Team 3: Getting the Strategic

Sequence RightKojo Prah

Dale UsseryRyan Swanner

Correct sequence crucial to validating blue ocean ideas to ensure their commercial viability

● Utility: Compelling reason for people to buy it?

● Price: Compelling ability to pay for your offering?

● Cost: Produce offering at target cost while earning a healthy profit?

● Adoption: What are the hurdles to rolling out your idea?

Right Strategic Sequence

Testing for Exceptional UtilityCompanies cannot be obsessed with the novelty of a new offering

Cutting edge technology does not equal cutting edge utility

Philips CD-i

Motorola Iridium

Buyer Utility Map: Combines six stages of buyer experience cycle and the six utility levers.

The Six Utility LeversUtility Levers: the ways in which companies can unlock exceptional utility

Most common- customer productivity

Looking to create different utility proposition and/or remove blocks to utility

Ford: Model T

EXCEPTIONAL UTILITY TO STRATEGIC PRICING

Price Dictates RevenuesVolume tends to have greater returns than niche pricing(risk)

Consumer can derive value from a product’s popularity

STRATEGIC PRICING | ImplementationThree Keys

Use similar products to know where to price |Follower Strategy

Adopt Excludability whenever possible | Excludability Strategy

Ensure a product has an impressive reputation|Brand Strategy

STRATEGIC PRICING | Tools and TacticsThe Pricing Corridor of the Mass

Step 1: Identify the price corridor

Step 2 : Specify a price level

Tactics

Mid to lower pricing is necessary for high fixed low marginal cost operations.

Product’s attractiveness depend on size of networks (Bigger is better)

Go lower if operation benefits from Economies of scale

From Strategic Pricing to Target CostingTarget Price Target Margin Target

Cost

Price-minus Costing not Cost-Plus Pricing

Focus on approaches to lower cost

Invest in Cost Innovations

Target Costing | Implementation Tools and TipsIdentify High Cost-Low Value

Items

Value Chain Analysis can help find unnecessary cost

Call Centers

Digital is Cheaper

Video Game manuals

Partnering Help disburse cost

SAP, Accenture and Oracle

Target Costing | Changing the ModelIf cost are as low as feasible possible change the cost model

Alternative Cost Models

Renting vs Buying

BlockBuster

Time Sharing vs Buying

Expensive Private Jets

Slice Sharing vs Buying

Mutual funds

From Utility, Price, and Cost to AdoptionUnbeaten business model might not be enough to GUARANTEE

SUCCESS

“threatens the status quo”

Nintendo wii

could provoke fear and resistance

3 main Stakeholders

employees

business partners

general public

EmployeesHAVE TO address concerns

Merrill Lynch

online brokerage service

stock price DROPPED 14%

resistance and fighting within company

Before Going Public

threats to employees

threats, diffusing the threats

Morgan Stanley

engaged employees

open internal discussion of strategy

Business PartnersFear of revenue streams/market positions being threatened

The new Coca Cola

1970s & early 80s

stiff competition, feared losing #1 spot

ceased production of classic cola

public outrage

They were forced to re-launch original formula immediately

Lesson learned: Don’t mess with success

General PublicInnovative and Brand New

could threaten established political or social norms

educating consumers

Communication to the public is key

Set clear expectations for ramifications

Describe strategy and addressing issues

Let their voice be heard

Blue Ocean Idea IndexUtility

exceptional?

compelling reason to buy your offering?

Price

is the price easily accessible to mass of buyers?

Cost

cost structure meet target cost?

Adoption

have you addressed these hurdles up front?