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| How to find new markets for your products published
in Vistage View, March,
2009 CEOs looking to gain ground
and grow their companies when the economy is down should consider overhauling
the way they approach strategy and innovation. A strong business strategy will
reduce your investment in offerings that are not vital to your business, while
increasing your customer base and the value of your products. Many companies
hire special consultants to help them find new markets that are not dependant on
fierce competition, expensive marketing and big R & D budgets. There are four steps to
substantive growth, whether in an up economy or down economy. These four, simple
but not easy, approaches were first described in the book Blue Ocean Strategy by Chan Kim and Renee Mauborgne. The Blue Ocean
Strategy process offers a suite of tools available to help companies brainstorm,
analyze and determine the best course of action for growth via strategy and
innovation. Those tools help companies achieve the following four steps or
business refinements: Eliminate
everything that does not add value to your target market.
Take the fat out of your offering by eliminating what the customer does not
value. One notable example of a company eliminating fat is Casella Wine makers
of the Yellow Tail wine. The company eliminated aging in the wine making
process. Aging, long a part of the wine process, is important to wine
aficionados; however, Casella was targeting primarily the beer drinkers as its
customers. And this segment didn’t care about the aging process and liked the
taste of un-aged Yellow Tail just fine. Reduce
the investment in everything that is over-offered.
Many times our resources go into products and services that have the sole aim of
keeping up with our competitors. When we reduce spending on product features and
services that customer don’t value, we end up with more profit. When Satoru
Iwata, CEO of Nintendo, developed the game console Wii, he eliminated the DVD
player amid a chorus of criticism from gaming-bloggers. Iwata argued that most
game-console purchasers already own a DVD player, so why add the extra
functionality at the risk of slowing production of the fast selling units and
increasing its costs? Nintendo recognized that most competing game consoles
contained DVD players, but the company choose to only include the features most
valued by their customer. Raise
the investment in those things being under offered to the customers.
Increase your investment in what your customer values, but which is not widely
offered by competitors. Allan Jones, CEO of
Discovery Ice Cream in Kingsport, TN, raised his investment in the factors of
“fun” and “activity” in his ice cream business. Recognizing that
children love ice cream, love to push buttons, and like activities, he invested
in an ice cream robot that children operate to create their own ice cream order
by pushing buttons. Jones was able to reduce his investment in the over-offered
element (people) as the robots gave more value and enjoyment to the customers,
thus eliminating the need for some of the staff. Create
new elements of value. If you’re
offering what your competitors offer then you will always be fighting them for
customers. How do you create new elements of value?
Where do you start? There are six pathways or places you can look to find
new factors of value to consider for your market.
1. Existing alternative
solutions.
What alternatives to your solutions already exist? For example, Southwest
Airlines considered that auto travel was an alternative to flying, and they went
after this market with low fares on short routes. Curves, the women’s health
gym, considered home exercisers as an alternative to going to the gym and they
targeting this market for their gym. If someone doesn’t buy your type of
product or service, how would they solve the problem? 2.
Strategic groups within industries.
The auto industry has luxury cars, mid size cars and economy cars; the
wine industry has budget and premium wines. These inter-industry strategic
groups are typically defined by price and complexity. Japanese car makers
combined two groups mid-size and economy cars to create a new, large market.
What strategic groups can you combine or create within your industry? 3.
Universe of buyers.
Does your industry sell to distributors, retailers, resellers or the end
user? Novo Nordisk, the pharmaceutical producer of insulin and sugar tests for
diabetics, had historically focused their marketing on doctors who treated
diabetics. When they refocused their efforts and marketed directly to the
diabetic, they became not just a manufacturer but a diabetes care company
selling directly to the end user. Are there other potential buyers of your
product who you have yet to sell to? 4.
Complimentary products and services.
If you spend time with your customer and look at what they do before, during and
after using your product or service you may discover ideas for new products.
Phillips realized that when the Brits make tea, they first boil water, then they
clean the lime scale (hard, off-white, chalky deposits found in kettles) out of
the water, then they brew the tea. Phillips developed a tea pot with a filter
that would catch the lime scale and give tea drinkers a beverage without lime
scale. 5.
Functional or emotional appeal.
If your product is an emotional one, what would happen if you stripped the
emotion out and made it functional? If it is a functional product, what would
happen if you made it emotional? Cemex Concrete in Mexico turned the functional
concrete product into an emotional one when they started selling concrete gift
cards to people for wedding gifts so the bride and groom could build a house
when they had enough concrete credit. Most cosmetics are sold
based on emotion. Charles Revlon of Revlon fame said he sold hope. One company
took the opposite approach went functional with make-up and skin care. The Body
Shop, a beauty products line, striped out much of the emotion commonly packaged
into beauty products, thereby reducing the expense and tapping a market that
prefers an unemotional approach to cosmetics. 6.
Future trends. Does your
industry show signs of a trend that is established, irreversible and has a clear
trajectory? Ted Turner realized the demand for news at any time in any time
zone, so he created CNN. Steve Jobs
recognized the trend of people who so badly wanted a particular song, unbundled
from an album, that they were illegally downloading them. What future trends do
you see? If you are using the old
SWOT analysis and other traditional planning tools, without incorporating the
new tools of value innovation creation, it is similar to using a typewriter
instead of a computer. The difference in results
and speed is huge. Dr. Sarah Layton is Managing Partner of Corporate Strategy Institute, Orlando, Florida. She is qualified by the Blue Ocean Strategy Initiative Center – London, in Blue Ocean Strategy concepts, tools and frameworks. Please visit her website www.corporatestrategy.com and her blog www.blueoceanstrategicplanning.blogspot.com. Email Dr. Layton now to receive free instructions for the strategy canvas tool at drsarahl@corporatestrategy.com or call her private line at 407- 876-2785. ©
2009
Corporate Strategy Institute, Orlando, Fl |
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