New Venture Development Week-4

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Presentation transcript:

New Venture Development Week-4 Instructor: Bora ÖZKENT

Today’s Agenda Goals Discussion Topics Discover Blue Ocean Strategy and Customer Experience Focused innovation concepts. Discuss the pressures and demands in the marketplace that are driving opportunities for entrepreneurs with an eye toward sustainability. Explain ways that entrepreneurial companies can gain competitive advantage by orienting products and processes that take environmental issues into account. Explain how social entrepreneurship is both similar to and different from traditional entrepreneurship. Offer a definition of social entrepreneurship that encompasses social ventures and enter-prising nonprofits. Evaluate and discuss the Northwest Community Ventures Fund case. Discussion Topics Discussion-1: In what ways does looking through sustainability lens change how an entrepreneur approaches a new venture opportunity? Discussion-2: How has the communications revolution become a major driver of entrepreneurial thinking and opportunities in sustainable, green business models? Discussion-3: What is an example of a wicked problem facing humanity, and what types of opportunities might arise for social entrepreneurship in that space?

Ideo’s Innovation Path Pre Study Research Analysis Discusiion Field Observation Interviewing Recording Brain Storming Idea Generation Idea Building Selection Prototyping Quick Testing Customer Testing Iterating Ideo’s Innovation Path

Sources of Ideas Opportunity Screening New Idea Creation Sea (ecosystem) changes Trend spotting Pattern recognition Cloning, Inspiring, Adapting Social networks Past Experience New Idea Creation Coincidence/Accident Problem/need observation Blue ocean strategy Creative thinking Customer development

The Book and the Authors Prof Renee Mauborgne © JOHN ABBOTT Prof Chan Kim

Red Ocean vs. Blue Ocean Compete in existing market space Create uncontested market space Make the competition irrelevant Create and capture new demand Break the value-cost trade-off Align the whole system of a firm’s activities in pursuit of differentiation and low cost Compete in existing market space Beat the competition Exploit existing demand Make the value-cost trade-off Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost

Value Innovation: The Cornerstone of Blue Ocean Strategy Creators of blue oceans follow value innovation Value Innovation Equal emphasis on value and innovation Defies value-cost trade-off of competition-based strategy Successful value innovation: Drives down costs while driving up buyers’ value Uses a whole-system approach Follows reconstructionist view

Four Actions to create a Blue Ocean What factors should be raised well beyond the industry standard? Raise What factors should be eliminated that the industry has taken for granted? Eliminate What factors should be created that the industry has never offered? Create What factors should be reduced well below the industry standard? Reduce

Example: A highly competitive Industry The American Wine Industry

What the industry offers Premium Wines Budget Wines Massive Choice

American Wine Industry 3rd largest in world: worth $20 billion Californian makes 66% - the rest is from Italy, France, Spain, Chile, Argentina, Australia Exploding number of new wines – new vineyards in Oregon, Washington, New York Customer base stagnant 31st in the world in per capita consumption!

American Wine Industry Top 8 producers had 75% of the market; 1600 had the remaining 25% $ millions spent in marketing - Titanic battles – intense competition Sever price pressure The dominant growth strategy was towards premium wines – more complexity, better image, more prestigious vineyards, number of medals won at wine festivals.

What wine customers said … “It is too confusing and complex” Wine descriptions and terminology The shopping experience The lack of clear guidance on what to buy and drink Thus, massively intimidating for‘noncustomers’ (the large majority of the US population who were not wine drinkers)

Strategy Canvas High Low The strategy canvas is both a diagnostic and an action framework for building a compelling blue ocean strategy. It captures the current state of play in the known market space. This allows you to understand where the competition is currently investing, the factors the industry currently competes on in products, service, and delivery, and what customers receive from the existing competitive offerings on the market. The horizontal axis captures the range of factors the industry competes on an invests in. The vertical axis captures the offering level that buyers receive across all these key competing factors. The value curve then provides a graphic depiction of a company’s relative performance across its industry’s factors of competition. High Premium Wines Budget Wines Low Above-the-line marketing Vineyard prestige and legacy Wine range Price Use of enological terminology Aging quality Wine complexity

Four Actions Framework + Eliminate/Reduce/Raise/Create Grid The four actions framework offers an technique that breaks the trade-off between differentiation and low cost and to create a new value curve. It answers the four key questions of what industry takes for granted and needs to be eliminated; what factors need to be reduced below industry standards; what factors need to be raised above industry standards; and what should be created that the industry has never offered. Which factors should be reduced well below industry standards? Eliminate A New Value Curve Create Which of the factors that the industry takes for granted should be eliminated? Which factors should be created that the industry has never offered? Raise Which factors should be raised well above the industry’s standard? The eliminate-reduce-raise-create grid pushes companies not only to ask all four questions in the four actions framework but also to act on all four to create a new value curve. By driving companies to fill in the grid with the actions of eliminating, reducing, raising, and creating, the grid provides four immediate benefits: it pushes them to simultaneously pursue differentiation and low costs; identifies companies who are only raising and creating thereby raising costs; makes it easier for managers to understand and comply; and it drives companies to scrutinize every factor the industry competes on.

Eliminate Raise Reduce Create Enological terminology and distinctions Aging qualities Above-the-line marketing Raise Price versus budget wines Retail store involvement Reduce Wine complexity Wine range Vineyard prestige Create Easy drinking Ease of selection Fun and adventure

To Be Canvas

Yellow Tail Only 2 types initially – Chardonnay and Shiraz Fruity, soft on palette, sweet-ish – great for those who had not drunk wine before Same bottle for red and white – low logistics costs Simple vibrant packaging – lower case letters/kangaroo Un-intimidating They were selling “The essence of a great land … Australia” – ie they were not selling the wine Australian clothing for the retail staff – they enthusiastically promoted a wine they could understand.

Value Innovation of [yellow tail] Utility proposition (customers, distributors and retailers) Creating of a social drink that is accessible to anyone Easy drinking, ease of selection, sense of fun and adventure Limit number of SKUs Price to move at volume Price proposition Targeted at the mass of customers Priced against the alternative (6-pack) Cost structure Elimination of working capital tied up in aging wines Fast product turnover

Results No 1 imported wine (outsells France and Italy) Fastest growing imported wine in the history of the USA industry New consumers of wine Jug drinkers trade up Premium wine drinkers trade down Industry criticizes them mercilessly at first Now wine press blurb gives it a “best buy” for value; winning wine awards.

Four Actions to create a Blue Ocean What factors should be raised well beyond the industry standard? Raise What factors should be eliminated that the industry has taken for granted? Eliminate What factors should be created that the industry has never offered? Create What factors should be reduced well below the industry standard? Reduce

Optional Assignment: Choose a real product that is already on the market (it can be either one of the above or your own preferences of product), brainstorm the value factors of the product and develop the Strategy Canvas

Customer Experience Focused Innovation

Experience Insight Model 24

The Party Checklist Create a guest list Create a party budget Pick theme or decor Order party supplies Decide menu & drinks Create menu & grocery list Create party supply shopping list Decide activities & games Send party invitations Book entertainment Order party favors Buy birthday games & game items Order balloons Enlist party helpers Gather owned party supplies (banners, utensils, platters) List other supplies needed Order rental equipment Buy film & video tape Buy piñata, candy & fillers Place RSVP guest list & pen by the phone Order Flowers Buy non-perishable food & beverages Buy candles Procure matches Bake & freeze unfrosted cake if making your own Schedule activities Decorate party room Gather birthday games or activities Set out party favors Prepare food that will refrigerate well overnight Arrange food delivery Defrost cake before bed Pick up cake, ice, balloons Frost & decorate homemade cake Decorate outdoor areas Set up birthday games Gather serving pieces Have camera ready Prepare perishable food Check bathroom for needed supplies (toilet paper, hand towels, soap) Smile and have fun! 25 25

Reframing the Problem – Redefining the Experience Percent of Solution Category Emotion Price Complete Party Total Relief Smile $750 Ready Made Cake + Party Theme items Enhanced Service Busy $75 Ready Made Cake Service Stressed $30 Ingredients Commodity Overwhelmed $7 90% 10% 30% 70% 15% 85% 10% 90% 26

Reframing the Problem – Redefining the Experience Percent of Solution Category Emotion Price Total Commodity 90% 10% 10% 90% The Commodity Problem The Commodity Solution The Total Experience Problem The Total Experience Solution 27

Your Customer Journey 13. 12. 11. 10. 9. 8. 7. 6. 5. 4. 3. 2. 1.

Customer Experience Journey Contact Dimension Details Customer asks.. Customer feels… Customer sees (5 Sense)… Customer says Customer remembers… Customer did… Customer was challenged Other observations

The Principles of Customer Experience DEFINITION YOUR EXPERIENCE Complete Solution Solve the complete problem Authentic Be real and genuine Personalized The customer as unique individual Relevant Make it relevant to their life Timely Be fast Customized Alter the experience to their needs Visualize Value Ensure that they see the value Simple Language Speak using clear language Value Pre-Sale Add value before you sell Value Post-Sale Add value after you sell Shared Allow to share with others Expressive Allow customers ability for self expression Lasting Make it last longer Profitable Ensure it is profitable to you Emotionally Engaging Evoke and engage emotions

Discussions 1& 2 In what ways does looking through sustainability lens change how an entrepreneur approaches a new venture opportunity? How has the communications revolution become a major driver of entrepreneurial thinking and opportunities in sustainable, green business models?

Sea Change Increased global regulatory pressure Demand for heightened transparency Growing public concern about the environment and health Environmental performance measures in procurement, from the investment sector, and in terms of public accountability

The Challenge The major challenge of this century is how to create prosperity for more people worldwide given climate change, water short-ages, urban air pollution, energy supply challenges, and the ne-cessity of feeding and providing decent lifestyles for a world population that is expected to double by 2050.

Oportunites Those ahead of the pack have grasped that the environment is a growing source of strategic opportunity for companies. It is now clear that there is a revolution under way in business as entrepreneurial companies gain competitive advantage by orienting products and processes to take environmental issues into account. “Green” is the new “black.” Entrepreneurs now need to look at their industries through a sustainability lens to identify new opportunities and devise means of acting on them. Sustainability includes the concept of economic viability. Sustainability also refers to the role new ventures play in supporting communities, improving human health, and protecting ecological systems.

Cool: Patagonia

Social & Green

Facebook app drags up old photos to show clothes that could be given to charity -You Will Never Wear That Again

At Brazil-based fast food chain, packaging is edible – Bob’s

World’s first low-water, low-energy vertical farm opens in Singapore

To save water, an iPhone app that drowns out embarrassing bathroom sounds http://www.springwise.com/eco_sustainability/to-save-water-iphone-app-drown-embarrassing-bathroom-sounds/

Wind turbine turns airborne moisture into drinking water

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Hybrid Models of Social Entrepreneurship For profit – primarily achieving economic goals For profit – primarily achieving social goals. For profit – equally emphasizing social and economic goals Not for profit, serving a social mission 7-49

7-50

Business Plan Preparation: Executive Summary In this phase of the course you should decide about the venture you would like to pursue as your business plan for the course. You cannot choose to open a franchise since the franchiser would have already done the bulk of the business plan work for you. During the course of the term, you will complete a Business Plan on your venture. There will be different portions of the assignment due each week from now on. You will follow the outline at the end of Chapter 08 in the Timmons and Spinelli textbook, starting on page 252. For this week, complete a brief Executive Summary of your new venture using the guidelines listed on pages 256-257 of the Timmons and Spinelli textbook (Sections A- The Opportunity F). While I recognize that "some" of this information is not yet available, please offer a best guess in your submission. The main purpose of this assignment is to have your "commit" to a business plan concept so that you can focus your efforts during the remainder of our course developing the complete plan. This assignment allows me to review your chosen venture and offer some feedback to the team.