Kristy Strong, John White, Andrew Maale

The Right Strategic Sequence Buyer Utility: Is there a compelling reason for people to buy it? Park the idea or rethink it Setting the right strategic price: Is your offering priced to attract the mass of target buyers so they are compelled to pay? Securing profit brings us to cost: Can you produce your offering at target cost and still earn profit margin? Adoption hurdles: What are the hurdles in rolling out your idea? Are you addressing them up front?

Testing for Exceptional Utility Is there Exceptional Buyer Utility in your Business Idea Need for Buyer Utility Phillips’ CD-i Bleeding-Edge Technology ≠ Bleeding-Edge Utility Value Innovation ≠ Technology Innovation Expressly Assess Where and How the new product or service will change buyers’ lives

Buyer Utility Map (figure)

Buyer Utility Map (explanation) Applying the Right Perspective Outlines all the Utility Levers companies can pull to deliver Utility as well as different experiences Buyers can have Managers can identify the full range of utility propositions that a product or service can offer

Buyer Experience Cycle (figure)

Buyer Experience Cycle (Explanation) Ask Questions about each 6 steps Purchase Delivery Use Supplements Maintenance Disposal UPS Buyer Experiences Applied

Six Utility Levers What blocks does your proposed product fill? Using this tool, you can see how and whether your proposed product creates untapped utility for customers If your product fills spaces as other players, chances are you have not tapped a Blue Ocean

Model-T Ford Example

From Exceptional Utility to Strategic Pricing Ensures that buyers not only will want to buy your offering but will also have the ability to pay for it. Many companies test the waters of a new product by targeting price-insensitive customers.

It is important to know from the start what price will quickly capture the mass of target buyers. Companies are discovering that volume generates higher returns than it used to. Value of a product may be closely tied to the total number of people using it. Network externalities-sell millions at once, or nothing at all.

Free Riding The use of a rival good by one firm precludes its use by another. Use of a nonrival good by one firm does not limit its use by another. Excludability is a function both of the nature of the good and of the legal system.

The Price Corridor of the Mass

Step 1 Identify the Price Corridor of the Mass Look at other products with in the same industry. Compare it to different products offered by non- traditional competitors. Different form, same function Model T vs. horse drawn carriages. Different form and function, same objective. Bars vs. restaurants vs. movies.

Step 2 Specify a level within the Price Corridor. Determines how high a price they can afford to set without bringing in competition. Degree to which the product is protected legally. Degree to which the company owns exclusive asset or core capability.

From Strategic Pricing to Target Costing Price-minus costing, not cost-plus pricing. To hit the cost target, companies have 3 principal levers Streamlining and cost innovations Partnering Changing the pricing model of the industry.

Streamlining and Cost Innovations Streamlining operations You can shorten the number of parts or steps used in production by shifting the way things are made. Introducing cost innovations from Manufacturing Distribution

Partnering Many companies mistakenly try to carry out all the production and distribution activities themselves. Partnering allows a company to leverage other companies expertise and economies of scale. Can be faster and cheaper.

Changing the Pricing Model “Pricing Innovation” Sometimes no amount of streamlining or partnering will make it possible for a company to hit its target cost. Blockbuster changed their model from selling to renting. Equity Interest HP trades high-powered servers to Silicon Valley start- ups for a share of their revenue.

The profit model

From Utility, Price, and Cost to Adoption Educate the fearful 3 main stakeholders Employees Business partners General public

Employees Communicate the threats of the idea Work with them to find ways to defuse the threats “Get the right people on the bus”

Business partners Discuss the issues with the partners Convince them what they have more to gain by cooperating And what there is to compensate from lost revenue

General Public By educating the public, you can help your company by avoiding any activist groups Let them know you have included them and that they have a voice No surprises

Blue Ocean Idea Index Yet Another Test to form an integral whole to ensure commercial success Examples to Illustrate this Test Phillips CD-I Motorola Iriduim DoCoMo i-mode Japan

Illustration of Blue Ocean Idea Index

Phillips CD-i

Motorola Iridium

DoCoMo i-mode Japan

What next? After passing the Blue Ocean Idea Index test, the company can shift from Blue Ocean Strategy to Execution How do you bring an Organization with you to execute this strategy even though it represents a different departure from the past? Answer: Overcoming key organizational hurdles— Tomorrow’s BOS presentation