Lecture Mail: Lesson 3 Day 2
Hi all! This is a tricky chapter. We hope that the notes below will help a
little to explain value as it’s used in this book. It’s too bad
that the authors couldn’t have tried to be more consistent with the terminology
that is currently in use.
Please continue to let us know via the MOI bulletin board if you are having
trouble grasping this topic.
Marc is preparing a page with links to everybody’s web-sites. You’ll
have it soon.
Check the bottom of the page for your next group question.
First of all: Is “generic value” an oxymoron?
While the authors talk about two kinds of generic value, they actually discuss
three kinds of value: trapped, hybrid and new-to-the-world value. When you read
this section, it should sound vaguely familiar because it’s based on the
innovation literature. If you remember, innovations can vary from product repositionings
to product improvements to new-to-the-world products/technology/services. They
can vary on a continuum from very minor changes to radically new departures
and still be called innovations. The authors’ discussion of value is similar.
Trapped value represents an improvement that results in efficiencies and savings.
It’s an important kind of innovation. These kinds of improvements come
from a review of process, or to use Porter’s terminology, an examination
of the value-chain. Anything you can do to streamline the process or even eliminate
steps will represent the liberation of trapped value. Think of how technology
has led to increased efficiencies and, hence, value. In an earlier lesson we
described how Procter and Gamble and Wal-Mart have developed a computerized
ordering system that allows each company’s computers to talk to the other’s.
This linkage has streamlined and facilitated management of inventory. Of course,
the end result is lower prices for customers.
Hybrid value extends the idea of trapped value to include major consumer benefits.
Several benefits are lower prices, greater information, and access to a greater
number of sellers in a larger geographic market. Car shopping is one example
of this. The Internet makes it much easier for consumers to find the best prices
because they are armed with as much information as they desire. Plus they have
the option of searching from an entire network of sellers—both dealers
and individuals.
New-to-the-world value is just that. It’s a radically new offering that
may reorganize or create brand new consumer segments. For example, auction houses,
such as Sotheby’s, have been around for decades. E-bay, however, offers
new-to-the-world value through the use of the Internet. The end result has been
the creation of communities of users based on interests.
Any discussion of innovation must necessarily be somewhat subjective. What we
perceive as new may be perceived by someone else as just a minor improvement.
This has led to a discussion of the difference between technological and market
innovators. Technological innovators are the companies that develop truly new
processes. Unfortunately, companies that follow the technological innovators
and make modifications to the innovations often will be identified by consumers
as the innovators. These companies are called market innovators. Check out the
web-sites for Intel and Microsoft that are provided below. Would you classify
them as technological or market innovators? By the way, while you’re looking
at the Microsoft site, be sure to check out the new car models that are featured
on MSN Carpoint. You no longer have to go to Detroit if you want to see what’s
new in auto design. Now that’s real value!
For your group to discuss and post:
Thinking about your two web-sites, does it make sense to talk about trapped
or hybrid value? For example, it’s fairly easy to see how group 1 could
talk about value for their sites, FordUSA.com and NissanUSA.com; but does it
fit with group two’s sites, vh1.com and comedycentral.com? What about
the other sites? Let’s plan about a week to give you time to post your
answers, then let’s all check out what group 1 and group 2 have to say!
(Just a little pressure.)