1. IS6117 Electronic Business Development Project Evaluating Markets for eBusiness Rob Gleasure R.Gleasure@ucc.ie www.robgleasure.com

2. IS6117 Today’s class  Looking for ‘signals of change’ in markets  Blue Ocean thinking in Web and Mobile development

3. Selecting your target customer segment… What is a good customer segment for an eBusiness?

4. Signals of Change Christensen’s ‘Signals of Change’ refer to a way to evaluate customer segments within an industry and identify how that industry is likely to change in the future At it’s essence, the signals of change requires that we consider three types of consumers  Undershot consumers  Overshot consumers  Non-consumers

5. Signals of Change Performance Time Pace of performance improvements Overshot customers Undershot customers Non-consumers

6. Signals of Change Each type of consumer can be targeted by different types of innovations, namely  New-market disruptive innovations  Sustaining up-market innovations  Low-end disruptive innovations If we can determine which consumers are going to be most profitable in an industry in the future, we can estimate the value of these different types of innovations

7. Signals of Change Market signals High and increasing rate of growth in new smaller emerging markets High volumes of action in certain targeted customer segments Links being removed in the service delivery chain  New market disruptive innovation  Target people who are not consuming in existing markets by 1. Introducing simple, affordable option that makes it easier for customers who lack money or skills for existing options 2. Trying to facilitate what the customers are already attempting to do, rather than seeking to ‘educate’ them to new behaviour

8. Signals of Change Market signals Customers are paying for upgrades Customers expressing frustration or ‘if only’ discussions Integrated companies are more successful than specialists  Opportunity for up-market sustaining innovations!  Look for improvements in the industry’s dimension for competition Early in a technology’s life, this is usually functionality and/or reliability These improvements can be incremental or radical  Look to integrate as much of development as possible

9. Signals of Change Market signals Consumers aren’t making use of new additions Ease-of-use becomes the main dimension for competition, most notably with regard to convenience, customisation, and price  These lead to three forms of disruptive innovations 1. Low-end disruptive innovations amongst most overshot customers 2. Displacement by specialist innovations 3. Migration of producer towards end-user innovations

10. Signals of Change Market signals Emergence of companies making money in different ways than established rivals  Low-end disruptive innovations amongst most overshot customers  Target the lowest tier in terms of needs  Remove all excessive functionality, then compete on price and wait for this customer segment to grow in size

11. Signals of Change Market signals Functionality is overshooting customers Modular and standard-based interfaces exist between product/ service components  Displacement by specialist innovation  Focus on one modular aspect of the solution being offered to the mainstream market  Streamline your business towards dominating this aspect of the solution

12. Signals of Change Market signals Propagation of standards Lessening importance placed upon theoretical knowledge during hiring processes  Migration of producer towards end-user innovation  Look for opportunities to get closer to customers and develop customised solutions  Look for aspects of supply, etc. that can be done ‘in house’

13. Selecting your target customer segment (revisited) You start by looking at a problem and at the competing solutions to that problem You then look at the key dimension for competition You then ask yourself if an eBusiness solution can improve upon this dimension for competition From here you have your target customers and your value proposition, now you start creating a business model

14. Blue Ocean Strategy There is an alternative to the previous process When a market becomes ‘pure competition’ (price-based), it may not be appealing for new entrants When this is the case, we may need to introduce some new factors to effectively create a new market  This has been described as adopting a Blue Ocean Strategy (Kim & Mauborgne 2008)

15. Red Ocean vs. Blue Ocean Red Ocean StrategyBlue Ocean Strategy Compete in existing market spaceCreate uncontested market space Beat the competitionMake the competition irrelevant Exploit existing demandCreate and capture new demand Make the value ‐ cost trade ‐ offBreak the value ‐ cost trade ‐ off Align the whole system of a company’s activities with its strategic choice of differentiation or low cost Align the whole system of a company’s activities in pursuit of differentiation and low cost From Kim & Mauborgne @ http://www.blueoceanstrategy.com/downloads/bos_web.pdfhttp://www.blueoceanstrategy.com/downloads/bos_web.pdf

16. What is Blue Ocean Strategy? The basic idea is very simple  We list out each competitive factor in our industry  We gauge each of these ideas according to customer needs and the capacity of existing competitors to meet those needs  Then we ask ourselves four questions…

17. What is Blue Ocean Strategy? From http://www.blueoceanstrategy.com/about/concepts/4-actions-framework/http://www.blueoceanstrategy.com/about/concepts/4-actions-framework/

18. Example of a Blue Ocean Value Curve From http://www.blueoceanstrategy.com/downloads/bos_web.pdf/http://www.blueoceanstrategy.com/downloads/bos_web.pdf/

19. Adopting a Blue Ocean Strategy for an eBusiness We can view this as resetting the market lifecycle described by Christensen  We’re looking for new functionalities Instead of asking if an eBusiness solution can improve upon a key dimension for competition, we ask 1. What can an eBusiness solution do that existing alternatives can’t? 2. Do people want this enough to justify changing their behaviour?

20. Want to read more? Links and references Christensen, C. 2004. Seeing What's Next: Using the Theories of Innovation to Predict Industry Change, Harvard Business School, Cambridge, MA.  http://books.google.ie/books?id=SZQnfdM9O7wC&printsec=front cover&source=gbs_ge_summary_r&cad=0#v=onepage&q&f=fals e http://books.google.ie/books?id=SZQnfdM9O7wC&printsec=front cover&source=gbs_ge_summary_r&cad=0#v=onepage&q&f=fals e  Kim, W.C., Mauborgne, R. 2005. Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant. Harvard Business Press, Cambridge MA.  Porter, M.E. 1980. Competitive Strategy, Free Press, NY, 1980.  Porter, M.E. (2008) The Five Competitive Forces That Shape Strategy, Harvard business Review, January 2008.