Managing Innovation

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MANAGING INNOVATION

3.0 Company background

Zipcar is an American car sharing company who provide automobile reservation to its members. This company was founded in year 2000 by Antje Danielson and Robin Chase. The company operates over 12,000 vehicles in urban areas and campuses. This allows access to over one million on-demands (Zipcar, 2020). Avis budget group acquired Zipcar for approximately US$ 500 million in 2014 (Zipcar, 2020). In 2016 Zipcar had one million members across 500 cities in 9 countries and also nearly 500 universities around the world. By that time they were offered nearly 10,000 vehicles to their members.

Zipcar moved from Red Ocean to Blue Ocean by using differentiation and cost leadership strategy. Company follows subscription, pay per use and digitisation business models. Zipcar

MANAGING INNOVATION

provides over 60 different makes and models of vehicles to their members including Hybrid, SUVs, Pickup trucks, Luxury vehicles, Mini vans and cargo vans (Zipcar, 2020).

3.1 Strategy canvas (Kim, 2014)

When Zipcar entered into the market, there was a traditional car renting service which was operated. If Zipcar decided to compete in the same market (Red Ocean), they would have used porter’s strategy or resource-based strategy as sustaining innovations. However, Zipcar decided to move on to Blue Ocean (Bocken, 2017).

First of all, Zipcar created strategic canvas to understand the current situation and the competition of the industry. By analysing the current situation, Zipcar decided to apply cost leadership strategy to create Blue Ocean.

Strategy canvas shows the path to Blue Ocean. Strategy canvas for Zipcar at the launch as follows.

(Source - Kim, 2014)

3.2 Four action frame work (Kim, 2014)

According to four actions framework, Zipcar decided what factors they can eliminate, raise, reduce and create. Here they use cost leadership strategy to create value for the customer.

To get into Blue Ocean, Zipcar decided to eliminate a few factors from traditional car hiring industry. They decided what they can create to enhance the customer value.

When Zipcar launched in the year 2000, this is how they utilised four actions framework.

Prices Sales Rep Paper Work Hub Flexibility Availability Ease of use

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Strategy Canvas Zipcar

Zipcar Traditional

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(Source - Kim, 2014)

Zipcar decided to eliminate paper work, sales representatives and venue (Hub). They raised flexibility and availability. Created mobile App for ease of use and reduce the customers hassle and stress.

3.3 Business Model Canvas (Osterwalder, 2015) (Refer Appendix 7) Zipcar Business model canvas reflects on how Zipcar enter into market and how they position themselves in the market. Business model canvas at the beginning of the company as follows,

Eliminate

Sales rep, Paperwork,

Hub

Raise

Flexibility, Availability

Create

Ease of use, Mobile App

Reduce

Hassle

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(Source - Osterwalder, 2015)

When company grows over the years, Zipcar had to face into competition. There are many companies that come into market. In this situation, the Blue Ocean turned into Red Ocean. With the introduction of Zipcar, they implemented cost leadership structure to gain advantage. Create value by cost cutting and eliminating a few activities.

As the competition rises, they had to restructure the strategy curve. This time they used differentiation strategy. They need to be different to create value. Later they were disruptive to the market by using differentiation.

Restructured strategy canvas as follows

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(Source - Kim, 2014)

This strategy canvas illustrates how they dominate the market by adding value and differentiate themselves from others.

Four actions frame that the company must have used will illustrates from following diagram.

(Source - Kim, 2014)

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Create

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Reduce

Hassle, price, additional fee,

complexity

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With the new strategy curve, company recognised that they needed to be different from the competition. Therefore, they have changed their business model according to the company value proposition. Based on that, new business model canvas illustrates as follows (Osterwalder, 2015).

(Source - Osterwalder, 2015)

4.0 Company future developments

4.1 Digitalisation

Technology plays a significant part in the modern world. AI and digitalisation is being used in many industries. In the travel and holiday sector, it could start from electronic passport gate to booking a car or hotel. Zipcar is planning to interconnect all these sectors together to provide customer a hassle free and stress-free holiday or journey. In terms of this, Zipcar is planning to introduce a 24hours system where you have access to many sectors including flight arrival notification to booking a hotel or hiring a car (Avis, 2020).

4.2 Improvement in maintenance and damage management system

Customers would be allowed to use Zipcar app to take 360-degree images of the car to provide detail about any damage to maintain full transparency (Avis, 2020).

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4.3 Provide full interconnected transport service to its customer and

business.

Zipcar has launched more than 100,000 cars to meet the future needs of customers. Operation of mobility lab in Kansas could pilot new customer experience and collaboration with cities. The migration of the entire platform to the cloud also enhances future development of technology. The new app provides you straight to vehicle access by passing the rental desk completely. This gives the customer access to have complete control of their rental from start to finish. The new app is designed to select the exact car that you want not the car group, just 2 hours before your rental starts (Zipcar, 2020).

Enable customer to connect with the car by using any device that they use. This allows customer to unlock the car and locate the car by flashing lights. Real time reports and personalised preferences like seating position or radio stations are remembered to enhance customer loyalty.

4.4 Helping government with zero emission project

Zipcar 2015 vision is to reduce CO2 emission. As a result of that, company are planning to use all electric cars in the future. They are planning to reduce 160,000 tonnes of CO2 by using 9,000 shared electric cars (Zipcar, 2020).

5.0 Own Idea for Future Development

Suggestions for the future developments are radical and disruptive innovations.

5.1 E-Banking

Zipcar e-Banking - Use of disruptive innovation and diversification theory Zipcar can expand their business in to new market with new product.

5.2 Air Taxi

This innovation is about air taxis using AI technology. The taxi will operate using autonomous vehicle (Auto Pilot System). This Taxi will be run by using Hydrogen Power as world is now moving towards hydrogen power in the future (CleanTechnica, 2020).

Strategy canvas for future innovation is as follows

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Four action frame work for future development

The rider will have full freedom while having a ride. The use of chip card will be eliminated. Air Taxi will respond to the customer’s voice and voice recognition technology will be utilised. The taxi will come to your location and pick you up. The taxi will take the customer from A to B off the ground. This will reduce traffic and the duration of the journey. To reduce CO2 emission, Hydrogen power will be utilise. By using air taxi customer will get Eco friendly ride with freedom.

5.3 Use of Disruptive and Diffusion innovation theory

With disruptive, companies innovate faster than customers lives change. This is a radical innovation for Zipcar cars sharing model. This innovation is about Air Taxis using Autonomous (Auto Pilot) vehicles. Zipcar can be disruptive by introducing this model to the car sharing market.

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Zipcar

Air Taxi

Eliminate

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Raise

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Reduce

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Time, Traffic

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This innovation may use both disruptive and diffusion theories. In the car sharing market, people already know about the use of technology such as book a car online, use of chip card and payment online. However, there are customers who look for new innovation and new technology. According to disruptive innovation, there are four different categories of customers. Low Quality Use, Medium Quality Use, High Quality Use, Most Demanding use (Liu et al, 2020). I think car sharing business is in High Quality Use stage at the moment. Therefore, we can introduce something that is disruptive and can serve most demanding segments. This is where we introduce Air Taxis.

This disruptive innovation could fall into diffusion. In the Diffusion theory, there are five stages, Innovators, Early Adopters, Early Majority, Late Majority, Laggards (Refer Appendix 8) (Davila et al, 2012).

In this case, Innovators would be a young generation who look for something exciting. They could be Zipcar members. Early Adopters could be Zipcar members who already observing the Innovators. Early Majority would find this product with advertising or WOM. This is when the company use three tier non-customer model (Davila et al, 2012) to find new customers. Once you reach to this segment of customer, there is another segment who is observing them. They will adopt this product after. By this time, this will become familiar to market. So, the Late Majority will tend to adopt this. Finally, Laggards may or may not adopt this new innovation. They might stick with traditional car sharing system or the system that they already adopted.

6.0 Conclusion

Organisations use different strategies to compete in current market (Red Ocean). Strategies are long term decision that organisations made in order to compete in the market. Porters five force and resource-based strategy will be use to compete in the Red ocean. However, innovations keep organisations alive in the competition. Blue ocean innovation is where organisations find uncontested market. Blue ocean innovation theory helps organisation to step in to uncontested market. In order to gain competitive advantage organisation has to come up with innovative ideas. This report illustrated how Zipcar introduce them to the market and how they invade the market using blue ocean innovation. In order to implement Blue ocean theory organisations must understand what customer need and how company can create value to gain competitive advantage. This could do by using strategy canvas and four actions frame work. Finally it conclude that success of an organisation depend on innovations.

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7.0 Reference

• 50MINUTES.COM (2015) Blue Ocean Strategy: Innovate your way to success and push your business to the next level. Management & Marketing, Primento Publishing.

• Bocken, N. (2017), "Business-led sustainable consumption initiatives: impacts and lessons learned", Journal of Management Development, Vol. 36 No. 1, pp. 81- 96. Available at - https://doi-org.roe.idm.oclc.org/10.1108/JMD-10-2014-0136 (Accessed 20.11.2020)

• Christensen, Clayton M. (2015) Innovator's Dilemma: When New Technologies Cause Great Firms to Fail. The management of innovation and change series. Harvard Business review Press.

• Clean Technica (2020) Hydrogen Power For Heavy Trucks In China And All The Ships At Sea. Available at - https://cleantechnica.com/2020/11/22/hydrogen-power-for- heavy-trucks-in-china-and-all-the-ships-at-sea/amp/ (Accessed 27.11.2020)

• Davila, T., Epstein, M and Shelton, R (2012) Making innovation work: how to manage it, measure it, and profit from it. Updated edition. Pearson FT Press.

• Drucker, P (2014) Innovation and entrepreneurship. Routledge Classics, New edition. Routledge.

• Fast company (2010) Stories about Zipcar Available at https://www.fastcompany.com/company/zipcar (Accessed 21.11.2020)

• Fast company (2013) Avis Budget Car To Buy Zipcar For $500 Million Available at - https://www.fastcompany.com/3004382/avis-budget-car-buy-zipcar-500-million (Accessed 22.11.2020)

• Fast Company (2019) An elegy for Car2Go, the smarter Zipcar rival that lost its way Available at - https://www.fastcompany.com/90446387/this-smartphone-enabled- car-sharing-service-was-fantastic-while-it-lasted (Accessed 21.11.2020)

• Johnson, G., Whittington, R., Scholes, K., Angwin, D. and Regner, P. (2017) Exploring Strategy: text and cases. (11th ed.) Harlow: Pearson Education.

• Kim Chang (2020) Blue ocean, what is Blue ocean strategy Available at - https://www.blueoceanstrategy.com/what-is-blue-ocean-strategy/ (Accessed 20.11.2020)

• Kim, W. Chan (2014) Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market Space and Make the Competition Irrelevant. Expanded edition. Harvard Business review Press

• Kim, W. Chan (2017) Blue Ocean Leadership (Harvard Business Review Classics). Harvard Business Review Classics, Harvard Business review Press.

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• Leavy, B. (2018), "Value innovation and how to successfully incubate “blue ocean” initiatives", Strategy & Leadership, Vol. 46 No. 3, pp. 10-20. Available at - https://doi- org.roe.idm.oclc.org/10.1108/SL-02-2018-0020 (Accessed 19.11.2020)

• Liu, W., Liu, R.-h., Chen, H. and Mboga, J. (2020), "Perspectives on disruptive technology and innovation: Exploring conflicts, characteristics in emerging economies", International Journal of Conflict Management, Vol. 31 No. 3, pp. 313- 331. Available at - https://doi-org.roe.idm.oclc.org/10.1108/IJCMA-09-2019-0172 (Accessed 23.11.2020)

• Osterwalder, A (2010) Business model generation: a handbook for visionaries, game changers, and challengers. Hoboken, New Jersey: John Wiley & Sons Inc.

• Raconteur (2019) Pioneering the future of mobility Available at - https://www.raconteur.net/sponsored/pioneering-the-future-of-mobility/ (Accessed 19.11.2020)

• Randall, R.M. (2015), "W. Chan Kim and Renée Mauborgne dispel blue ocean myths", Strategy & Leadership, Vol. 43 No. 2, pp. 11-14. Available at - https://doi- org.roe.idm.oclc.org/10.1108/SL-01-2015-0007 (Accessed 20.11.2020)

• Stars (2018) Analysis of business models for car sharing Available at - http://www.lgi- consulting.com/wp-content/uploads/2019/10/STARS-D3.1.pdf (Accessed 22.11.2020)

• Sullivan (2008) Defining Innovation Available at - https://www.sagepub.com/sites/default/files/upm-binaries/23137_Chapter_1.pdf (Accessed 20.11.2020)

• Taylor, S, P (2017) What is innovation? A study of the definitions, Academic models and applicability of innovation to an example of social housing in England. University of Cumbria. Open Journal of Social Sciences, 5 (11). pp. 128-146. Available at - https://insight.cumbria.ac.uk/id/eprint/3475/1/Taylor_WhatIsInnovation.pdf

• The Guardian (2014) Driverless cars - the future of transport in cities? Available at - https://www.theguardian.com/sustainable-business/driverless-vehicles-future-car- sharing (Accessed 23.11.2020)

• Trade Brains (2020) What exactly is a Blue Ocean Strategy? Available at - https://tradebrains.in/blue-ocean-strategy/ (Accessed 20.11.2020)

• Vox (2017) The man-made world is horribly designed. But copying nature helps. Available at - https://www.vox.com/videos/2017/11/9/16628106/biomimicry- design-nature (Accessed 22.11.2020)

• Wunker, S. (2012), "Better growth decisions: early mover, fast follower or late follower?", Strategy & Leadership, Vol. 40 No. 2, pp. 43-48. Available at - https://doi- org.roe.idm.oclc.org/10.1108/10878571211209341 (Accessed 21.11.2020)

• Wyatt Lehn, Connor Lew, Jack Weller and Jon Maciver (No Date) Blue ocean strategy. Fostering creativity Available at - https://citystudiocnv.com/wp- content/uploads/2019/12/Final-Group-Project-Blue-Ocean-Strategy-grp-1.pdf (Accessed 21.11.2020)

• Zipcar (2020) Zipcar over view Available at - https://www.zipcar.com/press/overview (Accessed 18.11.2020)

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8.0 Appendix

8.1 Appendix 1

(Source: Kim, 2014)

8.2 Appendix 2

Porters five force

(Source: Johnson et al, 2017)

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8.3 Appendix 3

Strategy canvas

(Source: Kim, 2014)

8.4 Appendix 4

(Source: Kim, 2014)

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8.5 Appendix 5

Three tiers of noncustomers

(Source: Kim, 2014)

8.6 Appendix 6

Buyer utility map

(Source: Kim, 2014)

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8.7 Appendix 7

(Source: Osterwalder, 2010)

8.8 Appendix 8

The corresponding Classic Bell-Shaped Adopters Curve