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Lecturer:
Ass. Professor Dr. Hj. Mohamad Md Yusuff
Subject: Marketing Management (YSP 503)
                Present by:
             1) Noorazlin Ani
              2) Zetty Rosela
             3) Haniza Harun
                4) Nadhirah
Professor of Innovation and Entrepreneurship at the
Wharton School, Executive Director of the Sol C.
Snider Entrepreneurial Research Center. Formerly,
Director of the Entrepreneurship center at NYU and
taught at Columbia and Northwestern Universities
and the University of South Africa.
Prior to joining the academic world, Professor
MacMillan was a chemical engineer, and gained
experience in gold and uranium mines, chemical and
explosives factories, oil refineries, soap and food
manufacturers and the South African Atomic Energy
Board.

Director of several companies in the travel, import/export and
pharmaceutical industries, and has extensive consulting experience, having
worked with many international companies throughout the U.S., Asia, and
Europe.
Professor MacMillan's articles have appeared in several leading journals.
His latest books, The Entrepreneurial Mindset and MarketBusters were
written with Rita McGrath.
Professor Emeritus of Finance and Economics
                         at Columbia University and the Founder and
                         Managing Director of Selden & Associates,
                         which has been advising the senior most
                         management of companies on share price
                         focused business performance improvement
                         for more than 15 years in North and South
                         America, Europe and Asia.


Co-author the widely acclaimed book Angel Customers and Demon
Customers. A former foreign exchange trader, Selden has been an advisor
to more than two hundred public and private companies across the globe.
Selden has been a lecturer and conference leader in innumerable
Executive Programs sponsored by Columbia University as well as other
institutions and corporations, often receiving the very highest ratings from
attendees.
He is a frequent presenter to Investment
Professionals on Investment Management
Techniques and Business Strategy and has
participated as a panelist and presenter for
Fortune’s Global CEO Forums, including a
presentation shown on closed circuit TV to 88,000
viewers worldwide. Business Week rated Selden as
one of the top ten academic advisors to leading
corporations. He has led or participated in
business (board) reviews for more than 150
companies in 30 countries and is a frequent
advisor on CEO presentations to buy-side and sell-
side investors.

A frequent contributor to Fortune and Business 2.0, Professor Selden has
published excerpts of his Angel Customers and Demon Customers in
Fortune, Harvard Business Review and American Banker and also appeared
on Wall $treet Week, the most widely watched business television show.
incumbent advantage
INTRODUCTION




WHAT IS INCUMBENT’S
   ADVANTAGES
INCUMBENT’S ADVANTAGE



In politic:
An incumbent advantage is an advantage gained
by someone already in a position, as compared to
newcomers.

In market:
The advantages companies already established in
a market have a new entrants.
President Obama and Mitt Romney
Fix line industry
Incumbent firms often face severe difficulties in
adapting to radical technological change. For
example, the Swiss watch making industry was
almost entirely destroyed by one of its own
inventions — the quartz. New entrants, such as
Seiko and Timex, were extraordinarily
successful in commercializing this new energy
source for clockworks (Glasmeier, 1991).
Radical innovations often initiate a
Schumpeterian process of ‘creative
destruction’, frequently leading to the
replacement of incumbents by new entrants.

     Complementary assets, strategic alliances, and the
     incumbent’s advantage: an empirical study of industry
     and firm effects in the biopharmaceutical industry
     Frank T. Rothaermel∗
Incumbent firms often face severe difficulties
in adapting to radical technological change
(Foster, 1986).

        INCUMBENT’S ADVANTAGE THROUGH
        EXPLOITING COMPLEMENTARY ASSETS VIA
        INTERFIRM COOPERATION
        FRANK T. ROTHAERMEL*
The advent of the personal computer (PC),
for example, destroyed the demand for a wide
array of products ranging from typewriters to
fully dedicated word-processing systems, while at
the same time it created huge opportunities for
new PC manufacturers, their suppliers, and the
producers of complementary products like
software and printers
EXTRACTING GOLD
 FROM CONCRETE
PROFITING FROM INITIAL CUSTOMER
            RESEARCH
        Needs to invest in research that exploits
        its unique access to its customer
        information.

           With customers teases out two main
                  customer segments:

      Strength seekers,
                                   Workability seekers,
      who use ready mix
     concrete for support          who pour cement for
   columns and other load-         interior spaces such as
                                    walls and staircases.
     bearing applications.
PRODUCT & SERVICES
  DIFFERENTIATION
PRODUCT                 SERVICES
      DIFFERENTIATION         DIFFERENTIATION
•   FORM                  • ORDERING EASE
•   FEATURES              • DELIVERY
•   CUSTOMIZATION         • INSTALLATION
•   PERFORMANCE QUALITY   • CUSTOMER TRAINING
•   CONFORMANCE           • CUSTOMER CONSULTING
    QUALITY               • MAINTENANCE AND
•   DURABILITY              REPAIR
•   REALIABILITY          • RETURNS
•   REPAIRABILITY
•   STYLE
incumbent advantage
incumbent advantage
incumbent advantage
incumbent advantage
USING THE INCUMBENT’S ADVANTAGE
BUILDING YOUR INCUMBENT’S
        ADVANTAGE
Building Your Incumbent’s Advantage


1) Fragmented structure of most market leading companies
   give ways to invaders.
2) Invaders tend to target vulnerable customer segments;
   most likely the segment that cut across product groups.
3) The invasion is hard to spot when too much concentration
   given on the strong accounts and neglecting the
   vulnerable one. When the sales for strong account keeps
   growing, the vulnerable ones are easy to disregard.
Fighting the Invaders

         1. Exploits incumbent’s     2. Organize corporate
             existing internal          structure around
              information to       customer segments needs
             understand the          by assigning teams to
         economics of the most      quickly mend losses and
           and least profitable         sustain the most
                customers.           profitable customers.


i.   Help give powerful insights into the incumbents’
     advantage.
ii. Lay the foundation for customer-centric information base.
iii. Enable tracking of performance of customer segment.
Techniques


1. Begin with small pilot database and steadily add
    in more customer data from other sources.


2. Begin with simple proof of concept . Discussion
  among key players across the organization to
identify the neglected customer segment, hence
create product/service specially tailored to meet
                  their needs .
CREATING YOUR INFORMATION
        ADVANTAGE
Creating your Information Advantage

1) DO NOT build a customer-segment database from scratch.
   Do a low-cost analyses of existing databases, which able
   to extract profits quickly.
2) For a start, DO NOT obsess over accuracy of the database.
   Identify major customer segments – build segments using
   the characteristic and behavior that can be extracted from
   existing record. Constructing a relatively simple customer
   characteristic database will allow incumbent to rank customers
   according to their profitability, subsequently identify its Most and
   Least Profitable Customers.
Creating your Information Advantage
3 ) Focus on specific segments, i.e. the top and bottom two
     deciles, following these steps:
i. Use regression analysis to uncover statistically significant
     relationships among customers’ profitability; behavior vs
     demographic characteristics .
ii. Perform a cluster analysis to group similar individuals into
     candidate customer segments.
iii. Identify actions that can reduce losses from profit-eating
     customers and can prevent defections by the most
     profitable customers.
Creating your Information Advantage

iv. Rank the above actions according to their most effective
    potential to improve incumbent’s profits.
v. Do a more detailed research on what additional resources
    candidate segments consume other than the one found in
    the initial profit-contribution calculation.
vi. Identify preliminary needs-based customer segments.
    Assign each candidate segment to a team who will be in
    charge of finding ways to increase the segment’s profit
    contribution.
Creating your Information Advantage

vii.   Start expand the customer-centric information system
       to include the middle deciles of customers.
Using Organizing to exploit your advantage.

• Build corresponding business unit for the identified
  needs based segments.
• Provide the team with budget and human resource
  for them to conduct experiments with customers in
  their segments.
• The team to focus on growing the segments’
  profitability.
• Current product managers to support this new
  segment team.
Purpose of having the Information Base


          “To yield comprehensive customer
        profitability analysis by assembling the
        required inputs for revenue, costs and
        capital at the customer segment level”.



It is an incumbent’s advantage because invaders does not
           have access to this type of information.
Source of Revenue


                      SHIFT TO
    Accustomed
                                    Customer
     Product or
                                    Segments
    Geography


It is CRITICAL TO SHIFT from thinking in terms of cost
allocation TO viewing costs strategically as customer
                     investments.
CONCLUSION

■   Market-leading companies get attacked when
    they focus on products and geographic locations
    rather than on what competitors and disrupters
    actually target – unmet customer needs.

■   To fend off invaders, an incumbent should
    strategically analyze and reorganize its customer
    information base and align its corporate
    structures accordingly.

■   Unrelenting attention to exploiting your
    incumbent’s advantage is the key to growing
    profits organically.
incumbent advantage
Thank You

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incumbent advantage

  • 1. Lecturer: Ass. Professor Dr. Hj. Mohamad Md Yusuff Subject: Marketing Management (YSP 503) Present by: 1) Noorazlin Ani 2) Zetty Rosela 3) Haniza Harun 4) Nadhirah
  • 2. Professor of Innovation and Entrepreneurship at the Wharton School, Executive Director of the Sol C. Snider Entrepreneurial Research Center. Formerly, Director of the Entrepreneurship center at NYU and taught at Columbia and Northwestern Universities and the University of South Africa. Prior to joining the academic world, Professor MacMillan was a chemical engineer, and gained experience in gold and uranium mines, chemical and explosives factories, oil refineries, soap and food manufacturers and the South African Atomic Energy Board. Director of several companies in the travel, import/export and pharmaceutical industries, and has extensive consulting experience, having worked with many international companies throughout the U.S., Asia, and Europe. Professor MacMillan's articles have appeared in several leading journals. His latest books, The Entrepreneurial Mindset and MarketBusters were written with Rita McGrath.
  • 3. Professor Emeritus of Finance and Economics at Columbia University and the Founder and Managing Director of Selden & Associates, which has been advising the senior most management of companies on share price focused business performance improvement for more than 15 years in North and South America, Europe and Asia. Co-author the widely acclaimed book Angel Customers and Demon Customers. A former foreign exchange trader, Selden has been an advisor to more than two hundred public and private companies across the globe. Selden has been a lecturer and conference leader in innumerable Executive Programs sponsored by Columbia University as well as other institutions and corporations, often receiving the very highest ratings from attendees.
  • 4. He is a frequent presenter to Investment Professionals on Investment Management Techniques and Business Strategy and has participated as a panelist and presenter for Fortune’s Global CEO Forums, including a presentation shown on closed circuit TV to 88,000 viewers worldwide. Business Week rated Selden as one of the top ten academic advisors to leading corporations. He has led or participated in business (board) reviews for more than 150 companies in 30 countries and is a frequent advisor on CEO presentations to buy-side and sell- side investors. A frequent contributor to Fortune and Business 2.0, Professor Selden has published excerpts of his Angel Customers and Demon Customers in Fortune, Harvard Business Review and American Banker and also appeared on Wall $treet Week, the most widely watched business television show.
  • 7. INCUMBENT’S ADVANTAGE In politic: An incumbent advantage is an advantage gained by someone already in a position, as compared to newcomers. In market: The advantages companies already established in a market have a new entrants.
  • 8. President Obama and Mitt Romney
  • 10. Incumbent firms often face severe difficulties in adapting to radical technological change. For example, the Swiss watch making industry was almost entirely destroyed by one of its own inventions — the quartz. New entrants, such as Seiko and Timex, were extraordinarily successful in commercializing this new energy source for clockworks (Glasmeier, 1991).
  • 11. Radical innovations often initiate a Schumpeterian process of ‘creative destruction’, frequently leading to the replacement of incumbents by new entrants. Complementary assets, strategic alliances, and the incumbent’s advantage: an empirical study of industry and firm effects in the biopharmaceutical industry Frank T. Rothaermel∗
  • 12. Incumbent firms often face severe difficulties in adapting to radical technological change (Foster, 1986). INCUMBENT’S ADVANTAGE THROUGH EXPLOITING COMPLEMENTARY ASSETS VIA INTERFIRM COOPERATION FRANK T. ROTHAERMEL*
  • 13. The advent of the personal computer (PC), for example, destroyed the demand for a wide array of products ranging from typewriters to fully dedicated word-processing systems, while at the same time it created huge opportunities for new PC manufacturers, their suppliers, and the producers of complementary products like software and printers
  • 15. PROFITING FROM INITIAL CUSTOMER RESEARCH Needs to invest in research that exploits its unique access to its customer information. With customers teases out two main customer segments: Strength seekers, Workability seekers, who use ready mix concrete for support who pour cement for columns and other load- interior spaces such as walls and staircases. bearing applications.
  • 16. PRODUCT & SERVICES DIFFERENTIATION
  • 17. PRODUCT SERVICES DIFFERENTIATION DIFFERENTIATION • FORM • ORDERING EASE • FEATURES • DELIVERY • CUSTOMIZATION • INSTALLATION • PERFORMANCE QUALITY • CUSTOMER TRAINING • CONFORMANCE • CUSTOMER CONSULTING QUALITY • MAINTENANCE AND • DURABILITY REPAIR • REALIABILITY • RETURNS • REPAIRABILITY • STYLE
  • 24. Building Your Incumbent’s Advantage 1) Fragmented structure of most market leading companies give ways to invaders. 2) Invaders tend to target vulnerable customer segments; most likely the segment that cut across product groups. 3) The invasion is hard to spot when too much concentration given on the strong accounts and neglecting the vulnerable one. When the sales for strong account keeps growing, the vulnerable ones are easy to disregard.
  • 25. Fighting the Invaders 1. Exploits incumbent’s 2. Organize corporate existing internal structure around information to customer segments needs understand the by assigning teams to economics of the most quickly mend losses and and least profitable sustain the most customers. profitable customers. i. Help give powerful insights into the incumbents’ advantage. ii. Lay the foundation for customer-centric information base. iii. Enable tracking of performance of customer segment.
  • 26. Techniques 1. Begin with small pilot database and steadily add in more customer data from other sources. 2. Begin with simple proof of concept . Discussion among key players across the organization to identify the neglected customer segment, hence create product/service specially tailored to meet their needs .
  • 28. Creating your Information Advantage 1) DO NOT build a customer-segment database from scratch. Do a low-cost analyses of existing databases, which able to extract profits quickly. 2) For a start, DO NOT obsess over accuracy of the database. Identify major customer segments – build segments using the characteristic and behavior that can be extracted from existing record. Constructing a relatively simple customer characteristic database will allow incumbent to rank customers according to their profitability, subsequently identify its Most and Least Profitable Customers.
  • 29. Creating your Information Advantage 3 ) Focus on specific segments, i.e. the top and bottom two deciles, following these steps: i. Use regression analysis to uncover statistically significant relationships among customers’ profitability; behavior vs demographic characteristics . ii. Perform a cluster analysis to group similar individuals into candidate customer segments. iii. Identify actions that can reduce losses from profit-eating customers and can prevent defections by the most profitable customers.
  • 30. Creating your Information Advantage iv. Rank the above actions according to their most effective potential to improve incumbent’s profits. v. Do a more detailed research on what additional resources candidate segments consume other than the one found in the initial profit-contribution calculation. vi. Identify preliminary needs-based customer segments. Assign each candidate segment to a team who will be in charge of finding ways to increase the segment’s profit contribution.
  • 31. Creating your Information Advantage vii. Start expand the customer-centric information system to include the middle deciles of customers.
  • 32. Using Organizing to exploit your advantage. • Build corresponding business unit for the identified needs based segments. • Provide the team with budget and human resource for them to conduct experiments with customers in their segments. • The team to focus on growing the segments’ profitability. • Current product managers to support this new segment team.
  • 33. Purpose of having the Information Base “To yield comprehensive customer profitability analysis by assembling the required inputs for revenue, costs and capital at the customer segment level”. It is an incumbent’s advantage because invaders does not have access to this type of information.
  • 34. Source of Revenue SHIFT TO Accustomed Customer Product or Segments Geography It is CRITICAL TO SHIFT from thinking in terms of cost allocation TO viewing costs strategically as customer investments.
  • 35. CONCLUSION ■ Market-leading companies get attacked when they focus on products and geographic locations rather than on what competitors and disrupters actually target – unmet customer needs. ■ To fend off invaders, an incumbent should strategically analyze and reorganize its customer information base and align its corporate structures accordingly. ■ Unrelenting attention to exploiting your incumbent’s advantage is the key to growing profits organically.