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IS6117Electronic Business Development ProjectEvaluating Markets for eBusinessRob Gleasure
IS6117
Today’s class Looking for ‘signals of change’ in markets Blue Ocean thinking in Web and Mobile development
Selecting your target customer segment… What is a good customer segment for an eBusiness?
Signals of Change
Christensen’s ‘Signals of Change’ refer to a way to evaluate customer segments within an industry and identify how that industry is likely to change in the future
At it’s essence, the signals of change requires that we consider three types of consumers Undershot consumers Overshot consumers Non-consumers
Signals of Change
Per
form
ance
Time
Pace of p
erform
ance im
provements
Overshot customers
Undershot customers
Non-consumers
Signals of Change
Each type of consumer can be targeted by different types of innovations, namely New-market disruptive innovations Sustaining up-market innovations Low-end disruptive innovations
If we can determine which consumers are going to be most profitable in an industry in the future, we can estimate the value of these different types of innovations
Signals of Change
Market signals High and increasing rate of growth in new smaller emerging markets High volumes of action in certain targeted customer segments Links being removed in the service delivery chain
New market disruptive innovation
Target people who are not consuming in existing markets by
1. Introducing simple, affordable option that makes it easier for customers who lack money or skills for existing options
2. Trying to facilitate what the customers are already attempting to do, rather than seeking to ‘educate’ them to new behaviour
Signals of Change
Market signals Customers are paying for upgrades Customers expressing frustration or ‘if only’ discussionsIntegrated companies are more successful than specialists
Opportunity for up-market sustaining innovations!
Look for improvements in the industry’s dimension for competition Early in a technology’s life, this is usually functionality and/or
reliability These improvements can be incremental or radical
Look to integrate as much of development as possible
Signals of Change
Market signals Consumers aren’t making use of new additionsEase-of-use becomes the main dimension for competition, most notably with regard to convenience, customisation, and price
These lead to three forms of disruptive innovations
1. Low-end disruptive innovations amongst most overshot customers
2. Displacement by specialist innovations
3. Migration of producer towards end-user innovations
Signals of Change
Market signals Emergence of companies making money in different ways than established rivals
Low-end disruptive innovations amongst most overshot customers
Target the lowest tier in terms of needs Remove all excessive functionality, then compete on price and
wait for this customer segment to grow in size
Signals of Change
Market signals Functionality is overshooting customers Modular and standard-based interfaces exist between product/ service components
Displacement by specialist innovation
Focus on one modular aspect of the solution being offered to the mainstream marketStreamline your business towards dominating this aspect of the solution
Signals of Change
Market signals Propagation of standards Lessening importance placed upon theoretical knowledge during hiring processes
Migration of producer towards end-user innovation
Look for opportunities to get closer to customers and develop customised solutionsLook for aspects of supply, etc. that can be done ‘in house’
Selecting your target customer segment (revisited) You start by looking at a problem and at the competing solutions to
that problem
You then look at the key dimension for competition
You then ask yourself if an eBusiness solution can improve upon this dimension for competition
From here you have your target customers and your value proposition, now you start creating a business model
Blue Ocean Strategy
There is an alternative to the previous process
When a market becomes ‘pure competition’ (price-based), it may not be appealing for new entrants
When this is the case, we may need to introduce some new factors to effectively create a new market This has been described as adopting a Blue Ocean Strategy
(Kim & Mauborgne 2008)
Red Ocean vs. Blue Ocean
Red Ocean Strategy Blue Ocean Strategy
Compete in existing market space Create uncontested market space
Beat the competition Make the competition irrelevant
Exploit existing demand Create and capture new demand
Make the value‐cost trade‐off Break the value‐cost trade‐off
Align the whole system of a company’s activities with its strategicchoice of differentiation or low cost
Align the whole system of a company’s activities in pursuit ofdifferentiation and low cost
From Kim & Mauborgne @ http://www.blueoceanstrategy.com/downloads/bos_web.pdf
What is Blue Ocean Strategy? The basic idea is very simple
We list out each competitive factor in our industry We gauge each of these ideas according to customer needs and
the capacity of existing competitors to meet those needs Then we ask ourselves four questions…
What is Blue Ocean Strategy?
From http://www.blueoceanstrategy.com/about/concepts/4-actions-framework/
Example of a Blue Ocean Value Curve
From http://www.blueoceanstrategy.com/downloads/bos_web.pdf/
Adopting a Blue Ocean Strategy for an eBusiness We can view this as resetting the market lifecycle described by
Christensen We’re looking for new functionalities
Instead of asking if an eBusiness solution can improve upon a key dimension for competition, we ask
1. What can an eBusiness solution do that existing alternatives can’t?
2. Do people want this enough to justify changing their behaviour?
Want to read more?
Links and references Christensen, C. 2004. Seeing What's Next: Using the Theories of Innovation to
Predict Industry Change, Harvard Business School, Cambridge, MA. http://books.google.ie/books?
id=SZQnfdM9O7wC&printsec=frontcover&source=gbs_ge_summary_r&cad=0#v=onepage&q&f=false
Kim, W.C., Mauborgne, R. 2005. Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant. Harvard Business Press, Cambridge MA.
Porter, M.E. 1980. Competitive Strategy, Free Press, NY, 1980. Porter, M.E. (2008) The Five Competitive Forces That Shape Strategy, Harvard
business Review, January 2008.
