Redifferentiating Products: New Technology or New Uses Week # 4

1. Redifferentiating Products: New Technology or New UsesWeek # 4 • Recognizing the Potential of an Innovation • Think Bubbles (Quizzing to understand the customers’ experiential context pp. 50-56) Instructor: J. Christopher Westland, Professor, ISMT Time: Tue & Thu 1:30pm-2:50pmVenue: Rm. 4333Duration: 5 Sep – 7 Dec Text. McGrath & MacMillan, The Entrepreneurial Mindset, HBS Press 2000 Contact: Office: 852 2358 7643 Fax: 852 2358 2421 Email: westland@ust.hk URL: http://teaching.ust.hk/~ismt302/

2. Innovation = Invention + Commercialization

3. Redifferentiating Products:New Technology or New Uses Redifferentiating Quizzing Consumption Chain Analysis Practicum: Think Bubbles

4. The Dialectic • Innovation involves a dialectic: • On the one-side are arguments about what the customer wants (demand-side) • Remember that the customer doesn’t care about us or our products • We have to make them care • On the other-side are arguments about what we can do (supply-side) • These are determined by our core competences • Which are to some extent determined by Mission and Vision statements, and our Business Models • We are on the 2nd chapter on the demand side

5. Redifferentiating • Lay your biases on the table • There is no market that is so mature that you cannot further differentiate your offerings • “Show me a manger who claims he’s in a mature business.. • … and I’ll show you a manger who’s asleep at the wheel” • --Shelly Weinig • Redifferentiating is a skill that can be learned • Quizzing • Consumption Chain Analysis

6. Function of Quizzing • Detailed look at customer usage and decision making regarding your product • Looks at the customers “stream of consciousness” • Through a series of questions • Looks for ideas to Change the Customer’s Experience (i.e., redifferentiate your product) • Remember: Experience is dynamic • So are the questions in quizzing • Over a time period prior to the first time customer is exposed to the product • To a time well after the customer has stopped using it

7. Preliminaries:The Basis for Quizzing Rudyard Kipling’s ‘six honest serving men’ • What, who, when, where, how & why? • What is the problem? • Who (which individual in the case) is responsible for solving the problem and making a decision? • Where is the money? (The value generated by the solution) • When does the problem need to be solved? • How will you measure success? • Why did you have this problem, and what will you do to prevent it in the future? • This establishes the context for the customer’s problem • And where you might find new business • by Redifferentiating your products

8. Quizzing Who? • … is with customers while hey use the product • How much influence do they have • If we could arrange it, who would we want the customer to be with … • What? • … Do our customers experience when the use the product • … needs provoked our offering • What else? … might customers have on their minds • When? … do our customers use this .. • Where? … are our customers when they use this • How? … do customers learn to use the product ..

9. Stream of Consciousness • Quizzing should be a Stream of Consciousness • Psychology and philosophy: • the set of constantly changing inner thoughts and sensations which an individual has while conscious • Literary criticism • technique which seeks to describe an individual's point of view by giving the written equivalent of the character's thought processes. • Stream-of-consciousness writing is strongly associated with the modernist movement. • May Sinclair transferred it from psychology to the literary context.

10. Mistakes to Avoid

11. Think Bubbles (Part 1) Quizzing Mind Maps to Recognize the Potential of an Innovation

12. Function of Consumption Chain Analysis • A complement to quizzing … • And (perhaps) quizzing done from a different (more graphical) perspective • Consumption Chain Analysis • Works from the premise that • opportunities for redifferentiation • lurk at every step and decision that your customers take • From the time they first become aware of their need for your product or service • To the time thy finally dispose of the remnants of the used up product • Rather than ‘stream of consciousness’ • It is time-sequential

13. Consumption Chain Analysis • A complement to quizzing … • And (perhaps) quizzing done from a different (more graphical) perspective • Consumption Chain Analysis • Works from the premise that • opportunities for redifferentiation • lurk at every step and decision that your customers take • From the time they first become aware of their need for your product or service • To the time thy finally dispose of the remnants of the used up product • Rather than ‘stream of consciousness’ • It is time-sequential

14. Consumption Chain Analysis

15. Think Bubbles (Part 2) Consumption Chain Analysis How can you improve on the existing steps in the Customer’s Consumption Chain?

16. Every Link in the Consumption Chain has its Own Attribute Map • The Attribute Map compares your product to those of others

17. At each step, remember to KISS (Keep It Simple, S****) • The simplest way to change a business model • Is to redesign your offerings … i.e., products and services • Aim for blockbuster design • One that so appeals to your target customers • That they feel almost compelled to buy from you

18. The Purpose of a Business is to Create a Customer-- Peter Drucker • Even if you create marvelous inventions • Your customers won’t care • Unless that is exactly what they need • Business customers are especially impatient • With any product that doesn’t help them gain competitive advantage • Yet your firm wants to build products that take advantage • Of their Core Competences

19. Creative Tension • Core Competences are the things that the firm does • That they do better than other firms • That are the source of their competitive advantage • They are not necessarily what the customer wants (!!) • Firms establish their core competences by: • Investing in people • Investing in assets, plant and land • Identifying and focusing their mission • The Firm’s core competences are often those of its CEO and management

20. Core Competences Consume your ResourcesKeep a Resource View of Firm Strategy

21. Recap: Steps for Redifferentiating • For each customer segment sketch the consumption chain • Identify the trigger events that precipitate customer movement from link to link • Put in place procedures to alert you when the trigger is pulled (and plan your response) • Quiz to assess needs that may not be met currently • Create an attribute map for each significant link in the Consumption Chain • Use your knowledge of Customer Experience to create Blockbuster Products • Put the ideas you generate into your opportunity register Repeat this process for each class of stakeholders

22. Redifferentiating in Industry Who does it well? Who Doesn’t? A look at some recent industrial success stories

23. Jeffrey Immelt General Electric • Repositioned GE's portfolio with major acquisitions in health care, entertainment, and commercial finance. • Created a more diverse, global, and customer-driven culture

24. Steven Reinemund PepsiCo • Developed a strong and diverse leadership bench that has helped PepsiCo tap new markets. • Attained consistent double-digit earnings growth through product innovation and smart marketing.

25. Hector Ruiz Advanced Micro Devices • Demonstrated the first mainstream dual-core chip, offering superefficient processing with low power consumption and heat dissipation. • Launched an initiative to sell low-cost PCs in developing countries in a bid to bridge the widening digital divide.

26. Steven Spielberg, Jeffrey Katzenberg, and David Geffen DreamWorks SKG • In the spring, the computer-animated Shrek 2 set a record with a gross of $436.7 million. • Had one of the year's hottest IPO's, pulling in $812 million. Stock zoomed by 45% the following month.

27. Robert Nardelli Home Depot • Turned a $46 billion business dominated by big-box stores into a $70 billion chain with urban, suburban, and international outlets. • A ruthless drive for efficiency, such as centralizing purchasing and investing in technology, pushed margins above 30%.

28. Joseph Tucci EMC • Revived growth by pushing sales of new, easier-to-use, less expensive storage gear. • Made $3.6 billion worth of software deals, boosting margins and broadening EMC's appeal to customers.

29. Linus Torvalds Open Source Development Labs • Created the core piece of the Linux operating system, which launched a software revolution. • Turned Linux into the No. 2 server operating system in the world, after Windows.

30. Edward Breen Tyco • Brought Tyco back after executive scandals and a liquidity crunch nearly killed it. • Tripled net earnings and regained an investment-grade rating on Tyco’s bonds.

31. Phil Knight Nike • Transformed a volatile, fad-driven marketing and design icon into a more shareholder-friendly company. • Hired outsider William Perez, ceo of household products company S.C. Johnson, to succeed him as ceo.

32. Chung Mong Koo Hyundai • Turned the company from the butt of talk-show jokes into a leader in customer-satisfaction surveys. • Boosted Hyundai's presence in the U.S., Europe, China, and India, resulting in record sales and profits.

33. Henning Kagermann SAP • Kept a tight lid on costs, which helped boost profits 20%, to $1.7 billion. • Tied SAP'S software to other companies' products, helping to win over a slew of new customers.