White Spaces Blog

Mint.com - A White Space Success Story

White Space Strategy — 2009-09-21T07:56:15-07:00

Mint.com is an exceptional Web 2.5 success story as documented by a great article in Slate on Friday. In a scant 2 years since their launch they grew to over 1.5 million users, and their free money management software became Quicken.com's key rival. Last week they were acquired by Intuit in a $170 million all cash deal. How did they do it? Slate attributes their success to what they call Web 2.5 - companies built on Web 1.0 and 2.0 infrastructure. However, a little closer look shows that applying the fundamental principles of a White Space Strategy are what really led to Mint.com's success.

Mint capitalized on multiple key market creation enablers to create new value and establish it's own unique market space for a free, thrift focused and easy to use money management application. First, Mint capitalized on the emerging market space created by the recession and a new focus by consumers on thrift. The external environment created an emerging and unmet demand for new value in the form of a free, cloud-based, personal finance tool. Here, a quick "market extents" analysis that identified the differences between edge-case quicken.com users and non-user near-customers could easily identify a value gap that needed to be filled - free, easy to use, thrift focused personal money management.

Second, Mint redefined the business model in the market by creating an agile and lean model that capitalized on enabling technologies and services in the cloud to run their business. In order to be a free service and offer compelling new value, Mint had to take advantage of new business model elements. Instead of huge ad campaigns, MInt used free social media and piggybacked on "popular new communications technology" - Facebook, Twitter and blogging. Their largest marketing expenditures lie in purchased search engine terms and moderate sums spent on analytics. They run their web site on Wordpress, use Google Analytics to track it and Zoomerang to conduct surveys - all free services that enable their new, low cost business model.

Finally, Mint redefined the value chain to create new value in its emphasis on thrift and adding value to the user experience through helpful hints, alerts and identifying opportunities for their users to save.

Yes, Mint's success was built on the infrastructure of Web 1.0 and 2.0 but it was even more built on fundamental white space principles - Enabling technologies, business models and value chains focused on real, relevant market needs for new, previously non-existant value to create new market spaces.

(Disclaimer: For those who may misunderstand, Mint.com is not a White Space Strategy client, but an excellent example of the application of White Space Strategy principles. We chose to use Mint.com as an example of how White Space Strategy principles can be applied and apologize for any misunderstanding.)

Positioning and Value Creation

White Space Strategy — 2009-08-28T09:01:55-07:00

I recently re-read a post on positioning titled "Destroy the Competition with Positioning Strategy" that once again posited that positioning is the magic elixir of differentiation and that one can even create the perception of differentiation via choice of positioning "strategy". I'm compelled to respond with a very simple "value based" retort.

Strategic Positioning is a very deliberate choice of what differentiated value to offer and emphasize to your customers and how it establishes your competitive differentiation. In White Space Strategy, we talk about the Compelling Value Equation (CVE) which is a strategic choice of what new and differentiated value a company chooses to offer it's target customers and how that value creates a compelling reason to buy that has previously not existed. Unlike artificially manufactured "positioning" it's critical that value based positioning actually create compelling new value. This approach to positioning is the strategic one that creates and captures new "White Spaces" that are both competitively advantaged and sustainable based on the new value proposition.

Walkman vs. iPod - Technology Outruns Applications

White Space Strategy — 2009-06-30T06:44:35-07:00

A BBC Magazine article this morning chronicles the "travails" of a 13 year old Brit who traded in his iPod for a 30-year old vintage walkman for a week. One of the most interesting statements in the entire article (well worth reading, by the way) was his statement that "I'm relieved that the majority of technological advancement happened before I was born". Having been the owner of a "14-Transistor RCA Pocket Transistor Radio" when I was 13, I must admit, I was sufficiently fascinated by the power of the technology that came before that I became an Electrical Engineer. However, my education quickly taught me that "the majority of technological advancement" had yet to be defined.

In 1964, we were fascinated by the application of the transistor to products like the radio. At the same time, the integrated circuit was in the labs and being used for aerospace applications. By the time we saw the IC in consumer products, the microprocessor was already on the drawing boards and so on - in short, we were already outrunning the applications with the technology.

The same is true today, though now we have names for the phenomena like Moore's Law and Metcalf's Law. But application still lags invention, and new technology appplications lead to the creation of new white spaces on a daily basis.

The White Space Imperative

White Space Strategy — 2009-06-22T06:57:36-07:00

White Space Strategy isn't just an offensive weapon, it's imperative for companies to avoid being suddenly and decisively marginalized. Every day companies who "had a lock" on their markets suddenly find a new entrant taking advantage of an emerging opportunity to create new, highly relevant value for their customers and making significant incursions into their markets. Therefore, pursuing a White Space Strategy approach to your business is not only a highly effective approach to growing your markets and revenues, but a necessary defensive technique to prevent you from being blindsided by a competitor who comes out of nowhere with a value proposition that "minimizes" your own.

The iPod instantly marginalized all the other mp3 players by providing the highly relevant value of massive storage and the much simpler, more elegant and effective click wheel interface to make that "thousand songs in your pocket" easily accessible. Salesforce.com instantly marginalized the vast majority of CRM software, especially for price sensitive buyers, by providing a new "pay for use" paradigm in it's software as a service offering.

No company can afford to ignore the formation of white spaces within and around their current businesses and markets except at the peril of suffering the same kind of fates. It's an imperative that your company have an active program to monitor evolving customer needs and wants both within and at the extents of your markets as well as the potential evolution of the core technologies, business models and value chains upon which your strategy is built.

It's simply not enough to keep pushing the current foundations of your bussiness toward "more" - more features, more product variations and options, more "speeds and feeds" - and not actively montor the potential for fundamental changes that create compelling new value. In today's markets in particular, those companies that are actively seeking out and capitalizing on white space opportunities to create new, less competitive and more profitable markets and address them with new, compelling value, will be the big winners. And those who cling to the safety of a scaled down, recession driven version of "business as usual" will be relegated to "also rans".

The Value of Price

White Space Strategy — 2009-06-09T08:12:19-07:00

An article in today's Wall Street Journal, "In Recession Specials, Small Firms Revise Pricing" points out one of the fundamental levers of White Space Strategy - pricing. Pricing is a major contributor to business model innovation that can capture opportunities both within and around your existing markets. Pricing has an innate value that is, as we see today, very closely tied to the prevailing economic environment.

It pays to remember that the basic tenet of White Space Strategy is creating NEW compelling value to fill in a value gap. The WSJ article points out a number of ways of creating new value through pricing that capitalize on the white space opportunities created by today's economic environment.

Pricing and Service Segmentation
Towerstream, a high speed internet access provider cited in the article, found that its $999/month, eight megabit per second offering was becoming harder and harder to sell. After offering a mid-range product priced at $500/month and 5-Mb/second they had a record first quarter. Clearly there was a white space in the market for a lower price, lower performance offering.

Similarly, Lone Star Limousine of Palo Alto was suffering from declining use of limos for both economic and image reasons. The addition of a van to its fleet of limos and high-end SUVs provided both a different value proposition and a lower price. This not only provided the new, less ostentatious, value that corporate users wanted, but engaged an entirely new client base in wedding venues, lodging and destinations such as wineries.

Adding New Value to Current Services
Mr. Transmission in Georgia, also mentioned in the article provides yet another angle on the "creating new value" element of white space strategy. By adding food and gasoline vouchers for customers who had to have pricey transmission overhauls, Mike Cook, the owner, added highly relevant value to his product and increased sales by 60% compared to last year.

Similarly, CouponCabin.com, after adding grocery coupons to its traditional offering of soft goods such as clothing and home goods has seen a 300% increase in visitors to its site. Once again, a white space created by the new needs of a recssionary economy when filled with relevant new value created substantial growth for CouponCabin's business.

These are just a few simple small business examples of the Value of Price in our current economic environment, but a wealth of opportunities abounds. We all need to ask ourselves several questions:

Are our price/value ratios and value propositions appropriate to the current environment?
Are there ways to add and/or create relevant new value in our product offerings that can capture more of our existing markets and enlarge and extend those markets by drawing in new market participants?
It there an opportunity in the current market environment to create a whole new market defined by the new needs, technologies business models and value chains that we can apply?

The SMB White Space

White Space Strategy — 2009-05-15T08:43:21-07:00

The SMB's are going to lead the way out of recession. WE've alwasys know that SMBs lead the way in job creation, but a recent Forrester report on the potential of SMBs points out that small businesses also don't cut as deeply during, and recover faster after, a recession. However, the report goes on to point out that the new breed of SMB's that is emerging from this recession is also very different - more tech savvy management and with a very techa-savvy millennial fueled work force.

What does that mean for technology companies? - That there's a huge, growing and urgent set of unmet needs for new value in the SMB market. In short - The SMB market represent a vast new White Space for new value creation NOW!

SMB’s represent a tremendous opportunity because:

The “New Rules” of the SMB segments have yet to be written

More tech savvy and tech enabled
New workforce demographics and dynamics
Web and social media enabled
Vendor direct and vendor specific relationships

The window of opportunity is NOW

SMB poised to grow again
New segmentation is already emerging

This Emerging new SMB Demographic presents an opportunity for vendors who are savvy in taking key actions:

Targeting the Small Business Owner in relevant SMB segments
Providing broad small business value
Going where the small businesses are – Following the path of influence
Adopting a mobile, social marketing communications strategy
Engaging Universities, Associations, entrepreneur groups and and other sources of entrepreneurial activity

Vendors who recognize this new market opportunity and actively take part in defining the emerging white space will profit handsomely.

Those Wide Open (White) Spaces in Social Networks

White Space Strategy — 2009-04-28T08:54:59-07:00

Om Malik's post on AOL's newly announced Socialthing points out that the entire web is still a white space for the evolution of new market spaces. We all know that the social network marketplace is dominated by the battle between Facebook and Myspace, with subsegments like business social networking (LinkedIn) and music (ilike, last.fm). However, as Om points out, new tools and applications have the potential to make the whole web a "social web".

Don't get me wrong, Facebook, Myspace, LinkedIn and the music social nets are all still viable markets, but the hyper-market opportunity that surrounds them in enabling the entire web experience as a unfied mega-network is a huge and rapidly approaching white space opportunity. AOL, with Socialthing, is making the first clear bid to own that "social web" market by providing some of the key market enablers:

Unified Sign-on
Social Syndication
On-site Chat and Instant Messaging
The Lifestream Platform
The AIM & ICQ Messaging Platform

The AOL Open Authentication API (OpenAuth)

The jury's out on whether their implementation and choice of enablers will be sufficient. As OM points out AOL is plagued with the problem that "Despite the vision, they fail to deliver". However, the concept clearly points out that there's a white space there, and somebody's going to turn it into a viable, profitable and defensable market.

Can't See the White Spaces for the Trees?

White Space Strategy — 2009-04-24T08:15:09-07:00

Last night's "How to Run Your Business on the Cheap" session at the SF Entrepreneur MeetUp Group not only got me thinking about how myopic we can be about seeing opportunities to save money, but also about seeing new opportunities to generate revenue. We're all guilty of being so familiar with or so expert about the status quo, that we often simply can't see a new opportunity that's right in front of us.

A Kick in the Side of the Head
Most of us read or heard about the principles of creativity in Roger von Oech's two seminal books "A Whack on the Side of the Head" and "A Kick in the Seat of the Pants" first published in the 80's - but that was so "two decades ago" that we've forgotten how to get back to the basics of framing creative questions. More importantly, now more than ever we need to apply creative questioning in a context that leads quickly to answers specifically focused on identifying short term business opportunities. The White Space Strategy framework is geared to do just that.

White Space acknowledges that we've all gotten so good at doing what we do, and knowing what we know, that we simply can't see white space opportunities to create new value and new markets simply because we "know" too much to see them. The key to finding the opportunities that are staring us in the face is to put what we "know" in a framework geared to discovery, then use that knowledge as a starting point for a whole new piece of paper where we creatively evaluate what we know and don't know and how the combinations can create new opportunities.

What We Don't Know
What we don't know can be grouped into a number of high level categories that all focus on the opportunities that could create new value and new markets. We don't know:

What are our customers and "near-customers" still unmet needs? If we knew this, we'd be busy meeting them, but all too often the customer service driven, incremental improvement model of product development and evolution gets in the way. Instead of asking "what are the really important opporunities to meet new customer needs?" we ask, "what should be the incremental improvements in our next release?" and miss the really big opportunities for a quantum leap in compelling value creation. Cadence, Mentor and Synopsis in the EDA space ignored the need to resolve timing issues that allowed Magma to virtually erupt onto the EDA scene and become the number 4 EDA vendor in only a few years.
What are the changes in relevant technologies, applications, value chains and business models that have occurred since the product and market were first defined that enable it to be redefined? We all "know" so much about our businesses, technologies, products and markets that we often miss changes that are relevant, but not dead center on our radar screens of important things to watch. Sony, Panasonic, and even Creative Labs were so focused on the technologies underlying their portable music player products that they missed the opportunity provided by the evolution of the "micro-disk drive" to mutiply music storage that Steve Jobs capitalized on with the first disk-based iPods. Barnes & Noble, Walden Books, Crown (remember them) and a plethora of others were so focused on the technologies underlying their current business models that they missed the enabling technology of the internet and the overnight shipping value chain that let Amazon become the world's biggest bookseller.
How can these unmet needs and new enablers be combined to redefine, extend and/or create whole new market opportunities? Once we've creatively discovered and inventoried what we don't know, how can we bring together the requirements of unmet needs and new enablers to define new opportunity. Can we create compelling, new and innovative value through applying or inventing new technology in new ways? Can we change our value chain and business model to create relevant, new and compelling products and services that open up whole new markets or market segments? All of the relevant combinations and permutations need to be quickly envisioned, examined for value and opportunity creation potential and cataloged.
Which of these potential new opportunities best fits the current needs of the company? The opportunities that emerge need to be ranked by the criteria key to the companies strategy and needs. A basic list of criteria includes; timing, opportunity size, addressability, resource requirements, strategic fit and of course financial returns. Some opportunites will emerge as short-term, rapid revenue generation opportunities that in today's market environment may be critical to implement immediately. Others may be longer term, but much greater in strategic importance. And, in the best of all worlds, some may emerge as having both short term revenue generation potential and significant long term strategic importance.
FInally, what should be our strategy for capturing these new opportunities? A simple market extension via new pricing or business model adaptation may be mainly tactical. New market creation will be highly strategic. In either case, there still needs to be underlying strategic thinking to ensure long term success.

White Space Strategy is designed to prevent the myopia that blinds us to the opportunities right in front of us. Whether it takes the help of an outside consultant, an internal oportunity assessment taskforce, or both, In today's economy none of us can afford not to see the white spaces for the trees in the forest of "what we know".

Location, Location, Location

White Space Strategy — 2009-04-22T10:15:18-07:00

I've been saying that white space opportunities can exist anywhere that there are unmet needs and the key enablers in technology, value chain and business model. Today's "Stat of the Day" from Harvard business publishing points out that location might be one of those value chain elements that deserves serious consideration.
To quote the May HBR article from which the statistics were taken -

"An institution that instills fear in many people seems the last place a retailer would want to open a shop, but companies that set up small outlets in hospital lobbies might be helping to create an emotional bond with consumers.
In our survey of more than 3,000 visitors and outpatients at seven hospitals in the Toronto area, seven out of 10 people indicated that the presence of businesses added great value to the hospital experience—specifically, many said they appreciated that the companies were there for customers in a time of need."

Now most of us might not consider a hospital location to be the ideal place for a retail operation, but clearly there are both revenue and relationship opportunities there that can all too easily be overlooked.

"Some 68% of respondents also reported that a retailer’s presence in a hospital had a positive influence on whether they would purchase from the business again at another location—and whether they would provide favorable word of mouth to relatives and friends."

One doesn't have to think much further than their last visit to a hospital, or a friend's family emergency to recognize the types of retail outlets and services that might be appreciated in the hospital setting - from travel services to books and child care to groceries, there are a wealth of opportunities to provide highly valued services in the hospital location. The study found that:

"People in hospitals said they were interested in shopping for books, electronics, apparel, and jewelry and visiting hairdressers, banks, and grocery stores on site."

Obviously, there's significant value in providing retail services in the hospital setting, in areas that we all might not have considered. What similar location-based convenience may yield new white space opportunities? With a little effort one can envision a myriad of potential opportunities for retail and services in locations like office buildings, municipal complexes, even parking garages. It's well worth keeping in mind that location convenience is a part of the value chain that can enable new business opportunities and create valuable new lasting relationships.

Don't Sit There Like a Lump on a Blog

White Space Strategy — 2009-04-11T11:09:18-07:00

It's Time
It's time to get busy - The S&P 500 is up 25% over its March 9 bottom, the President is "seeing glimmers of hope across the economy," and venture capitalists optimism is on the upswing, according to the most recent USF Entrepeneurial Progam survery. The number of "white space opportunities" to create new market opportunities for both start-ups and enterprises has multiplied significantly as the new economic reality we face puts even more emphasis on creating new, real, and relevant value. Right now green tech, music, social media and networking, advertising, web analytics, helper applications, revenue generation tools and a host of other market areas all exhibit significant white spaces for new, relevant and cost effective value innovation.

The SMB Opportunity
The small and medium business sector (note that I said SMB, not the artificially created SME moniker) is continuing to fight for growth and at the same time beginning to create new jobs again. A recent report from Forrester Research points out that not only do SMB's shed fewer jobs during a recession, but they also begin to hire earlier as recessions abate. More importantly, this is the first business cycle where new small business entrepreneurs will be both tech-savvy and have the ability to tap into the "grown up digital" MIllennial workforce for their employees. This phenomenon will create a new wave of opportunity for tech vendors to capitalize on the SMB sector's growing hunger for technology during the recovery.

Understand the Market

Vendors who want to capitalize on this white space opportunity need to take the time to understand the SMB sector and recognize that it is compriesed of multiple segments described by Forrester as SOHO, Small Business, small-medium and large-medium business. These segments behave differently, have different needs and diffrent adoption profiles for technologies like Web 2.0 and cloud computing. Vendors will do well to understand these subtle differences and craft marketing and sales strategies that take them into account.

Understand the new Small-Business Demographic

The new small business will not only be started by tech-savvy professionals, but represent both a new breed of entrepreneur and a new MIllennial-fueled workforce. These new SB's will understand both the potential and the necessity of tech-driven business models and processes that can improve efficiency, scale and reach.

Understand the new Small-Business Landscape

New SB's will know how to find, evaluate and acquire technology via online communities and new channels, including social networks, communities and vendor-direct options.

The Compelling Value Equation

White Space Strategy — 2009-03-22T23:41:34-07:00

The challenge we all face in today's economy is how to generate new sales and new revenue streams. The compelling value equation provides the simplest starting point for considering just what we need to do to accomplish this. The simple form of the equation is:

Present Value Proposition + New Value > Present Value Proposition + Cost of Change
In normal times this inequality is required to motivate a prospect to purchase. However, in today's uncertain environment the "Cost of Change" variable suddenly expands to include the uncertainty cost of change, or risk of purchase which can be covered by guarantees or even additional discounts.
Toll Brothers Builders and Hyundai have created additional new "risk compensating" value in their offerings by providing payment guarantees for purchasers who lose their jobs. Bank of America has just created a new level of discounting through their "Add It Up" program for on-line purchases through allied on-line retailers. In both cases, new offerings and changes in their business model and value chains have created new, compelling value for purchasers.
What does this mean for technology based businesses? Simply that we have to make it more compelling to "buy" our offerings. If your business model is to monetize via subscription, maybe it's time to consider a more risk minimizing subscription program. If your value chain includes economically risky elements, maybe it's time to minimize or eliminate those elements. If your value-added technology includes an element of "early adopter" risk, perhaps you need to find ways to minimize that risk to "mainstream" levels. Across the board, we all need to heed the change in the Compelling Value Equation and deliver value that exceeds our potential customers' purchase risk.

Basics of White Space Revenue Opportunities Video

White Space Strategy — 2009-03-16T20:05:29-07:00

We just posted the first video in our White Space Basics series on the home page. Here are the slides:

White Space New Revenues Wss Video Slides

View more presentations from Gruff.

Finding New Revenue in Your Current Markets

White Space Strategy — 2009-03-08T23:39:11-07:00

Every market has some white space opportunity within it - the operative question is "what new value will compel current customers to increase their spending?" In a recessionary market such as we're all facing, we have to get much more creative about discovering and creatively providing that value.

No two markets could be much more depressed than the housing and auto markets right now, and yet Toll Brothers and Hyundai, in very creative "relevant new value" strategies, are offering guarantees that fit the times and create compelling new offers. Toll Brothers Mortgage Protection Plan creates real, relevant, new value for qualified prospective new home buyers concerned about layoffs and Hyundai's "no credit impact" return policy coupled with coverage of up three months payments creates a similar value proposition for prospective new car buyers. Both offers address a new "white space" in their respective markets created by the new need for higher financial security in making a purchase and enabled by a business model value proposition of offering risk minimization for major purchases in uncertain times.

We're currently deep into what is perceived to be a high risk purchasing environment - What are your customers highest perceived risks? What "white space" segments of those customers have new needs that can be addressed by adapting your current business model and value proposition? What risks can you minimize for them that will create a sufficiently compelling reason to buy in spite of the economic environment?

Let us propose a simple exercise to explore these questions for an answer:
(1) Catalog and rank your customers concerns about their risks in purchasing in the current environment. What are the objections you're hearing to purchasing and what are their biggest underlying concerns?
(2) Evaluate the resources available to you to minimize these risks (meet their new needs), being mindful of new technology, value chain and business model options.
(3) Build a risk minimization/purchase elasticity and cost versus revenue curve
(4) Identify implementable new offers and select those with a net positive marginal contribution.
(5) Change the rules and implement those that capture the new revenue (and market) opportunity.

Be a game changer and capture the new white space created by the new market parameters of today's economy.

CREATING NEW VALUE - The White Space Antidote to the Economic Crisis

White Space Strategy — 2009-02-13T09:25:48-08:00

In the midst of all the gloom and doom surrounding the current economic crisis, we’ve all become caught up in the horrific scenarios of recession, looming depression, job loss and economic meltdown. What seems to have been forgotten in all this is the antidote that’s worked for every prior meltdown and the fundamental concept that drives growth in our economy – New Value Creation!

The engine that fuels the silicon valley, the motivator that gets people spending money again, the key to solving the current crisis in both credit and investment is the creation of new, relevant and compelling value. We pulled ourselves out of the wreckage of the dot-com bubble by creating relevant, new value with companies like Google, Facebook and YouTube. We got the economy moving again after the 1990-91 recession by pulling ourselves up on the back of new technology, the PC and the internet boom. In every economic cycle, despite all the other economic and financial factors like oil prices and monetary and fiscal policy, it has been the creation of new value that has led the way back to prosperity. We need to heed that call again and create our way out of the current economic crisis.

While status quo thinkers are looking for bail-outs, assistance and a return to the “good times” the key instead lies in redefining how we create value. The most recent “good times” were built on the creation of artificial value and unsustainable markets - what we call “white noise” in the White Space Strategy vocabulary. What’s needed now is the creation of real new value and real new markets.

I would propose that it’s a “New Value” manifesto that’s needed to break the downward spiral that the world and our personal economies are currently embroiled in. We need to quickly and determinedly identify the new “White Spaces” in the current world marketplace and create the compelling new value to fill them in with new products, services and business models that will get the economy moving again. What’s needed to combat the impact of the flawed and poorly constructed artificial value embodied in the credit and financial markets is the creation of new, real and relevant value in new markets for products, services and business models.

If you’re a company looking for revenue growth in this recession, the question you should be asking is “Where’s the White Space in this environment - what new, relevant, real and compelling value can I create to present a value proposition that’s compelling in the current environment?” If you’re a job seeker, the question you need to ask is “Where’s the White Space in the employment market right now - how can I create new, real, relevant and compelling value to a new employer?” If you’re a start-up looking for funding, the question is “How do I create new, real, relevant value for potential investors?”

The answer to the question of value creation, of course, needs to be formulated in the context of the current economic environment, but I would submit that the environment itself presents a multitude of “white spaces” for new value creation. No credit – create new value in business models that are self-financing. No jobs – create new value in redefining how you contribute as an employee or contractor or even as an individual entrepreneur. No market – create new value in defining and building one or expanding your current market into new white space. No funding – create new value in a business model that’s “funding friendly.” The list of opportunities is long and varied, but the key to all of them lies simply in the creation of real, new value, that’s relevant and compelling in the current environment.

In future blog posts we’re going to address each of these challenges in the context of White Space Strategy and new value creation, and hopefully provide a formula for combating the current economic crisis by creating our way out of it. Stay tuned for the following and more:
(1) Creating new revenue streams in current markets via white space value creation
(2) New Value/New Market creation in the current economic crisis
(3) Creating New Value in your job search – White Space Employment Strategy
(4) Creating New Value for investors – How to get funded in the midst of chaos by creating new value for investors
(5) White Space Opportunity Creation Strategies

Business Models and White Spaces

White Space Strategy — 2008-07-18T09:03:30-07:00

One of the key dimensions of White Space Strategies is the business model dimension. Changing business models can open up entirely new vistas of opportunity by simply redefining how a business gets done.

In a paper from MIT's Sloane School focused on determining the relative advantage of specific business models, the authors propose a typology of business models that can be very useful in white space analysis. They propose that all business models can be categorized on two principal dimensions - The types of rights being sold and the assets involved. Based on this classification they arrive at 16 basic business models that describe the spectrum of potential business models as combinations of:

Creators
Distributors
Landlords
Brokers

of assets that are:

Physical
Financial
Intangible
Human

This typology can serve very well to establish the types of business models that lend themselves to white space thinking and new models based on changing the current ones to increase customer value.

Leadership and Market Creation

White Space Strategy — 2008-05-29T16:13:06-07:00

My good friend and colleague Art Petty just posted an excellent blog entry on the leadership challenges in new market creation. In Seven Suggestions to Consider When Creating A New Market Art does a wonderful job of describing the management challenges of new market creation and providing some very real insight into the differences between steady-state marketing and evangelizing a new market. At the same time, Art provides a wonderful leadership perspective that we all need to heed in his discussion of remembering not to breathe your own exhaust fumes as you create new market opportunity. Have a read, it's well worth the time.

White Space and Value Chain Strategy: Creating Value Networks

White Space Strategy — 2008-05-17T11:48:33-07:00

In my last article, I described the �White Space Strategy� approach to competition � Namely, finding new, unserved, markets, or white spaces, and filling them in with new value. Often, capitalizing on white space opportunities also involves creating new value networks to serve the previously unserved markets, or even enabling these new markets exclusively by creating new value networks that previously didn�t exist.

Amazon, for example, not only revolutionized the business model for selling books, but also formed an entire new value network of suppliers and buyers that redefined the value chain for acquiring books and music. Replacing the retail bookstore with a web site and the �over the counter� delivery process with USPS, Fedex, and UPS delivery created a new value network that delivered customer convenience and an entirely different and lower cost business model. Applying that success to other retail items � from clothing to electronics and kitchenware � has resulted in the formation of a new super-retailer that we all have come to take for granted.

Perhaps even more importantly, Amazon�s new �networked� business model has allowed much more extensive inventories and offerings and the inclusion of other retailers in Amazon�s value network to serve increasingly more specialized customer desires. The resulting network of product providers has allowed Amazon to serve more and more of the �Long Tail� to the point that today Amazon�s daily sales of specialized Long Tail items exceed its sales of best sellers.

By looking at your own company�s value network and exploring the possibilities presented by alternative value networks of suppliers, intermediaries and �retailers� it�s often possible to identify new market spaces that are available to be addressed with a new value chain. For example:

Could your software be delivered as a hosted solution by a third party hoster, opening up new, previously unaddressed segments with minimal additional costs?

Could your consulting and/or training services be delivered as an interactive on-line or CD-ROM based product?
Might a new group of customers prefer a service solution delivered by a third party versus your current product purchase solution?

Perhaps even more importantly:

Can your product address previously unserved markets with a different whole product than that you currently provide?
Can the addition of unique partner and alliance value that you haven�t previously provided create whole new market opportunities?

The addition of select alliances and partners can often open up whole new market opportunities by either capitalizing on their domain expertise, or specialized channels and delivery networks. Platform vendors in particular can often find white spaces for their platform offerings by conducting rigorous whole product brainstorming sessions based on identifying potential new value networks.

The search for white space opportunities should be a regular part of the business development review process, particularly where growth has slowed and the growth potential in current market spaces has proven inadequate. Reviewing current value chains and exploring new value network opportunities can be a valuable tool for re-igniting growth.

White Space Strategy for Growth

White Space Strategy — 2008-05-17T10:42:36-07:00

t a recent panel discussion on growth, I heard an attendee recite the �Four Fundamentals Formula� for growth that we�ve all learned as the accepted methodology for growing a company:

Penetration � Saturate the current segment
Market Expansion - Expand your potential market into adjacent segments
Product Expansion - Sell current customers new products
Geographical Expansion - Go International

It�s a great list, and the concepts are so fundamental that we�ve come to accept them as the �right� answer for start-up business plans and public company strategies alike.

But the world has changed, and the competition for growth has become more intense than ever. The accepted formulas for growth have become a necessary, but not sufficient recipe for the kind of stellar growth that sets a Salesforce.com or Google apart from the crowd. This is where �White Space Strategy� becomes critical.

Companies that become skilled at asking �Where�s the white space?� of non-consumers and unserved or non-enabled market needs will be the companies that exhibit sustainable hyper-growth in the future. Business plans that follow the PMPG (Penetrate � new Market � new Product � new Geography) model well will achieve adequate growth to satisfy investors and financial markets, but the superstars will focus on executing sustained White Space Strategies. Only White Space market opportunities will provide the potential for sustainable double- and triple-digit growth.

White Space focused companies will become adept at asking and answering key enabling questions such as:

Where in our �resource addressable� business space are there significant non-consumer, underserved, or overshot consumer opportunities?
What technology-based and/or technology driven opportunities exist today that did not exist in the past?
New technologies
Newly technology-enabled business models
What new value-chains and value networks are now enabled, existent or potentially existent?
What elements of current competition have become irrelevant and what new elements have become important and underserved?
How are the industry business models outdated, inefficient or insufficient?

What is the result of this questioning process? Apple is an excellent example. Steve Jobs and company have once again exhibited their skill at identifying and serving White Spaces with the iPod. The greatest proportion of people wearing the near-ubiquitous white earphones today, weren�t wearing any earphones yesterday. Why? - Because the portable CD player, tape player or radio didn�t compellingly serve their needs, or for that matter, capitalize on current technology and changing distribution and consumption patterns. The iPod has successfully captured non-consumers and underserved or overshot consumers with a single product concept that has redefined the market. Users and non-users have flocked to the simplicity and ease of use and distribution of the iPod and iTunes, enabling a much larger market than the previous market for personal music players.

Introduction to White Space

White Space Strategy — 2008-05-17T10:06:44-07:00

White Spaces have been a key part of my consulting practice from the very outset of my consulting career. In working at Booz Allen, then Regis McKenna, and finally in association with Geoffrey Moore as an affiliate of The Chasm Group, the challenge was always to find the answers that created new opportunities for my clients.

Although the names used to describe the fundamental idea were different in each case, the goal was always the same - stake out new territory and/or create new opportunity. Most recently, I described the foundation of my practice as �changing the rules� to create competitive advantage for my clients.

The concept of �White Space� came from the realization that the �rule changing strategies� I was developing always included changing the rules to create new opportunity in ways that hadn�t been used before - changing the rules to create and then capture �white spaces�. In today�s hypercompetitive and fast moving markets, almost every �home run� we�ve seen is the result of capturing new white spaces in new ways.

The iPod and iTunes, Google, SaaS, MySpace, YouTube, Facebook have all succeeded by creating and filling new spaces that superceded the old spaces they replaced and expanded the prior markets significantly. This is the core of white space strategy - change the rules and color outside the lines. What do you think?

White Space � Why Compete Head-On When You Can Re-write the Rules?

White Space Strategy — 2008-05-17T10:02:28-07:00

There is no shortage of advice on how to compete. From Trout and Ries to Michael Porter to Clayton Christensen, the frameworks and strategies abound. You can compete for the future, innovate to compete, compete like a gorilla, or as a guerilla, enter co-opetition with partners or apply Judo strategy. It�s common knowledge that you have to have a competitor to validate your category � but perhaps a little more thought is deserved here. It�s possible to create and validate a whole new category - not by being a direct competitor, but by being a powerful substitute to existing categories.

In �Blue Ocean Strategy� W.Chan Kim and Renee Mauborgne point out numerous examples of just this �game changing� strategy by companies like Cirque du Soleil, Curves and Yellow Tail wines. They call this process of mapping out new territory �Blue Ocean Strategy� and present a well thought out framework for pursuing it that is much like the game changing �White Space Strategy� that we have pioneered with clients. Although this concept has been variously called category creation, market creation, market innovation, and now, finding blue oceans, it has yet to be integrated into the mainstream business processes of most companies. Rather, most continue to doggedly pursue new sources of competitive advantage in head-on-head competition.

White Space Strategy is advantaged in a number of ways, not the least of which is that it finds its genesis in the inexorable change that reshapes markets and competition. By identifying change, and the opportunities to satisfy the new demands of changing markets, intrepid strategists can create new white space businesses almost continuously.

The key to finding the white space that can generate new markets and expand existing ones lies in:

Comprehensively mapping the existing markets and identifying the most relevant elements of competition

Evaluating the relevance of current competitive elements and the current mix(es) employed by competitors

Identifying new competitive priorities as well as those that may have become less relevant

Understanding the underlying business models and their strengths and weaknesses

Are current cost and revenue elements still relevant?

How can the models be changed to create advantage in light of new services, technologies and other enablers?

Identifying shifts in unmet customer needs that create opportunities for new product service paradigms

What has changed that might motivate a customer to migrate to a new paradigm?

How have technology or economics changed the landscape to enable a new, even more compelling offering?

Boldly �imagineering� new models and offers that can fill in the white space around current offerings with new, compelling offers and business models.