Harvard Business Publishing

John,
The shaping strategy seems like a companion for the disruptive change model made popular by Clay Christensen, in that both see change driven by inflection points where existing purchasing characteristics are supplanted by some new characteristic (ie. CPU power shifts to portability/power consumption, walled garden is supplanted by links in open data architecture, etc) as the existing models overshoot market needs.

I've been focused on the evolution of the healthcare marketplace and see the existing metrics of "insured" and "covered" ripe for a shift into "convenient" and "personalized". As we see a shift in financial accountability change the payment landscape from wholesale to retail, pricing accountability and the ability to justify value on a retail pricing curve makes transparency of price AND services/value a requirement until clear brands that embody these value propositions (ie Walmart vs. Bloomingdales) begin to emerge.

When you step back and talk about retail value metrics in the health industry (distribution, ease of use, clear value propositions and trade-offs, service value proposition, integrated experience vs. modular handoffs) you can see an entire set of values and value chain that will have to emerge in a shift to retail...and the $15K/family present spend that is value-destroying for 80% of current participants will drive retail adoption of cost-saving approaches (ie low premium insurance, and eventually major medical/carve-out insurance only).

Shaping too, must impact the direction of the change. In health, the emphasis has often been on the very sick. In doing so, we've let the health of the average American atrophy. I bet you'll see retail health coming from wellness provide a countervailing force that will Shape what the health sector of the next decade looks like. It's a bet I've placed my life savings against (my company, HealthShoppr, is building "Expedia" for health services to create a retail health marketplace)...my sense is that in a retail purchasing system personalization and choice will drive purchasing trade-offs and we need to capture very different types of information about our health networks than we have at the moment.

Thoughts?

Hello,

Interesting note - we will get access ot the HBR article- but we see an example with the PAX tire system developed and marketed (recently withdrawn) by Michelin.

The tire was a run-flat system that allowed you to continue driving at 60kmph for 200km ..or something to that effect.

The reason it failed, we believe has a lot to do with the inability to create an "open system"...similar to the VHS -BETA wars.

When in the mass market, no one likes the new techonology to be concentrated in the hands of the few. Michelin, like Apple has wanted to gaurd its technology. However, Apple has always had single digit market shares, Michelin had maintained a greater than 20% market share. Michelin simply has no choice but to share the technology it is developing.

The other issue with PAX (about which much was written) was that the machines required for fitting and replacing cost a lot. (This problem could have been overcome if the market volumes had picked up quickly, which did not happen)

It was not a marketing problem. It was a great product, priced well. It was a strategy issue. New technologies (for mass markets) need to be shared quickly, before competitors come together and create an opposing standard building on the limitations of (in this case) PAX.

The end result is that we have run flat technology which seems to be a compromise, but a cheaper one / based more or less on an "open" technology platform and shared with a larger number of players.

Michelin could have changed the tire technology landscape, but did not.

thank you,

ritu and venkatesh rangachari
logothought
rituvenkat12.blogspot.com

***Would shaping strategies help settle today's troubled financial markets?***

The key reshaping opportunity is to develop financial literacy as a market. Bring the focus back to personal finance: giving consumers the tools to understand fundamental concepts like how loans amortize, how interest accrues, how to budget their money.

We have evangelists in this arena, but I am not convinced that they are reaching as wide an audience as we'd like to think. I'm convinced that if we took a poll of everyone who signed a no doc mortgage agreement, very few would claim to recognize names such as Suze Orman or Robert Kiyosaki. That tells me something about who's getting this information, and who is using it.

I've spoken to graduate-level communications classes on strategic management and the financial markets and time and time again, when I poll the students, they do not have even the most rudimentary understanding of personal finance. To me, this speaks volumes about the missed opporunity that exists in creating an entire market devoted to financial literacy.

In the context of the current financial markets meltdown, a lot of folks feel that more regulation of big business is the answer, and to some extent, I agree. I also think that consumers have a nickel in this quarter as well. We can regulate predatory lenders, but on the flip side, it takes two people to seal a deal. Consumers were certainly enticed into teaser rate loans, but from my vantage point, they also didn't take the time to read what they were signing. I can attest to this with a lot of anecdotal evidence from those around me who are now upside down on their homes b/c they didn't understand how ARMs work.

We can call it "pure ignorance" and throw our hands up in the air, or we can find solutions so that we do not repeat history. If we are going to stand by and let the government effectively bail out big business (i.e. Bear Stearns, FNMA, FHLMC, AIG) then we should ask for equal time for consumers: help them out the same way that big business is being assisted.

The key is to do so with a long-range outlook and by leveraging existing business who already have a "toe in the tide" so to speak: think of the credit counseling agencies. They are helping people renegotiate pennies on the dollar, but what are they doing to avoid "repeat business"? Turn the current business model on its head and look at the opportunities instead of wringing our hands in despair. The answers are right in front of us.

Consider gov't sponsored programs or, -- even better -- look to private equity/venture capital firms to enable these types of businesses to extend their assitance to more than "getting folks on a payment plan." Teach these folks to fish!

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