Platform-Services Innovation Map and Cash Cow Business Models
Increasingly, the following three strategic moves at the fundamental innovation level in business organizations are being recognized as game changers:
1. It is not just products, it is also the process.
2. It is no more only about products, it is also about platforms.
3. It is not only about products and platforms, it is also about services.
So lets understand product innovations, process innovations, (technology) platform innovations, and service innovations.
In the following tech strategy framework, what is posited on the left is the emergence of a dominant product design sometime around the intersection of the product and process innovation curves. This is intuitive, since a company initially focuses on building a core product out to market, and there is usually a lot of innovation around the product, until a dominant design emerges. Around that time, the rate of innovation at the business process level usually is on the rise, and this is depicted by the graph on the left, where the two blue hills of the product and process innovation charts intersect:
Similarly, what you see on the right hand side above are two curves depicting the rates of innovation at the technology platform level and at the services level respectively, as functions of time. The point in time where they intersect is also the time around which business focus has to shift from creating the world's best platform to servicing the customers who are using the platform. At this point in time, the rate of services innovation is still increasing even as the rate of platform innovation is on the decline.
What this platform-services innovation map depicts is a practical truth: before a business starts making boatloads of cash, it has to innovate its platform to a sufficient commercially optimized level, and also has to start working on its services as well. In a nutshell, cash-cow businesses now a days are not only about products or platforms, they are also about services.
Listen to the podcast to learn more about ongoing platform battlegrounds ranging from social networking (Facebook / MySpace) to smart mobile handhelds (Google Android / Apple iPhone), and how the cash-cow business model evolves at the cusp of platform and service innovation...
Technology Push vs. Market Pull
This framework builds on the Architectural Innovation framework (reproduced
in the diagram below on the top left hand side).
The framework TECHNOLOGY PUSH vs. MARKET PULL shows how
having an agile product strategy in terms of courting a continuously changing product architecture can be a
recipe for survival in the competitive marketplace for high-tech products, services, solutions, and platforms:
What is depicted above is a fact about human lethargy / inertia, as seen in many older, comfortable, bureaucratic, myopic high-tech firms. Frequently, the "technologists" in such organizations draw comfort from a stable product architecture and have a tunnel vision that innovation can happen only at the product "components" level. Consequently, they keep pushing their R&D and associated business / product development activities along the blue arrow as depicted above. Relying on this kind of technology push can be dangerous to the business; competitors / new entrants can upset the status quo by flooding the market with products / solutions which have newer product architectures. Sometimes, these moves by new entrants can take the form of technology invasions, as we have shown in a prior podcast.
Try this Business Mantra: Pull, don't just Push. If you can push your technology, or your products along the direction of market pull, as depicted by the red arrows above, then no one will be able to disrupt you! This is agile product strategy, this is true product innovation. Also, how can you look beyond product innovation into process innovations? In other words, how can you use the above framework to make your business processes leaner? Listen to the podcast to learn more...
Architectural Innovation as a Core Competency Destroyer
What is presented below is a pioneering framework, first articulated by Henderson and Clark in a research paper on "Architectural Innovation." The framework posits that where as firms love to introduce innovations along the blue arrow (from incremental to granular), for their core competencies are built along well set "product architectures," they frequently ignore the architectural dimension
of replacing older architectures with newer ones, as represented by the red arrow below:
The above framework suggests that incremental innovations and even a progressive innovation from incremental to granular along the blue arrow reinforces the core competencies, where as jumping across the comfort zone and going for "architectural innovation" along the red arrow above can destroy a firm's core competencies! Why? For "engineers" and "designers" do recognize when a new design at the component level hits the market. Whenever that happens, they consider that to be a "radical innovation," because they try to come up with better, cheaper, newer, faster, sleeker, smaller components themselves. Frequently, R&D departments within established firms focus on this, i.e., the blue arrow. Since a radical innovation incorporates that, i.e., newer components, a firm does not fail to notice this when it happens, or as it keeps happening; i.e., as better / cheaper / faster / sleeker / smaller / newer components incorporated within a similar product hit the market. However, if a firm is focused only on new components, new designs, overturning core design concepts, it can miss if an "architectural innovation" hits the market. Moreover, as per our framework above, a truly radical innovation is one which has not only newly designed components, but which also incorporates a new product architecture.
In other words, an architectural innovation is more subtle; no new component designs have been introduced; or the core design concepts underlying the components which go into making a product have not been overturned! This can be dangerous to an incumbent, if introduced by a new competitor, because it is a new product innovation. It is "outside the box" of thinking for an established firm, which is set in its ways in terms of building core competencies along the old, stable, established, product architecture. Hence, an architectural innovation being cooked outside your firm can be dangerous to your existing business, if business leaders in your firm are not aware that innovation can happen along this dimension, i.e., along the red arrow in the above framework. To learn more, please listen to the accompanying podcast. This framework is built on top of two older tech strategy frameworks: Dominant Designs, and S-Curves. Listen to the podcast to learn more...
Disruptive Innovations and Technology Invasions
The tech strategy model below depicts a disruptive technology which begins its trajectory of technology invasion at point D. We have placed two baseline frameworks, with which you all must be familiar, if you have used this Open Strategy Portal before: S-Curves and the Ansoff Matrix. In particular, we have placed points A, C, and D from the model with the corresponding points on the familiar S-Curves framework:
When the invasive technology has a gap in terms of performance output from the technology and what is demanded by the existing market (at time T1), the businesses selling the existing technology see no threat from the invasion. But what if the invasive technology is able to become a successful business by courting lead users and creating a new niche market, and make it to point B, where it is able to meet the existing market demand (at time T2)? Typically, it starts taking market share from the older stagnating / mature technology because of its better price / performance metrics... To learn more about this technology strategy model and its applications to current technologies / products (iPad, Google Buzz), listen to the associated podcast...
Dominant Designs and Technology Cycles
If you have listened to our podcast on S-Curves, you are already familiar with terms like Technology ferment, take-off, and mature / stagnate. However,
before a technology is productized / servitized and takes off in the market-place, there is fierce competition, and eventually a dominant design emerges, as depicted
in the following technology cycle.
So, what is a "dominant design?" What might intrigue you, and what the holy grail of product marketing truly is, is this concept called "Dominant Design." Why can your business model be shaky, if you package a product / service around a technology which does not have "dominant design" writtern all over it? Are there exceptions to this rule? Listen to this POCAST to find out more. Relax and enjoy; it is only 32 minutes long!
HALLOWEEN 2009 - CANDY CASE SOLVED AS A SOCRATIC DIALOGUE / NEW MARKET ENTRY
In this podcast, Sam Mishra, the author of Strategic Case Analysis: Business Concepts, Strategy Frameworks, and Solved Cases as Socratic Dialogues, takes the role of the Interviewer, and Jay Mishra assumes the role of the interviewee (could be an undergrad student in an Ivy League or an MBA student), as he goes about solving this NEW MARKET ENTRY case…The case is touched upon to a sufficient extent in the Franteractive Strategy Portal FranTerActive.Net, and is fully solved in the aforementioned book (and in this podcast).
The dialogue is built using frameworks like the 4P’s and the 5 C’s, and uses microeconomics concepts like the horizontal demand curve, demand elasticity, price sensitivity, profit maximization during perfect competition (Marginal Revenue = Marginal Cost), extraction of available consumer surplus, through price discrimination, etc. Branding and advertising strategies are also discussed.
If you are interviewing for a job in this tough economy, you should read Strategic Case Analysis by Sam Mishra. If you are not sure about marketing as a career track for MBAs (including brand management, strategic marketing, product marketing), you should read Strategic Case Analysis: Business Concepts, Strategy Frameworks, and Solved Business Cases as Socratic Dialogues. The book’s ISBN number is 978-0-9798354-0-7, and it is currently priced at $15.99 on Amazon.com. If you buy two copies, Amazon.com waives shipping and handling fees.
SOCRATIC DIALOGUE PODCAST - SOLVED CASE# 6 - CANNING COKE CANS
In this podcast, Sam Mishra, the author of Strategic Case Analysis: Business Concepts, Strategy Frameworks, and Solved Cases as Socratic Dialogues, takes the role of the Consultant, and Jay assumes the role of the Client (Coca-Cola), as they go about solving the Canning Coke Cans business case. The case is touched upon to a sufficient extent in the Franteractive Strategy Portal FranTerActive.Net, and is fully solved in the aforementioned book.
In the podcast, the author also announces that the book is now a prescribed text-book in UNLV - University of Nevada, Las Vegas, a large accredited University in United States.
Listen to this Socratic Dialogue to appreciate the fact that solving ANY business problem requires giving the needed attention to the pertinent details…
SOCRATIC DIALOGUE PODCAST - SOLVED CASE# 11 - AUDIOPHILE SPEAKER BUSINESS
In this podcast, Sam Mishra, the author of Strategic Case Analysis: Business Concepts, Strategy Frameworks, and Solved Cases as Socratic Dialogues, takes the role of the Consultant, and Jay assumes the role of the Client, representing the Audiophile Speaker Manufacturing business. The client has a business problem: its sale is seasonal, peaking prior to Thanksgiving / Christmas retail sales. Its customers, who are brand names ranging from Cerwin Vega to Niles Audio to Acoustic Research, have to place their products in retail chains like Best Buy and Circuit City by Mid-November. Frequently, to meet these deadlines, the client is forced to air-ship from India to USA.
This seemingly simple business problem has a lot of complexities underneath it, ranging from supply chain bottlenecks in China to sales forecasting in USA. The consultant finds out about these problems by engaging the client in a Socratic Dialogue. Once the consultant unearths the major problems, it proposes the solutions as part of this dialogue.
In the podcast, the author also announces that the book is now a prescribed text-book in UNLV - University of Nevada, Las Vegas, a large accredited University in United States.
Listen to this Socratic Dialogue to appreciate solving a business case at its analytical best. In the process, you will also learn about CRM (Customer Relationship Management) / sales forecasting, supply chain automation / lean manufacturing, shipping container loads by sea vis-à-vis air-shipping, the Pareto 80-20 rule (as opposed to the Pareto Negotiation Frontier), etc.
PODCAST ON VALUE CHAIN ANALYSIS
In this podcast, Sam Mishra talks about Value Chain Analysis and associated strategy concepts like forward integration, backward integration, off-shoring, outsourcing etc. Sam leverages his substantial experience in the software industry and explains a complex concept like Value Chain (which is typically used to analyze manufacturing companies) and how it can be applied to services companies like software. In the process, Sam touches upon the following:
- What is forward integration, what is backward integration, how can you take strategic make-vs-buy decisions in the context of off-shoring / outsourcing, etc. When does it make sense to forward integrate (for example, if you are competing with IBM, which has a global services arm, you better acquire a services firm if you don't want all your accounts be taken over by Big Blue), and is the services firm too big to forward integrate / acquire?
- Concepts like "synthesizing product requirements" as opposed to requirements "analysis" in the context of software development / manufacturing.
- Why Porter's Value Chain Analysis remains a robust tool to analyze not only a company's core competency, but also complementary assets like off-shored contract software development, off-shored contract software parters doubling up as biz-dev partners who can "open doors", etc.
To listen to the application of "Value Drain Analysis" (Value Drain is similar to Value Chain, and can be applied to scenarios where value is not created but destroyed) to analyze the $787 billion bank bailout / stimulus package, please check the podcasts page on Franconomics.com.
PODCAST – Sam Mishra narrates how he used the S-CURVES framework to trounce Scott McNealy of Sun Microsystems
In this podcast, Sam Mishra, Author of Strategic Case Analysis, talks about S-Curves and how he had successfully applied the framework to depict the disruption of Solaris by Linux. After his LinuxWorld keynote, Scott McNealy, the then CEO of Sun, was presiding over a Q&A session. There, Sam got a chance to approach the white-board and draw the framework out in its applied form - - - i.e., the lower S-Curve depicting Solaris and the upper S-Curve depicting Linux (so Linux was depicted as lower in terms of technology adoption but disrupting Solaris nevertheless). To listen to the complete story and how you can apply S-Curves to chalk product strategy, business strategy, and corporate strategy, please click here >>
PODCAST ON TALC (Technology Adoption Life Cycle)
In this podcast, Sam Mishra, the author of Strategic Case Analysis, explains the TALC – Technology Adoption Life Cycle framework from his book. The author begins by explaining the differences between the five user groups of a technology based product, also known as the (1) Innovators, (2) Early Adopters, (3) Early Majority, (4) Late Majority, and (5) Laggards. The author then proceed to explain associated concepts like the following:
- The Chasm: Apparently, a chasm exists between the various user groups, but the chasm that needs to be really crossed for the technology based product to win in the market place is the one that exists between the early adopters and the early majority. There are a lot of reasons why a tech product can’t go past this chasm. For example, if a product is tied to the economy, and the economy sours (as is happening right now at the time of broadcasting this podcast, i.e., mid-2009), then the product can very well fall into the chasm. Another example is the scenario where a bigger competitor with more resources comes and kills your product before you have been able to sell it to any Early Majority users.
- What strategies one should use while selling a technology based product to the early majority (clearly, the early majority will pursue the product / technology if it can given them a competitive advantage) vis-à-vis the late majority (this group can be sold the idea that since everyone else is using it, they should use it too; otherwise they will have a competitive disadvantage).
- Explains how the different stages of the <b>PLC</b> (product life cycle) and the <b>S-Curves</b> frameworks map into the five user groups or the five segments of TALC. For example, mathematically speaking, the S-Curve is the INTEGRAL of the TALC bell-curve, or if you plotted the area under the normal bell distribution, you would get the S-Curve!
PODCAST ON VALS-2 PSYCHOGRAPHIC SEGMENTATION AND STP MARKETING
In this podcast, Sam Mishra elaborates on the marketing segmentation related frameworks from his book Strategic Case Analysis. Using his vast experience in diverse industry verticals and actual marketing / strategy engagements, Sam touches upon the following in this podcast:
- How
Steve Jobs, the creator / founder / CEO of Apple Computers could fit
into different psychographic segments pertaining to "Status" at
different stages of his life, as he climbed from a "Striver" to an
"Achiever" to an "Actualizer"
- Relationship between VALS-2 pchychographic segments and Maslow's Hierarchy of needs
- Difference between hot-sheets, beat-sheets, cheat-sheets in Positioning (part of STP - Segmenting, Targeting, Positioning)
- STP best practices for segmenting industrial customer bases - can you do better than segmenting your customers into SMB (small and mid-size businesses), mid-market & enterprise / Fortune 500?
PODCAST ELABORATING THE FIVE C's FRAMEWORK
In this podcast,
Sam Mishra elaborates on the Five C's framework from his book Strategic
Case Analysis. Over and above what is covered under each C in the book,
the author uses his industry experience, his dialogs with successful
CEOs
(Andrew Grove of Intel), and his analysis of competitive dynamics in
the hyper-competitive Silicon Valley (competition between Cisco
Systems and Juniper Networks to dominate the Core Internet Router
business) to drive home
the point that Five C's are a key tool-set for any business strategist
/ strategic marketer:
Company: The author narrates how he asked Andrew Grove (the then CEO of Intel Corporation) once what Mr. Grove's leadership
style was, and what Mr. Grove's reply was. Listen to the podcast to
find out more, and to understand why leaders can make or break a
company.
Customers: While explaining the
C relating to Customers, the author refers to segmenting customers in more
meaningful ways, as dealt with in a separate podcast on STP
& VALS-2.
Competition: Delves
more deeply into concepts like "tight appropriability", "complementary
assets", and "speed". The author also explains how
Cisco Systems moved in strategically to dilute the competitiveness of
Juniper Networks in the battle between these two companies for dominance in the "core Internet routers" business.
Costs:
In the context of outsourcing / off-shoring to reduce costs, the author uses
his experience with a small product company which unsuccessfully tried
an off-shoring model and failed. However, off-shoring software
development to India can be a great cost cutting strategy if the firm
is a larger firm, i.e., at least a thousand programmers.
Channels: The author explains, using the double marginalization concept, how it is important to know who has how much market power in which segment of the channel.
Podcast explaining the Pareto "Negotiation" Frontier
In this podcast, Sam Mishra, the author of Strategic Case Analysis explains the Pareto "Negotiation" Frontier framework as outlined on page 141 within Chapter 5 - Advanced Frameworks of Strategic Case Analysis. As Mishra explains in this podcast, if two parties are negotiating, and one party knows the existence of the frontier, and the other does not, the party which knows that this frontier exists will be able to create and claim more value, without hurting the value claimed by the other party. During this discourse on negotiation, the author gets into business concepts like integrative and distributive bargaining, which are covered on page 26 within Chapter 3 - Business Concepts of Strategic Case Analysis. The book is available for purchase on Amazon.com for $15.99.To listen to the preface (read by the author) of Strategic Case Analysis --- Business Concepts, Strategy Frameworks, and Solved Cases as Socratic Dialogues, please click here. Thank You.
BOOKS ON STRATEGY
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