Team 3: Getting the Strategic Sequence Right Kojo Prah Dale Ussery Ryan Swanner
Team 3: Getting the Strategic
Sequence RightKojo Prah
Dale UsseryRyan Swanner
Correct sequence crucial to validating blue ocean ideas to ensure their commercial viability
● Utility: Compelling reason for people to buy it?
● Price: Compelling ability to pay for your offering?
● Cost: Produce offering at target cost while earning a healthy profit?
● Adoption: What are the hurdles to rolling out your idea?
Right Strategic Sequence
Testing for Exceptional UtilityCompanies cannot be obsessed with the novelty of a new offering
Cutting edge technology does not equal cutting edge utility
Philips CD-i
Motorola Iridium
Buyer Utility Map: Combines six stages of buyer experience cycle and the six utility levers.
The Six Utility LeversUtility Levers: the ways in which companies can unlock exceptional utility
Most common- customer productivity
Looking to create different utility proposition and/or remove blocks to utility
Ford: Model T
EXCEPTIONAL UTILITY TO STRATEGIC PRICING
Price Dictates RevenuesVolume tends to have greater returns than niche pricing(risk)
Consumer can derive value from a product’s popularity
STRATEGIC PRICING | ImplementationThree Keys
Use similar products to know where to price |Follower Strategy
Adopt Excludability whenever possible | Excludability Strategy
Ensure a product has an impressive reputation|Brand Strategy
STRATEGIC PRICING | Tools and TacticsThe Pricing Corridor of the Mass
Step 1: Identify the price corridor
Step 2 : Specify a price level
Tactics
Mid to lower pricing is necessary for high fixed low marginal cost operations.
Product’s attractiveness depend on size of networks (Bigger is better)
Go lower if operation benefits from Economies of scale
From Strategic Pricing to Target CostingTarget Price Target Margin Target
Cost
Price-minus Costing not Cost-Plus Pricing
Focus on approaches to lower cost
Invest in Cost Innovations
Target Costing | Implementation Tools and TipsIdentify High Cost-Low Value
Items
Value Chain Analysis can help find unnecessary cost
Call Centers
Digital is Cheaper
Video Game manuals
Partnering Help disburse cost
SAP, Accenture and Oracle
Target Costing | Changing the ModelIf cost are as low as feasible possible change the cost model
Alternative Cost Models
Renting vs Buying
BlockBuster
Time Sharing vs Buying
Expensive Private Jets
Slice Sharing vs Buying
Mutual funds
From Utility, Price, and Cost to AdoptionUnbeaten business model might not be enough to GUARANTEE
SUCCESS
“threatens the status quo”
Nintendo wii
could provoke fear and resistance
3 main Stakeholders
employees
business partners
general public
EmployeesHAVE TO address concerns
Merrill Lynch
online brokerage service
stock price DROPPED 14%
resistance and fighting within company
Before Going Public
threats to employees
threats, diffusing the threats
Morgan Stanley
engaged employees
open internal discussion of strategy
Business PartnersFear of revenue streams/market positions being threatened
The new Coca Cola
1970s & early 80s
stiff competition, feared losing #1 spot
ceased production of classic cola
public outrage
They were forced to re-launch original formula immediately
Lesson learned: Don’t mess with success
General PublicInnovative and Brand New
could threaten established political or social norms
educating consumers
Communication to the public is key
Set clear expectations for ramifications
Describe strategy and addressing issues
Let their voice be heard
Blue Ocean Idea IndexUtility
exceptional?
compelling reason to buy your offering?
Price
is the price easily accessible to mass of buyers?
Cost
cost structure meet target cost?
Adoption
have you addressed these hurdles up front?