The document discusses applying innovation intelligence for market segmentation and targeting. It covers topics like understanding customer needs rather than wants, identifying non-customers, disruption theory, signals of change, and organizational reconnaissance to anticipate industry changes. Innovation types include business models, processes, products, and more. Framework areas discussed are risk, efficiency, customers, outlook, and novelty. Additional concepts covered are competitive benchmarking, growth vector analysis, and macro environmental analysis. The goal is to use intelligence approaches to minimize threats and maximize opportunities for strategic decision making.

1. Applying Innovation Intelligence for Market
Segmentation and Targeting
Business Forecasting 2014 – Predictive Intelligence Summit
San Francisco USA
Tuesday 19 August 2014
Arik Johnson
Founder & Chairman, Aurora WDC
Managing Director, Center for Organizational Reconnaissance

2. Do you see the illusion?
2

3. Intelligence Has Always Been About Removing Illusions To
Improve Decision-Making

Strategic Decisions
What Business are We in and Where are New Opportunities for
Growth?

Operational Decisions
How do we structure and align those business units to most
effectively compete for and win Market Share?

Tactical Decisions
Which customers are available to us and how can we convince
them to select us over any and all functional equivalents?

4. Intelligence has Focused on Decisively Minimizing Threats &
Maximizing Opportunities

Minimizing Competitive Threats
 Understanding Threats to Current Business Status Quo:
Competitors, Legislation, Technology Shifts, Obsolescence,
Substitutes, Customers Backwards Integrating, Vendors
Forwards Integrating, etc.

Maximizing Market Opportunities
 Identifying New Sales, Revenue and Profit Centers
 Develop New, Innovative Products & Services
 Benchmarking Cost Reduction and Efficiencies from Direct Rivals
& Best-of-Breed non-competitors

5. Three Key Business Trends Driving Business Evolution
Human Capital & Enterprise Collaboration
Everyone in the Firm becomes a Virtual Member of the
Intelligence Apparatus, Better Engagement by Rank &
File, Shared Visibility of Issues & Actions
Corporate Governance & Risk Oversight
Board-level Priority Ensuring Reliability of Management’s
Earnings Forecast & Assessing Risks to Status Quo
Business Model Disruption & Value Innovation
Predicting the Outcome of Competitive Battles by
Anticipating Changes in Product/Strategy Dynamics

6. Collaborative Insights Team

7. Key Intelligence Topics (KITs)
Process of Interactive Dialog with Decision-Makers
through KIT Interviews
Consists of 3 Protocols w/Subtle Differences:

Strategic Decisions/Issues

Key Marketplace Players

Early-Warning Topics

8. Why Connect KITs to Methods?
Product Management Process Decisions
Pricing
Buy, Build
or Partner
Operational
Metrics
Business
Model & Case
Sales
Process
Thought
Leaders
Market
Requirements
Market
Sizing
Marketing
Plan
Product
Roadmap
Awareness
Bldg. Plan
Market
Research
Market
Problems
Distinctive
Competence
Product
Performance
Customer
Acquisition
Positioning
Customer
Retention
Launch
Plan
Product
Contract
Innovation
Market
Messaging
Channel
Training
Win/Loss
Analysis
Competitive
Battle Cards
Event
Support
Collateral &
Sales Tools
Presentations
& Demos
White
Papers
User
Personas
“Special”
Calls
Release
Milestones
Answer
Desk
Technology
Assessment
Competitive
Analysis
Lead
Generation
Buyer
Personas
Win-Loss
Market
Analysis
Product
Strategy
Program
Strategy
Product
Planning
Quantitativ
e Analysis
Channel
Support
Sales
Readiness
Strategic
Tactical
Channels
Analysis
Life Cycle
Strategy
Capabilities &
Resources
Supplier
Analysis
Sales Training
Sales
Automation
Market
Segments
Sell Against

9. Porter’s Five Forces

10.  Principles of Defensive Warfare
 Only the market leader should
consider playing defense.
 The best defensive strategy is the
courage to attack yourself.
 Strong competitive moves should
always be blocked.
 Principles of Offensive Warfare
 The main consideration is the
strength of the leader's position.
 Find a weakness in the leader's
strength and attack at that point.
 Launch the attack on as narrow a
front as possible.

Principles of Flanking Warfare
 A good flanking move must be made
into an uncontested area.
 Tactical surprise ought to be an
important
element of the plan.
 The pursuit is just as critical as the
attack itself.

Principles of Guerrilla Warfare
 Find a segment of the market small
enough to defend.
 No matter how successful you
become, never act like the leader.
 Be prepared to bug out at a
moment's notice.
-- Jack Trout
Guerrilla
Small Players
• Finding market small
enough to defend
• Prepared to bug out at
moment’s notice
Flanking
New Players
• Moving into
uncontested area
• Element of surprise
Offensive
No 2 or No 3
• Avoiding leader’s
strengths
• Attacking leader’s
weaknesses
Defensive
Market Leaders
• Attacking themselves
with new ideas
• Blocking competitive
moves
Marketing WarfareMarketing Warfare

11. Managers caught in this kind of competition almost
universally say they dislike it and wish they could find
a better alternative. They often know instinctively
that innovation is the only way they can break free
from the pack. But they simply don’t know where to
begin.
Chan Kim and Renee Mauborgne
Competing head-to-head can be cutthroat
especially when markets are flat or growing
slowly.

12. Innovation Innovation
Category Type
Business model How you make money
Networks and Alliances How you join forces with other companies for mutual
benefit
Enabling process How you support the company's core processes and
workers
Core processes How you create and add value to your offerings
Product performance How you design your core offerings
Product system How you link and/or provide a platform for multiple
products.
Service How you provide value to customers and consumers
beyond and around your products
Channel How you get your offerings to market
Brand How you communicate your offerings
Customer experience How your customers feel when they interact with your
company and its offerings
Delivery
Offerings
Process
Description of type
Finance
10 Types of Innovation

13. 10 Examples

14. Knowing Why They Buy
“Companies may know a
good deal about their
customers. They know
nothing, as a rule, about their
non-customers -- the people
who should be their
customers but buy from
someone else. Why do they
do that? And yet it is the non-
customer where important
changes always start first.”
Look Beyond the Current Business

15. Success Breeds Complacency
“It is a classic conundrum for business titans: How much
money and attention should be focused on a new, but
growing, operation that is far less profitable than the core
business?”
- Prof. Clayton Christensen, The Innovator's Dilemma

16. Customers “Hire” Products to
Do “Jobs” for Them
Concentrate Less on
What Customers “Want” and
More on What Customers “Need”

17. Disruptive Technology

18. Value Chain Evolution Theory
• Disruptive Business Models: Vertically Integrating VC to Improve
What’s “Not Good Enough” in the company’s products and services
judged by customers.
• Performance Defining Subsystems: Companies must control all
those activities and combinations of activities in the value chain
that drive the product performance characteristics that matter
most to customers.
• Specialists will seek to control performance drivers based on
asymmetric differences in Motivation and Skills around a modular
interface in the VC. (Sword & Shield)

19. Disruptive Innovation Theory
Sustaining Innovations
Better Products Brought to
Established Markets
Low-End Disruptions
Target Overshot Customers with a
Lower Cost Business Model
New-Market Disruption
Compete Against Nonconsumption
Difference
Performance
Measure
Time
Nonconsumers or Nonconsuming Contexts
Performance

20. Customer Demand & Signals of Change
1. Non-Market Contexts: External Forces (Government, Economics,
etc.) Increasing or Decreasing Barriers to Innovation
2. Undershot Consumers: Opportunities for Up-Market Sustaining
Innovations
3. Overshot Consumers: Opportunities for Low-End Disruption, Shifting
Profits by Specialist Displacements (Modularity) and the Emergence
of Rules
4. Non-Consumers: Opportunities for New Market Disruptive Growth
Established Companies almost always
Lose to Disruptive Innovators

21. Performance-Driven Organizational Reconnaissance Engages the
Workforce in Collaborative Intelligence and Analytics to Anticipate and
Act on Industry Change to Ensure Good Governance for Stakeholders
Signals
of
Change
Strategic Choices
Influencing
Success
Likely Outcome of
Competitive
Battles

22. RECON
 RISK
 EFFICIENCY
 CUSTOMERS
 OUTLOOK
 NOVELTY
Intelligence Should Concentrate on
Five Domains of Business Problem Solving

23. RISK
Ensuring against risk to the core business is critical to making
sure there is time for investments in new growth to start
paying off. Maintaining a positive status quo by protecting the
core is the chief role for managers in every business, with one
caveat: good businesses can often be the foremost enemy of
great businesses.
Cannibalization of a company’s current market share should
not exclude innovative ideas that might be foreign to the
corporate immune system.

24. EFFICIENCY
The ruthless cutting away of unnecessary costs in the value
chain is essential for a new market innovation strategy to work.
Create or build up that which is not yet good enough and
diminish or destroy that which is unnecessary.
Most of the unnecessary elements in the incumbent value
chain have long-since outlived their usefulness or were never
very important to customers in the first place.

25. CUSTOMERS
Companies become too dependent on their best customers’
input for signals about how they should innovate, but new
forms of competition usually present themselves at the current
consumption market.
The day your customers begin complaining about how
complicated or expensive or difficult your product is, you
should ask, “why was it good enough for them yesterday” and
who has offered an alternative?

26. OUTLOOK
Traditional market segmentation based on demographic,
geographic or sociographic data are fleeting at best and illusory
at worst and many decisions have been based on flawed
definitions of the fastest growing markets.
Defining the market by the “jobs” customers wish to
accomplish is more helpful in defining fast growing target
markets. Focus groups are often the worst mechanism of
market testing.

27. NOVELTY
Differentiation is mandatory for all organizations to master and
new market or “novel” solutions to customer problems are often
ecosystems of providers working together to produce sought-
after value.
Companies must build a business model designed to test
breakthroughs in the market more regularly but kill off those
that do not work early on, so support and development
resources can be allocated to those that do.

28. STEEP (Macro Environmental) Analysis

Strategic analysis begins with environmental market scanning and impact
assessment. STEEP covers this broadest “high-altitude” point of view of the
market environment, covering five aspects impacting competitiveness:
1. Social: values, lifestyles, ethical norms, literacy, cultural attitudes,
customs, beliefs, education
2. Technological: digital communications, biotech, chemicals, energy and
medicine
3. Economic: balance of payments, inflation, fiscal/monetary policy,
spending, income growth
4. Ecological: climate change, resource depletion, sustainable development,
recycling, pollution
5. Political: regulation, legislation, lobbying, political party platforms, local,
regional and national

29. Tactical CI Project Example: Cost Analysis

30. Level of CI Involvement in M&AStage
ID Evaluate Due Consum-
Criteria Targets Analyze Diligence Recommend Negotiation mation
Integration
Intelligence
Research
Business Units
Finance
Technical Assessment
Legal
Executives
M&A Specialists
Transition Team
Logistics
HR
Level of CI
Involvement
High
Low

31. Seven Steps to Effective Competitive Benchmarking
1. Determine functional areas within your operation to be benchmarked. This is
likely to be those areas that will benefit most from the benchmarking process,
based upon the cost, importance and potential of changes following the study.
2. Identify the key factors and variables with which to measure those functions.
Two general forms – wherewithal/resources and goals/strategy.
3. Select the best-in-class companies for each area to be benchmarked -- those
companies that perform each function at the lowest cost, with the highest
degree of customer satisfaction, etc. The companies you select will be those
that do whatever you’re measuring better than you do and/or are ones you
wish to emulate or copy.
4. Measure performance of the comparison companies for each benchmark
being considered.
5. Measure your own performance for each variable and begin comparing the
results in an "apples-to-apples" format to determine the gap between your firm
and the best-in-class examples.
6. Specify programs and actions to meet and surpass the competition based on
a plan developed to enhance those areas that show potential for compliment.
7. Implement your improvement program by setting specific improvement targets
and deadlines, and by developing a monitoring process to review and update
the analysis over time. This will also form the basis for ongoing monitoring,
revision and recalibration of measurements in future benchmarking studies.

32. Growth Vector Analysis

Growth Vector Analysis (GVA) reviews the different product alternatives available to
the firm in relation to its market options, not already being pursued by competitors.
Four complimentary characteristics are used for defining common threads of
strategy:
 Product-Market Scope specifies particular industries to which a firm confines its position.
 Growth Vector indicates the direction a firm is moving relative to current product-market posture
(market penetration, market development, product development and diversification).
 Competitive Advantage defined as particular properties of individual product markets conveying a
strong market position.
 Synergy is the combined effect on the firm’s resources that is greater than the sum of its parts.
Present Products Improved Products New Products
Existing Market Market Penetration Product Extension Product Development
Expanded
Market
Market Extension Market Segmentation / Product
Differentiation
Product Development / Market
Extension
New Market Market Development Product/Service Extension &
Market Development
Diversification

33. Feel free to ask for help:
 Email: Arik.Johnson@AuroraWDC.com
 Phone: +1 (608) 630-4242
 Twitter: @ArikJohnson
 LinkedIn: http://linkedin.com/in/ArikJohnson
 Skype: ArikJohnson
 Web: http://IntelCollab.com & http://AuroraWDC.com
What’s Next?
Leadership to Act is
Based on Confidence
Intelligence Combats the Paralysis that
Accompanies Uncertainty