Change Matters: How to Find New Market Space

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  • 18. Andre Rieu $19,468,768The Dutch violinist and PBS pledge-drive mainstay sold only 59,000 albums but was No. 6 on Billboard's list of top tours last year; his 30th-anniversary trek earned him more than $19 million and brought in nearly 500,000 people to 94 shows in Europe, Japan, North America, Australia and New Zealand in 2009. Rieu has logged 22 releases on Billboard's Top Traditional Classical Albums chart, with three of them in the top 10 last year. Rieu was No. 4 on Billboard's Top Traditional Classical Artists chart for 2009. —ABY
  • The eliminate-reduce-raise-create grid pushes companies not only to ask all four questions in the four actions framework but also to act on all four to create a new value curve. By driving companies to fill in the grid with the actions of eliminating, reducing, raising, and creating, the grid provides four immediate benefits: it pushes them to simultaneously pursue differentiation and low costs; identifies companies who are only raising and creating thereby raising costs; makes it easier for managers to understand and comply; and it drives companies to scrutinize every factor the industry competes on.
  • This might seem commercial but it has lots of applications for a non profit focused on doing well and doing good.
  • About 6,500 wine brands compete in the US alone, the largest wine market in the world
    All the most aggressive wine-producing countries are well represented: France, Italy, Australia, Chile, and Spain, besides the American wines and the all powerful Californians in particular.
    Ninety-six percent of those wine brands sold less than 100,000 cases in 2002, according to Impact Databank.
    Only 23 wine brands sold at least 2 million cases each, accounting for 40 percent of a growing market of 245 million cases.
  • John Souter expected to sell 25,000 cases in 2001, the first year Yellow Tail would hit the market.
    Cautious but lucky, he got all his projections wrong as the wine sold 9 times as much!
    With its bold branding, a good product and a very affordable price, the bottles with the fancy kangaroo leapt off the shelf.
    The first batches sold out so quickly that extra cases had to be shipped by plane, at considerable expense.
    Production could not follow either. Not only was the equipment insufficient but additional quantities of wine had to be bought on the bulk market, further cutting into Casella's thin margins, estimated at 75 cents per bottle.
    Nonetheless, Casella Wines sold 200,000 cases of Yellow Tail wines in 2001, and 2.2 million the following year. They have now invested in a $2.5 million bottling line to reach their goal of 4 million cases for 2003.
  • Pause: Where could you look?
  • The eliminate-reduce-raise-create grid pushes companies not only to ask all four questions in the four actions framework but also to act on all four to create a new value curve. By driving companies to fill in the grid with the actions of eliminating, reducing, raising, and creating, the grid provides four immediate benefits: it pushes them to simultaneously pursue differentiation and low costs; identifies companies who are only raising and creating thereby raising costs; makes it easier for managers to understand and comply; and it drives companies to scrutinize every factor the industry competes on.
  • Change Matters: How to Find New Market Space

    1. 1. Change Matters: How to Open a New Market Space Andrea J. Simon PhD Simon Associates Management Consultants info@simonassociates.net
    2. 2. Market Evolution Change Matters !!! 2
    3. 3. The Tao of Change Management “The Future is coming so fast we can’t possibly predict it. We can only learn to respond quickly.” Steven Kerr “The best way to predict the future is to invent it.” Alan Kim 3
    4. 4. Red Ocean vs. Blue Ocean Strategies Red Ocean Strategy Blue Ocean Strategy Compete in existing market Compete in existing market space space Create uncontested market Create uncontested market space space Beat the competition Beat the competition Exploit existing demand Exploit existing demand Make the competition irrelevant Make the competition irrelevant Create and capture new demand Create and capture new demand Make the value-cost trade off Make the value-cost trade off Align the whole system of a Align the whole system of a Break the value- cost trade off Break the value- cost trade off Align the whole system of a firm’s Align the whole system of a firm’s firm’s activities with its firm’s activities with its strategic choice of strategic choice of activities with its strategic choice activities with its strategic choice of differentiation and low cost of differentiation and low cost differentiation or low cost differentiation or low cost 4
    5. 5. Is It Time To Redefine Success? 5
    6. 6. Change is Going to Hurt Change is literally pain. Brain fights change. 6
    7. 7. To Adapt You Must SEE THINK FEEL 7
    8. 8. Let’s See, Feel and Think about a Blue Ocean Strategy ANDRÉ RIEU 8
    9. 9. Classical Music in a Blue Ocean? Andre Rieu 9
    10. 10. This is probably what you remember? 10
    11. 11. What Did He Do? Classical Music Pop Music Traditional Setting Untraditional setting Dress in classic form Colors, fashion Conductor’s back Disengaged Conductor’s Personality Face First Focused on adults Totally engaged Funeral Young and Old Party 11
    12. 12. Results? “A Maestro for the Masses” WSJ: Friday, June 11, 2010 Dutch conductor and violinist André Rieu is the king of 'crossover' classical music. At concerts Mr. Rieu grossed about $96 million on tour in 2009. 500,000 people attending 94 shows. That haul landed him at No. 6 among the world's top touring acts, according to Billboard's 2009 tally—ranked just below U2, Madonna and Bruce Springsteen, and above Britney Spears, Coldplay and Metallica. 12
    13. 13. The Four Actions Framework -- ERRC Reduce Which factors should be reduced well below the industry’s standards Eliminate Which of the factors that the industry takes for granted should be eliminated? Create A New Value Curve Which factors should be created that the industry has never offered? Raise Which factors should be raised well above the industry’s standard? 13
    14. 14. Four Actions How did André Rieu shift his focus? Eliminate Raise Serious Classical Music Audience engagement Stodgy performance hall Conductors engagement Disengaged conductor Community of fans For the “serious music lover” Use of social media Fun Reduce Create Formality Party atmosphere Lack of community Totally engaged; Face first Quiet in the music hall atmosphere Local focus Big Box Arena “Non-classical” classical concert (modern one) 14
    15. 15. Blue Ocean Strategies Change Scope of Operations Seek to enlarge a company’s scope of operations into markets that are so different from its current markets that they must be addressed as entirely new entities. Often, the future of the company is outside its current competencies today Repackaging, repurposing, reimagining
    16. 16. What is a Blue Ocean? Blue Oceans are creating and pushing into new market space, seeing things in ways not there before.
    17. 17. It is all about You! All about the Strategic Moves people made to solve problems differently. They saw solutions in different ways. And then made them happen. 17
    18. 18. Skeptical? Case Studies 18
    19. 19. What did these folks see? (yellow-tail)® wine 19
    20. 20. Interesting industry to tackle About 6,500 wine brands in US. Ninety-six percent of those wine brands sold less than 100,000 cases in 2002 Only 23 wine brands sold at least 2 million cases each, accounting for 40 percent of a growing market of 245 million cases. First time they tried to tackle the market (yellow tails)® predecessor, the Carramar Estate Label, failed for the Cassella Wine Company 20
    21. 21. What to do? John Souter and the Cassella family, rethought the industry established keys to the promotion of wine as: a unique beverage for the informed wine drinker worthy of special occasions 21
    22. 22. Wine Red Ocean Strategic Canvas High Premium Wines Budget Wines Low Price Use enological terminology and distinctions in wine communication Abovethe-line marketing Aging Quality Vineyard Prestige and Legacy Wine Complexity Wine Range How to make fun and nontraditional wine that’s easy to drink for everyone—particularly non-wine drinkers? 22
    23. 23. Went looking for a Blue Ocean Reconstructed its market strategy to Turn non-drinkers into frequent enjoyers. Only 15% of Americans drank wine-Red Ocean 85% drank other things-Blue Ocean waiting for them 23
    24. 24. For (yellow tail)®… Eliminate Enological terminology and distinctions Raise Price versus budget wines Retail store involvement Aging qualities Above-the-line marketing Reduce Create Wine complexity Easy drinking Wine range Ease of selection Vineyard prestige Fun and adventure 24
    25. 25. Results John Souter expected to sell 25,000 cases in 2001, the first year (yellow tail)® would hit the market. Cautious but lucky--the wine sold 9 times as much! Bold branding Good product Very affordable price Bottles with the fancy kangaroo leapt off the shelf. 25
    26. 26. Strategic Canvas (yellow tail)® wines Strategy Canvas (yellow tail) High Premium Wines (yellow tail) Focus Diversification Tag Line Budget Wines Low Price Use of Enological Distinctions Above-theline Aging Marketing Quality Vineyard Prestige Wine Complexity Wine Range Easy Drinking Ease of Selection Fun and Adventure 26
    27. 27. Execution helped Retailers received the brightly colored branded displays on time and were clearly built into the entire process 27
    28. 28. Today, Dominates the American Market « Dominating the overseas export market, [yellow tail]® is the fastest growing imported wine in US market history. The Shiraz is currently ranked as the No.1 selling 750ml red wine in the USA. The [yellow tail]® Merlot being the No. 1 selling Merlot in the USA. Selling more than 300,000 bottles a day, [yellow tail]® is now regarded as a global phenomenon. » 28
    29. 29. Blue Ocean Strategy What are we looking for? New market space Create demand Find new ‘non-users’ 29
    30. 30. How do you do that? Make the competition irrelevant Change the Value/Cost trade-off Align the entire organization 30
    31. 31. More Cases like You! STILL SKEPTICAL? 31
    32. 32. EAC/Integrated Power Solutions A Battery Design and Manufacturing Company “We were OEM’s– Original Equipment Manufacturer in the battery creation business” 32
    33. 33. Strategic Canvas Process Beginning of the process they thought what mattered to the customer was: Vertically Integrated Battery design experts Global Manufacturer Good Customer Service, responsive to solving problems Good supplier relationships 33
    34. 34. Not of much importance Branding Financial stability Charger capabilities 34
    35. 35. Their Strategic Canvas Summary Strategic Canvas 5-High 3-Medium 1- Low Battery Wholly Owned Vertical Expertise/ Charger Global Customer Supplier Financial Integration Experience Expertise Manufacturing Service Relationships Stability Relationships Branding 35
    36. 36. How they saw their competitors Competition Strategic Canvas High RRC/ Microsun/ Nexergy ICC/ Totex Nexergy ICC Varta Microsun Totex M-Power Varta Varta ICC/Microsun Nexergy RRC Totex ICC Totex Microsun RRC M-Power Totex Medium Nexergy Microsun Totex M-Power M-Power/Varta M-Power Nexergy Nexergy M-Power RRC RRC ICC Low Technical Expertise Vertical Integration On-time Delivery Varta M-Power/ Microsun ICC Battery Expertise/ Experience Charger Expertise Global Manufacturing RRX Flexibility Quality Cost Reduction Quality Customer Customer Service What they thought about their competition along the same attributes that they thought were important to their own customers. 36
    37. 37. Took them out to do Culture Probes Found a whole different set of issues for their customers and nonusers among their customers Speed to market Innovative ideas about mobile power solutions Ways to be ahead of the competition Stay on top of the battery power industry—what was happening that could help them? Teach them about rechargeable power. Give them a competitive edge Help them help their customers Lower costs—good value, give me innovative ideas at a price Longer, stronger, lighter power solutions. 37
    38. 38. For EAC… Eliminate Raise Focus on only disposable batteries Integrated Power Solutions Acting like an order taker Competitive Advantage Speed Technical Advantage Proactive leadership and consultative services Reduce Create Concern with pricing Charger Capabilities Concern with reactive customer service Innovation Branding Focus on Vertical Integration 38
    39. 39. Now they Visualized a Blue Ocean Summary Strategic Canvas 5-High tg/am Customer sb/jd 3-Medium jr am tg/ am/ jr/jd 1- Low tg/jd tg/am/jr tg/am/jr am/jr sb/jd Needs/Desires sb/jd tg/jr/sb/jd jr sb tg/am/jr/sb jr sb jd tg/am/jd tg/am/sb/jd Wholly needs Owned Battery help Global Supplier CM Vertical Expertise/ Charger Manufactur Customer Relationship Financial Integration Experience Expertise Service Stability state of them be Branding innovative needs speed to relationship cutting (game Customer- technical information market edge boy) centric the art talent Focus on Chargers and Rechargeable batteries Integrated power solutions Become more innovative—add value in innovative ways Fast—speed to market really mattered, but how? Brand EAC/Integrated Power Solutions—reduce risk 39
    40. 40. Techline and SnapTrack 40
    41. 41. Customer Care Means What? To Whom? 41
    42. 42. Laclede Chains Snow Chains Or Chain? 42
    43. 43. “Kill the Bottle” Hydration is essential for good health. Introducing Elkay's EZH2OTM bottle filling station 43
    44. 44. Nonusers Challenge Solutions for nonusers Alternatives Andre Rieu Cross over classical music for all ages Lots of options Yellow Tail Wine for non-wine drinkers Lots of options EAC/Integrated Power Solutions Integrated Power Solutions Companies assembling options themselves TelerX Under 40 year olds and social media customer care solutions Ignoring the telephone call center Laclede Easier solutions for chain; One stop for all your chain needs Shopping for solutions Elkay Hydration Stations Sustainability Directors, Universities, Green Companies and Green Communities Not many to fill the bottle How about you? Who needs a new solution? What are their alternatives? 44
    45. 45. Visual Exploration HOW DO YOU SEE, FEEL AND THINK IN NEW WAYS? 45
    46. 46. Why is it so hard to imagine? Brain has a mind map that helps to organize reality There is no reality—perceptions What you BELIEVE is what you SEE! Expectations lead you to select what you will see Have to push beyond or you will see, feel and think that everything is more of the same. So, let’s reverse everything. Innovation Games are fun. 46
    47. 47. Reverse Assumptions for a Restaurant Today Opposite Menus No Menus Serve food Don’t serve food Pay for food Don’t pay for food Sit at tables Don’t sit at tables
    48. 48. A new kind of restaurant Today Opposite New Element Menus No Menus Owner comes out and tells us what he found at the market today for our meal Serve food Don’t serve food Bring your own food and we entertain you—picnic style Pay for food Don’t pay for food Rent the space for a period of time and we give you free food Sit at tables Don’t sit at tables Chairs set up like a stadium and you watch oversized TV’s with exclusive entertainment on them
    49. 49. Let’s Deconstruct your Business Today Opposite We don’t We don’t We don’t We don’t We don’t New Element More ideas the better
    50. 50. Visual Awakening: Where are we Today? LET’S DO YOUR STRATEGIC CANVAS 50
    51. 51. Visual Awakening: Strategic Canvas Strategy Canvas -- Your Company High Low Current Industry Attributes Let’s try to build your Strategic Canvas today •You •Your Competition 51
    52. 52. What do we see? Do we look like our competition? Or? Are we investing in all the same things? How are we different? Focused? Are we in too many places? Is there a strategy? How are we adding value in innovative ways? Are we targeting a mass market with problems that overlap or a niche market? 52
    53. 53. How do we do this? WHAT’S THE PROCESS? 53
    54. 54. Blue Ocean Strategy Process Strategy Canvas -- Your Company High Low Industry Attributes 54
    55. 55. 1. Visual Awakening We started your Visual Awakening See yourself more clearly on a picture— visualize your business Where are you focused and why? Strategy Canvas -- Your Company High Low Current Industry Attributes 55
    56. 56. 2. Visual Exploration Go Exploring Look at the nonuser to see pent-up demand Look at the current customer to see new ways to solve old problems Observe and participate 56
    57. 57. Cannot easily ask people Henry Ford… “If I had asked people how I could improve their transportation they would have told me to make their horses go faster.” 57
    58. 58. Try to make it… Easy for people to use you More productive for them More fun and adventure Simpler Environmentally friendly These are key levers to open new market space 58
    59. 59. Where are you looking? Six Paths Industry Red Ocean Within Each Strategic group Blue Ocean Creating Across Buyer group Scope of product or service offering Functional-emotional orientation of an industry Time Kim & Mauborgne 2005 59
    60. 60. Four Action Framework to Reallocate Your Assets -- ERRC Reduce Which factors should be reduced well below the industry’s standards Eliminate Which of the factors that the industry takes for granted should be eliminated? Create A New Value Curve Which factors should be created that the industry has never offered? Raise Which factors should be raised well above the industry’s standard? 60
    61. 61. 3. Visual Strategy Fair Draw your “To Be” Canvas Visualize some ideas about new solutions Get feedback on alternative strategy canvases from customers, competitors, and nonusers. Use feedback to build the best “to be” future strategy. Strategy Canvas -- Your Company High Low Current Industry Attributes 61
    62. 62. 4. Visual Communications Build a story to tell to your team and to the outside world Support only those projects and operational moves that allow your company to close the gaps to actualize the new strategy. Test, test, test. 62
    63. 63. Blue Ocean Strategy Process Strategy Canvas -- Your Company High Low Industry Attributes 63
    64. 64. There are Blue Oceans Out There FINAL THOUGHTS TO SHARE 64
    65. 65. What is a Blue Ocean Strategy? Pushes into new market space Creates demand Sees things in ways not there before W. Chan Kim and Renee Mauborgné 2011 Ranking: #2 Winner of 2011 “Thinkers50” Strategy Award for Blue Ocean Strategy Research and Impact 65
    66. 66. It is all about You! All about the Strategic Moves people made to solve problems differently. They saw solutions in different ways. And then made them happen. 66
    67. 67. Who can you look for? Meet unmet needs Among nonusers Who have alternatives See things in new ways Repackage, repurpose, reimagine 67
    68. 68. Why Should I Find My Blue Ocean? Because it could open up an entirely new opportunity for you! 68

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