Key elements

Slide 6.1
Chapter 7: Exploiting opportunities of new market spaces in
e-business
After this session you should be able to:
 Explain how firms can open up new market spaces and thereby
create completely new types of value
 Understand how to draw a value curve and gain insights through
it
 Explain the six paths framework and be able to use it for value
creation in e-business
 Appreciate the importance of finding the right time to enter a
market
 Recognise the advantages and disadvantages of being an early
mover in e-business
Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2nd edition, © Pearson Education Limited 2008
Slide 6.2
Book Retailing
Exhibit 7.1 The value curve provides insights into new market spaces
High
Performance
Value curve of
traditional
bookstores
Value curve of
Amazon.com
Low
Price
Convenience
Selection
range
Speed
Face-to-face
interaction
Dimensions of benefit
Source: Adapted from C. Kim and R. Mauborgne, (1999).
Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2nd edition, © Pearson Education Limited 2008
Slide 6.3
The first step leading to value innovations is the ‘visual
awakening’
Assignment for team exercise
Activities
• Pick a specific company offering
Objective
Draw the value curve
of a specific offering
and compare it with
competitors
• Each team member writes down what he/she considers to
be the key product/service elements
• As a group discuss and reach consensus on the key
elements
• Rate the offering's level on each key element against the
main competitors
• Do you see other competitors with radically different value
curves?
Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2nd edition, © Pearson Education Limited 2008
Slide 6.4
Display the current situation of the offering selected
Value curve of . . . . . . . . . . .
Very high
High
Offering
level
Average
Low
Very low
Non existent
Key elements
Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2nd edition, © Pearson Education Limited 2008
Slide 6.5
Value innovations focus on customers rather than competitors
Characteristics of conventional and value innovation logic
Conventional logic
Value innovation logic
Assumption
An industry's value curves
follow one basic shape.
New value curves can be shaped
that solve traditional trade-offs.
Strategic
focus
Build a competitive advantage
and beat the competition.
Pursue a quantum leap in customer value. Competition is no
benchmark.
Customers
Retain and expand customer
base through segmentation and
customisation. Focus on the
differences.
Target the mass of buyers. Let
some existing customers willingly go. Focus on key commonalities in what customers value.
Resources
Utilise existing assets and
capabilities.
Ask what we would do if we were
starting anew?
Offerings
Offer the products and services
of your industry.
Offer the total customer solution
exceeding industry boundaries.
Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2nd edition, © Pearson Education Limited 2008
Slide 6.6
The second step leading to value innovations is the ‘visual
exploration’
Assignment for team exercise
Activities
• Adopt the perspective of a new industry entrant and reconsider the
existing value curves
Objective
Create a new
value curve for a
specific offering
• Use one or two of the paths to experiment with the creations of a
new value curve
– Industry: Ask which elements of substitute industries are
un/importants to target buyers?
– Strategic groups: Ask which key elements of the offer compel
buyers to buy up or buy down?
– Buyers: Ask who are the decision makers and how would changing
buyer focus affect the key elements?
– Scope: Ask how is the offer currently used and what
activities/services might be valuably incorporated?
– Appeal: Ask how we can change the polarity of appeal?
– Time: Ask what trends are impacting our industry and how do the
key elements match
• Plot a new value curve. Indicate which key elements are eliminated,
reduced, raised or created
Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2nd edition, © Pearson Education Limited 2008
Slide 6.7
Display possible changes to the existing value curves
Value curve of . . . . . . . . . . .
Very high
High
Offering
level
Average
Low
Very low
Non existent
Key elements
Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2nd edition, © Pearson Education Limited 2008
Slide 6.8
Exhibit 7.2 The six paths framework suggests different starting
points for creating value innovations in e-business
1
6
Looking
across substitutive
industries
Looking
across time/
trends
Factors to be
reduced?
2
5
Looking
across functional
or emotional appeal
Factors
to be
eliminated?
4
Looking
across complementary offerings
Factors
to be
created?
Factors to be
raised?
3
Looking
across strategic
groups
Looking
across the chain
of buyers
Source: Based on C. Kim and R. Mauborgne (1999), pp. 83–93.
Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2nd edition, © Pearson Education Limited 2008
Slide 6.9
Pinpointing possibilities for new value creation
Does what we do really
create consumer benefit? If
not, which components or
features of our product or
service should we
eliminate? 1
Where can we reduce our
range of offerings? What
costs us a lot of money but
does not create benefit?
2
Reduce
Eliminate
4
3
Create
Raise
Where should we raise the
standard of products or
services? Where can we
increase benefit by
expanding our existing
offering?
What can we do that has
not been done so far?
Source: See also W. C. Kim and R. Mauborgne (1997), pp. 103–112, and (1999), pp. 83–93.
Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2nd edition, © Pearson Education Limited 2008
Slide 6.10
Value innovation shifts the focus of strategy from head-to-head
competition to creating new market space
Six path framework to create value innovations
Head-to-head competition
Creating new market space
Industry
Focuses on rivals in its industry
Looks across substitute industries
Strategic
group
Focuses on competitive position within strategic group
Looks across strategic groups
within its industry
Buyer group
Focuses on better serving the
own buyer group
Redefines the buyer group
Product scope
Focuses on maximising value
of the industry's products/
services
Looks across complementary
offerings beyond the bounds
of its industry
Appeal
Focuses on improving the
given appeal
Rethinks the functional/emotional orientation
Time/trends
Focuses on adapting to trends
as they occur
Adopts the results of future
trends today
Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2nd edition, © Pearson Education Limited 2008
Slide 6.11
Finding the right timing for market entry in e-business is
critical
Early-mover advantages
Early-mover disadvantages
Learning effects
Market uncertainty
Brand and reputation
Technological uncertainty
Switching costs
Free-rider effects
Network effects
Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2nd edition, © Pearson Education Limited 2008

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