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Media Special Topic Interview: Innovation Strategies
DateTime: 2012-6-4 20:38:43 Author: CIIC Vision Magazine
February, 2012 Issues from CIIC Vision Magazine on Special Topic Interviews
Before and after the year end, often hear business leaders say a word, "It’s not easy to accomplish the goal this year, I really don’t know how to achieve a higher goal." If you are tired of this matter, you may now relax, and first read what this article have to share.
For two reasons:
(1) you are not alone, at the moment there are a lot like you who are searching for better strategies;
(2) the purpose of this article is to bring you relevant inspiration through the sharing of "six innovation strategy" story. All you need to do, is just take a few minutes to enjoy reading the story in the article and review the key to success, to seek the similarities of allowable, so that you may find references to solve the problem quickly.
For two reasons:
(1) you are not alone, at the moment there are a lot like you who are searching for better strategies;
(2) the purpose of this article is to bring you relevant inspiration through the sharing of "six innovation strategy" story. All you need to do, is just take a few minutes to enjoy reading the story in the article and review the key to success, to seek the similarities of allowable, so that you may find references to solve the problem quickly.
To achieve higher goals, organization will generally use two variable factors (new/old product and your new/old market) combination of four methods (see chart 1). The name and the combination of four methods are as follows: Digging method (existing market and existing products), Product Development method (existing markets and new products), Marketing method (existing products and new markets, New Markets method (new products and new market).
That the characteristics of the four methods:
(1) Digging: merchants in view of the existing target customer base to further mining and expand their own performance. This phenomenon is considered by some scholars as made a cut-throat and bloody "red sea" strategy, I believe you are familiar with this method.
(2) Product Development: organization through the development of new products, create "I have, you don't have a" competitive advantage in the target market of existing surge in sales and market share.
(3) Market Development: through the expansion of existing products quickly to the new market to cover a larger market, get earnings growth.
(4) Create New Market: identify neglected market of grey area, through the development of new products to meet the new competition has not yet been established targets, thus more easily and quickly help to achieve higher goals. Due to enter the market early, usually can enjoy more profits brought by the "zero" competition, this method also known as the "blue ocean" strategy.
Today we are going to focus on discussing how to explore in the field of the four combinations "innovation strategy", to expand more quickly and smoothly.
(1) Digging Method
In the highly competitive market, how can we by creating "good to great" value, that other people have, but we are with better value, let the customer get more choice when buying more services or products in the market and prefer to buy from us? The key lies in two aspects: (1) to help customers solve the problem, that is why many companies in recent years, the concept of product sales is transformed into the solution. (2) to understand and meet customers' unmet expectations, such as: to save time, save trouble, save money and save resources. The following two policies will reflect how we can create competitive advantage through the "save".
Strategy 2: Integrated Advantage (through cooperation in sharing resources)
In recent years, many large organizations transfer non-core businesses to outsource, and focus their energy on their core strengths, the phenomenon such as mergers, acquisitions and strategic cooperation is becoming more and more popular, such as airlines through cooperation in sharing resources scattered passengers gather in the same plane prompted you to get win-win benefit. Is one of the main reasons for these phenomena appear, the production of similar products of competitors is not necessarily the shooting enemies with you, as long as the reverse win-win concept to find a balance, can be hand in hand to create advantage of each other partner.
Key to the sucess of this strategy is to identify the advantage, through the way of working with rivals sharing resources to achieve a higher economic efficiency. When you put the energy to focus on their own advantages products and implement cross supply, not only can enjoy greater economic effect, make professional optimize the dividion of labor, more can solve the problem of complex process.
Case Study: X and Y company production of A and B two kinds of products respectively.
1. X company producing 100 units of A product (unit cost 10 yuan) and B (unit cost 20 yuan) respectively;
2. Y company producing 200 A products (due to splits of fix cost, bulk purchase, improved efficiency, the unit cost become 6 yuan) and B product (the unit cost is 14 yuan).
Before integration, cost respectively: see the table below,
Solution: X company focus on producing A product for own selves and Y company. Entrust Y company for B product. A consolidated production output will increase to 300. Assuming that the bottom line of the unit cost is ¥6, X company not only can benefit from the lower costs, it can take ¥7 (with ¥1 profit) sold back to Y company.
Y company focus on producing B products for own selves and X company. Entrust A product to X company. B products consolidated production will increase to 300. Suppose Y company purchase price of the product B is the bottom line cost of ¥14, it can now sell to X company for ¥18 (with ¥4 profits).
From seemingly Y company pay extra ¥1 of the unit cost for A product, but in the process of cooperation, it can get ¥4 of profits through B product.
After case results: Through integration, cost, respectively:
1. The cost of the "X" company: 6 x 300 (X production) + 18 x 100 (B products sell by “Y” company) - 7 x 200 (A product sell by “X” to “Y” = ¥2,200
2. The cost of the "Y" company: 7 x 200 (A product sell by “X”) + 14 x 300 (“Y” production) - 18 x 100 (B products sell by “Y” to “X” = ¥3,800
(2) Products Development
Create "we have what others don't" competitive advantage is widely used by organization for accelerate growth expansion model. However, what is the breakthrough point? How to encourage the development of new products and services consistent with customer needs to boost profits space? One of the innovative way of thinking is done by cost structure reorganization, diverting resources from a region of low value recognition to create surprises and higher value products and services, Specific strageies for:
Strategy 3: Transformers Strategy (create functional flexibility and optional)
Changing the bundled servcie or product fixed element function into the function with flexible choice, thus creating a more competitive advantage price space and market penetration. The limits of the primary stage is to break the inherent thinking, think through systematic and all-rounded analysis to launch innovative thinking, craete thge flexibiltiy of "transformers" products. This concept is the cost through a more flexible architecture to satisfy a larger group of a personalized needs of customer. For example, in half a century ago General Motor pioneered the concept of "owning a car before payment", which is today's auto loan services, expanding the market share and dominated the industry with leading position. Asian low-cost airlines by removing low recognition of products and services, set up internet booking service platform, not only realize the sharp expansion of the market, also won the rich source of revenue.
Case Studies: with the manufacturing industry price competition and rising cost, many electrical manufacturers are facing profits thinning, loss, or even collapse, but there are exceptions to an electrical company to draw up a "rainbow", "carve out a better quality, cheaper products" that the aim of the seemingly illogical. How could they realize the Chinese theory of "Pushing the horses to run faster without feeding them" terminology?
How to move into new areas, new markets, new industries or new target customers and achieve the goal for organization rapid expansion? In this process, we can use "all one’s strengths", can also let the potential customer to take proactive initiative for our "open doors" for us through outwit strategy. Here are two outwit strategy is worthy of reference.
Strategy 4: Freebee Strategy (giving before taking)
When we segment our customer, we often find more than one group, and generally can be divided into supply chain upstream and downstream transverse different or the same level. If we observe careful, you will find that the target customer group are in traction with each other. When we are free to attract a group they will greatly traction another group purchase demand.
Case Study: a leather supplier when entering the Chinese market is facing tough challenges. While the company products have unique style and quality, but because the product halfback, most of the shoe factories upstream of the supply chain is not familiar with this, do not know the recognition, the pricing were not good. The company took 3 months to adopt the traditional marketing concept from door to door sales, provide free samples, but to little effect.
Solution: after innovation strategy analysis, the supplier's target audience have three characteristics: (1) should know how to use this new type of leather products. (2) products (shoes) should be a recreational style. (3) the product is the top grade. In addition, in the process of investigate and understand the footwear market operation, they found a "copycat" phenomenon, namely the industry in a small group of leaders who dominated the market trend of design, because they have designed new products, popular, others will follow.
To encourage this jump out of a small group of leaders in the inherent mode of thinking, dare to try new leather products, also can put forward: advertise to customers for free, and only after the product sale extract a few as a reward. Suppliers, in fact, the upfront costs, it is adopted a new marketing mode, is considered to be a direct target market brand leader for consumer groups to advertising, which greatly saved through traditional advertising and many filter consumers to indirect access to the expensive cost of prospective customers. A "win-win" preferential conditions.
Cases results: other competitors were found in the leather products is the industry leader in supply of raw materials, are snapping up inventory. The leather supplier customer group set up quickly, a doubling of the monthly sales performance, is easy to enter the Chinese market in a matter of months.
Other cases: fitness club free or high quality services to attract the beauty of enrollment, keeps men members to join in order to achieve the purpose; Newspaper customers distributed free of charge to the target readers, to attract more businessmen ads to earn advertising revenue; Aircraft engine maker Rolls-Royce aircraft manufacturers to provide free engine, and then charging maintenance fees according to the flight distance to achieve the goal of their occupation of the leading market share.
Strategy 5: Fishes That Escaped From The Net (many a little makes a mickle)
As long as a little attention to the market rules and trend we will find that big businesses generally focus "to catch the big fish", by selling a small number of products and operating effect of meet the demands of a large group of normalized customer, already established its own position in the market. Therefore, for entering the market, smaller competitors, has not yet set up competition advantage, advice to develop market that the market leaders are not interested in. The different between this strategy and the strategy 1 is, strategy 1 focus on economic benefits in order to satisfy the demands of normalized customer, but this strategy focus is through the system benefits meet many scattered the personalized needs of customers, in order to achieve the effect of high-speed expansion (please search chart 2).
Case Study: with the increasing fierce market competition, a well-known pharmeceutical supplier market challenges facing more and more difficulties. Due to he popularity of science and technology information and competitor product differentiation the gap bacomes smaller. The profit space is reduced, customer demand the company managers caught in the harsh competition and corporation between the requirements of the higher goal, needs to explore how to complete the task indicators through strategy and breakthrough.
The company's long term uses the concept of "product marketing". Each product line lead by a senior product manager and professional team. In the past, through professional team's rich experience and expertise to complete performance is easy, but now the strategy has failed gradually along with the disappearance of the competitive advantages. On the other hand, through the second and third tier cities economy achieve high growth in the recent years, local hospital demand for the products from the company is small, and relatively weak purchasing power, purchase quantity for a single product cannot be compared with the first tier cities large scale customers for all the time. Plus to travel long distances transpirtation cost for fas megacities, return is out of proportion. The company has always been not trying to enter the market.
Solution: habitual thinking is about "how to sell more products to existing customers, big city's main hospital", but when to creative thinking to break convention, to the market and the enterprise the core root of scenario analysis found that when the group ignored lower-tier cities customers purchase sum in fact is a very attractive figure. So the key to solve the problem, and is based on the present condition, how to quickly and efficiently exploit this group of scattered customers?
Innovation strategy steps are:
(1) from the existing team in the selection of a new team dedicated to develop new markets, the second - and third-tier regional marketing strategy from "products professional guide" to the "customer solution oriented", that is, the product manager will be adjusted for the customer manager, transformation of the mode of responsibilities, knowledge structure and sales;
(2) Offer the new team with change management training, risk prevention, to overcome the psychological barriers of produced in the process of transformation, to help expand the inherent comfort zone; (3) changing of the sales strategy from "product marketing" to "solution oriented sales consultant type"; (4) to provide an individual product knowledge training; (5) establish internal information platform to provide key information and support.
Case results: successfully avoiding too much competition, the company successfully entered the second - and third-tier small market.
Other cases: the success of certain online services (B2B or B2C) is a good example, the establishment of self-help business platform for scattered, but the number is considerable demand for personalized buyers and suppliers to achieve docking, thus creating considerable turnover. A cue stick supplier through online shop management form, not only overcame the challenge of traditional retail business, more to realize low cost operation, with more competitive price to reap more profits, switch to the world market.
(4) Create Complete New Markets
Traditional academic and innovation of the difference is that the former is more focused on using the success of the past experience to think about the future, while the latter is to think more is how to open up a new concept of disruptive to win a "zero" competition of the market or to create differentiated competitive advantage. It doesn't matter whether it's a white cate or a black cat, a good cat will catch mice". The blue ocean strategy is a good example, as long as we keep the sense of smell, it's not hard to find customers with specific different requirements from the existing customer base. By exploiting new products to meet the needs of the new customer group will elad us into another new market.
General practice can be divided into two kinds:
(1) understanding the requirements and more demand to develop new markets;
(2) the associations to develop new products, new customers. Generally speaking, the practice of the former success rate will be bigger, work faster. The following strategies for reference.
Strategy 6: Gold Cicada Metamorphosis (develop new market based upon demands)
Case Study: The International Certified Professional Trainer course (CIPT), which was originally conceived to assist professional managers, managers and professionals for career transition or continue to work for retirement preparation, the charges of the similar public course comparatively it belongs to the high price of course. Found in practice, however, the course of a "assisting students to master how to influence the teaching process" charm with the content of the different, making 90% of the students making positive transformation from inner to outer attitude, with the effect of the words of mouth, it has attracted many high-end customers, including the world famous organization’s executives and key managers and other famous business school.
Solution: through contact with senior managers and observe their ascension process, after class attached to develop a new market, to create the additional value of the course, namely, through the way of training to assist senior managers by master training guidance ability in the process of enterprise high-speed development quickly set up excellent team, which is different from the public class of outside trainers in "training guide way of target, and the audience object". Executives, for example, how to put himself in the enterprise valuable experience to the team to promote the personal rapid growth of the company as a whole, this work can be "one to one" in the daily work of the executive personally, especially for some gave birth to the strong corporate culture of the company, this is irreplaceable by external trainers; In addition, the cultural essence of extend from one area to another area, and according to the demand for personalized, will hasten new strategy success. While external trainers work is how to guide managers think from a higher perspective of teaching management, at the same time pay attention to in the new market in addition to meet the demand of personal growth, balancing the needs of enterprise sustainable development.
Case results: starting from the demand to develop new markets, eventually make the CIIC CIPT project a gold cicada, successfully develop training community as a "blue ocean" market.
Other cases: along with the market competition and a surge in cost, a SPA club in Guangzhou (SPA) is facing the challenge of decline in prices and profits. The Canton fair that held twice every year, however, brought hope to the enterprise, they found that the hotel during the fair prices and shortages, in addition to establish more stable customer relationship has become one of the purposes of part of the customers during the fair. After position restructuring, the spa club from the original single "relieve pressure" spa services to provide "one-stop" service club, the new concept of party has added many suitable for home entertainment, fitness, health care massage, catering services and consulting, refers to the pressure, children's playground, reception room, computer studio and other service functions. To this innovation not only changed the company during the trade fair attracts more customers, during the fair has also attracted local businessman daily visitor and weekend will go to places. For customers, with the price of the three-star hotel to enjoy more value-added services is worth it; For the club's owner, each customer's demand space just like fly first-class, less than 3 square meters booth area, which makes the usable floor area of the club to maximize economic benefits. New market also led to a more stable revenue and profit for the club.
3M glue on R&D experiment failed after the Post (Post Pad) notebook, "Coca-Cola" evolved into the global market of beverage brands, and so on, these vivid cases proved that as long as we adopt the mode of innovation thinking, associate product and market docking, a new market will appear in front of our eyes.
