Knowing a Winning Business Idea When You See One

25Oct09

Introduction

In this paper, I will explain the concepts and frameworks those were mentioned in the world famous authors W. Chan Kim and Renée Mauborgne’s article [1] which has the same title as this paper. Then I will try to apply the concepts for our CSD project.

The paper starts with the question of identifying the business ideas which have commercial potential. It gives the example of Motorola’s Iridium satellite phone which was a total failure in the company’s history with an absurd price and low-usability. So what was Motorola’s mistake with Iridium ? The authors state that it was the deadly mistake of rushing a new technology to the market at the wrong time with the wrong price. So a good manager must assess the “commercial readiness” and the potentional of new business ideas. But how?

To answer the question of how, authors have built up a database of more than 100 companies which have innovated successfully and looked for the similarities between them. Then they compared them these companies with underperforming companies. Using this data they have created three analytic tools in order to have a systematic approach to reducing the uncertainties of innovation. These tools are “Buyer Utility Map”, “The Price Corridor of The Mass” and lastly “The Business Model Guide”:

Buyer Utility Map:

	Purchase	Delivery	Use	Supplements	Maintenance	Disposal
Consumer Productivity
Simplicity
Convenience
Risk
Fun and Image
Environmental Friendliness

Table 1 – Buyer Utility Map

This utility helps the managers to focus on the “benefits” of the product/service instead of concentrating too much on the technology applied –features-. It allows the managers to see how the new innovation will affect the lives of the customers. It tries to answer question of what value it will bring to the customers.

The columns of the “Buyer Utility Map” represent the experiences that a customer goes through during the “buying” process. Whereas the rows represent the utility “levers” which companies unlock for their customers. For example, a product can offer simplicity in purchasing by making it easy to buy for the customers. Locating a new product on this table will help managers how the product differs from its competitors and how it will make value for the customers. It will also help managers see how many innovations are still possible just by improving any of the 36 cells in the table.

Application of the Buyer Utility Map:

If we apply this tool to our project I think it would look like this.

	Purchase	Delivery	Use	Supplements	Maintenance	Disposal
Consumer Productivity			x
Simplicity			x		x
Convenience
Risk
Fun and Image
Environmental Friendliness

First our product improves the “Consumer Productivity” lever in the “using” experience. Compared to the manual lab tests, automating the water-quality management process will make the water board more productive by using the sensors and the SunSPOTs.

Secondly, since the tests will be handled by the sensors, it will unlock the “Simplicity” lever in the “using” experience. This way, the “Blantyre Water Board” will not need to have trained employees for analyzing the water.

Lastly but not leastly, “Maintenance” will be much simple as the system will be controlled by the base station centrally. So even if there are tens of sensors deployed in the water board, they will be maintained by a single machine.

Setting a Strategic Price

Without a right price, a product is not right anymore. Setting a price which will attract the “large pool of customers” is a crucial point to the success. Strategic pricing means having the price which will both attract the customer but also help you retain them. For this purpose, authors introduce the “Price Corridor of the Mass” tool :

Figure 1 – Price Corridor Of The Mass

The following are some of the points that will help us understand the tool better :

It is always the customer who defines your competitors. They are the ones who will prefer your product/service to any competitors. And these competitors may or may not be in your industry. For example, while an airlines company wouldn’t consider bus companies as their competitors, for customers they are competitors as they would choose any of them for traveling from point A to point B.

The authors state that, one must first find the price range which attracts the largest group of customers and depending on the legal and resource protection levels of the innovation, the price can be set as high as possible.

Regarding the competitors, there are two types of them :

Different form, same function: E-mail vs. mail, both let customers communicate each other.

Different form and function, same objective : Restaurants vs. Theaters, both target customers who want to have a good night out.

Applying the tool to our project:

At this stage, it is very difficult to have a price tag as nothing is finalized yet about the product. But we can easily say, targeting a country like Malawi, the price should be “lower-level” pricing as we don’t have legal or resource protections in this project.

Building a Profitable Business Model :

The first two tools are not enough to make money. To have a profitable business, companies also need to think about their business models.

Having said that, there is no magic wand or “one-fits-all” business model. But there are some guidelines as following:

Cost Target: The authors state that it must be the price which sets the costs, not the other way around. So after setting the strategic price, the companies must try to arrange their cost-structure with regards to the price.

Partners : Clock is ticking against the innovator, so unless the product has extremely well patent-protections, one must push it to the market as soon as possible, before the imitators get on the scene. So it is always a good-practice to involve other companies in your value chain if they complement the company’s strengths.

Price Model : Innovators do not have to stick with the market’s already-defined pricing models if that is a barrier for the business idea’s success. Managers must focus on the pricing models –direct selling, leasing, and equity payment- that would bring greater profit.

Applying the tool to our project:

I believe that our cost-target must focus on low-prices so our cost-structure must also focus on keeping the costs as low as possible. For example, we tried to use solar-panels to cut the energy consumption expenses.

Regarding the partners, especially for Malawi, we need to partner with the local polytechnic which can provide educated employees and support for us and the local entrepreneurs who can run this as a service to the government.

Lastly but not leastly, “direct selling” seems to be the only way for us as we neither have a company nor any employees in this project.

Conclusion :

There is no magic sauce that will make every business successful, sometimes it is just a matter of “luck”. But the education of entrepreneurship tries to raise the chances and apply analytical frameworks to new business opportunities.

The framework that I have tried to summarize in this paper is extended more deeply in the authors’ book “Blue Ocean Strategy” which is a best-seller business book that is read by the students and professionals all around the world. For those of you who would like to have more information, I highly recommend you to get this article from the “Harvard Business Review Library” and read the “Blue Ocean Strategy” book.

References

1- Kim, W.Chan and Renée Mauborgne. “Knowing a Winning Business Idea When You See One.” Hardware Business Review R00510, no. (2000): Inclusive [129-137]

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Tags: blue ocean strategy, harvard business review, Kim, knowing a winning business idea when you see one, Renée Mauborgne, W.Chan

IBC 2009 – Amsterdam

20Sep09

Last week I was in Amsterdam with my colleagues for “IBC 2009″ to represent our company Net Insight.  IBC stands for “International Broadcasting Convention” and is an annual trade show for broadcasters, content creators/providers, equipment manufacturers, professional and technical associations, and other participants in the broadcast industry.

Net Insight Partner Meeting:

After reaching to our hotel (on the right), Bengt (our  product manager) and I decided to move on to our partner meeting at downtown Amsterdam. The event took place in Hard Rock Cafe which was by the river and had a very pleasant atmosphere.

The meeting started with Net Insight executives having presentations about the company and the latest developments like IP Trunk and Ethernet Switching  Since the attendees were actually our partners, people were listening with full enthusiasm.

The interest has even peaked up when a magician came to the stage and did really cool magic tricks. The event went on with the award ceremony for the best partner of us. There were a lot of interesting presentations. For me Nikos’s presentation about how Net Insight delivered the Beijing 2008 Olympics without a single packet loss was the most interesting.

After we have listened to all the presentations it was time for the long-waited dinner. Filling our stomaches to the full, we were ready to network and connect with the other professionals. I had the pleasure to meet a lot of interesting and nice people from all around the world. They have shared different actual information about the markets that we were operating. I have seen once more that even in Europe the markets are so different from each other and local conditions are totally different i.e companies tend to be much more price-sensitive in Netherlands.

A Big, Real Big Convention Center

The first impression I got from the RAI Convention Center was that, it is really BIG! There were more than 45.000 attendees and a lot companies showing their latest products and connecting with their potential customers. People were waiting in the lines for registration and it was really crowded even at the first day.

At The Booth

This was the first time for me to work at the booth and be exposed to the potential customers who were asking questions about different features of our products. Listening to the questions they have asked and how my colleagues answered them, I began to understand better our place in the market and what type of problems we are actually solving. Seeing smiling customers who were coming back to see what we have developed lately was real good sign for the company.

Walking Around The Trade Fair

Although I didn’t have much time to walk around and see what other companies have been doing, Anders (our pre-sales guru) showed me around and gave me a lot of information about the competition and the market. We have seen many interesting stuff but I can list some of them as follows:

• 3D HD TV – which you watch with special glasses
• Hollywood quality cameras
• Remote controllable helicopter cameras
• Of course Net Insight products

Amsterdam

Meanwhile, we had a couple of hours after the working hours to see the town and learn what it offers to the visitors. As far as I have seen, Amsterdam is a very lively city but the taxi drivers that I have talked told me that it is only weekends. But  I can still say it gives you much more living energy compared to Stockholm.

Conclusion

In a nutshell, during this trade fair, I had the opportunity to have a look at the “big picture” of the industry and see where we fit in this picture. Talking to the customers and partners, I have learned more than I could have learned in months. I have to say that some of them knew better than me, so I actually was listening and learning from them as well. I am glad that I was at IBC 2009 and looking forward to attending the next one in 2010.

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Tags: "ibc 2009", ibc, international broadcasting convention, net insight

Second Period of My Life

19Jun09

As of today, the first period of my life has finished. Yesterday, I did my master thesis presentation and sent the latest version of my final report to my examiner which was my last assignment for the “first part” of my life, which can be summarized as studying and gathering as much information as possible.

Starting from Monday, I will be a “young professional” and it will be the beginning of the second period of my life which can be summarized as “having a career and improving yourself”. The first stop in my professional career is being a “Pre-Sales Engineer” at NetInsight AB. I hope that, I will learn a lot and succeed with the company for many long years.

My final report from my master thesis could be found in my “e-marketing master thesis” blog if you are interested. Otherwise, this is the latest news from my side and I wish a great “midsummer” for everybody!

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Twitter: I am still alive, open the coffin!

29May09

A new Swedish webservice (Webwill) is going to let you prepare twitter, facebook or even myspace messages those will be sent out after your death.

Your Online Heritage

Swedish design student Lisa Granberg from Beckmans College of Design states that an average Swede spends almost 2,5 hours online for twittering, sending messages on Facebook and even blogging. But there is no way to control your online life after your death.Yet, it is most probable that none of your friends or relatives will have the necessary information to access your social networking accounts. So how are you going to say your last words to the people out there?

Facebook Status: Parachuting..

Would you want your facebook status to remain as “parachuting..” forever after your sudden fall from 4.500 meters? Of course not ! What about your confession about your unknown kid, would you trust technology to let everyone know about it ?

Real Thoughts

The idea is really bright in a way that it took a lot of attention from the media at least here in Sweden. It can be argued if it really solves a problem but it sure made my day. What do you think, would this idea take off?

Introduction Video In English

The Local (Sweden’s News in English) Article

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Tags: afterdeath service, swedish webservice, webwill, webwill svenska, webwill.se

My First Swedish Video

13May09

I attended the exam for the “Intermediate Swedish Course” at KTH last Saturday. So I decided to see how my Swedish sounds and created this video in order to test it and get comments. It is becoming more and more easier to understand the others but speaking is definitely something else. Let’s check the video and please let me know what you think :

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Tags: gökhan dogan, my first swedish video, svenska, svenska turkiska, swedish presentation, swedish test