Case Study 1. 

Pigment for Color Laser Printers

Initial Situation

Our prospect, PCL Inc., was a large, diversified chemical company.  One of its core competencies was development of high-quality pigment powders for paints.

Corporate marketing department was good at slow-changing, mature markets; company always successfully used the "follower" approach and never tried to be the first in the market.  As a result, they were too late for fast-growing market of pigments for color laser printers; at the moment when we met the company representatives, company managed to gain only 3% of the market, while their largest competitor, PPP Chemical, already had 70%.  PCL Inc. was accustomed to enjoy the leadership in any market it entered, and this situation seemed like a "personal grudge."

OutCompete Team was approached with objective for the project, "To become the #1 in the market of pigments for color laser printers."

Preliminary Analysis: Real Competitive Risks

Preliminary OutCompete Analysis showed that, although PCL leadership considered PPP Chemical as their major "grudge," this company was not the largest competitive threat to them.  Definitely, a "huge elephant" could accidentally tread upon a small chipmunk, but only accidentally: the difference in sizes was far from "shooting distance" according to the Lanchester's Strategies.

Much more threatening competitive risk was in the market value chain.  Company possessed "intermediate" position in this chain, and its success heavily depended on goodwill and commitment of both pigment suppliers and laser cartridges OEMs.

The dilemma for PCL Inc. seemed as follows:

• It would be good to stay in color laser toner market because it is growing fast...
  ...and it is not a good idea to stay in this market because PCL's situation in the value chain is unstable.

This dilemma had derived from current consumers' expectations from color laser printing, current paradigm (widely accepted viewpoint) of market of digital imaging, and limitations imposed by consumers' expectations and market paradigm on structure of value chain and business relationships:

1. Consumers' current expectations that "pigment should melt at low temperature and adhere to paper while molten" allows use of only few pigments from several hundreds available.  As a result, the choice of suppliers is limited to those who supply the "good" pigments.  Such a limited choice gives suppliers "an upper hand" in negotiations and relationships with PCL Inc.
2. The notion that only OEM can produce the color toners for its cartridges, and that each OEM has its own formulae for toners, imposes on PCL the second limitation: there is only one OEM that uses PCL's pigment; other OEMs use pigments with different characteristics, and PCL, for many reasons, cannot meet their specs.
3. To make situation even worse, it is an established notion in the laser digital imaging market that each OEM supplies cartridges to its own printers.  Since PCL's OEM possesses 4th place in the market of color laser printers, market potential of PCL is limited even more.

Resources for further evolution of current paradigm of color laser printing, on the other hand, happened to be practically exhausted:

1. Market already had stabilized "on the plateau"
2. Products and marketing strategies of OEMs had become very similar
3. Huge number of patents have "covered" all viable innovations
4. Technology had been changing in incremental, slow changes

All these findings meant that PCL's position in this market is "stuck."

As a result of this Preliminary Analysis, the objectives for OutCompete Services had been redefined as follows:

• Discover the consumers' emerging expectations and Breakthrough Opportunities for PCL
• Strengthen PCL's position in the market value chain, with maximum leveraging of PCL's core competencies, through:
  • reduced dependence on suppliers and supplies
  • wider selection of users for "intermediate products," i.e. pigments
  • providing the products directly to the consumers
  • expansion of consumer base

Lighthouse on the Horizon: Dreamvision

Explicit understanding of root causes of PCL's limitations in the current market allowed OutCompete Team formulating the "dreamvision" for PCL:

1. Any pigment from several hundreds available can be used for color toner
2. All OEMs produce the same color toners; formulae for these toners use PCL's pigment
3. All consumer use universal cartridges, with PCL's pigment-based toners
4. All customers buy PCL's toners to easily recharge their cartridges

Realization of this "dreamvision" can leverage, to the maximum extent, PCL's core competences and expertise in colorants, polymers and powders.

As a result of realization of this "dreamvision," PCL can possess the leveraging position in the market value chain: it will have unlimited choice of supplies and suppliers, unlimited loyalty from OEMs, maximum direct exposure to the consumers and unlimited loyalty from them.

Hence, such changes in the marketplace can benefit PCL, if they would be taken under PCL's deliberate control.

Definitely, this "dreamvision" can disrupt the current market of color laser printers.  However, only disruption can "launch" PCL from its "stuck" market position.

It is clear to anybody that "leapfrogging" to this dreamvision would result in enormous Total Cost of Ownership; on the other hand, consumers would be reluctant to immediately accept it.  It is just what it should be: the lighthouse on the horizon that shows "where to go next."

What the Consumers Need?

Any printing is a way to satisfy the specific consumers' need

to make a "tangible" copy to share information with other people.

Satisfaction of this need is provided through the following Underlying Process:

1. Possess the image
2. Transfer the image to the tangible, shareable media
3. Make image available to other people
4. Make other people to perceive the image

The current consumers' expectation from realization of this process could be described as follows:

1. Image is prepared for image development (via software)
2. Image is transformed into the printer actions (via driver and hardware)
3. Colorant is transferred to the media (usually, paper)
4. Image is developed on the media
5. Image is fixed on the media
6. Operations listed above (1 to 5) are controlled
7. Image is stored and distributed
8. Image is perceived by other people

*     *     *

All following consideration is limited to one operation of Underlying Process:
Transfer the image to the media.

What Consumers Want Today?

Analysis of consumers' current expectations are based on "what consumers buy today."  These expectations could be described as follows:

What Consumers Will Want In the Future?

Long-term trend in the market of color printers is determined by the following "Lighthouse on the Horizon" that is free of current "flaws":

• Any printer is able to use universal cartridges
                                                                          with universal toners
                                                                                                            that use any pigments...
• ...and provide for development of image with good gamut,
                                                                               expanded gray scale
                                                                                                 and high stability of colors...
• ...on any flat media

Step-by-Step Into the Future: Mapping the Expectations

Map of Expectations depicts step-by-step changes in consumers' expectations, from current wants to the "Lighthouse on the Horizon."  These changes are shown for every operation in the Underlying Process.

For example, "fixing a colorant to media" will change in the following steps:

As you can see, pigment particle has acquired the "coat," material that compensates for deficiencies of pigment itself.  This "coat" changes from simple "fastener" to "universal fastener,"

This Map comprises three distinct "zones" of consumers' expectations:

1. "Spoken Expectations" zone comprises all expectations that either already have been satisfied or are already known, but not satisfied yet
2. "Future Expectations" zone comprises expectations that cannot be easily satisfied right now, including the "Lighthouses on the Horizon"
3. "Exciting Expectations" zone lies between former two and comprises the expectations that are still latent, but could be easily satisfied; as soon as those expectations are satisfied, even poorly, consumers become excited, and happily buy new products.

In our case, the Exciting Expectation is "Pigment is adhered by coat," because satisfaction of this expectation provides consumers the following benefits:

1. Significantly improved gamut of color image, because pigments with better colors can be used
2. Significantly reduced energy consumption of printer, because melting of coat is easier than melting of pigment particle
3. Expanded choice of media for printing, because melting temperature of coat is lower

Step-by-Step Into Tomorrow: Mapping the Breakthrough Opportunities

Now, we considered this Exciting Expectation in more detail, because it perfectly matched with PCL's core competencies, i.e. represented the Breakthrough Opportunity for PCL:

1. Nobody in the industry had not recognized this Opportunity yet
2. Customers would be excited when this Expectation is satisfied
3. All the essential resources needed for realization of this Opportunity already existed
   • Moreover, all these resources had been available inside PCL

This consideration resulted in the Map of Breakthrough Opportunities:

This Map showed that "coat" can play many additional roles, not only "adhesive," but "optical," too.  As a result, consumers could get more vivid images.

Selection of Breakthrough Opportunity for Execution

PCL leaders took their time to explore the possibilities provided by Map of Breakthrough Opportunities.  It was a great surprise for them that pigment powder was not the best opportunity for PCL: they anyway could not outcompete PPP Chemical.  On the other hand, a new Breakthrough Opportunity became evident: development of various "coats," first single-functional, then multi-functional, allowed leveraging the PCL's core competency in polymers.

As a result of this study, PCL leaders decided to execute development of various "coats" for pigment particles as the Breakthrough Opportunity.

Strategy Development: Proactive SWOT Analysis

Proactive SWOT Analysis starts with Opportunity:

Develop single-functional, then multi-functional "coats" for pigment particles used in color laser toners

Strength is defined as available critical resources needed for execution of this Opportunity:

1. Expertise in development of pigment particles
2. Expertise in development of polymers with specific features

Weakness is defined as currently unavailable critical resources for execution of Opportunity:

1. Expertise in applying "coats" to the individual particles
2. Expertise in development of toners for laser printing

Threats that could hinder execution or success of Opportunity:

1. Another Opportunity that "steals" the success
   • Develop the ways to apply "coat" to the pigment particles already attached to the media
2. Taking the same Opportunity
   • Develop the "coat" for function B while PCL develops the coat for function A
3. Making this Opportunity obsolete
   • Develop the pigment capable of direct chemical adherence to the media

The following preliminary plan of actions was suggested:

1. Organize the R&D team with expertise in development of pigment particles and polymers in order to develop the "coats"
2. Find out available alternative approaches to applying coats to individual particles, and acquire the expertise
3. Hire the expert in formulating the toners for laser printing
4. In the way of development of coats, consider various ways to apply these coats:
   • To the individual particles
   • To the media before colorant is applied
   • To the colorant / media during colorant applying
   • To the colorant / media after the colorant is applied
5. Consider alternative functions for coats, and develop several single-functional coats in parallel
6. Conduct another research to reveal other potential ways to adhere the colorants to various types of media

Strategy Development: Brand Array

Basic description of Brand Array is determined by Opportunity selected for execution:

Develop single-functional, then multi-functional "coats" for pigment particles used in color laser toners

So, Brand Array could be described as the following set of functions:

1. Coat is applied to particles
2. Coat is transformed while image is developed
3. Coat attaches pigment particles to the media
4. Coat covers pigment particles and protects them from environment
5. Coat conducts light to and from the pigment particles

Now, in order to develop the "diversity" of Brand Array, we considered all feasible alternatives to perform these functions:

1. Coat is applied to particles
   • Coat is applied to each particle before preparation of toner
   • Coat is applied to each particle during preparation of toner
   • Coat is applied to the media before transfer of toner to the media
   • Coat is applied to each particle during transfer of toner to the media
   • Coat is applied to each particle before fixing the toner to the media
   • Coat is applied to all particles before fixing the toner to the media
   • Coat is applied to all particles after they have been fixed to the media
2. Coat is transformed while image is developed
   • Coat is melted, then solidified
   • Coat is dissolved, then solvent is evaporated
   • Coat is dissolved, then solvent is absorbed by media
   • Coat is dissolved, then solvent is absorbed by separate absorbent
   • Coat is a monomer, then it is polymerized by chemical means
   • Coat is a monomer, then it is polymerized by ultraviolet radiation
   • Coat is softened, mechanically pressed into the media, and then solidified
3. Coat attaches pigment particles to the media
   • Coat "glues" to the media
   • Coat creates "roots" inside the media
   • Coat creates chemical bonds with media
4. Coat covers pigment particles and protects them from environment
   • Coat does not cover pigment particles on the image surface
   • Coat covers pigment particles partially on the image surface
   • Coat covers pigment particles completely with thin layer (less than 1/10 of particle diameter)
   • Coat covers pigment particles completely with thick layer
   • Coat covers pigment particles, then its top layer is removed
5. Coat conducts light to and from the pigment particles
   • Coat dissipates light
   • Coat is colored itself
   • Coat is transparent and matched to the pigment's refraction
   • Coat creates gloss
   • Coat makes image mat

When all this diversity was thoroughly considered, the "similarity" of Brand Array was developed: the "basic" substance that, with different specific additives, provide different functioning of coat.  This "basic" substance created the centerpiece of PCL's know-how, and thus cannot be disclosed here.

Strategy Development: The Whole Brand

The Whole Brand comprised various "functional components" for printer that provided:

1. Application of coat to the particles
2. Transformation of the coat during the image development (melting, solvent removal, UV treatment, etc.)
3. Storage / containment of coat if it is applied during printing process
4. Storage / containment of toner comprising coated particles

Development of the Whole Brand provided PCL with detailed list of resources that should be delivered through business partnership, merge and acquisition.

Strategy Development: Marketing Strategy

Since PCL decided to shift its efforts toward "coats," the competition with PPP Chemical became irrelevant.  On the other hand, PPP Chemical did not have expertise in specialized polymers.  Combination of these circumstances hinted the following marketing strategy: offer PPP Chemical the value-adding partnership when PCL produces coats for PPP's pigment.  This partnership opened for PCL large market that was not available before.

Another strategic approach had been considered, as well: run the spin-off company that will design the universal laser cartridge based on utilization of coated pigment particles.

Strategy Development: Manufacturing Strategy

Manufacturing strategy was developed based on Brand Array development.  This strategy considered three-unit manufacturing facility:

1. The major manufacturing unit produces the "basic" substance
2. The "branding" manufacturing unit produces the coating material by adding specific additives to the "basic" substance
3. The "coating" manufacturing unit produces pigment particles covered by appropriate coat.

This strategy allows producing wide variety of coats without any need for launching each one of them.

Monitoring

The monitoring team was organized in PCL; the assignment of this team was:

1. Monitor the changes in the market of color laser printing
2. Monitor the development of new resources in other markets
3. Monitor and correct the execution of Breakthrough Opportunity