Electronic Marketing
Components:
Customers and the
Business Model
Global Innovation Management
Blue-Ocean Strategy
create uncontested market space by
reconstructing market boundaries
Global Innovation Management
Blue-Ocean Strategy
– Value Innovation
» simultaneous pursuit of differentiation and low cost
– Strategy canvas,
– Four actions framework
»
»
»
»
reconstructing market boundaries,
focusing on the big picture,
reaching beyond existing demand
getting the strategic sequence right
– Eliminate-reduce-raise-create grid
»
»
»
»
visualizing strategy, noncustomers
launch idea
target costing
overcoming adoption hurdles.
Global Innovation Management
Innovating to Differentiate and
Create a Market Niche
• An ‘Innovation’ is:
– Invention + Commercialization
• Freeman, The Economics of Industrial Innovation
– A new way of doing things that is commercialized
• Porter
• The new knowledge in an innovation can be either
– Technological, or
– Market related
Global Innovation Management
Fundamental Equations
• Innovation = Invention + Commercialization
• Capabilities = Assets + Competences
• In the present economy
– Demand is driven by innovation
– Supply is constrained by capabilities
Global Innovation Management
Understanding Innovation
• Innovation occurs on;
–
–
–
–
Technology
Market channels and packaging of technology
Architectural rearrangement of existing components
Integration of new component technologies
• Theories and frameworks precede and motivate
commercialization of technology
• Business models and figures of merit precede
innovation
Global Innovation Management
Innovation = Change
• Change management is an essential part of
innovation management
– Change destroys old competitive advantages,
• And introduces new ones
• Success requires:
– Ability to collect and use information about the
competitive environment
– The nature of information that can be scanned from
the environment
Global Innovation Management
What the Consumer Sees
• Overall desirability of features is measured by a
figure of merit
– A quantity used to characterize the performance of an
item relative to other products
– often used as a marketing tool to convince consumers
to choose a particular brand
• Unfortunately, each feature carries with it both
desirable and undesirable characteristics
Global Innovation Management
Toolsets
Quiz & Organize with a Mind Map
Ask Questions: Customer Experience is dynamic
• Who?
• … is with customers while hey use the product
– How much influence do they have
• If we could arrange it, who would we want the customer to be with …
• What?
•
•
•
•
– … Do our customers experience when the use the product
– … needs provoked our offering
What else? … might customers have on their minds
When? … do our customers use this ..
Where? … are our customers when they use this
How? … do customers learn to use the product .
Global Innovation Management
Toolsets
Overview of Feature Set
Prioritize and choose the major features of Beats’
innovation
Review the main innovation features with a featureattribute map for the entire innovation
Basic
Discriminator
Energizer
Positive
Nonnegotiable
Differentiator
Exciter
Negative
Tolerable
Dissatisfier
Enrager
Neutral
So What?
Parallel
Global Innovation Management
Toolsets
Consumption Chain Analysis
•
You should only list the 3
or 4 most important steps
S elec tion
S earc h
D elivery
Repairs and
Returns
These will determine whether
the potential customer
proceeds to the next step
(good)
– Or leaves the consumption
process (not good)
O rder and
purc has e
Aw arenes s
of need
P aym ent
F inal dis pos al
S ervic e
F inanc ing
Us e
e
•
Determine the main steps in
consumption
L ea v
•
Continue
Global Innovation Management
Rec eipt
S torage and
tras port
In s ta lla tio n
a n d A s s e mb ly
Toolsets
Feature-Attribute Map the 3-4 Key Steps in the
Consumption and Manage those 3-4 Steps
L ea v
e
• Identify Discriminators
and Energizers
• Describe how you will
manage each of these
features of the
consumption process
Continue
Basic
Discriminator
Energizer
Positive
Nonnegotiable
Differentiator
Exciter
Negative
Tolerable
Dissatisfier
Enrager
Neutral
So What?
Parallel
Global Innovation Management
Recipes, Not more Cooking
• Big advances in our standard of living have always
come from ‘better recipes, not just more cooking’
• Economist Paul Romer
• Innovation is not necessarily about ‘new’
technology, design or marketing.
• It is about new combinations and configurations of features,
• limited only by the constraints imposed by existing
technology.
Global Innovation Management
Three Challenges
Framing
Venture Capital
Communication
Global Innovation Management
The Framing Challenge
• What Is the Real Business Problem?
– Accurately define your customers and what motives
them
• Properly framing a problem in terms of
• the reality of the situation and
• the objectives of the organization
– is an important step in the decision-making process.
– Mental frames act to channel our thinking and are
important tools to help navigate complex decisions
Global Innovation Management
The Venture Capital Challenge
• What is your business worth, and why?
• Your new venture competes in two markets:
• Product
• Financial
• How will you tie this to your business model
– tying narrative to numbers
• What are the activities, operations and products?
• What are the significant environmental influences?
– major competitive forces outside management control
• How does value flow through your business model?
• What is the Net Present Value of future activities
Global Innovation Management
The Communication Challenge
• Provide a ‘lead in’ which will ‘hook’ your listener (the elevator pitch)
• Provide a brief ‘sales pitch’ presenting the major components of your
innovation and business
• Consider what parts you most want to emphasize about the business
model
• Describe your business in one paragraph (equivalent to the 25 second
pitch)
–
–
–
–
–
Numbers
Behavioral model and capabilities required
Strategy model
Investment Risk
A summary financial analysis to show risk and ROI for the project
• Answer your investors question:
– Why should I give you My money?"
Global Innovation Management
Activity #1:
Identify your Customer
•
•
Commercialization is about creating a customer
‘Quiz’ to identify your customer:
• Who?
– … is with customers while hey use the product & How much
influence do they have
– If we could arrange it, who would we want the customer to be
with …
• What?
– … Do our customers experience when the use the product
– … needs provoked our offering
•
•
•
•
What else? … might customers have on their minds
When? … do our customers use this ..
Where? … are our customers when they use this
How? … do customers learn to use the product ..
Global Innovation Management
Toolsets
Organize Answers with a Mind Map
Global Innovation Management
Activity #2:
Select a Product or Service
• Select a Product or Service that you are interested in marketing via
Internet business models
– This is mainly about determining your Core Capabilities
• Capabilities =Assets + Competences
• Money is important
– Innovation  Utility  Commercial value
• Talk about your opportunity register (OR)
– Your repository of alternative ideas that can be pulled up at any time If a
particular idea isn’t working
Global Innovation Management
Identify the 3 most important features
•
Specify the particular customer choices you are offering in your
product or service (no more than three) as
– Identify the discriminators and energizers
•
•
What differentiates your product from competitors’ in the
customer’s minds?
List the three features that are important to the target
customer, and rank them from most to least important.
Basic
Discriminator
Energizer
Positive
Nonnegotiable
Differentiator
Exciter
Negative
Tolerable
Dissatisfier
Enrager
Neutral
So What?
Parallel
Global Innovation Management
Activity #3:
Make a Profitable e-Marketing Business
•
•
•
Define how you will measure the usefulness or attractiveness of each of
these features to the target customer.
•
This performance metric should be a numerical measure
Draw a value map describing your companies proposed business model,
and
– provide some indication of the costs and revenues that will flow into
and out of the business.
Define your product’s top competitor in each of these 3 features



•
Are these companies profitable?
How big (approximately) is their business?
Why is your product better?
Think: Low-cost or Differentiated Products?
Global Innovation Management
Activity #4:
Define your Marketing Channels
• Consumption Chain Analysis
– Works from the premise that
• opportunities for differentiating your product from others
– lurk at every step and decision that your customers take
– From the time they first become aware of their need for your
product or service
– To the time thy finally dispose of the remnants of the used up
product
• Product differentiation is the secret to high revenue
Global Innovation Management
Se a rc h
(Go o g le
O rg a n in c ,
A d W o rd s ,
e tc .)
P otential
Cus tom er
so m
Go
Am azon
W ebs tore
'Landing'
P age
Am azon
W ebs tore
P roduc ts
P ages
Am azon
W ebs tore
'Cart' P age
A ma zo n
W e b s to r
'Ch e c ko u t
M e rc h a n t
A c c e p ta n c e '
Am azon
W ebs tore
'Chec kout
P ay'
Le
ew h
av
e re
e lse
e
CRM S ys tem
L ea
L ea
ve
ve
L ea
ve
Y o u earn revenu e
Global Innovation Management
Activity #5:
Describe the Business Model and
Entrance Strategy
• Start with a compelling story
ns
s ig
De
W ork
P r o d u ctio n
Labor
R& D
Cus tom ers
N
ee
ds
– Part of selling your strategy / investment
– Tying Narrative to Financial Numbers
F actory
M
C ustom er
R elationship
M anagem ent
ar
ke
g
t in
• Strategy becomes less philosophy
• More performance and outcome
– What activities, operations and products are within the ‘scope’ of the
valuation analysis? (Bubbles: depends on audience)
– What are the significant environmental influences? (Boxes: major
competitive forces outside management control)
– How does value flow through the relevant scope of the analysis?
(Arrows: value metric)
Global Innovation Management
Market Entrance Strategy
• What are the major competitive forces molding
managerial strategy which add to, or take away from
‘Value’?
• What ‘levers’ (strategy drivers) can management pull
to influence value added?
• What is the functional relationship between value and
the strategy drivers? (Define the ‘Strategy Model’)
• What are the major technologies relevant to
managerial strategy which add to, or take away
from ‘Value’?
Global Innovation Management
Business Model and Strategy Need
to do Two Things
• (1) Must produces revenue by satisfying customer
demand
– i.e., that meets the ‘Framing’ challenge; and
• (2) Must controls costs and generates a high return
on investment,
– where expected revenues significantly exceed
expected costs,
– and thus can be argued to meet the ‘Venture Capital’
challenge.
Global Innovation Management
Activity #6:
Internet Marketing
• Keywords, keywords, keywords
–
–
–
–
–
Which will you buy?
What are the trends?
How much will it cost?
How much traffic?
How much revenue
• Will that traffic generate?
Global Innovation Management
Conversions
• Conversion = Money Generating Web Action
• Point users to the right landing page.
• When users click on your ad, they should arrive at a landing page clearly
displaying the information or product offered
• Keep the user experience in mind.
• Place important information and images on the top left, where the eye
naturally goes first.
• Help people get what they want in three clicks or fewer.
• Create a simple process for users to complete transactions
Global Innovation Management
Meet the Challenges
•
•
•
Framing
– What Is the Real Business Problem?
– the reality of the situation and
– the objectives of the organization
Venture Capital
– Your new venture competes in two markets: (1) Product; (2) Financial
– What are its activities, environmental influences, operations and products?
– How does value flow through your business model? What is the NPV of
future activities
Communication
– Provide a ‘lead in’ which will ‘hook’ your listener (the elevator pitch)
– Provide a brief ‘sales pitch’ presenting the major components of your
innovation and business
– Consider what parts you most want to emphasize about the business model
– Answer your investors question:
• Why should I give you My money?"
Global Innovation Management
The Long Tail
• In a typical graph of demand
– rank ordered over all products (say MP3 files)
– Inventory storage limits you to best sellers
• Whereas the majority of the market will be ‘niche’
– i.e., in the long tail
– Internet technologies give you access to the long tail
Limits
of Shelf
Space
Market without limits
Global Innovation Management
When do you have an Innovation?
• You start by asking what you do better than anyone
else in:
–
–
–
–
Technology
Market channels and packaging of technology
Architectural arrangement of components
Integration of new component technologies
Global Innovation Management
Where to find New Business
Global Innovation Management
The Nature of Innovations
• New ideas arise in either:
– technology behind the invention, or
– marketing, logistics, networking and design strategy
• To succeed requires a holistic perspective on management of the
innovation process:
– Innovations will not come about by R&D staff inventing
whatever they want
– then throwing it over the fence for Production to make, and
Marketing to sell
• All the resources in the firm need to be considered at all phases
of the innovation’s life-cycle if it is to be a success
Global Innovation Management
Establish Your Identity
• Make it memorable
• "Amazon.com" is more unique and less limiting than
"booksonline.com."
• Describe your business
• Avoid confusion by simply and logically describing your
business
• "Flowers.com" obviously leads one to believe they can buy
flowers on the site.
• If you are setting up an online presence for an established
business, keep the name of your site the same as the name
of your business
Global Innovation Management
Build a User-Friendly Site
• Plan Your Site
• identify clear marketing goals
• such as generating leads,
• building a database of potential customers' names and e-mail
addresses,
• putting a product catalog online to save the time and
expense of printing and mailing
– Quantify your objectives - such as increasing sales by
15% - so you know whether or not your site is
successful.
Global Innovation Management
Build a User Friendly Site
• Figure out what your potential customers need to
know before buying your products and services
• An overview of your company, its products and services, and
their applications
• Complete product or service descriptions, including features,
key benefits, pricing, product specifications, and other
information, for each product or service
• Testimonials, or success stories so customers can see how
similar individuals or organizations have worked with you
• FAQ section that anticipates and answers customers'
common issues
Global Innovation Management
User-friendly sites
Plan the structure of your site
Make it easy for customers to learn what they need to know,
make a purchase decision, and then buy quickly.
Create a site map that outlines every page on your site
starting with the home page and mapping how customers
get from one page to the next
Use tools that quantitatively measure site activity - where
customers are clicking, how often, and whether they end
up purchasing - then compare the results with your goals.
Global Innovation Management
Site-Building Tools
• Site building is not extremely difficult
– But the number and breadth of tools is confusing
• The following is a brief survey
• Often your choice will be dictated by:
–
–
–
–
Company standards
Templates
Platform (e.g., iPhone)
Personal experience (e.g. Dreamweaver)
Global Innovation Management
E-Commerce Site Design
• Carefully research your own favorite e-commerce sites
• Creatively adapt the most compelling marketing and design
techniques to enhance your site's effectiveness.
• Your home page is your business’ online front door
• make a good first impression on visitors
• Make sure it clearly presents
• Your company name, logo, and tagline prominently …showcase
your brand identity.
• Contact information
• Don't make it difficult for visitors to find your phone number, email address, mailing address, and fax number
Global Innovation Management
Site Design
• Provide a link to
– an "About the Company" page for customers to
quickly learn who you are and what your business
offers.
– A menu listing the basic subsections of your site
• Keep this menu in the same place on every page throughout
your site to make it easy to navigate.
– A "What's New" section for news, announcements,
and product promotions.
– Your privacy statement
Global Innovation Management
Site Building
• Make it easy for customers to navigate your site. As
you build your site
• minimize the number of clicks it takes the customer to go
from your home page to actually being able to make a
purchase
– Four to six clicks is a useful rule of thumb
• Make sure links make sense, so customers know
what to click to find what they're looking for.
• Quantify your goals for sales, clicks, or inquiries
• so you can objectively measure the success of your ecommerce Web site
Global Innovation Management
Site Building
• Keep things simple
– Stick to the same basic color palette and fonts your company
uses in other communications, like your logo, brochures, and
signage
– Ensure that images and graphics serve to enhance, not distract
from, your marketing goals. Make sure the text is easy to
• Keep download times short
– Test pages to make sure they're not too heavy with graphics
that will slow load
– Most Web pages take anywhere from three to eleven seconds to
load
• i.e., waaayyy too long
Global Innovation Management
Web Hosting: what to look for
•
•
Shared hosting or dedicated server
Hard-disk storage space
–
•
Availability
–
•
E-mail accounts that match your domain name are often available from your ISP.Are they included with your monthly
access and hosting fee?
SSL Encryption
–
•
If you run an e-commerce business, your site must be accessible to customers 24 hours a day. ISPs and Web hosts
maximize the availability of the sites they host using techniques like load balancing and clustering. Can your ISP
promise near 100% availability?
E-mail accounts
–
•
Smaller sites may need only 300-500 MB (megabytes) of Web site storage space, while busier e-commerce sites may
need at least 9 GB (gigabytes) of space - or their own dedicated Web server
The security of the credit card numbers and other personal information customers send you should be a top concern.
Does your ISP or Web host protect your site with an SSL server ID? See Step Four below to learn more about Web
site security.
Support
–
A big part of the value of turning to an ISP or Web host is that you don't have to worry about keeping the Web server
running. Does your host offer 24x7 customer service?
Global Innovation Management
The Innovation Workout
Reversing Assumptions
• Forcing yourself to “think outside the box”
• This exercise is about reexamining what you think
are the
– underlying requirements,
– objectives and
– constraints
– of a problem
• Example: the 9-dot problem
– What do you assume are the underlying
requirements, objectives and constraints?
Global Innovation Management
The Innovation Workout
Reversing Assumptions
Global Innovation Management
Case study
{iPod + iTunes}
1. Describe Apple’s iPod business model.
•
Where does Apple make money? What are its costs?
2. Many once innovative companies suffer from the
‘Not Invented Here Syndrome’ (NIHS).
•
How do you think Apple has managed to avoid the NIHS
problem?
Global Innovation Management
Case study
{iPod + iTunes}
3. How did Apple use adaptive execution to develop
the (iPod + iTunes) business?
•
What firm capabilities does Apple possess that made it a
successful competitor in the MP3 player market?
4. What was innovative about the iPod versus other
MP3 players?
•
How did this help its commercialization?
5. What role does the industrial design of the iPod
play in its success?
Global Innovation Management
Case study
{iPod + iTunes}
6. What role does software play in the success of the
iPod business?
6. Describe how Apple reused and repurposed software
designed for another function in order to make the iPod a
success.
7. What role does the WWW play in the success of
the iPod business?
8. Challenge one of the fundamental assumptions of
iPod’s business model by reversing it.
•
Define an ‘anti-iPod’ product and business model that
satisfies your reversed assumptions
Global Innovation Management
Case study
{iPod + iTunes}
9. What are the commercially important attributes
that make iPod’s business model successful and
sustainable?
10. Split just one of the attributes in question 8 into
three sub-attributes.
•
How could you alter each of these sub-attributes to create
a new product?
11. Describe customer activity at each step of iPod
purchase and usage.
•
Do you see any opportunities for new businesses?
Global Innovation Management