Change Matters: How to Find New Market Space

Change Matters: How to Open a New Market Space

Andrea J. Simon PhDSimon Associates Management [email protected]

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Market Evolution

ChangeMatters !!!

The Tao of Change Management

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“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

Red Ocean vs. Blue Ocean Strategies

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Create uncontested market

space

Make the competition irrelevant

Create and capture new demand

Break the value- cost trade off

Align the whole system of a firm’s

activities with its strategic choice

of differentiation and low cost

Create uncontested market

space

Make the competition irrelevant

Create and capture new demand

Break the value- cost trade off

Align the whole system of a firm’s

activities with its strategic choice

of differentiation and low cost

Compete in existing market

space

Beat the competition

Exploit existing demand

Make the value-cost trade off

Align the whole system of a

firm’s activities with its

strategic choice of

differentiation or low cost

Compete in existing market

space

Beat the competition

Exploit existing demand

Make the value-cost trade off

Align the whole system of a

firm’s activities with its

strategic choice of

differentiation or low cost

Blue Ocean StrategyBlue Ocean StrategyRed Ocean StrategyRed Ocean Strategy

Is It Time To Redefine Success?

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Change is Going to Hurt

Change is literally pain. Brain fights

change.

To Adapt You Must

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SEE

FEEL

THINK

ANDRÉ RIEULet’s See, Feel and Think about a Blue Ocean Strategy

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Classical Music in a Blue Ocean?

Andre Rieu

This is probably what you remember?

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What Did He Do?

Classical Music

Traditional Setting

Dress in classic form

Conductor’s back

Disengaged

Focused on adults

Funeral

Pop Music

Untraditional setting

Colors, fashion

Conductor’s Personality Face First

Totally engaged

Young and Old

Party

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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.

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Which factorsshould be reduced

well below theindustry’s standards

Reduce

A NewValueCurve

RaiseWhich factors should

be raised wellabove the

industry’s standard?

Eliminate Create

Which of the factorsthat the industry

takes for granted should be eliminated?

Which factorsshould be createdthat the industry

has never offered?

The Four Actions Framework -- ERRC

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Four Actions

Eliminate Raise

Serious Classical Music

Stodgy performance hall

Disengaged conductor

For the “serious music lover”

Audience engagement

Conductors engagement

Community of fans

Use of social media

Fun

Reduce Create

Formality

Lack of community

Quiet in the music hall atmosphere

Party atmosphere

Totally engaged; Face first

Local focus

Big Box Arena

“Non-classical” classical concert (modern one)

How did André Rieu shift his focus?

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

What is a Blue Ocean?

Blue Oceans are creating and pushing into new market space, seeing things in ways not there before.

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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.

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Case Studies

Skeptical?

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What did these folks see?

(yellow-tail)® wine

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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

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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

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Wine Red Ocean Strategic Canvas

How to make fun and nontraditional wine that’s easy to drink for everyone—particularly non-wine drinkers?

High

Low

Vineyard Prestige and Legacy

Use enological terminology and distinctions in wine communication

PriceAbove-the-line marketing

Aging Quality

Wine Complexity

Budget Wines

Wine Range

Premium Wines

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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

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For (yellow tail)®…

Eliminate Raise

Enological terminology and distinctions

Aging qualities

Above-the-line marketing

Price versus budget wines

Retail store involvement

Reduce Create

Wine complexity

Wine range

Vineyard prestige

Easy drinking

Ease of selection

Fun and adventure

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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.

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Strategic Canvas (yellow tail)® wines

High

Low

Price

Use of Enological Distinctions

Above-the-line Marketing

Aging Quality

Vineyard Prestige

Wine Complexity

Wine Range

EasyDrinking

Ease of Selection

Fun and Adventure

Strategy Canvas (yellow tail)

(yellow tail)Focus

DiversificationTag Line

Premium Wines

Budget Wines

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Execution helped

Retailers received the brightly colored branded displays on time and were clearly built into the entire process

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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. »

Blue Ocean Strategy

What are we looking for?

New market space

Create demand

Find new ‘non-users’

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How do you do that?

Make the competition irrelevant

Change the Value/Cost trade-off

Align the entire organization

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STILL SKEPTICAL?More Cases like You!

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EAC/Integrated Power Solutions

A Battery Design and Manufacturing Company

“We were OEM’s– Original Equipment Manufacturer in the battery creation business”

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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

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Not of much importance

Branding

Financial stability

Charger capabilities

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Their Strategic Canvas

5-High

3-Medium

1- Low

Vertical

Integration

Battery

Expertise/

Experience

Charger

Expertise

Wholly Owned

Global

Manufacturing

Customer

Service

Supplier

Relationships

Financial

Stability Relationships Branding

Summary Strategic Canvas

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How they saw their competitors

HighRRC/ Microsun/ Nexergy ICC/ Totex Nexergy ICC ICC/Microsun Nexergy

Varta Microsun RRC ICC

Totex Totex Totex Microsun Varta

M-Power Varta Varta RRC M-Power TotexM-Power/ Microsun

Totex M-Power

Medium Nexergy M-Power/Varta Nexergy Nexergy

Microsun M-Power M-Power

RRC RRC

ICC RRX

Low ICC

Technical Expertise

Vertical Integration

On-time Delivery

Battery Expertise/ Experience

Charger Expertise

Global Manufacturing Flexibility Quality

Cost Reduction

Quality Customer

Customer Service

Competition Strategic Canvas

What they thought about their competition along the same attributes that they thought were important to their own customers.

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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.

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For EAC…

Eliminate Raise

Focus on only disposable batteries

Acting like an order taker

Integrated Power Solutions

Speed

Competitive Advantage

Technical Advantage

Proactive leadership and consultative services

Reduce Create

Concern with pricing

Concern with reactive customer service

Focus on Vertical Integration

Charger Capabilities

Innovation

Branding

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Now they Visualized a Blue Ocean

5-High tg/am

sb/jd tg/jd tg/am/jr tg/am/jr jr

3-Medium jr am am/jr sb/jd sb/jd sb

tg/ am/ jr/jd tg/jr/sb/jd tg/am/jr/sb jr

1- Low sb jd tg/am/jd tg/am/sb/jd

Vertical

Integration

Battery

Expertise/

Experience

Charger

Expertise

Wholly

Owned

Global

Manufactur Customer

Service

Supplier

Relationship Financial

Stability

CM

relationship

Branding

speed to

market

help

them be

cutting

edge

innovative

(game

boy)

Customer-

centric

needs

technical

talent

needs

state of

the art

information

Summary Strategic Canvas

Customer

Needs/Desires

Focus on Chargers and Rechargeable batteriesIntegrated power solutionsBecome more innovative—add value in innovative waysFast—speed to market really mattered, but how?Brand EAC/Integrated Power Solutions—reduce risk

Techline and SnapTrack

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Customer Care Means What?

To Whom?

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Laclede Chains

Snow Chains

Or Chain?

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“Kill the Bottle”

Hydration is essential for good health.Introducing Elkay's EZH2OTM bottle filling station

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Nonusers

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Challenge Solutions for nonusers AlternativesAndre Rieu Cross over classical music for all

agesLots 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?

HOW DO YOU SEE, FEEL AND THINK IN NEW WAYS?

Visual Exploration

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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.

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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

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

Let’s Deconstruct your Business

Today Opposite New Element

We don’t More ideas the better

We don’t

We don’t

We don’t

We don’t

LET’S DO YOUR STRATEGIC CANVAS

Visual Awakening: Where are we Today?

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High

Low

Current Industry Attributes

Strategy Canvas -- Your Company

Let’s try to build your Strategic Canvas today•You •Your Competition

Visual Awakening: Strategic Canvas

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?

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WHAT’S THE PROCESS?How do we do this?

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Blue Ocean Strategy Process

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High

Low

Industry Attributes

Strategy Canvas -- Your Company

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1. Visual Awakening

We started your Visual Awakening

See yourself more clearly on a picture—visualize your business

Where are you focused and why?

High

Low

Current Industry Attributes

Strategy Canvas -- Your Company

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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

Cannot easily ask people

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Henry Ford…

“If I had asked people how I could improve their transportation they would have told me to make their horses go faster.”

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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

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Where are you looking? Six Paths

Kim & Mauborgne 2005

Industry

Strategic group

Buyer group

Scope of product or service offering

Functional-emotional orientation of an industry

Time

Blue Ocean CreatingAcross

Red Ocean Within Each

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Four Action Framework to Reallocate Your Assets -- ERRC

Which factorsshould be reduced

well below theindustry’s standards

Reduce

A NewValueCurve

RaiseWhich factors should

be raised wellabove the

industry’s standard?

Eliminate Create

Which of the factorsthat the industry

takes for granted should be eliminated?

Which factorsshould be createdthat the industry

has never offered?

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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.

High

Low

Current Industry Attributes

Strategy Canvas -- Your Company

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.

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Blue Ocean Strategy Process

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High

Low

Industry Attributes

Strategy Canvas -- Your Company

FINAL THOUGHTS TO SHARE

There are Blue Oceans Out There

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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 Mauborgné2011 Ranking: #2

Winner of 2011 “Thinkers50” Strategy Award for Blue Ocean Strategy Research and Impact

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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.

Who can you look for?

Meet unmet needs

Among nonusers

Who have alternatives

See things in new ways

Repackage, repurpose, reimagine

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Why Should I Find My Blue Ocean?

Because it could open up an entirely new opportunity for you!