Events and
publications

June 23, 2010
Business model innovation
8.00 – 9.00 am
University of San Diego

July 23, 2010
Free webinar: Agile Strategy for New Ventures
An introduction to applying the principles of agile strategy to maximize new venture success. 

• First to market / network effects.  Being the first to market is a tactic where you benefit from being the first company to get your product out in the market.  It is a very useful tool for independent entrepreneurs.  Being first to market is an advantage when “network externalities” exist.  Network externalities are based on the condition that greater value is created when there are more users.  A good example of this is eBay.  On eBay, as the numbers of people who shop and place items for sale on eBay increase, the value of the electronic auction house increases.  By being the first to market and building up customers (buyers and sellers), eBay captured the advantage that makes it hard for other electronic auction houses to compete with them.  It is important to point out that being first to market is not always a sufficient condition to capture value.  If a product is rushed too quickly into the market it could lead to a reduction in quality and reliability, and a second-mover could gain an advantage by learning from and capitalizing on your missteps.  

• Branding/reputation. Building a reputation of providing customers with the best product or providing thought leadership is another method used for being a market leader.  Blue Mine Group recommends undertaking reputation building activities such as authoring or contributing to articles for relevant publications, speaking at industry conferences and events, and engaging in online activities (making your resources available on the web and utilizing search engines and social media).  Through these activities, a company is able to garner a powerful and cost-effective mindshare among customers, stakeholders, and industry influencers.

• Becoming the industry standard.  Another approach to capture value is to have your innovation become the industry standard thereby increasing adoption and market leadership.  An effective practice used by emerging technology companies is to create an industry consortium or alliance of influential companies to drive the definition, promotion, and adoption of your innovation.  An alliance has several advantages among them the cross-pollination of ideas that are integrated into your innovation and ability to drive adopters’ decisions based on the stature and reputation of member companies.  A recent example is the Blu-ray Disc Association (BDA), which was founded in 2002 by a large group of companies.  The ability of the BDA was instrumental in propelling Blu-ray to become an industry standard over HD DVD, a competing standard.

• Unique control of distribution channels.  In order for your customers to be able to find and purchase your product, you must make them available through attractive and accessible distribution channels.  Through the development of strong vendor relationships, a network of reliable channel partners, and innovative distribution methods, you can influence customer preference.  With the ability to utilize web-based distribution channels, this approach can be powerful, but is generally difficult to sustain.  The tactics presented below can also be used to influence and solidify control of distribution channels by creating a positive feedback loop with other customer activities.

• Unique sales, marketing and service skills.  By building up a world-class sales, marketing, and customer service organization, you are able to guide a customer through the challenges of selecting among competing offerings.  These skills can be realized through organizational, process, and/or messaging-based initiatives to communicate with, educate, support, and provide value to current and prospective customers through the cycle of buying, integrating, learning, using, and replacing your product.

• Switching costs. Switching costs can be an effective method for retaining your customers.  By elevating the real and/or perceived costs of switching from your product to a competing or substituting one, a company is able to capture value.  Even when switching costs are low, being first to market allows your product to become a benchmark against which later products are evaluated. In many instances, customers are only willing to switch if the later product represents a significant improvement.