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CS419 Info. Technology Entrepreneurship. Fall 2012 – 2013 Emre Oto. Building a Lean, Scalable Startup. www. CS419 onlin e.com Follow on Twitter: @ CS419Bilkent. CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC». Half Moon Bay, CA. - PowerPoint PPT PresentationTRANSCRIPT
CS419 Info. Technology Entrepreneurship
Building a Lean, Scalable StartupFall 2012 – 2013
Emre Oto
www.CS419online.comFollow on Twitter: @CS419Bilkent
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
Half Moon Bay, CA
Today’s Agenda Value Innovation
Blue Ocean Strategy
The Technology Adoption Lifecycle
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
Today’s Agenda Value Innovation
Blue Ocean Strategy
The Technology Adoption Lifecycle
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
Value InnovationIndustry Analysis An industry is a group of firms that market
products which are close substitutes for each other (e.g. the car industry, the travel industry).
Classical view: Structuralist View Industry structural conditions are a given and firms
are forced to compete within them = Environmental determinism Companies and managers are largely at the mercy
of economic forces greater than themselves.
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
Value InnovationIndustry Analysis = Porter’s 5 Forces
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
Value InnovationIndustry Analysis = Porter’s 5 Forces
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
The world doesn’t work this way: Reason 1: Co-opetition
= Game Theory We will study this later.
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
Value InnovationIndustry Analysis = Porter’s 5 Forces
The world doesn’t work this way:
Reason 2: The Reconstructionist View
Market boundaries and industries can be reconstructed by the actions and beliefs of industry players.
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
Value InnovationIndustry Analysis = Porter’s 5 Forces
Value InnovationStructuralist vs. Reconstructionist
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
Value InnovationStructuralist vs. Reconstructionist
Structuralist view says (Porter) Pursue either low-cost OR differentiation
Reconstructionalist view says You can and should attain
low-cost AND differentiation at the same time
= Value Innovation
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
Value InnovationCost Reduction + Differentiation
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
Value InnovationCost Reduction + Differentiation
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
• Cost savings are made from eliminating and reducing the factors an industry competes on.
• Buyer value is lifted by raising and creating elements the industry has never offered.
• Over time, costs are reduced further as scale economies kick in, due to the high sales volumes that superior value generates.
Value Innovation..lies in Blue Oceans
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
Today’s Agenda Value Innovation
Blue Ocean Strategy
The Technology Adoption Lifecycle
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
Blue Ocean StrategyRed Oceans Red oceans represent all the industries in existence today—
the known market space.
In red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are well understood.
Companies try to outperform their rivals in order to grab a greater share of existing demand.
As the space gets more and more crowded, prospects for profits and growth are reduced.
Products turn into commodities, and increasing competition turns the water bloody.
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
Denote all the industries not in existence today—the unknown market space, untainted by competition.
Demand is created rather than fought over.
Companies can give rise to completely new industries, abut in most cases, a blue ocean is created from within a red ocean when a company alters the boundaries of an existing industry.
It is about doing business where there is no competitor
Blue Ocean StrategyBlue Oceans
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
Blue Ocean StrategySeldom about technology Blue oceans were seldom the result of
technological innovation per se; the underlying technology was often already in existence.
Most blue oceans are created from within, not beyond, red oceans of existing industries.
This challenges the view that new markets are in distant waters.
Blue oceans are right next to you in every industry.
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
Blue Ocean StrategyCreating Blue Oceans
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
Focus
Divergence
The value curve—a graphic depiction of the way a company or an industry configures its offering to customers
Drawn by plotting the performance of the offering relative to other alternatives along the key success factors that define competition in the industry or category.
Blue Ocean StrategyThe Value Curve
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
Blue Ocean StrategyThe Value Curve – xIndustries
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
Blue Ocean StrategyThe Value Curve – xIndustries
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
Blue Ocean StrategyThe Value Curve – xIndustries
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
Blue Ocean StrategyCreating New Market Space
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
Blue Ocean StrategyRead the HBR papers folks!
Value Innovation: The Strategic Logic of High Growth, by W. Chan Kim and Renée Mauborgne
Creating New Market Space, by W. Chan Kim and Renée Mauborgne
Blue Ocean Strategy, by W. Chan Kim and Renée Mauborgne
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
Today’s Agenda Value Innovation
Blue Ocean Strategy
The Technology Adoption Lifecycle
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
The Technology Adoption Lifecycleaka the TALC
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
The Technology Adoption LifecycleInnovators = Tech. Enthusiasts
Fundamentally committed to new tech.
Take pleasure in its intricacies, love to get their hands on the latest and greatest innovation
One drawback: They don’t have any money. But they have influence Gatekeepers to the rest of the lifecycle We need their endorsement
“True revolutionaries who want to use the discontinuity of any innovation to make a break with the past and start an entirely new future”
Expectation: Being the first to exploit the new capability Creating a dramatic and insurmountable competitive
advantage
They put money on the table As much money as the VC/Angel investor community may provide
The Technology Adoption LifecycleEarly Adopters = Visionaries
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
They also help publicize the new innovation, giving it a necessary boost to succeed in the early market.
Tradeoff: Each visionary demands special modifications no one else would dream of using. Screws up your R&D resources when you are a
startup Please God, give me a customer that wants what
everybody else wants = pragmatist
The Technology Adoption LifecycleEarly Adopters = Earlyvangelist
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
The Technology Adoption LifecycleThe Early Market
Early Market
First to exploreFirst to exploit
No one else is interested in being the first
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
The Technology Adoption LifecycleEarly Majority = Pragmatists
Make the bulk of technology purchases
They believe in evolution, not revolution
They shy away from visionaries
Neutral about technology
Look to adopt innovations only after a proven track record of useful productivity improvement and strong references
Buy the de facto standard = the market leader
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
Pessimistic about their ability to gain any value from technology investments Only undertake them if there is a
“force majeur” and the next best thing is to let the rest of the world pass them by
Very price-sensitive, highly skeptical, very demanding
Unwilling to pay for any extra services
Simplify and commoditize systems to the point where they just work
“Happy to buy several dozen of the world’s most advanced microprocessors, as long as they are deeply embedded inside a BMW”
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
The Technology Adoption LifecycleLate Majority = Conservatives
They challenge the hype, and possibly to the level of hating your guts
They are not customers, but ever-present critics
The goal of high-tech marketing is not to sell to them but rather to sell around them
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
The Technology Adoption LifecycleLaggards= Skeptics
Begin by seeding new products with the technology enthusiasts to they can help you educate the visionaries
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
The Technology Adoption LifecycleExpected Natural Progression
Once you have captured the visionaries’ interest, do whatever it takes to make them satisfied customers so that they serve as good references for the pragmatists.
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
The Technology Adoption LifecycleExpected Natural Progression
Gain the bulk of your revenue by serving pragmatists, ideally by becoming the market leader and setting the de facto standards.
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
The Technology Adoption LifecycleExpected Natural Progression
Leverage success with the pragmatistis to generate sufficient volume and experience so that products become reliable enough to meet the needs of the conservatives.
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
The Technology Adoption LifecycleExpected Natural Progression
Leave the skeptics.
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
The Technology Adoption LifecycleExpected Natural Progression
The Technology Adoption LifecycleVisionaries and Pragmatists
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
The Technology Adoption LifecycleVisionaries and Pragmatists
Visionaries do not present a reference group for pragmatists.
Products get stuck in the chasm
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
The Technology Adoption LifecycleCrossing the Chasm
Niche market selection Identify target niche vertical “Bowling Alley” metaphor
Whole product
Competitive positioning
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
The Technology Adoption LifecycleCore Product vs Whole Product Minimum set of product features and services that
fulfills the compelling reason to buy of the pragmatic customers in the niche vertical segment
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
The Technology Adoption LifecycleWhole Product for MITS
CMSVOD
Core product
İYSVOD
CRM integration
Reporting
Incentive system
3D designand anim.
Design of print material
Securityand network
Social media
Interaction
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
The Technology Adoption LifecycleCompetitive Positioning Unlike early adopter customers, pragmatic
customers need to compare
You have to position your product against a meaningful competition that they can compare against
..and you have to establish the positioning of the product against your identified competition
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
The Technology Adoption LifecyclePrinciples of positioning
Principle 1: Positioning is a noun, not a verb
Principle 2: Positioning exists in people’s heads not in your words
Principle 3: For the pragmatic customer, positioning is the single largest influence on the buying decision
Principle 4: People are highly conservative about entertaining changes in positioning Don’t constantly mess up with people’s heads
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
For (target customers – beachhead segment only) Who are dissatisfied with (the current market
alternative) Our product is a (new product category) That provides (key problem-solving capability) Unlike (the product alternative) We have assembled / Our system is (key whole product features for your specific application)
The Technology Adoption LifecycleThe positioning statement
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
The Technology Adoption LifecycleThe Big Picture
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
The Technology Adoption LifecycleShortcomings of the TALC model Problems occur much earlier than the chasm
“You should be lucky to have this problem” Doesn’t provide a systematic methodology on how to
“get” to the chasm
Gaussian growth only happens in an entrepreneur’s dreams A startup’s customer base growth never follows a
smooth continuous curve Growth is not a simple sales execution problem The actual transition from one type of customer to
another is at best a step function (depending on market type)
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»
TALC is a “model” with exceptions and shortcomings Gaussian assumption Tipping point dynamics
“Chasm crossing” problem Not your primary concern right now “You’ll be lucky to have that problem” Learning and discovery vs Execution and adoption But it is important to be able to “TALC” your
technology and your clients
The Technology Adoption LifecycleEpilogue..
CS419 Technology Entrepreneurship Week #3 «Value Innovation and the TALC»