Value opportunity webs: a new concept for anticipating potential marketplace breakthroughs

The Authors

Liam Fahey, Author of Competitors (Wiley, 1999), is executive director of Leadership Forum Inc., an executive leadership education company (Liam.Fahey@leadershipforuminc.com)

V.K. Narayanan, Stubbs Professor of Strategy and Entrepreneurship, Associate Dean for Research and the Director of the Center for Research Excellence at the LeBow College of Business, Drexel University, Philadelphia (vkn22@drexel.edu)

Acknowledgements

Abstract

Purpose – The paper aims to examine how to devise ways to capture data in and around the marketplace that generates indicators of emerging and potential marketplace change which could lead to breakthrough customer offerings and how to do so long before the opportunities are manifestly visible.

Design/methodology/approach – The paper describes a new methodology, the Value Opportunity Web (VOW), a process for collecting insights about the external environment and transforming and leveraging them into winning customer offerings. These data come from unique communities of individuals “close to the action” who can anticipate, for example, how a set of technologies might someday intersect.

Findings – The paper shows cases where companies have used VOWs to identify unique data sources, have created sets of technological mechanisms or “platforms” to capture the relevant data and have managed these communities successfully.

Research limitations/implications – The authors are leading consultants with access to cutting edge information gathering programs, which they have disguised for this article.

Practical implications – The VOW has a critical strategic purpose: to extract breakthrough opportunities from an ever-burgeoning world of external data by learning from a community of talented recruits, each an expert in one or more fields. Companies are learning to use VOWs to quickly understand change and to test breakthrough ideas as they emerge.

Originality/value – The ultimate purpose of a VOW is not data gathering but reflection and analysis, with the goal of identifying and developing new ways to deliver customer value.

Article Type:

Conceptual paper

Keyword(s):

Market forces; Economic trends; Value analysis; Customers.

Journal:

Strategy & Leadership

Volume:

Number:

Year:

2008

pp:

5-10

Copyright ©

Emerald Group Publishing Limited

ISSN:

1087-8572

The purpose of strategy is to identify, create and realize marketplace opportunities. Leading analysts recommend companies extract opportunities for breakthrough customer value by learning from the future before it happens, by seeking out disruptive technologies and by crafting peripheral vision capabilities.

At the core of these and other methodologies lies one unavoidable challenge: how do you devise ways to capture data in and around the marketplace that generates indicators of emerging and potential marketplace change that could lead to breakthrough customer offerings? And, in particular, how do you do so long before the opportunities are manifestly visible?

To address this challenge, we propose a new methodology we call the Value Opportunity Web (VOW), a process for anticipating potential marketplace breakthroughs. Although a number of leading companies are experimenting with elements of a VOW, their efforts and successes to date have not been reported on and so the potential of a VOW is not widely known. So exactly what is a Value Opportunity Web, how does it work and what are the steps involved in creating and managing one?

A value opportunity web is a process for capturing and analyzing potentially valuable data about the external environment and transforming and leveraging the analysis of such data into winning customer offerings. These data come from a community of experts in a variety of fields, individuals “close to the action” who can anticipate, for example, how a set of technologies might intersect at some future point in time to create new product solutions or project the likely evolution of the legislative process around a new regulatory standards. The first challenge that a VOW addresses is how to identify these data sources and how to effectively capture the relevant data and insights.

The ultimate purpose of a VOW, however, is not data gathering but reflection and analysis, with the goal of identifying and developing new ways to deliver customer value. A VOW discovers and considers new customer needs, new ways of doing things, new functionalities, and new ways for a firm's customers to deliver value to their customers.

Value Opportunity Web: four key attributes

There are four distinct and guiding attributes of a VOW:

Opportunity creation, which identifies potential customer needs.
Relationships with insightful external sources that drive the requisite data collection.
A “community” of information mavens that fosters interconnectivity and continual learning from each other.
Knowledge processes that are needed to transform data into valuable insight and action implications.

These four key attributes define the future of discovery and analysis of emerging markets: organizations need to develop increasingly adept ways of garnering external data and leveraging knowledge that lies outside their own boundaries.

VOW: search for significant opportunity

How is this different from the analysis of the external environment that all well-run companies now do? All too often such environmental analysis is nothing more than generating an update of last year's assessments, projections, and expectations about the direction of marketplace dynamics, rivals' strategies, and customer proclivities.

A VOW, on the other hand, focuses explicitly on identifying and assessing new marketplace opportunities. Specifically, a VOW, places three questions on the table:

Who outside our firm might have insight into emerging and potential opportunities?
How do we reach these individuals and learn from them?
How do we identify and shape opportunities from what we learn?

Consider how one large manufacturing firm is addressing these questions. It has identified a substantial set of technology experts in broad specialties including materials sciences, component development, energy shifts, engineering developments, and manufacturing and operations. It asks these individuals to nominate others who might be valuable sources of insight into particular technologies. These individuals are affiliated with universities and consulting, research, development, governmental and specialist technology organizations.

The manufacturer's analysts conduct periodic structured and open-ended phone and in-person interviews with these individuals to ascertain key changes in their focus areas and what the implications of these changes might be for product development, design, manufacturing and customer delivery. These projected changes and alleged implications are then factored into the firm's internal analysis and assessment processes to determine potential technology developments and how these might contribute to specific customer opportunities.

To make a VOW process work effectively, information collection systems, intensive knowledge structure tools, and organizational routines are required.

VOW: fresh sources of insight and data

A VOW does not just talk with customers and end-users. VOWs seek data and insight about the firm's future competitive context. To accomplish this, a VOW searches for knowledgeable sources that the firm would not exchange information with in the normal course of day-to-day business. Research institutions, technology development organizations, thought leaders, subject matter experts, university faculty, public policy participants, and many others can be active members of a firm's VOW.

For example, marketing managers in a new VOW in a financial services firm sought out insights into customers' current and potential buying patterns from sources outside their market “information network.” One outcome: judgments of institutional customers’ potential likelihood of switching to a new entrant's offering provided by experts in one consulting firm spurred an analysis of the emerging customer needs across distinct segments. The result was a commitment to develop customized solutions for each market segment.

Leading firms are learning the value of online connectivity spaces where such critical information can be gathered, conversations with external players conducted, and insights generated.

Virtual VOW communities

For example, the business intelligence practice of a large consumer goods firm has developed a human intelligence network consisting of as many as 40 individual external sources (customers, retailers, suppliers, technology experts, governmental organizations, security analysts and trade press professionals). These experts provide vital insight into industry events and possibilities on an “as requested” basis. Historically, the information was acquired only through person-to-person conversations. Now the firm is moving to on-line linkages with each individual so that responses to questions can be obtained more quickly and often in more depth. In the interests of maintaining confidentiality, individuals do not see each others’ responses but the firm can easily and quickly ask individuals for their reactions to the point of view expressed by any one person. As the firm synthesizes these contributions, it has been able to identify potential new technologies and ways in which technologies might converge, new product possibilities and some customer needs that could only be satisfied through the development of radical new product solutions.

VOW: community centered

Three types of VOW communities are now operating at leading firms: communities of interest, formalized communities, and work-focused communities.

1. A community of interest connects a diverse set of individuals and/or institutions that have a need to exchange information for some specific purpose. For example, a community to anticipate emerging changes in regulations or likely next stage developments in a technology or threats to industry standards (see Box 1: “Examples of communities of interest”).

2. Formalized virtual (customer) communities. Recently, leading companies have been organizing virtual communities that let customers interact on the website. These customer communities allow both current and prospective customers to “talk to each other” in a safe, secure, open, and productive context. Their conversations may address topics and issues predetermined by the firm or they may be largely open-ended in which community members respond to each others’ comments, observations and inquiries. Such is the value of these virtual communities that third parties have emerged in the last few years specifically to create and manage customer communities for corporate clients (for example, www.communispace.com)

A community for “Millennials.” One Communispace community of more than 400 individuals is dedicated to understanding the Millennials generation – those aged between 19 and 24. Members engage in discussions around topics as diverse as lifestyle, shopping, technology, consumption, ethnicity, music and engaging with others outside their age group. The community allows a client firm to experience what these Millennials say, how they say it, what they mean, and how they behave and why. The mode of engagement across the community allows a firm to explore, for example, how these Millennials experience certain brands, what a brand means to them and how they react to the brand and why.

For another example, at Hallmark's trail-blazing and innovative on-line community customers interact freely among themselves. By monitoring this community, Hallmark discovered opportunities for new business lines for web-based greeting cards.

3. A work community allows external and internal participants in a work flow process to interact in an on-line forum. Evidencing many of the attributes of internally focused communities of practice, these workflow communities enable diverse entities to contribute to the advancement of a project.

For example, pharmaceutical companies recognize that to be competitive they need to tap into the knowledge, skills and competencies that reside outside their firm. To do this, one large pharmaceutical firm created an on-line set of connections via a simple collaborative tool that spanned eight research institutions. A significant feature of the dialogue that developed was the ability of leading researchers to educate their colleagues in the other institutions about aspects of the research. The eventual result was a “product” that entered clinical trials considerably sooner than could otherwise have occurred.

VOW: enabling knowledge

A defining hallmark of effective VOWs is that their true focus is on gaining knowledge – insights that embody fresh understanding of the marketplace and its decision making implications. To use knowledge to recognize opportunities a VOW needs to have a system of analysis tools and techniques to ensure that value is extracted from data. These tools include:

Signal analysis . These are techniques to rapidly draw inferences from data or indicators reflecting potential environmental change.

Change trajectories. Captured data is transformed into projections of trends and patterns.

Assumption analysis. Data about likely environmental change can be used to identify assumptions about the future marketplace and these can in turn be used to challenge the firm's current assumptions. The debate around assumptions within a VOW sensitizes the firm to the implications if a set of assumptions proves false (or correct).

Mapping market change. Techniques that can illustrate structural change in and around distinct market segments over time.

Implementing the VOW

In many markets and industry contexts, where rapid change is the norm, the VOW approach offers a critical pathway to building the strategic agility necessary for survival. However, VOWs just don't happen; they must be managed (see Box 2: “Steps involved in setting up a VOW”).

A VOW can also be viewed as a dynamic forum that can shape and stock critical conversations around marketplace opportunities. To facilitate these conversations three sets of organizational routines are necessary – those related to information, analysis and implementation.

Information routines link conversations to the extensive data generated and the ensuing insights.

Analysis routines test the insights against the organization's knowledge structure – what individuals and sub-units presume they know.

Implementation routines link the insights to decisions and implementation, thereby reducing the cycle time between strategy formulation (that is, identifying the desired opportunity set) and implementation (that is, what needs to be done to realize the opportunities).

A way to understand change

The Value Opportunity Web (VOW) has a critical strategic purpose: to extract breakthrough opportunities from an ever burgeoning world of external data. The VOW enables strategists to promote knowledge structures in the organization and use them to initiate and inform discussions of strategy and operations. Indeed, a VOW thus becomes a way for the strategist to quickly understand change and to test breakthrough ideas as they emerge.

Box 1

Box 2

Corresponding author

V.K. Narayanan can be contacted at: vkn22@drexel.edu