business ideas and customer value oslo university 2007-08-28 martin edlund, ph.d....
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Business Ideas and Business Ideas and Customer ValueCustomer Value
Oslo University2007-08-28
Martin Edlund, [email protected]
Challenges• Find the right users
(customers)• Overcome different
perceptions • Penetrate different types of
needs • Provide the right competence
where needed• Resources/willingness to
invest in ”customer knowledge”
• Put the new knowledge into the design process
Innovation Each step involves customer need
discovery and verification
creationcreation demonstrationdemonstration sustentionsustentionpromotionpromotionincubationincubation
An idea that potentially create value for customers in a new way (business idea formulation, problem description)
Analysis thevalue that can be created(the business plan, VoC, marketsize estimation)
Funcitionality testof value creatione.g. (test installation)
Feedback from users(actual sales, warranty, surveys)
The first real test: Whobuys for how much?(launch and initial sales)
We want to create customer value
Customer Customer ValueValue =
Perceived Perceived benefitsbenefits
ΣΣ (Customer (Customer Costs)Costs)
Linking Technology and Market
- Functional analysis -
Functionsand performance
Solutionsand features
Needsbasic, spoken and
latent
ProvideSatisfy
Customer Needs- Example: Bilge Pump/Rule
Industries• Reliable pump function• Easy to install in bilge• Easy to replace • Less residual water in
bilge• Maintenance free• Long service life• High pump capacity• Non-clogging• Reasonable price
• Durable • Appealing design• Trusted brand• Manual functionality test• Mounting flexibility• Good information to
understand the system• Low impact on boat
battery• Health status of system
available remotely
Functionality of a systemDefinition of functions: A=>B(Noun) - Verb - Noun- The car signals image.- The bottle contains water- The watch tells time.
Functional performance characteristicsEx. the function to “show time” can be measured as:- Accuracy (how many minutes +/- in a year?)- Exactness (hours, minutes, seconds…)- How many time zones (three in parallel)
Hammer NailHITS
Analysing a multilevel open system
What system-levels and functions are relevant?
system
supersystem
subsystemssubsystems
subsystems
Environment
customer/user
Linking customer value and functions
Main Functions Additional Function Unwanted Functions
Customer Value = Perceived Benefits Total Customer Costs
Purchasing Costs Operating Costs Decommissioning Costs
A structured process to capture needs
- VoC -1. Undertand your
invention/product (functional analysis) and prepare customer interviews
2. Set up meetings (hard work!)
3. Conduct and follow-up interviews/visits
4. Analyze and compile results
5. Quantify via surveys (if necessary)
Voice of the customer (VOC)- Two vital steps for generation of new
knowledge
Exploration Verification(Testing of our hypothesis)
business idea
Need or Solution to a Problem
Market BusinessModel
AA
BB CC
Customer needs are created in different
areas
The Dominant Managerial Logic
• Overuse of existing knowledge
• Which are the basic potential customer needs?
• Who is the customer?
• The difficult process of unlearning
• The limit of a core competence approach to innovation and business extension
Generic strategies to increase customer value
- What is the long-term survival strategy?
• Increase functionality
• Influence the customers perception of value
• Sell to the right customer
• Lower the price
Creation ofCustomer
ValueCo
sts
Needs
Functionality
Pe
rce
pti
on
User-driven innovation ?
• Value for users is a driver through the innovation process
• User-decisions is a driver for growth
• End-users drive the commercial chain in the long-run
• But, entrepreneurs/venture teams drive innovation
A ten-step bottom-up approach to market estimation1. See the product in the users hands (”Viceralization”) – who will
use it?2. Discuss value and customer needs – how many are interested?3. Understand the customer chain – who win/who loose/who pay?4. Price in relationship to competition and substitution - how
much will be paid and what will you get paid?5. How large is the population of potential buyers at that price
(maximum size of market)?6. Adoption rate – how fast will customers buy?7. Life cycle of products – how long will sales last? 8. Influence of competition – how will the buying pattern change?9. Product range extension and product differentiation – how can
the market be develop further?10. Risk analysis: identify threats, consequences and how to
mediate – what is the best, most likely and worst case?
Example: Market Estimation
• Use the step-wise process to guide your discussion
• Estimate the market size of a wave-driven bailer for small boats in Norway
1. See the product in the users hands (”Viceralization”) – who will use it?
• Links to the VoC work• A choice• Example: Automatic Welding Helmets
– For everyone?– Indoor/outdoor– Type of welding (MIG, TIG...)– Large/small companies– Safety culture in different countries
2. Discuss value and customer needs – how many are interested?
• The customer value equation: how does it apply for the different users?
• What is the customer value in economic and other terms?
• Use the functional analysis to penetrate this question
• Example: The RV Maserator– Very unwanted funtions eliminated– Vacation and RV is expensive, Maserator
cheap...
3. Understand the customer chain – who win/who loose/who pay?
• It is your sales figures that are of interest!
• Use the Five forces model• Who provides what in the customer chain
from a customer value perspective?• Example: A new fuel-level sensor to the
automobile industry– Car dealer, manufacturer, supplier, sub-
supplier...– Low bargaining power?
4. Price - how much will be paid and what will you get paid?
• Cost-based or Value-based• Competition• Substitites• Currency-rates/local buing power• Total costs for customer• Example: RV Maserator, oil detection
tool, and composite wave guide
5. How large is the population of potential buyers at that price?
• Stick to the right level of analysis when using macro data
• Creativity is needed in most cases to extrapolate from known sources of statistics
• Focus on the first target market that can prove your case
• Example: Ultrasound diagnostics Logiq 700/500/400– Known statistics on health-care operations– Known standard of living/buying power– A model of the market was created to make
estimatins on size
6-7. Adoption rate and Life cycle– how fast will customers buy and for how
long?
• The adoption curve• Installed-base• Substitution curve• Crossing the chasm