Team 3: Getting the Strategic Sequence Right Kojo Prah Dale Ussery Ryan 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 Utility Companies 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 Levers Utility 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 Revenues Volume tends to have greater returns than niche pricing(risk) Consumer can derive value from a product’s popularity

STRATEGIC PRICING | Implementation Three 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 Tactics The 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 Costing Target PriceTarget 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 Tips Identify 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 Model If 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 Adoption Unbeaten 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

Employees HAVE 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 Partners Fear 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 Public Innovative 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 Index Utility 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?