Slide 6.1 Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2 nd edition, © Pearson Education Limited 2008 Chapter 7: Exploiting opportunities of new market spaces in e-business After this session you should be able to:  Explain how firms can open up new market spaces and thereby create completely new types of value  Understand how to draw a value curve and gain insights through it  Explain the six paths framework and be able to use it for value creation in e-business  Appreciate the importance of finding the right time to enter a market  Recognise the advantages and disadvantages of being an early mover in e-business

Slide 6.2 Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2 nd edition, © Pearson Education Limited 2008 Dimensions of benefit Convenience Selection range Value curve of Amazon.com Value curve of traditional bookstores SpeedFace-to-face interaction High Low Performance Price Book Retailing Exhibit 7.1 The value curve provides insights into new market spaces Source: Adapted from C. Kim and R. Mauborgne, (1999).

Slide 6.3 Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2 nd edition, © Pearson Education Limited 2008 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

Slide 6.4 Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2 nd edition, © Pearson Education Limited 2008 Display the current situation of the offering selected Value curve of Offering level Very high High Average Low Very low Non existent Key elements

Slide 6.5 Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2 nd edition, © Pearson Education Limited 2008 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 customisation. Focus on the differences. Utilise 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 custo- mer value. Competition is no benchmark. Target the mass of buyers. Let some existing customers willing- ly go. Focus on key commonali- ties in what customers value. Ask what we would do if we were starting anew? Offer the total customer solution exceeding industry boundaries.

Slide 6.6 Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2 nd edition, © Pearson Education Limited 2008 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/importants 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

Slide 6.7 Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2 nd edition, © Pearson Education Limited 2008 Display possible changes to the existing value curves Value curve of Offering level Very high High Average Low Very low Non existent Key elements

Slide 6.8 Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2 nd edition, © Pearson Education Limited 2008 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? Exhibit 7.2 The six paths framework suggests different starting points for creating value innovations in e-business Source: Based on C. Kim and R. Mauborgne (1999), pp. 83–93.

Slide 6.9 Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2 nd edition, © Pearson Education Limited 2008 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.

Slide 6.10 Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2 nd edition, © Pearson Education Limited 2008 Value innovation shifts the focus of strategy from head-to-head competition to creating new market space 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

Slide 6.11 Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2 nd edition, © Pearson Education Limited 2008 Finding the right timing for market entry in e-business is critical Early-mover advantagesEarly-mover disadvantages Learning effects Brand and reputation Switching costs Network effects Market uncertainty Technological uncertainty Free-rider effects