1. OpenTTO.org - DILIGENT Phase 3 – Industry Dynamics Analysis
IDA Objective
Industry Forces
Generic Strategic Vs Forces
Analysing Structure and Dynamics
Shaping The Industry
Confidence Index
©2004 OpenTTO.org

2. Optimize the value-creation & value-capture strategy
IDA Objective
Understand the context in which firms compete:
Understand the rules of the game
Predict competitors and their moves
Identify options & strategies to optimize value capture
Predict the likely reactions to the selection options.
Optimize the value-creation & value-capture strategy
©2004 OpenTTO.org

3. Industry Dynamics Analysis
1.0 CPA
2.0 MVP
3.0 IDA
4.0 ADC
3.1 Describe Industry
3.2 Describe Forces
3.3 Workshop Dynamics
3.4 Develop Thesis and Risk Analysis
3.6 Summarise Player Dynamics
Overview
Describe the industry in which the IP will apply and the dynamic forces of that industry developed to give a view of the major agents who will influence the value of the IP and identify the options & strategies.
Supplier
Process
Output
2.0 MVP
Business Leads
Market Experts
Industry Experts
Researchers
3.1 Describe the Industry in which the IP will apply and
the major sources of influence and power
3.2 Describe the forces that will apply to the owner or
developer of the IP in the nominated industry
3.3 Workshop the dynamics of forces at play between
players and technology in the industry
3.4 Develop an Industry thesis of forces and behaviours
relevant to the future potential and value of the IP
3.5 Summarise the dynamics of the key players and
their potential influence on the value of the IP
3.6 Complete and review Confidence Index for IDA
Industry View
Key Players
Value Implications
Strategy Issues
Input
Customer
IP Map & Technology Roadmap
Market Value Proposition
Industry Description
- Market Size, Growth, Structure
4.O ADC
Business Leads
Governance
©2004 OpenTTO.org

4. IDA Industry Forces The classic Porter model:
The industry model is a subset of later cluster and country models
Firm Strategy Structure and Rivalry
Related and Supporting Industries
Demand Conditions
Factor Conditions
Porter’s (1990) model of competitive advantage
©2004 OpenTTO.org

5. IDA Porter's 5 Forces
SUPPLIER POWER Supplier concentration Importance of volume to supplier Differentiation of inputs Impact of inputs on cost or differentiation Switching costs of firms in the industry Presence of substitute inputs Threat of forward integration Cost relative to total purchases in industry
BARRIERS TO ENTRY Absolute cost advantages Proprietary learning curve Access to inputs Government policy Economies of scale Capital requirements Brand identity Switching costs Access to distribution Expected retaliation Proprietary products
THREAT OF SUBSTITUTES -Switching costs -Buyer inclination to substitute -Price-performance  trade-off of substitutes
BUYER POWER Bargaining leverage Buyer volume Buyer information Brand identity Price sensitivity Threat of backward integration Product differentiation Buyer concentration vs. industry Substitutes available Buyers' incentives
DEGREE OF RIVALRY -Exit barriers -Industry concentration -Fixed costs/Value added -Industry growth -Intermittent overcapacity -Product differences -Switching costs -Brand identity -Diversity of rivals -Corporate stakes
©2004 OpenTTO.org

6. IDA Generic Strategies Vs Forces
Industry Force
Generic Strategies
Cost Leadership
Differentiation
Focus
Entry Barriers
Ability to cut price in retaliation discourages potential entrants.
Customer loyalty can discourage potential entrants.
Focusing develops core competencies that can act as an entry barrier.
Buyer Power
Ability to offer lower price to powerful buyers.
Large buyers have less power to negotiate because of few close alternatives.
Large buyers have less power to negotiate because of few alternatives.
Supplier Power
Better insulated from powerful suppliers.
Better able to pass on supplier price increases to customers.
Suppliers have power because of low volumes, but a differentiation-focused firm is better able to pass on supplier price increases.
Threat of Substitutes
Can use low price to defend against substitutes.
Customer's become attached to differentiating attributes, reducing threat of substitutes.
Specialized products & core competency protect against substitutes.
Rivalry
Better able to compete on price.
Brand loyalty to keep customers from rivals.
Rivals cannot meet differentiation-focused customer needs.
©2004 OpenTTO.org

7. IDA Impact of Technology
Technology can change the playing field:
Technology 3Cs 4Ps
Capabilities
Speed
Cost
New value
New market
Limitations
Ownership
Distribution
Performance
Government
Customer
Company
Competitor
Product
Price
Place
Promotion
©2004 OpenTTO.org

8. IDA Suppliers and Inputs
Templates P C S O I
Transform
Typical questions for suppliers and inputs:
Is the definition clear of what constitutes the “industry”?
Is there information available about the nature of the industry?
Are there trends regarding R&D expenditure and performance?
Which knowledge created past competitive advantage?
What outside views can shed light on industry dynamics?
Is sufficient information known about generic firm strategies?
Cost
Differentiation
Focus
©2004 OpenTTO.org

9. IDA Process and Transformation
Templates P C S O I
Transform
Suggested analysis method:
Map the major industry forces
Map the periphery and the emerging players
Understand the emerging players – strategies and objectives
Hypothesis the major forces and trends
Link in the IP Map and the Technology Roadmap
Use the map and roadmap to confirm or remodel the forces
Consider the effect of the forces the “disciplined” firms
Consider the effect of the forces on the peripheral firms
Describe the role of the invention and its network
Identify the key players around the invention and the timing
©2004 OpenTTO.org

10. IDA Analysing Structure and Dynamics
Typical detailed questions in support:
What is the size of the total industry market?
How concentrated is it – market share held by largest firms?
How competitive – what are the typical margins?
Which lines of business provide the major sources of profit?
Where are the threats to the incumbent players?
Are the “disciplined” firms being challenged by new players?
What value would that destroy for the “disciplined” firms?
What barriers are faced in getting there?
Is technology or access to technology a key barrier?
How high/low are the entry/exit barriers?
©2004 OpenTTO.org

11. IDA Shaping the Industry
Key competitive moves shaping the industry are by:
Firms improving differentiation
Implementing key innovations in process and product
Creatively using channels of distribution
Exploiting relationships with suppliers
Customers lowering their switching costs
Firms raising the barriers to entry
Buyers increasing their power
Suppliers increasing their power
Government regulation changing the dynamics
New technology
©2004 OpenTTO.org

12. IDA Outputs and Customers
Templates P C S O I
Transform
Present the industry dynamics:
What are the compelling dynamics?
How do they impact on the value of the invention?
Which players will likely be most attracted by the invention?
What would be the “size” of their interest?
What would be the nature of their attraction?
Blocker, Builder, Developer, Exploiter
What would be the timing of their interest?
What are they key resources they offer commercialization?
Document and prioritise the key dynamics which explain and underwrite the potential value of the invention to partners, who may be current or emerging.
©2004 OpenTTO.org

13. IDA Summary
Industry structure determines customer and competitor behaviour
Impact of Technology
Revenue and cost
Bundling
Intermediation
Cross-industry
Process to understand and influence the impact of technology
Describe current business model
Describe capabilities and limitation of the technology
Create alternative business models
©2004 OpenTTO.org

14. IDA Templates The IDA Phase Summary Report:C S O I
Transform
The IDA Phase Summary Report:
Part of an evolving Business Plan
Contains at least:
Objective
Conclusion
Summary
Actions
Notes and carry-forward handover matters
Actions for further work may precede or run in parallel with the next Phase - ADC
©2004 OpenTTO.org

15. IDA Confidence Index How confident are you that:
The industry with the most potential has been well understood?
The dynamic forces have been adequately determined?
Porter’s Five Forces have each been well explored?
The key fading firms and emerging firms have been identified?
The invention will be important to the industry dynamics?
The most prospective “target” companies have been identified?
Possible intentions of those companies have been identified?
The timing and resources necessary to go forward are clear?
The resources which partners may contribute are understood?
The technology should be taken to the next DILIGENT step?
©2004 OpenTTO.org