Bess Luker
Alicia Estrada
Ryan Dupriest
Taylor Watts
Mamie Dupre
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Get the strategic sequence right
Fleshing out
Validating blue ocean ideas
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Fail to deliver exceptional value
Philips’ CD-I
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“Imagination Machine”
Video machine
Music System
Game Player
Teaching Tool
LACKED ATTRACTIVE SOFTWARE TITLES
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Bills and whistles of the new technology
Bleeding-edge technology is equivalent to
bleeding-edge utility
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Create a strategic profile
Assess where and how the new
product/service will change the lives of its
buyers
Less a function of its technical possibilities
and more a function of its utility to buyers
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Utility Levers
◦ Simplicity
◦ Fun and Image
◦ Environmental Friendliness
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Removed the greatest blocks to utility
The thirty-six spaces
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Convenience in the use phase
Risk in the maintenance phase
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Set the right strategic price
◦ Buyers will want to buy your offering
◦ A compelling ability to pay for it
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Many companies take reverse course
◦ Testing the waters
◦ Over time they drop prices ro attract mainstream
buyers
Volume generates higher returns than it
used to
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Knowledge intensive
Value of a product/service
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Ex. eBay
Network externalities
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Rival good
Non-rival good
Excludability
Strategic Pricing
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Setting price
Products and Services in two categories
◦ Different form, same function
◦ Different form and function, same objective
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How High the Price
Two principal Factors:
◦ Degree to which the product is protected by patents
◦ Degree to which the company owns some exclusive
asset or core capability
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Upper Boundary Strategic Pricing
Mid-to-lower-boundary strategic pricing
Price Corridor of the mass
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Target costing is the next step in the
strategic sequence, addresses the profit side
of the business model
Start with strategic price then deduct its
desired profit margin from the price to get to
the target price
Price-minus cost and not cost-plus pricing
◦ Essential if you arrive at a cost structure that is both
profitable and hard for potential follower to match
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If companies give in to the tempting route of
either bumping up the strategic price or
cutting back of utility they are not on the
path to lucrative blue waters
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To hit the cost target
First: streamlining operations and introducing
cost innovations from manufacturing to
distribution
◦ High cost low value added activities in your value
chain be significantly eliminated reduce of
outsource
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Second: partnering
◦ Secure needed capabilities fast and effectively while
dropping their cost structure
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Third: changing the pricing model of the
industry
◦ If the cost of the market is to high find another way
to make your product easier for customers to get
your product
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Three main stakeholders:
Employees
Business Partners
General Public
Before moving forward and investing in the
new idea, the company must first overcome
such fears by educating
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Failure to address concerns of employees
about a new business idea can be expensive
Before going public communicate so
employees are aware
Work with employees to find ways to make
everything less confusing
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Partners who fear that their revenue streams
or market position are threaten
Be open to discussion
Let executives convince on positives
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If the idea is very new and innovative it can
effect the public not just the company
Educate public of benefits
Encourage open discussion