Topic: Declining Markets
Post financial crisis, business models are truly tested in their aptness to declining markets. Some models are challenged to an extent where it is necessary to revise its components, so that it is better fit to withstand the market condition.
For confidentiality reasons, there will not be full disclosure of the process and the parties involved. The scenarios are meant to provide an insight into how companies have received input, without compromising the value that is meant solely for the participants of the given process.
The market for travels in the Nordic region has declined (40% in Finland, 25-30% in Denmark and Sweden, and a minor decline in Norway), but this company at hand has maintained its volume in Denmark, and has gone from no. 3 to market leader. The company has successfully kept 90% of its clients while gaining an important client, the Danish State. Furthermore, the company has renegotiated its covenant, and is now in a h3 and healthy financial position.
However, there is an acceptance of travel agencies being at a late stage in the product life cycle, and currently the most important competitive leverage is low prices. In order to maintain leadership and market share, the company needs to create value for its clients. In the travel business, a traveling agency is a commodity to clients, and seemingly, the brand is one of the only elements that can be used as its competitive advantage. It is not economically favorable to lower the prices for the travelling agency, so the company must form a competitive advantage that reaches beyond prices and brand - an advantage, which would make it possible to keep customers, maintain prices and volume, and extend the product life cycle or add new services.
How do we successfully incorporate alternative services in our value chain, and where will value be added in the value chain in the future?
How do we make our content visible in order to keep existing clients, and what are the clients' reasons to buy in 2 years?
As noted, for confidentiality reasons, there will not be full disclosure of the input.
The value chain was scrutinized and there was a clear need to assess the innovation process.
- Firstly, it was proposed that the company needed to analyze its core business areas in order to define the company's culture. When this was done, the company would have a better notion of which direction to steer innovative measures.
- Secondly, it is vital to analyze the customers continuously so that the company is always up to date on which needs they have and which segments that are the most attractive
- Thirdly, in order to strengthen its innovation process, the company was advised to apply the Stage Gate model, which would provide a structured approach in engaging users in the innovation process. In order to insure flexibility to the model, certain tactics were proposed, such as introducing a maverick, who can jump over the grates in the process.
This model was not so widely used in this line of business and not at all known by this company. Sparring with the peer executives came to the natural conclusion of using it as a relevant input to the innovation initiatives as the first significant step.