Class #1) Arun Pareira
a) Benefit 2X, not Product 2.0. The approach should be to focus on the value extraction through new revenue model. The question to be asked is that is the modification in the product best way to serve the underlying need that it is currently serving ?
Form Focus is only short term perspective. Function focus is the long term perspective.
b) The Dangers of Marginal Thinking. The ENDM course focuses only on the DEMAND side.
The Managerial Approach is tied to the present and past (marginal cost thinking) cost structures. The goals are clear and pre-specified, based on product and services. Focus on "supply side" (inputs) 4P's (Product, Price, Promotion & Place). Emphasizes efficiency. Predictive and hierarchy sensitive.
The Entrepreneurial Approach is not tied to present or past cost structures (full cost thinking). Clarity in goals only after journey of discovery, based on understanding customer "pain". Focus on demand side (output or outcome) 4Cs - Customer Benefit ? Cost to customer (including the change in behavior cost) ? Convey value to the customer ? Convenient Access ?. Emphasize creativity. Non-predictive and network oriented.
c) Difference between early adopters and late majority. The saddle is the drop in the sales of the product after the adoption by early adopters and transition to late majority. This is because of the different need of the two segments. The product specifications may be tweaked to meet the needs of the late majority. Chasm Effect.
d) Entrepreneurship: "business discovering" not "business planning" Be open to modify your business plan. Use Analogs - learning from the successful businesses; Antilogs - learnings from the unsuccessful ventures not necessarily from the same domain; Check your leaps of faiths; Test hypotheses.
e) Conditions for cultivating gut instinct A decision based on gut instinct is likely to be effective is the decision maker's subconscious mind has accumulated information relevant to the decision, gathered over time, because of repeated practice. This is more likely to happen under the following conditions -
i) The individual is involved in an environment characterized by predictable regularity.
ii) The individual has the opportunity for repetitive practice in this environment
iii) The individual uses gut instinct for decision-making only within the boundaries of this specific environment.
This is the issues with senior executives.
f) The Premortem exercise
Class #2) Arun Pareira
Segmentation should be driven by customer response and not by customer characteristics.
Value Creation: Disruptors and Definers
Disruptors: The process by which a product or service takes root initially in simple application at the bottom of the market and then relentlessly moves "up market" eventually matching or displacing established competitors. Ex - Walmart, Cannon Copier, Amazon, Sears, Dell, Ford, Turbotax, Hyundai, Toyota, Kia, Best Buy, Bloomberg, Charles Schwab, Embrar Jets, kodak, McD. Each co chose a segment that was relatively unattractive, and thus overlooked by the incumbents.
Why do existing players allow disruptors to emerge ?
Success leads existing players to the more attractive, high margin, premium segment. They tend to overlook the low margin, smaller segment. Profit maximizing and resource allocation.
Definers: Creating a newly defined "market" and/or providing a broad solution that straddles more than one existing market. Typically Definers address once or more of the following-
1) existing customer pain points
2) inefficiencies
3) "wished for" customer benefits
Ex- Twitter, Google, MoveInSync, ZSM, GIBBS, LifeIsOutside, Practo, Dropbox
Why do incumbents allow Definers ?
They tend to become "Skill focused" and fall into the "marginal thinking" trap. Increasing specialization and pressure to scale.
The "foothold" segment is more likely to lead to long term success, if the venture can evade the following traps -
Three Traps:
1) Saddle and Chasm (to avoid - recognize and understand adopter/late majority segment)
2) Sustaining Innovation Trap (to avoid - Target segments outside sustaining innovation)
3) Customer Resistance Trap - Customers tend to not easily accept innovations that require substantial behavior change. (to avoid - target non-resistant customer segement)
Segmentation: Basis and Descriptors
Basis - which can be controlled. (old way - via judgment)
Descriptors- data to describe the segment and enable managers to identify and communicate with the segment.
Toolbox: Cluster Analysis
Class #3) Arun Pareira
There are no traffic jams in the extra mile you go for the customer
Segmentation Data: New Approach
Open Ended Question / Focus Groups: (need to translate the qualitative data into quantitative - ask for preference value not 1,2,3 coz relative distance not known but assign value out of 100 points) (Foucs groups may suffer from cultural issues - women not telling in front of men)
VOC:
Structured Customer Insight: (The participant in a focus group discuss a product/service from the following perspective -
1) Moving from an undesirable state - solving immediate problem, preventing potential problem, maintaining stable state
2) Moving towards a desirable state - exploring interest opp
3) Displeasure in use
4) Ineffective / frustrating outcome)
Day in the Life of the customer: (value merchants book): (used for B2B marketing, dont listen to but become the customer, focus on actual behavior)
Criteria for foothold segment: Engage / Embrace / Others
Various criteria can be used -(size of segment, growth potential, purchasing power etc,) In addition the following two are important-
Engage - Can you engage with and reach the segment effectively ? That is, is the segment actionable ?
Tool - Cluster Analysis
Embrace - Can you embrace the customer more comprehensively to make a more compelling value proposition (go extra mile based on customers's consumption chain ?)
Tool- CC method
Consumption Chain Analysis - the consumption chain offers framework to investigate ways to embrace the customer, increase product/service differentiation, set up entry barrier and build loyalty
Differentiaiton is possible at every point of the CC
GE/McKinsey Portfolio Matrix
MDS
a) Benefit 2X, not Product 2.0. The approach should be to focus on the value extraction through new revenue model. The question to be asked is that is the modification in the product best way to serve the underlying need that it is currently serving ?
Form Focus is only short term perspective. Function focus is the long term perspective.
b) The Dangers of Marginal Thinking. The ENDM course focuses only on the DEMAND side.
The Managerial Approach is tied to the present and past (marginal cost thinking) cost structures. The goals are clear and pre-specified, based on product and services. Focus on "supply side" (inputs) 4P's (Product, Price, Promotion & Place). Emphasizes efficiency. Predictive and hierarchy sensitive.
The Entrepreneurial Approach is not tied to present or past cost structures (full cost thinking). Clarity in goals only after journey of discovery, based on understanding customer "pain". Focus on demand side (output or outcome) 4Cs - Customer Benefit ? Cost to customer (including the change in behavior cost) ? Convey value to the customer ? Convenient Access ?. Emphasize creativity. Non-predictive and network oriented.
c) Difference between early adopters and late majority. The saddle is the drop in the sales of the product after the adoption by early adopters and transition to late majority. This is because of the different need of the two segments. The product specifications may be tweaked to meet the needs of the late majority. Chasm Effect.
d) Entrepreneurship: "business discovering" not "business planning" Be open to modify your business plan. Use Analogs - learning from the successful businesses; Antilogs - learnings from the unsuccessful ventures not necessarily from the same domain; Check your leaps of faiths; Test hypotheses.
e) Conditions for cultivating gut instinct A decision based on gut instinct is likely to be effective is the decision maker's subconscious mind has accumulated information relevant to the decision, gathered over time, because of repeated practice. This is more likely to happen under the following conditions -
i) The individual is involved in an environment characterized by predictable regularity.
ii) The individual has the opportunity for repetitive practice in this environment
iii) The individual uses gut instinct for decision-making only within the boundaries of this specific environment.
This is the issues with senior executives.
f) The Premortem exercise
Class #2) Arun Pareira
Segmentation should be driven by customer response and not by customer characteristics.
Value Creation: Disruptors and Definers
Disruptors: The process by which a product or service takes root initially in simple application at the bottom of the market and then relentlessly moves "up market" eventually matching or displacing established competitors. Ex - Walmart, Cannon Copier, Amazon, Sears, Dell, Ford, Turbotax, Hyundai, Toyota, Kia, Best Buy, Bloomberg, Charles Schwab, Embrar Jets, kodak, McD. Each co chose a segment that was relatively unattractive, and thus overlooked by the incumbents.
Why do existing players allow disruptors to emerge ?
Success leads existing players to the more attractive, high margin, premium segment. They tend to overlook the low margin, smaller segment. Profit maximizing and resource allocation.
Definers: Creating a newly defined "market" and/or providing a broad solution that straddles more than one existing market. Typically Definers address once or more of the following-
1) existing customer pain points
2) inefficiencies
3) "wished for" customer benefits
Ex- Twitter, Google, MoveInSync, ZSM, GIBBS, LifeIsOutside, Practo, Dropbox
Why do incumbents allow Definers ?
They tend to become "Skill focused" and fall into the "marginal thinking" trap. Increasing specialization and pressure to scale.
The "foothold" segment is more likely to lead to long term success, if the venture can evade the following traps -
Three Traps:
1) Saddle and Chasm (to avoid - recognize and understand adopter/late majority segment)
2) Sustaining Innovation Trap (to avoid - Target segments outside sustaining innovation)
3) Customer Resistance Trap - Customers tend to not easily accept innovations that require substantial behavior change. (to avoid - target non-resistant customer segement)
Segmentation: Basis and Descriptors
Basis - which can be controlled. (old way - via judgment)
Descriptors- data to describe the segment and enable managers to identify and communicate with the segment.
Toolbox: Cluster Analysis
Class #3) Arun Pareira
There are no traffic jams in the extra mile you go for the customer
Segmentation Data: New Approach
Open Ended Question / Focus Groups: (need to translate the qualitative data into quantitative - ask for preference value not 1,2,3 coz relative distance not known but assign value out of 100 points) (Foucs groups may suffer from cultural issues - women not telling in front of men)
VOC:
Structured Customer Insight: (The participant in a focus group discuss a product/service from the following perspective -
1) Moving from an undesirable state - solving immediate problem, preventing potential problem, maintaining stable state
2) Moving towards a desirable state - exploring interest opp
3) Displeasure in use
4) Ineffective / frustrating outcome)
Day in the Life of the customer: (value merchants book): (used for B2B marketing, dont listen to but become the customer, focus on actual behavior)
Criteria for foothold segment: Engage / Embrace / Others
Various criteria can be used -(size of segment, growth potential, purchasing power etc,) In addition the following two are important-
Engage - Can you engage with and reach the segment effectively ? That is, is the segment actionable ?
Tool - Cluster Analysis
Embrace - Can you embrace the customer more comprehensively to make a more compelling value proposition (go extra mile based on customers's consumption chain ?)
Tool- CC method
Consumption Chain Analysis - the consumption chain offers framework to investigate ways to embrace the customer, increase product/service differentiation, set up entry barrier and build loyalty
Differentiaiton is possible at every point of the CC
GE/McKinsey Portfolio Matrix
MDS
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