1 / 21

Ideas and Strategy

Ideas and Strategy. PRESENTATION TO DUKE BUSINESS PLAN COMPETITION PARTICIPANTS. Kevin Coyne, McKinsey & Company. December 1, 1999. Today. Developing an idea Assessing your idea Describing your strategy A couple of wrinkles. Developing an idea. Why brainstorming usually fails

Download Presentation

Ideas and Strategy

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Ideas and Strategy PRESENTATION TO DUKE BUSINESS PLAN COMPETITION PARTICIPANTS Kevin Coyne, McKinsey & Company December 1, 1999 AT-CZG002-120199Coyne-MSTR

  2. Today • Developing an idea • Assessing your idea • Describing your strategy • A couple of wrinkles AT-CZG002-120199Coyne-MSTR

  3. Developing an idea • Why brainstorming usually fails • 3 frameworks • Product trees • 4 killer questions • The 5Cs model AT-CZG002-120199Coyne-MSTR

  4. Product idea tree • Creative bundling to eliminate complements • . . .radically modify existing products • Radical distortions of key value equation components • Unexpected users • New uses for existing products • Heavy users • Search for killer product ideas by exploring opportunities to . . . • . . . generate radical increases in existing product sales • Potential users blocked by one obstacle • New users for existing products • Potential users who differ in one way from current users • New ways to meet existing needs • . . . develop new products • Stimulating new needs AT-CZG002-120199Coyne-MSTR

  5. Product idea tree • Question • Existing example • Potential idea • What would it take to make my product at half the cost? • Southwest Airlines • PC clones • 6 packs of single-use, lightweight, disposable umbrellas • Can I reduce by half or double my distribution cost? • Personal shopper • Mail order • Discount realtors • Could I offer my product at 5 times the cost if it had greater feature/function? • Premium ice cream • A bank with home cash delivery • Radical distortion of key value equation components • Could I double my product depth or cut breadth in half? • PetSmart • Baby Superstore • Home decorator superstore • What input, if reduced by half the cost, would allow me to cut my price 20%? • Zinc in batteries • Low-rate credit cards for high credit rating • Industrial pawn shop for small business lending AT-CZG002-120199Coyne-MSTR

  6. 4 killer questions • 1. What is the biggest hassle about this product? • For what subgroup of users . . . • For what subgroup of usages . . . • Etc. • 2. What do the Batman movie, roller blades, and Ben and Jerry’s have in common? • 3. How would I do things differently if I had perfect information? • 4. Where are the search, order entry, and tracking costs a large percentage of total costs? AT-CZG002-120199Coyne-MSTR

  7. The 5Cs model • Price • 3 • Capture surplus from customers • 4 • Create new demand • 2 • Concentrate surplus from channels • Retailer • Costs • 1 • Compete for surplus • 5 • Cooperate to capture surplus • OEM • Costs • Client • 2 • Concentrate surplus from suppliers • Raw material suppliers • Costs • Volume AT-CZG002-120199Coyne-MSTR

  8. Today • Developing an idea • Assessing your idea • How powerful? • How large? • Describing your strategy • A couple of wrinkles AT-CZG002-120199Coyne-MSTR

  9. Invent: create a new standard • Create a new standard of performance that previously was not recognized as important but becomes one of the critical buying factors for a target market • Innovate: radically improve an existing important standard • Accelerate pace of innovation in a critical performance dimension by 3-5 years Performance enhancement • Unique performance AT-CZG002-120199Coyne-MSTR

  10. Price-based value propositions must offer extreme discount to market Percent below competitors • Home Depot 20 • Amazon 20 • Staples 50 • Retailers • Office Depot 50 • Old Navy* 20-50 • CompUSA 20-80 • Dell** 40 • Average price discounts of 30-45% • PC manufacturers • Gateway** 50 • Commodore 40-50 • America West 30 • Airlines • People Express 50-70 • E-Plus 15 • Orange 20-30 • Telecom • Mobilcom 30-50 • Other • Iomega Zip Drive 60-70 * Compared to The Gap ** Compared to IBM and Compaq AT-CZG002-120199Coyne-MSTR

  11. Estimating market size • Primary effects • Secondary effects AT-CZG002-120199Coyne-MSTR

  12. Today • Developing an idea • Assessing your idea • Describing your strategy • A couple of wrinkles AT-CZG002-120199Coyne-MSTR

  13. Communicate • Deliver Describing your strategy • A strong business concept . . . • . . . driving a reinforcing business system • Where to compete • How to compete AT-CZG002-120199Coyne-MSTR

  14. Where to compete • Product range • Target customers • Channels • Geography AT-CZG002-120199Coyne-MSTR

  15. How to compete • Sustainable competitive advantage • Value proposition • + • “The compelling reason why the target customer should buy your product instead of alternatives” • “Why competitors cannot copy you once it is obvious you are succeeding” AT-CZG002-120199Coyne-MSTR

  16. Reinforcing business system • Communicate the value • Provide the value • Sales message • Adver-tising • Promotion, PR • Design product, process • Procure, manu-facture • Distribute • Service • Price AT-CZG002-120199Coyne-MSTR

  17. Today • Developing an idea • Assessing your idea • Describing your strategy • A couple of wrinkles AT-CZG002-120199Coyne-MSTR

  18. How valuable is the first mover advantage? • Real value • Absolute resource scarcity • True network externalities • False value • “Controlling the space” AT-CZG002-120199Coyne-MSTR

  19. 4 primary models exist for rollout • High • (“Big bet”) • “Big bang” • “Blitzkreig” • Establish presence in many local markets simultaneously • Target relatively large percentage of national market from the outset • Levels of rollout aggressiveness • “Sneaky scaler” • “Serial replicator” • Establish presence in local market or region, then move onto the next • Initially target small percentage of national market, then attempt to increase scale • Low • (“boot strapper”) • Replicator • Scaler • Natural business scale • Local • National AT-CZG002-120199Coyne-MSTR

  20. Determine level of rollout aggressiveness through careful balance of strategic and operating risk • Strategic risk • Function of • Extent of “crowding” – how close are your competitors? • Scale advantages – when you do run into competition, how much scale/market capture is necessary to win? • Capturing scale resources – are there a limited number of key scarce resources (e.g., scientists, store locations) that you must capture? • Operating risk • Risk • Function of • Management capacity • Capital available • Ability of company to replicate skills • Physical availability of scarce resources • Quality of management decision making • Velocity of growth (in a given year) AT-CZG002-120199Coyne-MSTR

  21. CONCEPTUALCATEGORY/KILLEREXAMPLE • 0 • 1 • 2 • 3 • 4 • 5 • 6 • 7 • 8 The combination of these two provides direction on the aggressiveness of rollout • With low strategic risk, company can afford to open optimal number of stores from operating risk standpoint • Strategic risk scenarios • But as strategic risk increases, companies • will be forced to increase expansion to a straining point in a “big bet” • Risk • Velocity • Number of stores added in that year AT-CZG002-120199Coyne-MSTR

More Related