide new types of performance  This is an iterative process
    103. 103. For Your Presentation  If you describe a strategy canvas in your presentation, you must justify your strategy canvas with data and/or logic
    104. 104. Outline  Customer needs  Market segments and customer selection  Definition of value proposition  Examples  Quantitative methods ◦ Strategy canvas, i.e., Blue Ocean Strategy ◦ Product development specifications  Conclusions
    105. 105. Establishing Target Specs for Products  Choose a specific segment  Start with customer needs for the segment  Prepare a list of metrics for the segment  Collect data on metrics for products in the segment  Set ideal and marginally acceptable target values for the specifications  Reflect on the results and process  Very similar to value proposition and customer selection! But much more complex!
    106. 106. Product Specifications Example: Mountain Bike Suspension Fork
    107. 107. Start with the Customer Needs # NEED Imp STTritrack Maniray2 1 The suspension reduces vibration to the hands. 3 • •••• 2 The suspension allows easy traversal of slow, difficult terrain. 2 •• •••• 3 The suspension enables high speed descents on bumpy trails. 5 • ••••• 4 The suspension allows sensitivity adjustment. 3 • •••• 5 The suspension preserves the steering characteristics of the bike.4 •••• •• 6 The suspension remains rigid during hard cornering. 4 • ••• 7 The suspension is lightweight. 4 • ••• 8 The suspension provides stiff mounting points for the brakes. 2 • •••• 9 The suspension fits a wide variety of bikes, wheels, and tires. 5 •••• ••••• 10 The suspension is easy to install. 1 •••• ••••• 11 The suspension works with fenders. 1 ••• • 12 The suspension instills pride. 5 • •••• 13 The suspension is affordable for an amateur enthusiast. 5 ••••• • 14 The suspension is not contaminated by water. 5 • ••• 15 The suspension is not contaminated by grunge. 5 • ••• 16 The suspension can be easily accessed for maintenance. 3 •••• ••••• 17 The suspension allows easy replacement of worn parts. 1 •••• ••••• 18 The suspension can be maintained with readily available tools. 3 ••••• ••••• 19 The suspension lasts a long time. 5 ••••• ••••• 20 The suspension is safe in a crash. 5 ••••• •••••
    108. 108. Metric# Need#s Metric Imp Units 1 1,3 Attenuation from dropout to handlebar at 10hz 3 dB 2 2,6 Spring pre-load 3 N 3 1,3 Maximum value from the Monster 5 g 4 1,3 Minimum descent time on test track 5 s 5 4 Damping coefficient adjustment range 3 N-s/m 6 5 Maximum travel (26in wheel) 3 mm 7 5 Rake offset 3 mm 8 6 Lateral stiffness at the tip 3 kN/m 9 7 Total mass 4 kg 10 8 Lateral stiffness at brake pivots 2 kN/m 11 9 Headset sizes 5 in 12 9 Steertube length 5 mm 13 9 Wheel sizes 5 list 14 9 Maximum tire width 5 in 15 10 Time to assemble to frame 1 s 16 11 Fender compatibility 1 list 17 12 Instills pride 5 subj 18 13 Unit manufacturing cost 5 US$ 19 14 Time in spray chamber w/o water entry 5 s 20 15 Cycles in mud chamber w/o contamination 5 k-cycles 21 16,17 Time to disassemble/assemble for maintenance 3 s 22 17,18 Special tools required for maintenance 3 list 23 19 UV test duration to degrade rubber parts 5 hours 24 19 Monster cycles to failure 5 cycles 25 20 Japan Industrial Standards test 5 binary 26 20 Bending strength (frontal loading) 5 MN Establish Metrics and Units
    109. 109. Link Metrics to Needs1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Need Metric Attenuationfromdropouttohandlebarat10hz Springpre-load MaximumvaluefromtheMonster Minimumdescenttimeontesttrack Dampingcoefficientadjustmentrange Maximumtravel(26inwheel) Rakeoffset Lateralstiffnessatthetip Totalmass Lateralstiffnessatbrakepivots Headsetsizes Steertubelength Wheelsizes Maximumtirewidth Timetoassembletoframe Fendercompatibility Instillspride Unitmanufacturingcost Timeinspraychamberw/owaterentry Cyclesinmudchamberw/ocontamination Timetodisassemble/assembleformaintenance Specialtoolsrequiredformaintenance UVtestdurationtodegraderubberparts Monstercyclestofailure JapanIndustrialStandardstest Bendingstrength(frontalloading) 1 reduces vibration to the hands.• • • 2 allows easy traversal of slow, difficult terrain.• 3 enables high speed descents on bumpy trails.• • • 4 allows sensitivity adjustment. • 5 preserves the steering characteristics of the bike. • • 6 remains rigid during hard cornering. • • 7 is lightweight. • 8 provides stiff mounting points for the brakes. • 9 fits a wide variety of bikes, wheels, and tires. • • • • 10 is easy to install. • 11 works with fenders. • 12 instills pride. • 13 is affordable for an amateur enthusiast. • 14 is not contaminated by water. • 15 is not contaminated by grunge. • 16 can be easily accessed for maintenance. • 17 allows easy replacement of worn parts. • • 18 can be maintained with readily available tools. • 19 lasts a long time. • • 20 is safe in a crash. • •
    110. 110. Benchmark on Customer Needs # NEED Imp STTritrack Maniray2 RoxTahxQuadra RoxTahxTi21 TonkaPro GunhillHeadShox 1 The suspension reduces vibration to the hands. 3 • •••• •• ••••• •• ••• 2 The suspension allows easy traversal of slow, difficult terrain. 2 •• •••• ••• ••••• ••• ••••• 3 The suspension enables high speed descents on bumpy trails. 5 • ••••• •• ••••• •• ••• 4 The suspension allows sensitivity adjustment. 3 • •••• •• ••••• •• ••• 5 The suspension preserves the steering characteristics of the bike.4 •••• •• • •• ••• ••••• 6 The suspension remains rigid during hard cornering. 4 • ••• • ••••• • ••••• 7 The suspension is lightweight. 4 • ••• • ••• •••• ••••• 8 The suspension provides stiff mounting points for the brakes. 2 • •••• ••• ••• •• ••••• 9 The suspension fits a wide variety of bikes, wheels, and tires. 5 •••• ••••• ••• ••••• ••• • 10 The suspension is easy to install. 1 •••• ••••• •••• •••• ••••• • 11 The suspension works with fenders. 1 ••• • • • • ••••• 12 The suspension instills pride. 5 • •••• ••• ••••• ••• ••••• 13 The suspension is affordable for an amateur enthusiast. 5 ••••• • ••• • ••• •• 14 The suspension is not contaminated by water. 5 • ••• •••• •••• •• ••••• 15 The suspension is not contaminated by grunge. 5 • ••• • •••• •• ••••• 16 The suspension can be easily accessed for maintenance. 3 •••• ••••• •••• •••• ••••• • 17 The suspension allows easy replacement of worn parts. 1 •••• ••••• •••• •••• ••••• • 18 The suspension can be maintained with readily available tools. 3 ••••• ••••• ••••• ••••• •• • 19 The suspension lasts a long time. 5 ••••• ••••• ••••• ••• ••••• • 20 The suspension is safe in a crash. 5 ••••• ••••• ••••• ••••• ••••• •••••
    111. 111. Benchmark on Metrics Metric# Need#s Metric Imp Units STTritrack Maniray2 RoxTahxQuadra RoxTahxTi21 TonkaPro GunhillHeadShox 1 1,3 Attenuation from dropout to handlebar at 10hz 3 dB 8 15 10 15 9 13 2 2,6 Spring pre-load 3 N 550 760 500 710 480 680 3 1,3 Maximum value from the Monster 5 g 3.6 3.2 3.7 3.3 3.7 3.4 4 1,3 Minimum descent time on test track 5 s 13 11.3 12.6 11.2 13.2 11 5 4 Damping coefficient adjustment range 3 N-s/m 0 0 0 200 0 0 6 5 Maximum travel (26in w heel) 3 mm 28 48 43 46 33 38 7 5 Rake offset 3 mm 41.5 39 38 38 43.2 39 8 6 Lateral stiffness at the tip 3 kN/m 59 110 85 85 65 130 9 7 Total mass 4 kg 1.409 1.385 1.409 1.364 1.222 1.1 10 8 Lateral stiffness at brake pivots 2 kN/m 295 550 425 425 325 650 11 9 Headset sizes 5 in 1.000 1.125 1.000 1.125 1.250 1.000 1.125 1.000 1.125 1.250 1.000 1.125 NA 12 9 Steertube length 5 mm 150 180 210 230 255 140 165 190 215 150 170 190 210 150 170 190 210 230 150 190 210 220 NA 13 9 Wheel sizes 5 list 26in 26in 26in 26in 700C 26in 26in 14 9 Maximum tire w idth 5 in 1.5 1.75 1.5 1.75 1.5 1.5 15 10 Time to assemble to frame 1 s 35 35 45 45 35 85 16 11 Fender compatibility 1 list Zefal none none none none all 17 12 Instills pride 5 subj 1 4 3 5 3 5 18 13 Unit manufacturing cost 5 US$ 65 105 85 115 80 100 19 14 Time in spray chamber w /o w ater entry 5 s 1300 2900 >3600 >3600 2300 >3600 20 15 Cycles in mud chamber w /o contamination 5 k-cycles 15 19 15 25 18 35 21 16,17 Time to disassemble/assemble for maintenance 3 s 160 245 215 245 200 425 22 17,18 Special tools required for maintenance 3 list hex hex hex hex long hex hex, pin wrnch 23 19 UV test duration to degrade rubber parts 5 hours 400+ 250 400+ 400+ 400+ 250 24 19 Monster cycles to failure 5 cycles 500k+ 500k+ 500k+ 480k 500k+ 330k 25 20 Japan Industrial Standards test 5 binary pass pass pass pass pass pass 26 20 Bending strength (frontal loading) 5 MN 55 89 75 75 62 102
    112. 112. Assign Marginal and Ideal Values Metric Units MarginalValue IdealValue 1 Attenuation from dropout to handlebar at 10hz dB >10 >15 2 Spring pre-load N 480 - 800 650 - 700 3 Maximum value from the Monster g <3.5 <3.2 4 Minimum descent time on test track s <13.0 <11.0 5 Damping coefficient adjustment range N-s/m 0 >200 6 Maximum travel (26in wheel) mm 33 - 50 45 7 Rake offset mm 37 - 45 38 8 Lateral stiffness at the tip kN/m >65 >130 9 Total mass kg <1.4 <1.1 10 Lateral stiffness at brake pivots kN/m >325 >650 11 Headset sizes in 1.000 1.125 1.000 1.125 1.250 12 Steertube length mm 150 170 190 210 150 170 190 210 230 13 Wheel sizes list 26in 26in 700c 14 Maximum tire width in >1.5 >1.75 15 Time to assemble to frame s <60 <35 16 Fender compatibility list none all 17 Instills pride subj >3 >5 18 Unit manufacturing cost US$ <85 <65 19 Time in spray chamber w/o water entry s >2300 >3600 20 Cycles in mud chamber w/o contamination k-cycles >15 >35 21 Time to disassemble/assemble for maintenance s <300 <160 22 Special tools required for maintenance list hex hex 23 UV test duration to degrade rubber parts hours >250 >450 24 Monster cycles to failure cycles >300k >500k 25 Japan Industrial Standards test binary pass pass 26 Bending strength (frontal loading) MN >70 >100
    113. 113. Set Final Specifications: Like Value Proposition METRIC Units Value 1 Attenuation from dropout to handlebar at 10hz dB >12 2 Spring pre-load N 650 3 Maximum value from the Monster g <3.4 4 Minimum descent time on test track s <11.5 5 Damping coefficient adjustment range N-s/m >100 6 Maximum travel (26in wheel) mm 43 7 Rake offset mm 38 8 Lateral stiffness at the tip kN/m >75 9 Total mass kg <1.4 10 Lateral stiffness at brake pivots kN/m >425 11 Headset sizes in 1.000 1.125 12 Steertube length mm 150 170 190 210 230 13 Wheel sizes list 26in 14 Maximum tire width in >1.75 15 Time to assemble to frame s <45 16 Fender compatibility list Zef al 17 Instills pride subj >4 18 Unit manufacturing cost US$ <80 19 Time in spray chamber w/o water entry s >3600 20 Cycles in mud chamber w/o contamination k-cy cles >25 21 Time to disassemble/assemble for maintenance s <200 22 Special tools required for maintenance list hex 23 UV test duration to degrade rubber parts hours >450 24 Monster cycles to failure cy cles >500k 25 Japan Industrial Standards test binary pass 26 Bending strength (frontal loading) MN >100
    114. 114. Quality Function Deployment (QFD) and House of Quality technical correlations benchmarking on needs customer needs engineering metrics target and final specs relative importance relationships between customer needs and engineering metrics
    115. 115. Multiple Houses of Quality for QFD Engineering Metrics Engineering Metrics
    116. 116. Differences and Similarities of Setting Target Specs and QFD  Like marketing analysis and strategy canvas, there is a focus on ◦ customer needs ◦ existing products in each market ◦ strengths and weaknesses of each product  There is also an iterative process  Differences, “setting product specifications” focuses ◦ a single market segment ◦ relative importance of different needs and setting detailed specifications for not only products, but not parts and processes
    117. 117. Level of Detail in Analysis  You must make decision about level of detail to include in analysis  Some needs are more important than others to customers and thus require more analysis  Some needs are easier to quantify than others and thus quantitative data is more applicable and necessary for your presentations  But remember why someone buys a drill – because they want a hole!
    118. 118. Conclusions (1)  Successful products (including technological discontinuities) provide users with superior value proposition  A superior value proposition providers users with more value in some way ◦ More economic, functional, or psychological value ◦ These include lower price, new dimension of performances new features, new forms of access/distribution  Value propositions and customer selection cannot be separated ◦ Value propositions only have value for specific customers
    119. 119. Conclusions (2)  Finding new dimensions of performance or new features is often the key factor in success ◦ Or at least finding ones that have been underemphasized  Another key factor is finding customers who value these dimensions of performance, new features  How can firms find these new value propositions and these unmet needs? ◦ By thoroughly investigating the needs of customers in many segments ◦ By understanding the technological and other changes that are making new value propositions possible
    120. 120. Conclusions (3)  Finding new dimensions of performance, new features, and new customers is only the first step  Then a firm must ◦ define the product’s specs, scope of activities, and methods of value capture and strategic control (some of this covered in later sessions) ◦ develop and promote the product (not covered in this module) ◦ make the product available to customers (not covered in this module) ◦ firms must be good at both identifying and implementing new value propositions

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