1 Dickson K.W. Chiu PhD, SMIEEE, SMACM, Life MHKCS Jelassi & EndersJelassi & Enders: Chapter 7 COMP7880: E-Business Strategies Exploring new market spaces

Strategy options External analysis Internal analysis Sustaining competitive advantage Internal organisation Implementation Exploring new market spaces Interaction with suppliers Interaction with users/customers Creating and capturing value Strategic analysis Strategy implementation E-business strategy Mobile e-commerce strategy 12 Opportunities/ threats Strengths/ weaknesses Our Roadmap Strategy formulation COMP7880-EN-2

Dimensions of benefit Convenience Selection range Value curve of Amazon.com Value curve of traditional bookstores SpeedFace-to-face interaction High Low Performance Price Value curve provides insights into new market spaces Source: Adapted from C. Kim and R. Mauborgne, (1999). COMP7880-EN-3

The first step leading to value innovations is the ‘visual awakening’ Assignment for team exercise Pick a specific company offering Each team member writes down what he/she considers to be the key product/service elements As a group discuss and reach consensus on the key elements Rate the offering's level on each key element against the main competitors Do you see other competitors with radically different value curves? Activities Objective Draw the value curve of a specific offering and compare it with competitors COMP7880-EN-4

Display the current situation of the offering selected Value curve of Offering level Very high High Average Low Very low Non existent Key elements COMP7880-EN-5

Value innovations focus on customers rather than competitors Characteristics of conventional and value innovation logic Conventional logicValue innovation logic Assumption Strategic focus Customers Resources Offerings An industry's value curves follow one basic shape. Build a competitive advantage and beat the competition. Retain and expand customer base through segmentation and customization. Focus on the differences. Utilize existing assets and capabilities. Offer the products and services of your industry. New value curves can be shaped that solve traditional trade-offs. Pursue a quantum leap in customer value. Competition is no benchmark. Target the mass of buyers. Let some existing customers willingly go. Focus on key commonalities in what customers value. Ask what we would do if we were starting anew? Offer the total customer solution exceeding industry boundaries. COMP7880-EN-6

Activities Objective Create a new value curve for a specific offering The second step leading to value innovations is the ‘visual exploration’ Assignment for team exercise Adopt the perspective of a new industry entrant and reconsider the existing value curves Use one or two of the paths to experiment with the creations of a new value curve –Industry: Ask which elements of substitute industries are un/important to target buyers? –Strategic groups: Ask which key elements of the offer compel buyers to buy up or buy down? –Buyers: Ask who are the decision makers and how would changing buyer focus affect the key elements? –Scope: Ask how is the offer currently used and what activities/services might be valuably incorporated? –Appeal: Ask how we can change the polarity of appeal? –Time: Ask what trends are impacting our industry and how do the key elements match Plot a new value curve. Indicate which key elements are eliminated, reduced, raised or created COMP7880-EN-7

Display possible changes to the existing value curves Value curve of Offering level Very high High Average Low Very low Non existent Key elements COMP7880-EN-8

Looking across functional or emotional appeal Looking across time/ trends Looking across substitutive industries Looking across strategic groups Looking across the chain of buyers Looking across comple- mentary offerings Factors to be raised? Factors to be eliminated? Factors to be reduced? Factors to be created? Six paths framework: creating value innovations in e-business Source: Based on C. Kim and R. Mauborgne (1999), pp. 83–93. COMP7880-EN-9

Eliminate Reduce Raise Create Pinpointing possibilities for new value creation What can we do that has not been done so far? Does what we do really create consumer benefit? If not, which components or features of our product or service should we eliminate? Where can we reduce our range of offerings? What costs us a lot of money but does not create benefit? Where should we raise the standard of products or services? Where can we increase benefit by expanding our existing offering? Source: See also W. C. Kim and R. Mauborgne (1997), pp. 103–112, and (1999), pp. 83–93. COMP7880-EN-10

Value innovation shifts from head-to-head competition to creating new market Six path framework to create value innovations Head-to-head competitionCreating new market space Focuses on rivals in its industry Focuses on competitive posi- tion within strategic group Focuses on better serving the own buyer group Focuses on maximising value of the industry's products/ services Focuses on improving the given appeal Focuses on adapting to trends as they occur Looks across substitute industries Looks across strategic groups within its industry Redefines the buyer group Looks across complementary offerings beyond the bounds of its industry Rethinks the functional/emo- tional orientation Adopts the results of future trends today Industry Strategic group Buyer group Product scope Appeal Time/trends COMP7880-EN-11

Finding the right timing for market entry in e-business is critical Early-mover advantages Early-mover disadvantages Learning effects Brand and reputation Switching costs Network effects Market uncertainty Technological uncertainty Free-rider effects COMP7880-EN-12

13 Entrepreneurship process Entrepreneurship and creativity is a process! Identify an Opportunity Develop a Concept Determine the Required Resources Acquire the Necessary Resources Implement and Manage Harvest the Venture Source: Morris et al. Entrepreneurship & Innovation Entrepreneurial Process The Environment The Entrepreneur The ResourcesThe Concept The Organizational Context

14 Entrepreneurship – How to find opportunities Source: Morris et al. Entrepreneurship & Innovation TypesMethodsSourcesDetractors Perennial  Deliberate search vs. Discovery  The rules change  Demographics change  No need present  Window is not yet open Occasional  Market pull vs. Resource or capacity push  Underserved markets  Social trends  Strong loyalties  High switching costs Multiple Causes  New customers to the market  Satisfied customers Multiple Effects  Increase in usage rates  Shortages  Easy for others to enter with alternatives  Intense competition  New knowledge  Customers hard to reach

15 Entrepreneurship: Types of Innovations New to the world products or services New to the market products or services New product or service line that at least one competitor is offering Addition to existing products or service lines Product/service improvement, revision, including addition of new features or options New application of existing products or services, including application to a new market segment Repositioning of an existing product or service Source: Morris et al. Entrepreneurship & Innovation

16 Entrepreneurship - Entry Wedges Source: Morris et al. Entrepreneurship & Innovation