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Applying Innovation Intelligence for Market Segmentation and Targeting

  1. 1. Applying Innovation Intelligence for Market Segmentation and Targeting Business Forecasting 2014 – Predictive Intelligence Summit San Francisco USA Tuesday 19 August 2014 Arik Johnson Founder & Chairman, Aurora WDC Managing Director, Center for Organizational Reconnaissance
  2. 2. Do you see the illusion? 2
  3. 3. Intelligence Has Always Been About Removing Illusions To Improve Decision-Making  Strategic Decisions What Business are We in and Where are New Opportunities for Growth?  Operational Decisions How do we structure and align those business units to most effectively compete for and win Market Share?  Tactical Decisions Which customers are available to us and how can we convince them to select us over any and all functional equivalents?
  4. 4. Intelligence has Focused on Decisively Minimizing Threats & Maximizing Opportunities  Minimizing Competitive Threats  Understanding Threats to Current Business Status Quo: Competitors, Legislation, Technology Shifts, Obsolescence, Substitutes, Customers Backwards Integrating, Vendors Forwards Integrating, etc.  Maximizing Market Opportunities  Identifying New Sales, Revenue and Profit Centers  Develop New, Innovative Products & Services  Benchmarking Cost Reduction and Efficiencies from Direct Rivals & Best-of-Breed non-competitors
  5. 5. Three Key Business Trends Driving Business Evolution Human Capital & Enterprise Collaboration Everyone in the Firm becomes a Virtual Member of the Intelligence Apparatus, Better Engagement by Rank & File, Shared Visibility of Issues & Actions Corporate Governance & Risk Oversight Board-level Priority Ensuring Reliability of Management’s Earnings Forecast & Assessing Risks to Status Quo Business Model Disruption & Value Innovation Predicting the Outcome of Competitive Battles by Anticipating Changes in Product/Strategy Dynamics
  6. 6. Collaborative Insights Team
  7. 7. Key Intelligence Topics (KITs) Process of Interactive Dialog with Decision-Makers through KIT Interviews Consists of 3 Protocols w/Subtle Differences:  Strategic Decisions/Issues  Key Marketplace Players  Early-Warning Topics
  8. 8. Why Connect KITs to Methods? Product Management Process Decisions Pricing Buy, Build or Partner Operational Metrics Business Model & Case Sales Process Thought Leaders Market Requirements Market Sizing Marketing Plan Product Roadmap Awareness Bldg. Plan Market Research Market Problems Distinctive Competence Product Performance Customer Acquisition Positioning Customer Retention Launch Plan Product Contract Innovation Market Messaging Channel Training Win/Loss Analysis Competitive Battle Cards Event Support Collateral & Sales Tools Presentations & Demos White Papers User Personas “Special” Calls Release Milestones Answer Desk Technology Assessment Competitive Analysis Lead Generation Buyer Personas Win-Loss Market Analysis Product Strategy Program Strategy Product Planning Quantitativ e Analysis Channel Support Sales Readiness Strategic Tactical Channels Analysis Life Cycle Strategy Capabilities & Resources Supplier Analysis Sales Training Sales Automation Market Segments Sell Against
  9. 9. Porter’s Five Forces
  10. 10.  Principles of Defensive Warfare  Only the market leader should consider playing defense.  The best defensive strategy is the courage to attack yourself.  Strong competitive moves should always be blocked.  Principles of Offensive Warfare  The main consideration is the strength of the leader's position.  Find a weakness in the leader's strength and attack at that point.  Launch the attack on as narrow a front as possible.  Principles of Flanking Warfare  A good flanking move must be made into an uncontested area.  Tactical surprise ought to be an important element of the plan.  The pursuit is just as critical as the attack itself.  Principles of Guerrilla Warfare  Find a segment of the market small enough to defend.  No matter how successful you become, never act like the leader.  Be prepared to bug out at a moment's notice. -- Jack Trout Guerrilla Small Players • Finding market small enough to defend • Prepared to bug out at moment’s notice Flanking New Players • Moving into uncontested area • Element of surprise Offensive No 2 or No 3 • Avoiding leader’s strengths • Attacking leader’s weaknesses Defensive Market Leaders • Attacking themselves with new ideas • Blocking competitive moves Marketing WarfareMarketing Warfare
  11. 11. Managers caught in this kind of competition almost universally say they dislike it and wish they could find a better alternative. They often know instinctively that innovation is the only way they can break free from the pack. But they simply don’t know where to begin. Chan Kim and Renee Mauborgne Competing head-to-head can be cutthroat especially when markets are flat or growing slowly.
  12. 12. Innovation Innovation Category Type Business model How you make money Networks and Alliances How you join forces with other companies for mutual benefit Enabling process How you support the company's core processes and workers Core processes How you create and add value to your offerings Product performance How you design your core offerings Product system How you link and/or provide a platform for multiple products. Service How you provide value to customers and consumers beyond and around your products Channel How you get your offerings to market Brand How you communicate your offerings Customer experience How your customers feel when they interact with your company and its offerings Delivery Offerings Process Description of type Finance 10 Types of Innovation
  13. 13. 10 Examples
  14. 14. Knowing Why They Buy “Companies may know a good deal about their customers. They know nothing, as a rule, about their non-customers -- the people who should be their customers but buy from someone else. Why do they do that? And yet it is the non- customer where important changes always start first.” Look Beyond the Current Business
  15. 15. Success Breeds Complacency “It is a classic conundrum for business titans: How much money and attention should be focused on a new, but growing, operation that is far less profitable than the core business?” - Prof. Clayton Christensen, The Innovator's Dilemma
  16. 16. Customers “Hire” Products to Do “Jobs” for Them Concentrate Less on What Customers “Want” and More on What Customers “Need”
  17. 17. Disruptive Technology
  18. 18. Value Chain Evolution Theory • Disruptive Business Models: Vertically Integrating VC to Improve What’s “Not Good Enough” in the company’s products and services judged by customers. • Performance Defining Subsystems: Companies must control all those activities and combinations of activities in the value chain that drive the product performance characteristics that matter most to customers. • Specialists will seek to control performance drivers based on asymmetric differences in Motivation and Skills around a modular interface in the VC. (Sword & Shield)
  19. 19. Disruptive Innovation Theory Sustaining Innovations Better Products Brought to Established Markets Low-End Disruptions Target Overshot Customers with a Lower Cost Business Model New-Market Disruption Compete Against Nonconsumption Difference Performance Measure Time Nonconsumers or Nonconsuming Contexts Performance
  20. 20. Customer Demand & Signals of Change 1. Non-Market Contexts: External Forces (Government, Economics, etc.) Increasing or Decreasing Barriers to Innovation 2. Undershot Consumers: Opportunities for Up-Market Sustaining Innovations 3. Overshot Consumers: Opportunities for Low-End Disruption, Shifting Profits by Specialist Displacements (Modularity) and the Emergence of Rules 4. Non-Consumers: Opportunities for New Market Disruptive Growth Established Companies almost always Lose to Disruptive Innovators
  21. 21. Performance-Driven Organizational Reconnaissance Engages the Workforce in Collaborative Intelligence and Analytics to Anticipate and Act on Industry Change to Ensure Good Governance for Stakeholders Signals of Change Strategic Choices Influencing Success Likely Outcome of Competitive Battles
  22. 22. RECON  RISK  EFFICIENCY  CUSTOMERS  OUTLOOK  NOVELTY Intelligence Should Concentrate on Five Domains of Business Problem Solving
  23. 23. RISK Ensuring against risk to the core business is critical to making sure there is time for investments in new growth to start paying off. Maintaining a positive status quo by protecting the core is the chief role for managers in every business, with one caveat: good businesses can often be the foremost enemy of great businesses. Cannibalization of a company’s current market share should not exclude innovative ideas that might be foreign to the corporate immune system.
  24. 24. EFFICIENCY The ruthless cutting away of unnecessary costs in the value chain is essential for a new market innovation strategy to work. Create or build up that which is not yet good enough and diminish or destroy that which is unnecessary. Most of the unnecessary elements in the incumbent value chain have long-since outlived their usefulness or were never very important to customers in the first place.
  25. 25. CUSTOMERS Companies become too dependent on their best customers’ input for signals about how they should innovate, but new forms of competition usually present themselves at the current consumption market. The day your customers begin complaining about how complicated or expensive or difficult your product is, you should ask, “why was it good enough for them yesterday” and who has offered an alternative?
  26. 26. OUTLOOK Traditional market segmentation based on demographic, geographic or sociographic data are fleeting at best and illusory at worst and many decisions have been based on flawed definitions of the fastest growing markets. Defining the market by the “jobs” customers wish to accomplish is more helpful in defining fast growing target markets. Focus groups are often the worst mechanism of market testing.
  27. 27. NOVELTY Differentiation is mandatory for all organizations to master and new market or “novel” solutions to customer problems are often ecosystems of providers working together to produce sought- after value. Companies must build a business model designed to test breakthroughs in the market more regularly but kill off those that do not work early on, so support and development resources can be allocated to those that do.
  28. 28. STEEP (Macro Environmental) Analysis  Strategic analysis begins with environmental market scanning and impact assessment. STEEP covers this broadest “high-altitude” point of view of the market environment, covering five aspects impacting competitiveness: 1. Social: values, lifestyles, ethical norms, literacy, cultural attitudes, customs, beliefs, education 2. Technological: digital communications, biotech, chemicals, energy and medicine 3. Economic: balance of payments, inflation, fiscal/monetary policy, spending, income growth 4. Ecological: climate change, resource depletion, sustainable development, recycling, pollution 5. Political: regulation, legislation, lobbying, political party platforms, local, regional and national
  29. 29. Tactical CI Project Example: Cost Analysis
  30. 30. Level of CI Involvement in M&AStage ID Evaluate Due Consum- Criteria Targets Analyze Diligence Recommend Negotiation mation Integration Intelligence Research Business Units Finance Technical Assessment Legal Executives M&A Specialists Transition Team Logistics HR Level of CI Involvement High Low
  31. 31. Seven Steps to Effective Competitive Benchmarking 1. Determine functional areas within your operation to be benchmarked. This is likely to be those areas that will benefit most from the benchmarking process, based upon the cost, importance and potential of changes following the study. 2. Identify the key factors and variables with which to measure those functions. Two general forms – wherewithal/resources and goals/strategy. 3. Select the best-in-class companies for each area to be benchmarked -- those companies that perform each function at the lowest cost, with the highest degree of customer satisfaction, etc. The companies you select will be those that do whatever you’re measuring better than you do and/or are ones you wish to emulate or copy. 4. Measure performance of the comparison companies for each benchmark being considered. 5. Measure your own performance for each variable and begin comparing the results in an "apples-to-apples" format to determine the gap between your firm and the best-in-class examples. 6. Specify programs and actions to meet and surpass the competition based on a plan developed to enhance those areas that show potential for compliment. 7. Implement your improvement program by setting specific improvement targets and deadlines, and by developing a monitoring process to review and update the analysis over time. This will also form the basis for ongoing monitoring, revision and recalibration of measurements in future benchmarking studies.
  32. 32. Growth Vector Analysis  Growth Vector Analysis (GVA) reviews the different product alternatives available to the firm in relation to its market options, not already being pursued by competitors. Four complimentary characteristics are used for defining common threads of strategy:  Product-Market Scope specifies particular industries to which a firm confines its position.  Growth Vector indicates the direction a firm is moving relative to current product-market posture (market penetration, market development, product development and diversification).  Competitive Advantage defined as particular properties of individual product markets conveying a strong market position.  Synergy is the combined effect on the firm’s resources that is greater than the sum of its parts.   Present Products Improved Products New Products Existing Market Market Penetration Product Extension Product Development Expanded  Market Market Extension Market Segmentation / Product  Differentiation Product Development / Market  Extension New Market Market Development Product/Service Extension &  Market Development Diversification
  33. 33. Feel free to ask for help:  Email:  Phone: +1 (608) 630-4242  Twitter: @ArikJohnson  LinkedIn:  Skype: ArikJohnson  Web: & What’s Next? Leadership to Act is Based on Confidence Intelligence Combats the Paralysis that  Accompanies Uncertainty

Notas del editor

  • This is adapted from
    The “real world” process is obviously less linear and more on-going ….
    Every one of the above processes can be further studied by attaching analysis tools to them, but the key is to first find out where the gaps, problems, missed opportunities exist.
    Consider: What missing, what OK to miss?
    Market Analysis (Where Going? Why Successful? How Get There?)
    Distinctive Competence / Competitive Analysis: Why successful there?
    Market Research/Market Problems: Where
    Market and Competitive Analysis:
    Clients, Industry Experts, Internet
    Employ: Porter’s Forces, Blue Ocean Strategy, Other Frameworks
    Technology Assessment: How
    Quantitative Analysis
    Before and After Launch: Market Sizing: Market Segments?
    After Launch: Product Performance / Win-Loss Analysis: Feedback? Against Metrics? Internal Impact?
    Product Strategy:
    Business Case: include Buy, Build, Partner
    Pricing: Its own field of study
    Product Portfolio: Consider portfolio – which do in biz case and is required in most non-startups
    Innovation: Competence, Analysis, BUT CREATIVITY
    Product Planning
    Positioning: in terms of clients
    Sales Process: repeatable , depending on target market – per lecture 6
    MRD: as discussed
    Product Roadmap: part of vision and selling process … next few quarters …
    User Personas / Use Scenarios: Starting Design
    Release Milestones: approx order if Agile
    Program Strategy (Marketing Strategy)
    Marketing Plan: Will Discuss
    Customer Acquisition / Retention: Advertising, etc. ; but also how to retain
    Launch Plan: Much of what remains in matrix, initial marketing plan (collateral, training, press releases, train support, early customers)
    Buyer Personas / Success Stories: Very helpful for sales …
    Emsense .. Went to raise $ based on a Coke Success Story
    Thought Leaders: Become and represent …
    Lead Generation: Help Sales with ….
    Sales Readiness:
    Channel Training: How training sales
    Collateral and Sales Tools: What materials they need
    White Papers: including white papers
    Competitive Write-Up: helpful… but don’t give to clients
    Channel Support:
    Presentation and Demos
    “Special Calls” – Product Managers can becomes Super Sales Engineers
    Event Support
    Answer Desk – and addl support
  • A classic example of a well-executed defensive block using Competitive Intelligence was that of Johnson & Johnson when Bristol-Meyers decided to launch Datril to compete directly with Johnson & Johnson's successful Tylenol brand. Datril was to be priced 35% lower than Tylenol.Johnson & Johnson learned of Datril before its launch, and informed Bristol-Meyers that it was cutting the price of Tylenol to match that of Datril. Johnson & Johnson even extended credits to its distribution channels to make the price cut effective immediately. This move was intended to prevent Bristol-Meyers from advertising Datril as a lower-priced alternative to Tylenol. However, Bristol-Meyers responded by accelerating the launch of the television advertising campaign. Finally, Johnson & Johnson countered by convincing the television networks not to run the Datril ads since they no longer could truthfully claim that Datril was priced lower than Tylenol. Johnson & Johnson's efforts were successful and Datril achieved less than a 1% market share. Tylenol sales soared on the publicity and lower prices.