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Davida Vogel 4/8/22 Discussion 3: Applying Value Innovation Techniques to the SBA (1) While examining the highly competitive business education market in the Philadelphia area, it becomes apparent that there exist a diverse group of key players who compete on a variety of strategic dimensions. The value curve elements that I have focused on for Widener, Wharton, WCU, and Drexel include price, reputation (quality), campus location desirability, availability of online program delivery options, acceptance rate, and student outcomes (graduation and employment rates). (2) Looking across substitute industries- competition with companies in other industries that produce substitute services. With rising tuition costs across the industry, substitutes are gaining more traction. Alternative learning and skill-development options like “mini-MBA” programs or business bootcamps that are only weeks or months long, and learning through conference attendance can be options for those who do not wish to invest thousands of dollars in a traditional MBA program. How can Widener rival some of these alternative options? In some ways, Widener SBA is already trying to do so with the offering of various certificate programs that are shorter, skills-based learning options. Another substitution for pursuing a degree in business is pursuing degrees in other academic fields. Widener SBA does offer joint degree programs, such as the PsyD/MBA to hope to attract learners that may be interested in other fields of study to the value of an MBA as well. A new market space in this respect would be creation of additional joint degrees (at both the undergraduate and graduate level) that Widener SBA has not already established. Looking across strategic groups within industries- groups of companies within an industry that pursue similar strategy. For Widener, this might include the schools discussed above. Widener SBA should analyze why certain students choose a higher cost program like Wharton or Drexel over schools like Widener and WCU. Widener SBA could explore ways to enhance program quality (like bringing in distinguished adjuncts or lecturers) without increasing price. Looking across the chain of buyers- understanding who the purchasers are and when that differs from the actual users. In the case of graduate business education, influencers may include employers that encourage, or even pay for, employees to obtain MBA degrees in order to bolster their skills and leadership abilities, and positively affect their company. Widener SBA could promote the value of their programs to employers, such that they might encourage their employees to enroll in one of SBA’s programs. Looking across complementary product and service offerings- examining the total solution buyers seek when choosing a product or service. When choosing to do an MBA or another business degree, students often seek a well-rounded educational experience with abilities to network, try new skills in practice, and have fun. An area of untapped potential may include opportunities or locations for students to gain practical experience in the area. If it is difficult to get an internship because of lack of relevant businesses in the area around a school, students will be less likely to want to pursue a specific program. Widener SBA could focus on developing strategic partnership in the Chester and surrounding areas, and a special track for hands-on learning, so that this is exceedingly easy for students to obtain. Looking across functional or emotional appeal to buyers- competition on emotional appeal vs. rational appeal. In the case of the business education environment, most consumers focus on the practical, rational aspects of whether the program offers a quality education and whether graduation and employment rates indicate that they will be able to find a good job afterwards. SBA could position itself and its faculty as highly supportive and the most inspirational environment in order to appeal to the emotions of consumers. Looking across time- examining external trends that might affect need for change. Things like focus on climate change and sustainability, as well as diversity, equity and inclusion are becoming more and more central to the decisions that students make when looking at institutions of higher education. By anticipating the needs in these areas, Widener SBA could cater to important values of consumers by considering new offerings. This might include specialty tracks for those looking to implement green and sustainable business practices, as well as tracks for those interested in workplace diversity, equity, and inclusion. Based on the above approaches, I think that the dimensions that should be added to the value curve include dual-degree options and new tracks or elective course offerings related to sustainability and diversity. These options seem to capture a new market space in ways that other programs do not. Therefore, in these areas, Widener would not have to compete as intensely with other programs. WidenerPriceReputationDesirable LocationOnline Program OptionsAcceptance RateStudent Outcomes34.31.5533.9WhartonPriceReputationDesirable LocationOnline Program OptionsAcceptance RateStudent Outcomes5.099999999999999654.810.85DrexelPriceReputationDesirable LocationOnline Program OptionsAcceptance RateStudent Outcomes4.54.54.753.24WCUPriceReputationDesirable LocationOnline Program OptionsAcceptance RateStudent Outcomes1.211552 Low High Creating New Market Space Managing for Results through Value Innovation How to Achieve Superior Results by Creating New Market Space Blue Ocean Strategy 1 Learning Objectives Understand the concept of value innovation & how it differs from conventional competitive logic https://youtu.be/clp-IMpuwaQ (Mauborgne: 6:02) Understand the various approaches to the creation of new market space (i.e. value innovation approaches) https://youtu.be/2N3XqyuOwIM (2:26) Learn how to plot value curves and how to use the 4-Action framework to create a new value curve for the firm 2 1. What is Value Innovation? Create products/services for which there are no direct competitors by staking out new market spaces Why? Constraints of conventional competitive logic Convergence of strategy as a result of ↑ competition ↑ competition lowers profitability Limited perspective of who customers are & what they value Value innovators can break away from the competitive pack Instead of fighting over cost/differentiation advantages, stake out new market space where competitors have not ventured The Blue Ocean 3 Value Innovation vs. Convention Conventional approachValue Innovation Industry assumptionConditions are givenConditions can be changed Strategic focusBeating the competitionMaximize value to customers CustomersExisting target marketsNew target markets Capabilities and assetsLeverage existing onesLess of a constraint Product/service offeringsWithin traditional boundariesEstablishing new boundaries 4 2. Value Innovation Approaches Break free from the conventionally defined boundaries of competition – look for new market spaces across: Substitute industries Ex: Home Depot & Intuit Strategic groups Ex: Ralph Lauren & Sony Walkman Buyer groups Ex: Bloomberg & Philips Lighting Complimentary products Ex: B&N & Dyson Functional-emotional orientations Ex: Starbucks & Body Shop Time (decisive, irreversible, & clear trajectory) Ex: Cisco Southwest 5 Example: Virgin Atlantic Value innovation & creating new market space across complimentary products/services for business travelers Eliminated first class Focused on improving business class Sleeper seats Added new amenities The total solution for the busy executive Lounges with relevant services: showers, apparel services, office services, massages Transportation to/from airport Maximize value for customers → Business travelers Extending boundaries & developing new capabilities/resources 6 3a. Value Curves A value curve is a graphic depiction of the way a firm or industry configures its offering to customers by plotting the level of a firm’s product/service relative to other alternatives along key success factors Here value innovation can occur along 3 platforms Product platform – physical offering Service platform – support, maintenance, skills Delivery platform – logistics, channel 7 Example: Airline Industry Value Curves 8 3b. Creating New Value Curves: The 4 Actions Framework Ask four questions – to challenge industry norms and the firm’s business model What features should be reduced well below the current industry standard? What taken-for-granted features should be eliminated because they add no value? What features should be raised well above the current industry standard? What new factors should be created – features that the industry has never offered before? 9 An Example: Creating New Value Curves & the 4 Actions Framework Virgin Atlantic What features should be reduced well below the current industry standard? # of classes & locations served What taken-for-granted features should be eliminated because they add no value? First class seating What features should be raised well above the current industry standard? In-flight & airport lounge amenities What new factors should be created – features that the industry has never offered before? Transportation 10 Airline Industry Value Curve with new Virgin Atlantic value curve 11 An Example of Value Innovation: Yellow Tail Winery The wine industry is not an attractive one Intense global competition – flat demand in US Mounting price pressure → Increasing bargaining power of retail/distributors (i.e. buyers) Threat of substitutes – beer, malt beverages & spirits Many new entrants – low barriers to entry Agricultural input/product (i.e. suppliers) Key Question How do you break out of the vicious competition and find uncontested market space? Consider value innovation approaches? Consider the 4 actions framework to create a new value curve? 12 Segmentation in the Wine Industry Premium wines High on price, terminology, marketing, aging, legacy, complexity, range Budget (table or jug) wines Low on all these features Wine is promoted as a unique beverage for a sophisticated consumer for special occasions 13 Industry Value Curve: Wine Industry competes on following dimensions: Price Marketing – retail incentives Esoteric terminology & labeling Appellation, chateau, vintage, & varietal Prestige/legacy of winery Aging as a sign of quality Complexity – e.g. tannins, oak, minerals 14 Creating a New Value Curve – Yellow Tail Winery Yellow Tail used the 4 Actions framework Reduced/eliminated factors that did not add value and which in fact intimidated potential customers Tannins, complexity, aging, jargon Raised/added factors not normally offered by wine that attracted consumers of substitute products Ease of selection, fun labels, smooth taste/fruitiness, retail ambassadors Found opportunities for value creation by targeting consumers of substitute products, facilitating buying decisions, adding function https://www.youtube.com/watch?v=_uVTsle9AIA 15 Value Curves in the Wine Industry 16 Results of Yellow Tail’s Value Innovation Strategy Within 2 years, Yellow Tail became #1 wine in U.S. Instead of stealing customers from other wine makers, it created new market space: Attracted 6 million new customers – those who consumed substitutes (beer, cocktails, coolers) Increased consumption levels among novices Drink wine more frequently, not just special occasions Encouraged jug wine drinkers to trade up 17 Where did Yellow Tail create new market