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Creating New Market Space

In an ever growing competitive and globalized world firms need to not only strengthen their

core competencies but rev up their strategic engine focusing on lines of business that are either

slightly modification to existing core values or to something completely different altogether. Be

it to explore new avenues for growth after witnessing a slow death in a mature/declining

market, or to diversify the risks popping out of the sheer globalization and keeping it safe from

the economic downturn situations, in the past firms have chosen various ways to create

superior value. In the past, corporate world has witnessed many success and failure stories of

conglomerates that have adopted such various product market combinations.

General Electric (GE), being one of the most diversified conglomerates of recent time has

leveraged its learning and knowledge and resources across business units, made a remarkable

space for quality in consumers mind. On the other hand, retail giant Sears, who has gone to

diversify its business from the traditional retail store to a private label credit card company,

came out severely damaged and ultimately had to wind off its non-core unsuccessful financial

service business by selling it to Citi bank in 2009.

W. Chan Kim and Renee Mauborgne (1999) have researched many such companies and found

out that there are major six ways of creating new market space for firms in todays cut throat

competitive world.

Conventional Boundaries of

CompetitionHead-To-Head Competi tion Creating New Market Space Innovative Company Examples

Industry Focuses on rivals within its industry. Looks across substitute industries.

Home Depot, Intuit's Quicken

Software, Federal Express, UPS, and

Southwest Airlines.

Strategic GroupFocuses on the competitive position

within a strategic group.

Looks across strategic groups within

its industry.

Polo Ralph Lauren, Toyota's Lexis,

Sony Walkman, and Champion

prefab housing.

Buyer GroupFocuses on better serving the buyer

group.

Redefines the buyer group of the

industry.

Bloomberg business i nformation,

and Philips Lighting Company.

Scope of Product & Service

Offerings

Focuses on maximizing the value of

product & service off erings within

the bounds of i ts industry.

Looks across to complementary

product and service off erings beyond

industry

Borders Books & Music, Barnes &

Noble, V irgin Entertainment, Dyson

vacuum cleaners, and Zeneca Cancer

Centers.

Functional-Emotional

Orientation of an Industry

Focuses on improving price-

performance in line with the

functional-emotional orientation of

its i ndustry.

Rethinks the functional-emotional

orientation of its industry.

Starbucks coffee bars, Swatch

watches, the Body Shop and Direct

Line Insurance.

TimeFocuses on adapting to external

trends as they occur.

Participates in shaping external

trends over time.Enron, and Cisco Systems.

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superior financial performance through another cycle of radical innovation resorting to

entrepreneurial marketing in the large organization which can revive the entire parent

company.

Technological vs Marketing Knowledge

Another important aspect that firms often do not pay heed to is the importance of a

synchronization of technical as well as competitive knowledge. This is important for two major

reasons:

Both types of knowledge reside in different departments (R&D vs marketing and sales).This might have consequences for the autonomy of projects in terms of leveraging

knowledge

The timing of development differs for both types of knowledge. Experimenting withmarket approaches and distribution takes place after introduction of the product in the

market. While experimentation with products itself takes place before the launch

The figure above is s conceptual framework for four idealized types of projects that link the

degree of technological knowledge and market knowledge. Each quadrant represents a

different strategy and has different completion criteria. The right half has criteria of market

introduction while the left half has criteria of achieving profitability.

New Existing

eExploration of bothtechnological and

market knowledge

Exploration of

technological knowledge

Existing

Exploration of market

knowledge

No exploration of

knowledge

TechnologicalKno

led

ge

Market Knowledge

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Polaroid

Polaroid as a brand was famous for its instant photographs and was the market leader in that

category. It employed a razor/blade pricing model whereby it priced its camera low to drive

penetration and made money by selling films. The brand was extremely popular in the 1980s. It

was during that time that they invested heavily in digital photography technology. With the

R&D backup that they had, they were able to come up with cutting edge technology. However,

the company could not succeed in the digital space. Of the several reasons that contributed to

their failure, the primary one was that they did not even recognize the need for exploration of

market knowledge. They failed to understand that their pricing model was inconsequential as

digital imaging did not use films. They needed new market knowledge in the form of business

models and alternate distribution channels. Other competitors came up and Polaroid lost space

in the digital market space.

Google Inc.

As an organization, Google Inc. has always been one of the innovative firms of recent times

bringing in a plethora of innovation led products ranging from Search Engines to Android and of

lately the Google Eye Glasses. All these products have been the result of Googles continuous

focus on innovation and creating something that industry has never seen before. Alongside

maintaining the innovation throughout its offerings it has still maintained the open source

dynamics in its business.

In the recent times, Google has started looking beyond its traditional industry to new industries

which look very different from its existing one. Moving away from its bread & butter services to

the Handsets industry by buying Motorola Mobility and to Airborne Wind Turbines by acquiring

Makani Power and to Robotics & Home Devices through its recent acquisitions of Redwood

Robotics & Nest respectively (See Table Below), Google is trying to diverse its product offering

across the various facets of customer types.

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Similar to GE who has electricity at the center in its initial business lines, throughout all these

acquisitions of Google, there is one thing in common data; gathering and crunching the

numbers to make physical devices more intelligent.

The increased level of diversification could be instrumental for Google to create new value and

create new avenues of growth which will further strengthened its offering of unique value to its

customers.

References:

1. Kim, W. C. and R. Mauborgne. 1997. Value innovation: The strategic logic of high growth. HarvardBusiness Review (January-February): 103-112.

2. Kim, W. C. and R. Mauborgne. 1999. Creating new market space: A systematic approach to valueinnovation can help companies break free from the competitive pack. Harvard Business Review (January-

February): 83-93.

3. Morgan P. Miles and Jenny Darroch, 2004. Large firms, entrepreneurial marketing processes, and thecycle of competitive advantage.

4. The New GE: Google Everywhere. 2014. [http://www.economist.com/news/business/21594259-string-deals-internet-giant-has-positioned-itself-become-big-inventor-and]

5. Burgers, J. H., et al., 2008. Why New Businesses Development Projects Fail: Coping with Differences ofTechnological versus market Knowledge. Long Range Planning, vol 41, 55-73

6. Tired Brands: Polaroid. [http://brandfailures.blogspot.in/2006/11/tired-brands-polaroid.html]