A Simple Metric for Designing, Evaluating, and Managing Blue Ocean Projects

BLUE OCEAN PROJECT MANAGEMENTA Simple Metric for Designing and Managing Blue Ocean Projects Dr. Rod King
Value Quotient (VQ) Management

COMPANIES THAT ARE SUCCESSFULLY EXECUTING BLUE OCEAN PROJECTS
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net &http://businessmodels.ning.com & http://twitter.com/RodKuhnKing

WHAT IS “BLUE OCEAN”?
Blue Ocean PLANNING
Blue Ocean Strategy
Blue Ocean Mission
Blue Ocean Plan
Blue Ocean Project
Blue Ocean Vision
Blue Ocean Product (Design)
Blue Ocean Goal
Blue Ocean Service (Design)
Blue Ocean Objective
Blue Ocean BUSINESS MODEL

BLUE OCEAN MAP: Global View of the Value Quotient
for Determining Where You and Your Competitors Currently Are & Where You Must Go
IDEAL VALUE QUOTIENT (BLUE OCEAN)
Fractal Market Segmentation (Niches) of Short-haul Transportation Market
∞
Highly differentiated and premium-priced/free value chain
BLUE OCEAN Southwest Airlines
Value Quotient (VQ)
Blue Ocean Plan
(+):
DELIGHT
Lowly differentiated and low-cost value chain
RED OCEAN * Average (“Me Too”) Airline
* Car/Bus Transportation
Strategic Choice
Red Ocean Plan
(-): PAIN
(Uncontested Experience, Market Space, or New Category)
No. of Direct Competitors

WHAT IS THE VALUE QUOTIENT?A Universal Metric of Success and Decision-making
+
-
Note
Value Quotient
= Advantage/Disadvantage
= Benefit/Cost
= Revenue/Cost
= Strength/Weakness
= Opportunity/Threat
= Reward/Risk
= Relevant Content/Noise
= Positives/Negatives
= Delight/Pain
= Good/Bad

BLUE OCEAN RADAR for Southwest Airlines200,000ft View of the Value Quotient
Ideal Value Quotient (Blue Ocean Transportation)
Object/Core Job: Aircraft/Cars
Ideal VQ = ‘Perfect 10’
Look within and across industries as well as in nature for similar or analogous resolution of trade-off
Southwest (VQ = 3.4)
Average Airline (VQ = 5.8/6 = 1.0)
Car (VQ = 0.9)
(Free)
COST
Value Quotient (VQ) = Benefit/Cost = Revenue/Cost =
Reward/Risk = Slope of Value Quotient Line
Ideal Value Quotient (Blue Ocean) Ideal Final Result of Continuously Implementing IVQ Decisions Job To Be Done (JBTD) at No Cost & With No Negative Effect

STRATEGY RADAR: 40,000ft View of the Value Quotient (Factors)
Southwest Airlines
4 ELEMENTS OF BUSINESS MODEL:
Competitive Advantage Strategies
Quality (Q)

Increase speed to level 9

Cost ( C )

Reduce ticket price to level 1.3

Differentiation (D)

Reduce lounges to level 1.2
Reduce meals to level 2.1
Increase friendly service to level 8.8

Personalization (P)

Reduce seating choice to level 1

Value Propositions (Innovative Processes)

Higher speed at lower cost
Friendlier service at lower cost

Targeted Customer Segments (Niches)

Frequent/Low-cost traveler
Early adopter/innovator; Non-customers

Value Quotient (VQ)

Benefit = Quality + Differentiation + Customization = (9 + 1.2 + 2.1 + 8.8 + 1)/5 = 22.1/5 = 4.42
Cost = 1.3
Value Quotient (VQ) = 4.42/1.3 = 3.4

BLUE OCEAN STRATEGIC PLAN: Strategic View of the Business
INDUSTRY/BUSINESS

Industry: Airline/Transportation
Niche: Short-haul, low-cost air travel
Model: Point-to-point air travel with ‘no frills’ to secondary city-airports (cf. hub-and-spokes model with meal)

COMPANY BACKGROUND

Location: Dallas,Texas (USA)
Founder(s): Herb Kelleher; Rollin King (1967 inc.; first flight in 1971)
Revenue: $11 Billion (2008)
No. of Direct Competitors:

PRODUCTS/SERVICES

Airline
Aircrafts
Air travel/transportation

CUSTOMER VALUE PROPOSITION
“The speed of a plane at the price of a car …”
Targeted Customer Segment: Frequent/low-cost travelers
BLUE OCEAN STRATEGIC PLAN FOR: SOUTHWEST AIRLINES
CUSTOMER BENEFITS/EXPERIENCE

Faster travel at lower cost
Simple fare structure

VISION (“Future Headline”)
“Do the right thing.”
MAIN GOAL/OBJECTIVE/STRATEGY
Blue Ocean Strategic Plan for quickly reaching destination at the lowest price

(See Blue Ocean Compass & Blue Ocean Map; Blue Ocean PAD; Value Chain Model; Blue Ocean Dashboard)

MISSION/CORE VALUES
“Dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.”

REFERENCES
Chesbrough, H. (2006) Open Business Models. Boston: Harvard Business School (HBS) Press.
Christensen, C.; Raynor, M.E. (2003) The Innovator’s Solution. Boston: Harvard Business School (HBS) Press.
Kim, W.C.; Mauborgne, R. (2005) Blue Ocean Strategy. Boston: Harvard Business School (HBS) Press.
King, R. (2009) The Zoomable Page for Innovative Thinking in Space and Time:How Geniuses
and World-class Innovators Really Think … And How Anyone Can Do So in 1 Minute or Less.
Fresno: Value Quotient Management.
Dr. Rod King

Speaker, Consultant, and Trainer on Business Model Analysis, Design, and Innovation
rodkuhnking@sbcglobal.net & http://businessmodels.ning.com
http://twitter.com/RodKuhnKing