Introduction:innovating,andnot:innovation.

Thisbookisaboutinnovating,notabout:innovation. Moreprecisely,ittriestohelpagoodideahitthemarketandgetsold. Thispartoftheinnovationsjourney,theonethatgoesfromwhenanideahasbeen invented (found, identified) to when it becomes adopted and creates value, is not reallywelldocumentedinliterature. Isjustsincefewyears(since1997,precisely)thatClaytonChristensenhasdescribed thepathofinnovationtomarketandhascharacterizedsometypicalroutesthatare madebythesuccessfulones. Failing to understand the differences among those paths, when they should alternativelypursued,andwhymakingthewrongchoiceleadstofailure,causesto mostoftheInnovatorstowastetimeandresources. Thequestionscollectedhereshouldhelpyoutodecipherthecircumstancesinwhich youareandmaketherightdecisionsaboutwhetherandhowtoproceedtowardthe market. Butwhenwedoinnovate? Innovationis:anewwaytoreachagoal.Ifoundthisdefinitionaboutinnovatingin a paper of Benoit Godin, of INRS Canada, who explained how the concept of innovationevolvedintime. Itstartedmeaning:Change(oftheestablishedbehaviorsoftheuserwhowill adopttheinvention),thenitadded:Rupture(withthepast,notjustdetaching fromit,butmoreprofoundlydestroyingit,toachieveanewanddiversestatus) andlately,inthepastfewcenturies,thewordinnovationhasbeenconnotedwith 2modernelements:creativityandutility. Todayweassigntoaninvention(thecombiningofelementsthatcreatesanew value)thestatusofinnovationonlyiftheinventionbringsinanutility. UtilityinvolvesbothanadoptionbyaCustomer(achangeinhisbehaviors)and theabilityoftheinventiontobemarketable(capabletogenerateanexchangeof value).

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Underthislightitbecomesclearthatthestartingpointofanyinnovatingattemptis intheCustomer.Withouthim,thereisnoUtility. Thisiswhythisbookstartswiththequestion:DoyouhaveaCustomer? Thereareonlytwotheoptions: 1)oryoudohaveaCustomer:youhaveanideaaboutwhoishim,andyoualready bargainwiththisfellow. 2)oryouhavenoideaatall,andyouhavetohopetofindhim.

Thisentitlestotwodifferentkindofproblems: Inthefirstcaseyourtaskistominimizethechanceoffailureforyourinvestments. Thereisahugesetofbestpracticesthatcompaniesaroundtheworldhavecollected inordertomaketheinitiativeofbringinganewideatoexistingCustomers,safer. Thesecondoptionismoretricky:becausetheonlywaytodiscoveryourCustomeris totry.Learnyourwaytohimbytrialanderror,beingreadytochangeyourpath whenabetterwayisencountered.Inotherwordsisamatterofexperimenting: maximizetheopportunitiestolearn,whileusingtheminimumamountofmoney andavoidingthechainsthatcanteardownyourflight. Thesetwocoursesofactionseemsselfevident.Andinrealitytheyareequallyviable inprinciple.WhatChristensenhashighlighted,hasbeenthatthereareprecise circumstancesthatindicatewheneachoneisworthtobepursued. Failingtoidentifythemmayleadtodeadends,fightingagainstwindmills,struggling withresources,findyourselfalonehalfthewayetc. TheRoadmaptoMarketwilltrytoguideyoutotherightpath,andhelpyou identifyallthesignsthatleadtosuccess.
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Summary:
TheRoadmaptoMarketaimsatcollectingalltheinformationyouneed,toanswer to3basicquestions: 1)IsthereaClientformyidea? 2)ifYes,canIminimizetheriskoffailureformynewproductorService? 3)ifNo,canImaximizethechancestofindtherightone? The First Question will help you recognize the signs to the right Road to market, avoiding deadend paths that have been proven (by others failure) to have the lowestchancesofsuccessifany. TheSecondoneisaimedatcollectingallthedataneededforanNPV(NetPresent Value)analysis:Demand,Share,ContributionMarginandRisklevel.Andistheroute you should take if you own the Clients and you just want to beat competition and leverageyourcompetitivepositiontogetthemostoutofyouridea,withthelowest chancesoffailure. The last one is the most risky but also the most rewarding. Because, if you do not haveaClient,youmaythendiscoverthatyourideaisworthtosomeoneyounever thoughtbefore,andhewasreallyjustwaitingtoittosolvehispressingproblems. TomakeyouswiminthisBlueOceanofopportunities,youneedtoaskyourselfhow you can discover the route to the Eldorado. And because noone have been there before,maximizingtheresultofeverytrialistherealjobthatbringsyouthere. Caveat: ThisbookcollectslessonsofseveralleadingScholarsintheFieldofGameTheory( e.g.: DixitNalebuff), Strategy (Porter, Christensen, KimMauborgne) and Marketing (Trout, Reeves, Bly, Stokes, Choun). I sacked wildly their ideas and tried to build a roadmapforinnovators,bridgingtheirtheorieswhereIsawpossiblejoints. Therefore this book is not intended for beginners. You should have a basic understandingofmarketingandbefamiliarofthecommonjargonsused.Inthisway youwillmultiplytheeffectivenessofthisRoadmap,thatorganizessoundmarketing models. FurthermoreInotintendedtogiveyouareadingcompanion,butaworkingtool where to find rapidly hints about marketing innovation. You will not find many examples.Justbriefexplanationsofwhateachvoiceshouldmean.
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TheRoadmaptoMarket: Part1.DoyouhaveaCustomer?
DoyouhaveaCustomer?
Wheneverafriendcomestometelling:Ihaveabusinessideathefirstquestion ImakehimisdoyouhaveaClient?.Buttherealwaytoputthequestionshould be.DoesanyCustomerownsyou?. BecauseisnotenoughthatyouhaveanideaofyourtargetClient.Youshouldhave bargainedwithhim.YourpotentialClientshouldhavebeenabletoexperienceyour service,oratleastexperienceyou.Recognizingyouasasolutionprovider.Someone whohastheabilitytosolvehispressingproblem,ortoallowhimtoachievehisgoal. Ifthisisthecase,probablyyouarenotalone.Youmoveintoatrajectorywithothers likeyou,readytoservethatclientatthebestoftheircapability. TheCustomerdictateshisneedsandrequisites,ifnotevenasksawelldefined performanceleveltoanattributeofyoursolution.

Ifyes,whichpartofthemarketareyouthinkingtoserve?
Incaseyouknowyourtargetcustomer,hecangiveclearindicationsaboutthelevel ofperformanceneeded.Butbecareful.Notalwayswhatheaskforiswhathereally isgoingtouse.ListeningtoomuchtoClientsrequestsmayenduppushingyour offertowardthehighendofthemarket.

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ThisisaveryattractivesegmentofCustomers.Theyareneversatisfiedandask alwaysmore.Andareevenwillingtopaythisplus.Butthehighertheperformance level,thelessaretheClientstobesatisfied. ThedistributionoftheClientswithinthemarketmayresembleaGaussBellshape: Withfewatthelowandhighends,andamassconcentratingaroundthemedian performance.

Areyouunderperforming,orareyouoverperforming?
Takingasatargetthemediancustomer,iftheperformancesofferedbythemarket arebelowtheexpectation,allthecompetitorsarefightingforthetop.

Fightingforthetop:
Theystrivetosellabetterproductintoanestablishedmarket,andeachtime someonecomeupwithabettersolution,hecausestheimmediatecompetitors reaction. Theprizeatstakeishuge,becauseusuallythemassoftheclientsarestilltobe tackled,andtheopportunitiestosellgrowthebettertheproductis. FurthermoretheClientdoesnotfindabettersolutiononthemarket,soiswillingto payforthebest.Whatyoureallyarefightingforistomakeyourcustomerachievea betterresult,notreallytoassurethatyourproductreachabetterperformance. Inthisraceyoucannotstandstill.Youwillbeleftbehindfightingwithahardto differentiateproduct,andagainstcompetitorswithsimilarcoststructures. Youaregoingtolookforthoseideacapabletoimproveoratleastmaintainyour profitmargins,exploitingyourorganizationsprocesses,coststructureand competitiveadvantages.Alltheinventionsthatcannotdeliverimprovedprofit marginsrelativetothecurrentcoststructure,arediscarded.Becausethecost structureismostprobablyanheavyone.Thearchitectureneededtomanagethe
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complexityandtheuncertaintyunderlyingtheresearchofabetterperformanceisa hugeandcostlyone.Ifyouintendtotakeparttotherace,betterbeequipped.

Integratedarchitecture:
What you need is an integrated architecture. An organization that is a platform capabletoachievenewlevelsintermsofPerformanceandReliabilityofyouroffer. Isamatterofconcurrentefforts:youneedtheabilitytodevelopthecomponents of your offer simultaneously, solving the unknow and unpredictable interdependencies among them. It requires Experience, Talents, ability to manage risksandtime.Andthewillingtosustaintheseeffortsforlongperiods. An integrated architecture can be only proprietary. Is a unique enterprise that demandhighCapitalExpendituretocoverR&Dcosts,backupinventories,talented humanresources.Allthiscommandhugemarginsfromeachsale. The high capital expenditure and capital on operating costs ratio of an integrated architecture is the source of differentiation, and the first barrier to entry for new competitorsintotheofferingtrajectory.Thesecondbarriertoentryisgivenbythe steepeconomyofscalethatisgeneratedbyanintegratedarchitecture. Thisiswhytryingtobringanewinventionintoanexistingtrajectorycouldnotbea goodidea,unlessyoudohavetheintegratedarchitectureandtheClientstoserve. Theraceyouwouldwillingtoparticipatewouldnotbearacetosucceed,butarace tonotfail.

Carefullyplanningnottofail:
Companiesthatplaythisgamehaveorganizations,processes,values,resources,that are committed to stay on track and sustain themselves. Their strategic efforts are dedicated to filter out inventions with lower chances to succeed, with expected marginsinsufficienttosustaintheircoststructure.Theyareoptimizedtoextractthe most out of the existing customer base, and in doing so they fight to scale up the existingsolutiontowardshighermarginssegmentofcustomers:thehighendofthe market.Anewideathathasthepotentialwillneverbejustaddedtotheoffer.Most probably embedding it into theoffering trajectory will require sound practices and experienceinmanagingtheinterdependencieswithallothercomponents. Andthemorehightechistheidea,e.g.ifisaninventioncomingoutofaresearch laboratory,themoreresourcesareneededtogovernit.Nowonderthatonlylarge corporations can dare to bring on the market the most sophisticated scientific discoveries.Theyaretheonlyonedesignedtomanagethecomplexityandcostsof suchachallenge. This race has a toll: the quest for higher margins may distract from understanding wherethemedianmarketis.Listeningtocustomerswhoaskformore(andpromise
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topayforit)mayendupsurpassingthelevelofperformancerequiredbythemass. FortheseCustomers,themarginalincreaseinpricethataCompanycansustainfor an improved product slowly approaches to zero. This suggests that the marginal utilitythatCustomersderivefromusingtheproductalsoisapproachingzero. Yourproductisactuallyoverperforming.

Areyouoverperforming?
HowyoucanrecognizeiftheofferisoverperformingrespectwhattheCustomeris willingtobuy?Afterall,Customersarethosewhoaskformoreinallthe questionnaires,survey,feedbacksandrequestsforquotationyoureceive. Atleastitseemsso.Ononeside,infact,thereisapsychologicalstiffnessofthe customerinconformingtothehighendluxurytastes,akindofirrationalwishful thinking,thatforacertainperiodmayhelpyourcustomerfeelbetter,whenasked abouthisneeds.Ontheothersideyourorganizationtendtoreportasfeedback, onlythosethatarealignedwithwhattheCompanywanttohear:moremargins.
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Andmoremarginscanbefoundonlyinthehighendminorityofthemarket demand.Itsfeedbackisthereforetheonlyonethatsurvivethefilteringscreeningof theCompanyprobes:itsmiddlemanagement. AbetterlookmayshowthatMedianCustomersarestartingnotwillingtopayforthe marginalincrementinperformance.Suddenlytheyshifttheirinterestfrom performance,toReliability.Theyhaveenoughofwhatyourproductrangecan offer.Theywantthattheproductperformthesamewayaslongaspossible.Later on,whenalsothisrequirementbecomesmorethansatisfied,theirinterestshift again.ItmovestoConvenience:thepreferredproductbecomestheonethatis easiertogetanduse.Finallywhenalsothisfeaturebecomesagiven,thelast criteriumofchoiceamongcompetitiveofferingsremainsPrice.

Whenyouarestillontheperformancetrajectory,youmaystartnoticethatyour customersarestartingtobuytheentrylevelproductsofyourproductrange,orof themarketproductsrange.Allofthecompetitorsarestartedtobetreatedalike. Pricebecomesaninterestinggaugeofchoice. Isinthissituationthatathreatsmaterialize:

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AreyouleavingroomtoaNewEntrant?
ThisisthequestionfromaCompetitorstandpoint.Youmayseethatnew competitorswithabetterpricingcanundermineyouroffer.Ifsuchanewplayeris abletocapturecustomersattention,andhasalowercoststructureheisgoingto benefitofhighmarginsuntilthelastcompetitorofthePerformancetrajectory,will stayinthemarket,sustainingthepricelevelstowardsthehighendofthemarket. ThecompetitorsinthePerformancetrajectory,areevenincentivatedintheirrush towardhighermargins,toleavethelowendsegment,movingtheiroffering portfoliotowardsthehighendcustomers.Insodoingtheirportfoliosmargintend toincreaseonaverage,somakingthisattractiontothetopevenfinanciallyjustified (atleastuntilsomeonestarttoseethathigherpricesbylowervolumesdonotcoop withcompanysgrowth).

IsthereaThreatoranOpportunity?
Iffromthecompetitorspack,overperformingcouldbeseenasathreat,fromthe pointofviewofsomeonewithagoodnewidea,thissituationismoreofan opportunity. Anobservationofthelowendcustomersmayleadtodiscovernotonlyawayto penetratethemarket,buteventoexpandit. Amongthelowendcustomerstherearesurelyuserswhoareperfectlyfinewiththe lowendproductsrange.Butacloselookmayshowthatamongthemthereare Clientswho,yesaresatisfiedwiththeminimumperformance,butinrealitytheyare usingotherfeaturesoftheproduct.Featuresthatareconsiderednotimportantor notconsideredatallbytherestoftheMarket.

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Someoftheselowendcustomersneedhelptomaketheproductworkforthem. Theymayneedexpertconsultantswhohelpthemadjustandfittheproductfortheir need.Theylackofthecompetencesortheinfrastructure:tools,systems, information,tojustplugandplaytheproducttosolvetheirproblemorachievetheir goals.AllofthemarelookingforSimplicity.Otherstravelalongdistancejusttoget theproduct.Theyuseonly10%ofit,butthat10%isworthalongtrip.Ifsomeone couldbeabletoofferthesame,justalittlemoreConveniently,wouldbecome instantaneouslytheirpreferredsupplier.OtherCustomerswouldlovetogetthe productbuttheycanbarelyaffordthePrice.Sometimetheyjustbouncebackand goawayandmakewithoutit.Iftheyareluckytheytrytomakewithanemergency solution,somethingthatmakehalfofthework,butisbetterthannothing. Ifyourbrandnewideacanchangethecoststructureoftheoffering,reshufflingitto maketheproductmoresimpletoget,moreconvenient,andsellableatlowerprices: allofthesecustomersareyours.

CanmyideadisruptthePerformancestrajectorygame?
IfamongyourCustomersyoufindsomeonethatbehavesassaidbefore:lookingfor simplicity,convenienceandprice,orjustbouncingaway,chancearetherethata largercrowdofthesametypemaybeserved. Unfortunatelymanytimethepeoplethatspottheseopportunity,lackoffantasy. Ihaveseenpeoplespinningoffoneofthecompetitors,justtorephrasethesame offer,atlowerprice,orforjustsomeopportunistcustomer,butreallywithout bringinganythingnewonthemarket.Justgivingawaymargin,andtryingtomake theirwaycuttingfixedcosts(branding,service,R&D)fromtheoriginalcompetitor coststructure. Thisisquiteeasytoseehappeningfromtheservicesideoftheoriginalcompetitor.It isquiteeasytospotthehugemarginsthatthecompanyismakingwithitsservice business,stoleafewofthebestservicemendoublingtheirsalary,promiselower pricestosomefriendcustomeranddentingforawhilethesalesoftheoriginal company. Thismayworkinanupswingeconomy,wheretheserviceofferingcapacitymaybe notfullysatisfied.Butgenerallydoesnotlasttheshakeoutofadownturn,orofa companythathaditenoughofthosebitestoitsrevenuebase. Soifyouspottedtheopportunity,bettertomakeasanitycheckandverifyifthe moveisbackedupbyanewideacapabletobringthesamevalue,butwithanew typeofcoststructure. Thepeoplethatsucceedingrabbingtheopportunity,generallyhavespottedthat theproductsonthemarketarefarmorecomplexthanwhatisneededtodeliverthe performanceusedbytheCustomer.(remember:customerstendtoaskformore,
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evenwheninrealityuselessthanwhatyouoffer)sotheyfindawaytopull togetherthekeycomponentsoftheproductontoamoresimplerandstandardized architecture.Amodularsystemwheretheinterfacesarefixed,andthecomponents canbepluggedintoachievethesufficientlevelofperformance. ThisperformancebecomesagivenfortheCustomer:whatheisreallylookingfor isspeed,responsiveness,convenienceandprice. Ifmyideaisbuiltonamodulararchitecture,andthisisaninventionthatcandeliver thelowendperformancelevelrequired:therearechancesthatmoreofthealmost customerswillswitchtothisnewsolution. Ifthisinventioncanachievealevelofperformancethatcansatisfythemedian customers,withafaster,simplerandcheapersolution.Theareverygoodchances thatthemajorityoftheCustomerswillmovetoyourinnovation. Disruptingtheoriginalmarket.

Ismyideabuiltonanew(modular)architecture?
Intheorythenewideaarchitecture,shouldnotnecessarilybemodular.Forsureis newdifferentrespecttheoneinusebythecompetitorsonthemarket.Butifitis anintegrated,complexone,thechancesthatthecoststructurewillallowalower pricearefew.Thechancesthatastartupnewentrant,canmanagethecomplexity, withouttheexperience,andcollectresourceswithoutacustomerbase,arefew. Sobeforetomove,letscheckiftheideaisbuiltona(new)modulararchitecture. Thekeypointhereisthatthecomponentsoftheproductshallbepluggedinthe supportingarchitecturewithouthavetotuneittotheothercomponents.Inother wordsthemodulararchitectureinterfacesshallnothaveunpredictable(notyet know)interdependencies.Inthiswayeachcomponentcanbedevelopedseparately aslongastheymeettheinterfacesspecifications.Thecomponentsspecifications limitthedegreeoffreedomofthewholeproduct,sotheytendtoleadtoasub optimizationofitsperformance.Butthisisnotaproblemaslongtheperformance achievableareenoughtosatisfythelowendcustomers(betterif:themedian Customer).Whatcountstomakethefinalproductperformance,isnothowthe componentsintegrate(coordinate),buthowwelleachofthemperforms. Thegreatadvantageisthattheperformanceofeachcomponentcanbeoptimized, withouthavingtoreinventtheentireproduct. Furthermorethemodulararchitectureallowsoutsourcing,leveraginginthiswaythe economyofscaleofthesupplier.Youcandosoifyourarchitecturemeetsthe criteriaofSpecificability(youknowwhatiscrucialforeachcomponent), verificability(youareabletospecifyitandtomeasureit),Predictability(you cansaythattherearenopoorlyunderstoodorunpredictableinterdependencies amongcomponents)
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Isittherighttypeofmodulararchitecture?
Notallthemodulararchitecturesareequallyinteresting,fromabusinesspointof view.Ifitisaproprietarymodulararchitecturetheownerofit,willretainmostof themargin,attheexpensesofhiscomponentssuppliers. Hecanspecifythecomponentsinterfaces,inauniqueway.Hissupplierscanonly buildaproducttofitthem,withoutbeingcapabletoofferthesameproductto otherClients.TheOwneroftheproprietaryarchitecturewillmakethemoney,while thesupplierswillfightwithcompetitorstogivethebestpricepossible. (thisisthecaseforexampleofaGasturbinemanufacturer,thatcanspecifythe bladesofitsturbine,andsupplierscompetetosatisfythosespecswithouthaving thechancetoofferthesamebladetootherturbinesmanufacturers) Ifonthecontrary,themodulararchitectureisanindustrystandard,andother playerscanusethesame,theownerofthearchitecturebecomesalowcost integrator,andthesuppliermakesthemoney.(seewhathappenwithindustry packagersofsimpleindustrialskids) Inbothcase,themodulararchitectureallowslowercostsstructures(R&D, Inventory,HR)andpermitstosellatlowerpricestoalargerpoolofcustomers. Thedifferenceiswherethemoneygoes.

Whoisthecustomerofanewmodulararchitecture?
Ifyourideahaspassedthetestforarchitecture,isworthtorecapthebattleyouare goingtofight,beforetoproceed,andbesureyouunderstandwhoarethe customersyouarelookingfor.
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Youaregoingtoofferyourinnovation,basedonanewkindofcoststructureand architecture,toanexistingcustomerbase.Youareanewentrantonanexisting performancetrajectory.Youcompeteforcustomersthatarealreadyconsuminga product,andthelargemajorityofthemarewelloverservedbytheexistingoffer. Yourentrycustomersarethelowendsegmentofthemarket.Arethosethatarethe mostoverserved,theleastprofitable,andthereforelesswantedbytheincumbent competition.Youaregoingtoproposetothosecustomersalowercostsolution. YourstrategyleveragesamodulararchitecturethatgrantyouaCostAdvantage. Thisadvantageisthereonlytillthesamecustomersarealsoservedbythe incumbentcompetition.Aslongasthelastofthecompetitorsowningtheoriginal architectureabandonethefight:yourcompetitiveadvantagewillfadeaway. Youwillfindyourselffightingagainstequallyequipped(remember:youmost probablyhaveanindustrystandardmodulararchitecture)competitorsatough pricewar.Sobereadytoenjoythemarginsuntilthelastincumbentcompetitoris stillthere. Youronlywaytoenjoymarginsistoprecedetheabandonmentofthelast incumbentcompetitor,invadinghisspace.Yournexttargetisthereforehighertire customers.Andtodosoyoumustbereadytoextendyourmodulararchitecture stretchingitsperformanceuntilyousatisfythosehighertirecustomers. Todosoyoucanonlycountonyoursupplier.Youmustbereadytoincorporate whateveradvancementtheycanofferfortheircomponent,thatcanallowto increaseyoursystemperformance.Thearchitectureinfactisagiven,andyoucan notcountonittoincreasetheperformanceorgaincompetitiveness. Speedinadoptingthenewcomponentsisofmaximumimportance:inordertobe thefirsttoreachthenewmarketsegment,whiletheincumbentsretreatfromit.

Areyougivingawayyourbusinesstoyoursuppliers?
Theothersideofthismechanismisthattheonlywaytogainsomethingintermsof architectureoptimizationistooutsourcetothesuppliersareasalwaysmorelargeof yourplatform.Inthiswaythesuppliercanintegratedtheareaandofferanenlarged subsystem,optimizednotonlyintermsofprice,butalsointermsofperformance. Andyouhaveverygoodreasontodothis:yourcoststructurewillbenefit,cause architecturesbasecostsgetsqueezed. Thenaturalpathisthatwhileyouaretacklingthehighertirecustomersservedby interdependentarchitectureplayers,simultaneouslyyougiveawayalwayslarger chunksofyourarchitecturetosuppliers.Theyexpandthescopeoftheir (interdependent)architecturetofulfillalltherequirementsofallthepossible subsystemsofyourproduct.Theywillfinallyendupofferingtoyourclienta solutionthatisfullycommoditized:isaffordable,undifferentiated,overperforming, reliableandconvenient.
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 Atthatpointtheonlydifferentiationleft,goesintothedistributingchannel:and amongthem:theonlycapabletoprovideanythinganytimewillprevail. Thisiswhathappenedwiththesportclothsindustry:wherethetailormade solution,arenowsupersededbylargeretailchain,offeringproductsbrandedwith thechannelname(Decathlon,tomakeanexample). Thegamethereforeneverends,isatokenpassinghands:theinterdependent architectureispulledtowardsthehighendniches,untilthemarketisdisintegrated andsupersededbyamodulararchitecturethatisthensupersededbya commoditizedintegratedarchitecturewithadifferentiatingdistribution channel...etc.

Canyouavoidit?Notreally.Whatyoucando,ifyouareasavvycompetitorusingan interdependentarchitecture,istorecognizetheemergenceofamodular architecture,andanticipatethemovesofthenewentrant,destructuringyouroffer intothekeycomponents,standardizingtheirinterfacesandsellingthemtothenew entrant,thatinthiswayispushedintoaindustrystandardarchitecture,beforethat hefullydevelopitsown,andreducehimtothestatusofalowcostpackager. Youwillretainthetechnologyofthekeycomponents,andwithit,thelargestshare ofmarginthenewvaluechaingenerates.

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Confess:youdonothaveaCustomer,dontyou?
IfyouarenotsurewhoyourClientcanbe,probablyyouareoneofthoseguythat afterbeingimmersedintoatechnologytrajectoryforawhile,yousawawaytofind thesamethingbutmuchmoresimply. Youprobablybelongstotheengineering,marketingorservicedepartmentofoneof theleadingplayers.Somethingtriggedyourattentionandyoupulledtogetherpieces ofthesolutionassemblingoutoftheshelfcomponentsonamodulararchitecture andobtainingwhatitlookslikeanotenoughperformingabort.Butitswaymore cheap,fasttobuild,easytopurchase.Andthesuppliersbelongstoatotallydifferent valuechain,generallyspeaking,muchlessdemandingandbranded. Theabort,sorry:idea,thatyoupulledtogetherdoesnotworkfortheusual customersbelongingtoyourperformancetrajectory.Atmaximumcanalmostserve thelowestendofyourcustomerssegments. Yourbosshasridiculizedtheidea.Customersfeedbackisliketohavepresented thematoy.Yoursolutiondoesnotshowtohavethemarginrequiredtobeableto contributetotheexistingproductportfolio. Butithasaveryimportantattribute:itworks.Furthermoreitssimple.Anyonecan useit,itsmuchcheaper,becausetherearenotinhousebuiltpreciouscomponents: everythingwasavailableonthemarket. IfyouonlyhadaClient!

Whothehellmaywantit?
Thisistheproblemwithgoodideasthatarecheaperandsimpler,butdonot performenough.Yourusualcustomersdonotwantit,andyoudonotknowwho may.Yourcolleague,instead,theonethathasproposedthebiginvestmentneeded toimproveofthe1%theperformanceoftheexistingproductline,passedthetest. Hisidea,wasrisky,difficulttorealize,butwasinlinewithwhatcustomerswere demanding.AndwhatCustomeraskfor:getprecedence. Hisproblemwastomakealltheplantomitigatetheriskoffailure.Whatthe companyhasdoneistocarefullycheck,andeliminateanyriskofpromisingto customerssomethingthecompanyisnotabletodeliver. Yourideaisdifferent.Isthere.Itworks.JustneedtofindaCustomer. Theproblemistheopposite:isnotamatterofreducingthechanceoffailure.You needtomaximizetheopportunitiestobumpintotherightcustomer. Andonethingissure:isnotthecustomerthatyoualreadyknow. Probablyissomeonethatisstrivingtodoajob,wherethetypeofsolutionyou proposemayhelpalot.Buttodayisnotoffered.Thesepotentialcustomersprobably usesomethingdifferent,asuboptimalproduct,thatperformsunsatisfactorily. Onthoserespect,yourideawouldbeasubstituteproduct. Probablyyourproductwouldenablethosepotential(nonyetconsuming) Customers,thatlackedthemoney,theskillsorcouldnoteasilyreachthesolution.
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Whoarethosecustomersandhowmany,nobodyknows.Theonlywaytofindthem istodesignasetofexperimentscapabletoidentifythemandthebestwaytoserve them. Andbecausetheyarenotknow,youdonotevenknowthroughwhichchannelyou canreachthem.Youknowonlythat,becausetheyareaskingsomethingcheaper, easierandfaster,speedandresponsivenesswillbeakeyfeatureoftheright channel. Andcannotbethesamechannelusedbyyourcompanysforitsproducts. Becauseyoucannotofferthesameshareofmarginstothem.Youneedtofinda channeltomarketthatcanbehappywithyourlowermargins:forwhichyour productmayofferhighermarginsrespecttheirexistingportfolio.Someonethatwill beenthusiasttoaddyourproducttotheiroffering. Therearegoodnewsforyou,however:first:thereisamethodologytohelpyoufind therightcustomer.IscalledDiscoveryplanningandissummarizedinthe3dtpart ofthisbook.Second:youareasubstituteproduct:thismeansthatyoucompete againstdoingnothingandlivewithitor,atworst,againstatemporary,sub optimalsolution.Third:youaregoingtouseavaluenetworkthatnobodyisusing now.Youarethefirst,theonlyonethathasenvisagedthemodulararchitecturethat cansolvetheproblem,andevenifyouaregoingtostealfewcustomersfromthe originalmarket,thecompetitionwillnotevennoticeit,becausetheyaretheone withlowestmargins(forthem). YoujustneedaplantodiscovertherightpathtoCustomers,andlearningbydoing, adjustingyourwayuptohighervolumesandbetterprofits,intoanewBlueOcean ofopportunities.

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