In “Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant,” authors W. C. Kim and R. Mauborgne present a strategic sequence for evaluating innovations, similar to the framework we use in MIS4596. Using this sequence, I will examine how the product GrandPad, a low-tech, easy-to-use, wifi-connected tablet is a low-end, sustaining innovation that taps into a new market of nonconsumers.
First, the sequence looks at six buyer utility levers. GrandPad touches on four of these levers. GrandPad increases utility in the simplicity category by limiting the number of apps and features to only those users use regularly. It increases convenience by using larger icons and an intuitive interface, meaning no training or assistance is required. It increases utility in the risk category by providing seniors with a private family network, eliminating concerns regarding internet scams and risky browsing. Finally, because it’s focused on the family, it has greater utility to seniors in the fun and image category.
After establishing exceptional utility, the next step is to price the product strategically. Because the GrandPad innovation lacks excludability, rivals can take the idea and customers along with it. Therefore the price must be set low to retain customers. At $200 for the tablet, plus accessories and support, and $40 per month service fee, this product is at the low-end of the tablet and cellular service markets. This matches the price-sensitivity of seniors as well.
The next step is ensuring costs are low enough to hit the company’s profit target. The levers the authors of “Blue Ocean Strategy” reference are streamlining operations, partnering, or changing the pricing model of the industry. GrandPad uses the latter two options in its strategic costing. GrandPad is a product of Consumer Cellular who partners with large cellular companies like T-Mobile by buying their unused capacity at a reduced cost. Their pricing model is unusual in that they bundle cellular and tablet costs which reduces marketing costs for the cellular arm of the company.
The final step is to address anything that would limit users from adopting the product. The GrandPad could face user adoption issues if seniors had to buy a lot of additional components or call their families every time they needed help using the product. GrandPad solves these issues by providing complementary products like stylus pens, charging stations, protective covers, and specialized user support in the product’s bottom-line price. One user adoption issue they still need to revisit is coverage. The cellular coverage in rural areas, where many older people choose to retire, is not as good as in dense, urban centers. Despite this, the product is making waves in the tech industry: https://www.bloomberg.com/news/articles/2018-05-07/an-ipad-for-80-year-olds-senior-citizen-carrier-bets-on-tablets
Justin Rowlatt of the BBC looks at various valuation metrics related to Uber’s entrance into the driverless electric car market. Rowlatt postulates that Uber is in an advantageous position to reduce transportation costs and gain a positive net present value from their investments. He cites the driverless format as having the potential to cut transportation costs by 50%. Additionally, Rowlatt points out that electric engines extend the life of the vehicle and cost less to maintain because they have fewer parts. He believes electric engines will reduce costs by another 40%.
He notes that profits from this investment depend on regulatory approval from government entities. By assigning a probability of reaching this approval over the three years, we can find the net present value of investments Uber would make. Using the industry standard as an example, the investment for driverless car technology costs $1.1 billion. Add another $500 million for an electric car fleet, and the total investment is $1.6 billion. With a 90% reduction in costs, Uber would have 1.7 billion in savings per year assuming the U.S. government provides regulatory approval. If we put the odds of approval at 0% in year 1, 50% in year two, and 100% in year three with a discount rate of 12%, the net present value equals $420 million, making this a good investment for Uber.
According to a report today by TechCrunch, Microsoft is integrating its mixed reality product, the HoloLens, with its enterprise CRM and ERP software, Microsoft Dynamics. This is significant; while mixed reality is a well-known technology, it has yet to become a pervasive element of either organizational or home technologies. The company is connecting an unproven technology to a neglected user group, field service workers; which could mean an untapped and easy-to-capture market.
Microsoft’s use cases focus on field workers, those with expertise in a trade. Tradespeople are one of the last segments of the workforce to use technology in their daily tasks, given much of their work is hands-on. ERP and CRM systems are great for documenting and implementing business processes, but can these systems benefit a repair-person whose brain may cycle through a list of ten malfunction checks in a matter of seconds? Microsoft is proceeding with caution- the HoloLens use cases revolve around more unusual or difficult repairs. For such cases, HoloLens provides a real-time view to a remote expert who can assist an onsite employee through the repair.
Microsoft is starting with an exciting set of use cases for the HoloLens, but I don’t see the connection to ERP and CRM systems yet. The company could combine this technology with the Business Process Flow (BPF) functionality currently available in Dynamics CRM. Business Process Flows walk an employee through a set of steps in a process, diverging down new paths as the customer scenario plays out. This technology could be useful for everyday repairs, as well as unusual cases. For example, a plumber could visualize and verbally check off the repairs completed from a list in the system as he is completing them. The repairs could be tallied up into a virtual bill on the spot. He could also document what the completed job looked like for warranty records and perform any quality assurance checks required by the system. Finally, he could document a visual confirmation from the customer that they are satisfied with the job. Using BPF would automate the data points moving into the CRM and ERP systems, reduce field repair errors, and speed up the interaction between client and employee.
I’m really excited about this technology and think the use cases will expand as users become comfortable with it. I could see the HoloLens becoming a household product with consumers performing their own repairs with the help of an expert or business process flow!