Ideas to Income: Introduction to marketing (Part 2)

History of the GarageToday, the garage stands behind a two-story ShingleStyle home built for Dr. John C. Spencer about 1905. The exact construction date of the garage is unknown,but while there is no evidence of its presence oninsurance maps dated 1908, by1924 it is clearly denoted on updated documents as a private garage.

In 1938, Bill Hewlett and Dave Packard decided to “make a run for it” in business. Dave left his job atGeneral Electric in Schenectady, New York, and returned to Palo Alto while Bill scouted rentals. He found one perfect for their needs on Addison Avenue.Chosen specifically because of a garage he and Davecould use as their workshop, the property also offered athree-room, ground-floor flat for Dave and his new wifeLucile and an 8x18-foot shed for Bill. They shared the$45 per month rent.

The garage served as research lab, developmentworkshop, and manufacturing facility for early products,including the Model 200A audio oscillator. The company,founded in 1939, was named with a coin toss. Thegarage was soon outgrown, and in 1940 HP moved into larger quarters on Page Mill Road.

The garage was dedicated as the Birthplace of SiliconValley in 1989, and the property was acquired by HP in2000. HP is proud to have worked closely with the Cityof Palo Alto to return the house, garage, and shed toconditions much as they were in 1939. The legacy projectwas completed in 2005. In 2007, the property was listedon the National Register of Historic Places.

While the HP Garage is not open for public tours,individual visitors and small groups may view andphotograph the property and landmark from thesidewalk. Addison Avenue remains a quiet residentialneighborhood, and HP urges you to respect the privacyof our neighbors.

Tucked away on a quiet, tree-lined residential street nearStanford University, the HP Garage stands today as theenduring symbol of innovation and the entrepreneurial spirit. It was in this humble 12x18-foot building that college friendsBill Hewlett and Dave Packard pursued the dream of acompany of their own. Guided by an unwavering desire todevelop innovative and useful products, the two men blazed a trail at the forefront of the electronics revolution.

The garage is California HistoricalLandmark No.976—Birthplace ofSilicon Valley. (1939 photo)

HP Garage367 Addison Avenue, Palo Alto, California

The restored HP Garage in 2006.

HP Garage, Silicon Valley

Ideas to Income An Introduction to Marketing (Lecture 2)

MaRS Entrepreneurship 101 January 20, 2010

Peter EvansAdvisor, MaRS Venture [email protected] T: @Techmarketer

Why Marketing Matters Definition and fit with strategy

© 2010 Peter M. Evans Slide 1

The Innovator’s Paradox The problem with Ideas, Capabilities & Opportunities


Trendspotting


Market Opportunity Size

Interactions

Landscape

Scope

Size


Innovation Types


Customer Value/Utility


On-Trend

Relevant

Differentiated

Synchronized

Engaged

Sustainable

The Market Actualized StartupWhat’s required for market success?


TREND IS YOUR FRIEND WHEN YOU LOOK AT THE MARKET IS THERE A WIND AT YOUR BACK ?

BE CAREFUL…EVEN TURKEYS CAN FLY IN A TORNADO… © 2009 PETER EVANS

LESS COWBELL IT’S TIME TO STOP ADDING “UNRECOVERABLE COSTS” TO MAKE PRODUCT

PERFORMANCE IMPROVEMENTS THAT CUSTOMERS WON’T PAY FOR… © 2009 PETER EVANS

Homework Assignment


Developing a Value Driven Strategy

The Most Important Equation You Should Remember


Creating Buyer UtilityStages & Utility Levers

Enterprise Server

Stages of the Buyer Experience Cycle (2)

Purchase (3)

Delivery (4)

Use (6)

Maintenance (7)

Disposal

Customer Productivity

Simplicity

Convenience

Safety/Risk

Fun and Image

Environmental Friendliness

Util

ity L

ever

s

(5) Supplements

(1) Eval./Trial/Reco.

*

Social* Responsibility

Source: Blue Ocean Strategy – Kim & Maubourgne * Indicates revision to model


Developing a Value Driven Strategy

The Most Important Equation You Should Remember


Pricing Think before you set your price

  What’s your fundamental strategic model? –  Premium Price (Product Leadership) –  Lowest Price (Operational Excellence) –  Blended Model (Customer Intimacy)

  What is the Method for Capturing Revenues –  Product sales (Perpetual, Annual/Monthly Sub., One-Time Use) –  Licensing –  Advertising supported –  Brokering Transactions – Cost per acquisition etc.

  Some other Factors Need to be Considered –  What are the total costs? - professional services, sales engineers etc. –  Upfront payments or recurring revenues? (maintenance, upgrade revenue sources) –  Do partners need to be paid? - Sales Channel – Direct, Distributors, VARS


How do you Make Money

Revenue =

Users Queries

User Clicks

Ads Ads

Query Revenue

Click x x x x

Google Knows its Ratios


Premium Price vs. Non. Consumption

$1,200 Free?

Functional Spec. = Get your Kid From A-B

$10

Start with Identifying the REAL Determinants of Value


CONTRARIANS RULE MARKET LEADERS WOULD SOONER ZIG THAN ZAG. THE KEY TO THE KINGDOM IS

TO DELIVER DIFFERENTIATE YET “UNEXPECTED VALUE” TO CUSTOMERS © 2009 PETER EVANS

80/20 Rules

Asymmetric Warfare

Unexpected Value

Bradley Gale Vilfredo Pareto Sun Tzu Noriaki Kano

Customer Value Design

Notable Contrarians An asymmetric collection of warriors and economists


Case Study: FAA Light Sport Aircraft Category

Weight •  Maximum gross takeoff weight of not more

than 1,320 pounds (600 kg) or 1,430 pounds (650 kg) for operation on water

Airspeed •  Max. in level flight of 120 knots (220 km/h;

140 mph); •  Max. stall speed of 45 knots (83 km/h;

52 mph); Seating •  Max. of 2 persons Equipment •  Fixed undercarriage •  Fixed-pitch or ground adjustable propeller •  Single electric motor or reciprocating engine


✔

✔ Economic

Political

Sociological

✔ Legal

Technology

Capital

✔

✔

Why Now? Are these favourable conditions for launching a new aviation venture?


You have CompetitionIt comes in many forms

Direct Indirect Potential Entrants

Substitutes

Non-Consumption


Pontiac Aztec

Apple Pipin Microsoft WebTV

RJ Reynolds’ Smokeless Cigarettes

Famous and Not So Famous Flops Did these crossover products do anything really well?


Foldable

Floatable

Portable

Easy-to-Fly

Safer

A5 Test Flight 2008 Affordable

Lets go back to primary benefit?How do you best achieve what the customer (really) wants?

Portable Floatable Vertical Roadable


What’s the Real Opportunity?And how do you best achieve what the customer (really) wants

Portable “Fits on a

Trailer”

Floatable “Amphibiou

s Hull”

Vertical “No

runway required”

Roadable “Drives on

Roads”

Degree of Relevance

Degree of Differentiation

Low

High Unique Elements Driving Choice

Necessary Requirements

Unique Elements but not Driving Choice

Not Relevant or Distinctive


High

Low

Traditional Float Plane

Terrafugia Flying Car

Personal Aircraft The Market Today

ERRC Framework by Kim & Mauborgne (Blue Ocean Strategy) Data here is for illustration purposes only and has not been validated

© Peter M. Evans Slide 34

Which factors should be reduced well below the industry’s standard?

Which factors should be created that the industry has never offered?

Which factors should be raised well above the industry’s standard?

Eliminate Reduce

Create Raise

  Facility Requirements

  Performance (Maneuverability)   Safety to Operate   Accessibility to Remote Regions   Design Aesthetic   Ease of Purchase

  Training (Certification) Time   Operating Cost   Payload   Range

  Driveway Storage   Enhanced Ergonomics & Instrumentation   Winch & Tow Transportability

A New Product CategoryIcon Aircraft: Sample ERRC Grid


© Peter M. Evans Slide 35

Icon A5

Boat

High

Low

Traditional Float Plane

Terrafugia Flying Car

Reduce Raise Create Eliminate

Personal AircraftStrategy Canvas



Creating Buyer Utility Stages & Utility Levers

Stages of the Buyer Experience Cycle (2)

Purchase (3)

Delivery (4)

Use (6)

Maintenance (7)

Disposal

Customer Productivity

Simplicity

Convenience

Risk

Fun and Image

Environmental Friendliness

Util

ity L

ever

s

(5) Supplements

Social Responsibility

* Indicates revision to model


(1) Eval./Trial/Reco.

*

Segmentation Model (Example)Customers cluster on key dimensions of value


Customer SegmentationLearn this slide!

  A Segment is a Sub-Set of Buyers: –  Within a market who share similar needs –  Demonstrate similar buyer behaviour

  Emphasis is on identifying clusters of buyers who are: –  Attractive –  Unattractive –  Non-addressable

  Good Segmentation Reveals Clusters that satisfy the following criteria: 1.  Identifiable - The differentiating attributes of the segments must be measurable so that

they can be identified 2.  Accessible - The segments must be reachable through communication and distribution

channels. 3.  Substantial - The segments should be sufficiently large in order to justify the resources required

to target them 4.  Unique Needs - To justify separate offerings, the segments must respond differently to

the different elements of the marketing mix 5.  Durable - The segments should be relatively stable to minimize the cost of frequent product

changes


Seg

men

t A

Seg

men

t B

Seg

men

t C

Seg

men

t D

Seg

men

t E

Seg

men

t F

Seg

men

t G

Market Size [$] $.6 B $1.2B $5.0 B $.16 B $1.5B $0.3B $0.2B

Value Chain Ownership 1 5 8 6 3 2 1

Market Potential $ $0.2B $75M $10M $35M $80M $15M $10M

Time to Market [years] 4 2 1 3 2 4 7

Barriers to entry [#] 6 2 2 5 4 3 9

Differentiation [#] 7 4 5 4 3 5 9

Competitive Threats [#] 2 2 2 4 7 4 2

Investment required [#] 6 5 3 7 9 5 9

Segment Scoring (Sample Template) Developing a Objective Model to Find the Right Targets


Marketing to B2B Buyers

Features Seymours

  IT Manager

  Marketing Manager

  Director

VITO’s

  CEO/President

  Executive Director (Assoc.)

  Executive VP (Industry)

  COO/CFO/CMO

Functions Users

  Salesperson

  Clerical Staff

  Database Admin.

  Call Center Sales/Support

What to ask:

What are you using for a system now?

How are you using it?

Any serious problems?

Who’s who in the org.?

What to ask:

What are the technical criteria?

How much? How long?

How big?

How would you design the perfect solution to this problem?

What to ask:

What are the specific goals for your organization over the next (quarter, year?)

What new markets is your organization looking to grow in?

What are the criteria for establishing a business relationship?

Benefits

Parinelli’s Influence & Authority Network


James Spangler Hoover (1908)

Sir. James Dyson (1986)

Dr. Helen Greiner (2002)


Positioning Aligned with Primary Benefit

Performance =

Automation =

Portability =

New Growth in a Mature Category Requires Focus

Trade Off: Doesn’t clean the house automatically

Trade Off: May miss the tight corners

Trade Off: Performance


Simplicity of Function & Design

"Google has the functionality of a really complicated Swiss Army knife, but the home page is our way of approaching it closed. It's simple, it's elegant, you can slip it in your pocket, but it's got the great doodad when you need it. A lot of our competitors are like a Swiss Army knife open--and that can be intimidating and occasionally harmful."

Marissa Mayer VP of Search Products & User Experience, Google


Google: Simplicity SellsThe importance of a focused product

comScore Nov. 2009 Estimates

66% Google

Search Market Share vs. 17%

Yahoo!

Search Market Share


On-Trend

Relevant

Differentiated

Synchronized

Engaged

Credible

Sustainable


iSYNCHRONIZE WHAT RESEARCH, SUPPLY AND DISTRIBUTION PARTNERSHIPS GIVE

YOU AN UNFAIR ADVANTAGE IN THE MARKET? © 2009 PETER EVANS © 2010 Peter M. Evans Slide 47

Customers want Whole Products

ComplementaryServices

ComplementaryProducts

The Core

Product

Hardware Consulting

Post-salesService &Support

Software

Pre-salesServices Peripherals

Connectivity LegacyInterfaces

How will you build, buy, partner and connect to be a synchronizer?

Source: Chasm Group


CONVERSUATION WHAT IS THE ONE KEY THING YOU ARE GOOD AT?

REMEMBER: CLEAR BENEFIT + DRAMATIC DIFFERENCE + REASONS TO BELIEVE & U Value © 2009 PETER EVANS

Reasons to Believe •  Personification: “Hi it’s Vince” •  Tone: Smooth talking condescension •  Visuals: Product demos – see it in action •  Authenticity: Association with German quality •  No Financial Risk: Money-back guarantee •  Exclusive Offer: Use of scarcity of supply (“call now” tactics)

Unexpected Value

Clear Benefits Utility Driver 1: Absorbency (Acts like a vacuum..works twice as hard) Utility Driver 2: More Uses (Doesn’t Disintegrate like paper towels) Utility Driver 3: Reusable (Can wash and reuse)

•  Extra set of towels free (call within 20 min.) •  Free ShamWow mop (supplies are limited)

Dramatic Difference •  Functional: Holds 12x it’s weight in liquid = Get More Done •  Financial: 10x Cheaper (Assumes Paper Towels $20/Mo.?) = Save Money

Key Lessons from ShamWow Can you can’t argue with success


Engagement: A 360-Degree Exercise

PR & Investor Relations

Advertising

Behaviour

People

Products

Customer Service & Support

Identity/ Logos

Online Presence

Trade Shows & Events

Corporate & Investor Communications

Physical Environments

Promotional Materials

Brand

The way we were


Source: Interbrand


Think about Visual Thinking

  Process Driven Visualization –  Forces a disciplined approach to

mapping the value proposition in a sequential/parallel process-driven way (i.e. Diagram by XPLANE)

  Benefits –  Taps in to the high percentage of

visual thinkers –  Mitigates the compressed

timeframes people have to learn –  Great for VITO’s (many are big

picture people) –  Creates a richer story for analysts

and media

It pays to “Disnify” your solution to engage visual thinkers


What is your Product? Example of a Core Platform (Infrastructure) - “Disnified”


What Does it do? Functionality - “Disnified”


NASDAQ: F-1 Filing Prospectus

Visual Thinking Works Everywhere Even SEC filings ought to be in pictures


On-Trend

Relevant

Differentiated

Synchronized

Engaged

Sustainable


The Value Creation Cycle

1. Create

2. Capture

3. Sustain

Market Value

Search Technology

Category: Online Search/Advertising



1. Create

2. Capture

3. Sustain

Market Value

MP3 Standard

Category: Recorded Music



1. Create

2. Capture

3. Sustain

Market Value

CRM Platform (ASP)

Category: CRM Software (ASP Model)


Fail Tales From blunders to boo-yas!

V2.0 = Boo-Ya! V1.0 = Fail

1993

1993 1983

2007

1995 2007


Customer Goal: Competitive Advantage

Solve Problem Adopt Obvious Extend Paradigm

Customer Need: Potential of Technology

Complete Solution Safe Choice Better Value

Vendor Goal: Validate Technology Segment Share Market Share Profitability

Strategy: Demo the Technology Show ROI Gorilla Power! Segment Focus

Skills: Technology Proficiency Customer Intimacy Closing Deals Relationship Mgmt.

“The Chasm Companion” Paul Wiefels “Crossing the Chasm” by Geoffrey Moore

How Markets Adopt Technology How markets move and your position changes with it


Sustaining your Market Position The Teeth Whitening Market: A Case Study in Value Migration

_____

Cost

Convenience Low

High

High


Teeth Whitening Market: Channel Options

Retail Kiosk

Retail Store

Professional

Multi-Level

Connecting your Ideas to IncomeThink Big Picture ….But get out there and build something!*

Set a course for market success

Look to the edges for the best ideas

Build fewer, bolder concepts

Commit to implementing quickly

•  Study customers & non-customers •  Identify changing trends •  Look for converging trends

•  Go beyond products •  Use multiple innovation types •  Engage the whole org.

•  Focus on massive shifts in buyer utility •  Solve big problems vs. incremental improvements

•  Focus on Prototypes (not just analysis) •  Remember the importance of failure •  Build with cross-functional teams •  Identify quick victories •  Celebrate collective success

* Inspired by Larry Keeley, Doblin Group (Division of Monitor)


Thank You Peter Evans, Advisor, MaRS Venture Group E [email protected] T: @techmarketer

Business

Ideas to Income: Introduction to marketing (Part 2)