Posted by Stephen Wunker on Thu, Jul 29, 2010 @ 03:57 PM
Sharp Corporation faces a dilemma. As a world leader in display technology, it has doubtless studied the potential of tablet computers for years, as have many other consumer electronics firms. The category may eventually be worth over $10 billion, and it has been open for pioneers to lay a claim. Yet these companies waited until Apple moved first with its iPad. Now that Apple has sold over 3 million of these devices, Sharp, Acer, Toshiba and others are pouring in. But how do they distinguish their offering from the market leader?
The irony for these firms is that they would love to be in Apple's current position, but it was not feasible for them. Lacking Apple's millions of loyal fans, strong brand, retail outlets, and wireless carrier partners, their launch of a tablet may have been widely ignored. Only a firm with Apple's strengths could have created this category quickly. Sometimes being a fast follower is simply a consequence of being slow, but in this case it was the only realistic choice.
There are other circumstances in which fast follower strategies can be compelling. In categories where there are few network effects, no proprietary company ecosystems, minimal brand advantages, and small scale economies, companies may be wise to wait to understand how markets react to a first mover. For instance, a grocery chain strong in a particular local market can observe what a chain in a distinct market is doing around self-service salad bars, then copy the eventual winning formula.
In the tablet PC industry, Sharp has three options. It could choose a niche to pursue vigorously, seeking to be known quickly as the dominant player for that particular market need. Panasonic has done this successfully with its Toughbook computers, such as
through creating a variant catering just to healthcare workers. Sharp could also focus on a geographic territory where it is comparatively strong, leveraging its brand and distribution to force consumers to pay attention. It could also subsume its brand under that of strong sales channels, letting the channels do the heavy lifting of seizing market share.
Sharp has opted for all three approaches. It is emphasizing Asian character handling, which it claims is poor on the iPad. The company is focusing heavily on its home turf of Japan. Outside of Asia, the firm is partnering with wireless carriers to provide them with tablets proprietary to their network -- it is widely rumored to be working on such a device with Verizon in the United States. These are all sensible strategies. Once the firm has built market position, it can leverage scale economies to create advanced technologies at relatively low costs. After all, this is how a once-obscure Finnish company, Nokia, became the world's leading mobile handset maker.
For a more in-depth article on when to be an early mover, fast follower, or late follower, click here to download Stephen Wunker's piece in Strategy & Leadership magazine.
Stephen Wunker is the Managing Director of New Markets Advisors and Author of Capturing New Markets: How Smart Companies Create Opportunities Others Don't (McGraw-Hill, 2011)
Posted by Stephen Wunker on Wed, Jul 21, 2010 @ 01:49 PM
No matter the context, radical change is tough. Just as people fight engrained tendencies to reach for another doughnut as they try to diet, organizations struggle with breaking long-established norms. Like frustrated dieters, staff may understand the macro-level case for change but reflexively resist the immediate implications. In some firms, senior management can force through change by fiat. Yet many organizations lack a means of dictating the everyday work practices that can lead change programs to succeed or fail, and they have highly sought-after workforces that must be kept aligned for the long-term success of the institution.
Hospitals and physician networks -- often grouped together as "health systems" -- face a particularly severe form of this quandary. The unsustainable rise in healthcare costs, U.S. health reform, and new business models are combining to threaten decades-old practices. Health systems must urgently sort out their strategy for the new landscape: are they going to radically lower costs to win business in a handful of specialities, dominate metro areas so that health insurers find them indispensible, integrate from primary care through to surgical procedures and post-operative home care, or compete based on strong patient preference? Health systems can no longer try to be all things to all people -- they must carefully choose their priorities and competitive strategy. These choices will likely lead some internal stakeholders to lose out, and difficult negotiations may follow. These challenges would be difficult for any organization -- now picture how much harder it is for health systems where physicians can be intimately involved in governance, community groups may hold substantial power, and non-profit charters can lead to confusion about the organization's ultimate objectives.
In this setting, traditional approaches to change will struggle. The strategic planning process, for example, may excel in setting next year's financial and operational metrics, but it does not create alignment among a broad set of stakeholders about radical change. Campaigns for operational improvements -- such as fighting hospital infections -- can succeed in instituting a small set of new work practices, but they do not tackle deep-rooted issues like distrust between physicians and hospitals, misaligned incentives bewteen primary care and specialities, or controversial success metrics.
For radical change, a program needs a clear and far-reaching mandate, a group of senior stakeholders rolling up their sleeves to examine issues, a means of creating broad buy-in, and an objective party sheparding the process. One health system, which we'll call UniversityCo, has tackled the challenge through creating a small working group of top executives, a series of regular meetings with clear objectives, a program of research to understand marketplace demand from stakeholders' perspective, cross-functional ideation workshops, and a tight timeframe for making decisions. Through this process the UniversityCo executives are working as a team to jointly re-imagine the organization's future, rather than as delegates of internal interest groups bargaining about near-term objectives. It is time-intensive, uncomfortably unfamiliar, and urgently necessary.
The keys to success are:
- Take a deliberate approach to strategic change, recognizing that this initiative is unlikely to follow in the footsteps of other, more everyday efforts
- Resist the temptation to outsource the process of making strategic recommendations, and instead engage in the kind of intensive, structured dialogue that produces both vigorous debate and long-term buy-in
- Step outside your everyday struggles to view the marketplace from the perspective of your customers and other stakeholders. Design your future state from the ground-up to meet marketplace needs, rather than as an iteration of your current strategy and structure
Click for more of New Markets' thinking on healthcare and innovation capabilities.
Posted by Stephen Wunker on Thu, Jul 08, 2010 @ 10:09 AM
Recently, leading companies have been eager to tout how they are using social media for innovation -- articles have appeared about firms as diverse Pepsico, Ford, and Dell. Yet there is a common limitation in these efforts: they focus heavily on using social media to generate line extensions and sustaining innovations, not disruptive innovations that can create new markets.
Social media is an excellent way to tap into passionate communities of a product's users to understand their key issues, solicit ideas, and gain quick feedback on innovative concepts. There are watch-outs, to be sure -- unhelpful comments, intellectual property issues, competitive signalling, and more. But these concerns can be outweighed by the reach, immediacy, and interactivity of social media. It is a great tool for many kinds of innovation.
Unfortunately, disruptive innovations and new markets tend not to have these passionate user communities -- they are new! To the extent the communities do exist, they may not be representative of the potential mass market, but rather be composed of leading-edge adopters who are less risk-averse, less convenience-motivated, and more forgiving of the flaws common in new offerings. They can provide feedback about must-fix issues but not a roadmap for long-term growth.
Moreover, social media lends itself to asking people what they want, yet in new markets potential customers often cannot articulate their needs or may think that new concepts are a bit weird. I was present for some of the first concept tests of flat screen TVs and DVDs -- people just did not grasp the benefit, and thought the idea of a TV hanging on a wall to be really a bit odd. Concept testing of new markets requires a different kind of interaction -- more in-depth interview, observation, and interaction with simple prototypes, with less quick reaction.
For disruptive innovations and new markets, social media has different uses including:
- Finding latent needs -- Groups of similar users, from mechanical engineers to disease sufferers, can grouse about issues they face in their daily lives. There is much to sift through, but occasional nuggets of golden insight. These users can also provide quick feedback on open-ended questions. They will usually not provide deep thinking in this setting, but their comments can open avenues of inquiry.
- Enabling fast adoption -- New markets often struggle to find their first customers, who will provide testimonials about a new offering and lower the barriers for broader adoption. Social media can enable marketers to recruit those first customers through starting word-of-mouth campaigns, creating hyper-targeted ads, and linking early adopters to wider groups of potential users.
- Circumventing established channels -- Sales channels are a frequent innovation-killer. They see limited upside for themselves in new offerings, and much liability in the form of salesforce training, customer education, dealing with complaints, and the like. For early efforts at market development, direct efforts can be most effective. Social media are a good way of leading potential customers to these direct channels, which can always yield to a channel-oriented approach as a market becomes more established.
It is encouraging to see firms shift so rapidly to using social media for innovation. If they vary their approaches according to the sort of innovation sought, the results will be compelling.
Click for more of New Markets' thinking about innovation capabilities.