EXPONENTIAL PERFORMANCE IMPROVEMENT & BUSINESS GROWTH
  How Southwest Airlines Improved the Business Model of Red Ocean Ai...
Blue Ocean Compass: Visually Documenting, Analyzing, and Improving the Performance of Business Models in the Airline Indus...
Blue Ocean Map for THE VALUE QUOTIENT OF THE AVERAGE AIRLINE AND SOUTHWEST AIRLINES

                         IDEAL BLUE O...
Company Overview of SOUTHWEST AIRLINES                                   Date: April 28, 2009

                    Author(...
30,000ft Level: Blue Ocean Compass
  60,000ft Level: Blue Ocean Map
 Global Level: Company Overview
Blue Ocean Compass: Visually Documenting, Analyzing, and Improving the Performance of Business Models (in a Given Industry...
Template of Blue Ocean Compass: Visually Documenting, Analyzing, and Improving the Performance of Business Models (in a Gi...
Blue Ocean Map for Simply Mapping, Designing, Executing, and Monitoring a Value Proposition as well as Business Performanc...
Company Overview of …………………………………………………………………..                           Date: …………………………………….………..………..

               ...
INNOVATIVE PROCESSES FOR VALUE CHAIN AND BUSINESS MODEL (for fulfilling challenging value propositions)




  GENERAL PROC...
8 QUESTIONS FOR UNCOVERING OPPORTUNITIES FOR EXPONENTIAL PERFORMANCE IMPROVEMENT & BUSINESS GROWTH




  1. TRADITIONAL CU...
REFERENCES
  1.   Chesbrough, H. (2006) Open Business Models. Boston: Harvard Business School (HBS)
       Press.
  2.   C...
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Blue Ocean Compass: A Dashboard for Simply Designing and Monitoring Blue Ocean Business Models

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This document introduces the Blue Ocean Compass which is a universal dashboard for illustrating and designing the performance of any system including business models. As an example, the Blue Ocean Compass is applied to show how Southwest Airlines radically improved the shape of the business model for Red Ocean Airlines.

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Blue Ocean Compass: A Dashboard for Simply Designing and Monitoring Blue Ocean Business Models

  1. 1. EXPONENTIAL PERFORMANCE IMPROVEMENT & BUSINESS GROWTH How Southwest Airlines Improved the Business Model of Red Ocean Airlines … And Became the Largest Airline in America 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
  2. 2. Blue Ocean Compass: Visually Documenting, Analyzing, and Improving the Performance of Business Models in the Airline Industry Southwest Airlines Blue Ocean Compass for 4 ELEMENTS OF BUSINESS MODEL: the Average Airline and Southwest Airlines Competitive Advantage Strategies Increase quality (speed) to level 9 Reduce cost (ticket price) to level 1.3 Quality (Speed) Increase differentiation (novelty/simplicity) 10 to level 7.6 8 Increase on-demand; 24x7/(adaptability; customization) services to level 3 6 4 Value Propositions (Innovative Processes) 2 Higher quality (speed) at lower cost On-demand; 24x7 Higher differentiation (novelty/simplicity) at 0 Cost (Price) (Customization) lower cost Targeted Customer Segment(s) Frequent/Low-cost traveler Early adopter/innovator; Non-customers Value Quotient (VQ) Differentiation (Novelty/Simplicity) Benefit = Quality + Differentiation + Customization = (9 + 7.6 + 3)/3 = 19.6/3 = 6.53 Cost = 1.3 Ideal Business Model Southwest Airlines Average Airline Value Quotient (VQ) = 6.53/1.3 = 5.03 BOBM. Blue Ocean-Business Models. Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com
  3. 3. Blue Ocean Map for THE VALUE QUOTIENT OF THE AVERAGE AIRLINE AND SOUTHWEST AIRLINES IDEAL BLUE OCEAN (FINAL RESULT) Fractal Market Segmentation of Short-haul Airlines/Car Transportation ∞ BLUE OCEAN Southwest Airlines Benefit Highly differentiated and premium-priced/free value chain Blue Ocean Plan (+): DELIGHT RED OCEAN * Average Short-haul Airlines * Car Transportation/Taxis Strategic Commoditized and Choice Red Ocean Plan low-cost value chain (Uncontested Experience, Market Space, or New Category) (-): PAIN Cost BOBM1.1. Blue Ocean-Business Models. Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com
  4. 4. Company Overview of SOUTHWEST AIRLINES Date: April 28, 2009 Author(s): Dr. Rod King (rodkuhnking@sbcglobal.net) Ref.: …………………………………..……………………. COMPANY BACKGROUND INDUSTRY/BUSINESS PRODUCTS/SERVICES Location: Dallas, Texas (USA) Industry: Airline/Transportation Airline Founder(s): Herb Kelleher; Rollin King Niche: Short-haul, low-cost air travel Aircrafts (1967 inc.; first flight in 1971) Model: Point-to-point air travel with Air travel/transportation Revenue: $11 Billion (2008) ‘no frills’ to secondary city-airports No. of Direct Competitors: (cf. hub-and-spokes model with meal) CUSTOMER VALUE PROPOSITION COMPANY OVERVIEW OF: CUSTOMER BENEFITS/EXPERIENCE “The speed of a plane at the price of a SOUTHWEST AIRLINES Faster travel at lower cost car …” Simple fare structure Targeted Customer Segment: Frequent/low-cost travelers MAIN GOAL/OBJECTIVE/STRATEGY VISION (“Future Headline”) MISSION To quickly reach the destination at “Do the right thing.” “Dedication to the highest quality of the lowest price Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.” BOBM8A. Blue Ocean-Business Models. Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com
  5. 5. 30,000ft Level: Blue Ocean Compass 60,000ft Level: Blue Ocean Map Global Level: Company Overview
  6. 6. Blue Ocean Compass: Visually Documenting, Analyzing, and Improving the Performance of Business Models (in a Given Industry) Worst Business IMAGE Blue Ocean Compass for 4 ELEMENTS OF THE BUSINESS MODEL: Worst Business Model Competitive Disadvantage Strategies (quot;Why Businesses and Value Chains Failquot;) Reduce Quality: Level 1 Increase Cost (Price): Level 10 Reduce Differentiation (Novelty): Level 1 Quality 10 Reduce On-demand; 24x7/(Customization) services: Level 1 8 6 Worst Value Propositions (Innovative Processes) 4 Lowest quality at highest cost (price) Lowest differentiation at the highest cost 2 On-demand; 24x7 Lowest differentiation without adaptability, 0 Cost (Price) convenience, or customization (Customization) Lowest quality without adaptability, convenience, or customization Targeted Customer Segment(s) Dissatisfied customers Differentiation Worst Value Quotient (VQ) (Novelty/Simplicity) Worst Benefit = Quality + Differentiation + Customization = (1 + 1 + 1)/3 = 1 Worst Cost = 10 Worst Value Quotient (VQ) = Benefit/Cost = 1/10= 0.1 BOBM. Blue Ocean-Business Models. Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com
  7. 7. Template of Blue Ocean Compass: Visually Documenting, Analyzing, and Improving the Performance of Business Models (in a Given Industry) Ideal Business IMAGE Blue Ocean Compass for 4 ELEMENTS OF THE BUSINESS MODEL: Ideal Business Model Competitive Advantage Strategies (quot;Perfect, Free, Different, and 24x7 Value Chainquot;) Maximize Quality: Level 10 Minimize Cost (Price): Level 1 Maximize Differentiation (Novelty/ Quality 10 Simplicity): Level 10 Maximize On-demand; 24x7/ (Adaptability; 8 Customization) services: Level 10 6 Ideal Value Propositions (Innovative Processes) 4 Highest quality at lowest cost (premium) 2 Highest differentiation at the lowest cost On-demand; 24x7 0 Cost (Price) Highest differentiation on demand (Customization) (adaptability; mass customization) Highest quality on demand (adaptability) Targeted Customer Segment(s) Every niche: customers; non-customers Ideal Value Quotient (VQ) Differentiation (Novelty/Simplicity) Ideal Benefit = Quality + Differentiation + Customization = (10 + 10 + 10)/3 = 10 Ideal Cost = 1 Ideal Value Quotient (VQ) = Benefit/Cost = 10/1 = 10 (‘Perfect 10’) BOBM. Blue Ocean-Business Models. Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com
  8. 8. Blue Ocean Map for Simply Mapping, Designing, Executing, and Monitoring a Value Proposition as well as Business Performance IDEAL BLUE OCEAN (FINAL RESULT) Fractal Market Segmentation of ………………………………………………………………………. ∞ BLUE OCEAN- Benefit Value Proposition Highly differentiated and premium-priced/free value chain Blue Ocean Plan (+): DELIGHT RED OCEAN- Value Proposition Strategic Commoditized and Choice Red Ocean Plan low-cost value chain (Uncontested Experience, Market Space, or New Category) (-): PAIN Cost BOBM1.1. Blue Ocean-Business Models. Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com
  9. 9. Company Overview of ………………………………………………………………….. Date: …………………………………….………..……….. Author(s): …………………………………………………………………………………….. Ref.: …………………………………..……………………. COMPANY BACKGROUND INDUSTRY/BUSINESS PRODUCTS/SERVICES Location: Industry: Founder(s): Revenue: Niche: No. of Direct Competitors: Model: CUSTOMER VALUE PROPOSITION COMPANY OVERVIEW OF: CUSTOMER BENEFITS/EXPERIENCE Value Proposition: Targeted Customer Segment: MAIN GOAL/OBJECTIVE/STRATEGY VISION (“Future Headline”) MISSION BOBM8A. Blue Ocean-Business Models. Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com
  10. 10. INNOVATIVE PROCESSES FOR VALUE CHAIN AND BUSINESS MODEL (for fulfilling challenging value propositions) GENERAL PROCESSES EMPLOYEE PROCESSES MACHINERY/FACILITY PROCESSES Vertical/Horizontal Integration Specialization/IP Creation-Protection Franchise/Leasing/Rental Extension/Compression/Removal Outsourcing/Sub-contracting/Agents Localization/Substitution/Reversal Open Innovation/Collaboration ‘Star’ Performers/Top grading/Fun Modularization/Standardization Unbundling/De-integration/Bundling Wisdom of the Crowd/Co-creation Asymmetry/’Poka Yoke’/Nesting Convergence/Standardization/Self-X Cross-functional Teams/Downsizing Attributes Interdependency ENVIRONMENT/SUPPLIER PROCESSES DOMAIN-PROCESSES/FUNCTIONALITY Partnering/Complementing/Feedback Digitalization/Idealization/Downsizing INNOVATIVE PROCESSES FOR Merging/(De)Centralizing/Integration Virtualization/Customization/DIY Networking/Volunteering/Recycling VALUE CHAIN AND Zero Defect/Lean/Six Sigma/JIT Convergence/(De)Regulation BUSINESS MODEL Automatic/Outsourcing/Low Cost Distributorship/Affiliates/Network Restructuring/Inventive Principles CUSTOMER PROCESSES CHANNEL/WHOLESALERS PROCESSES PRODUCT/SERVICE PROCESSES Segmentation/Direct Selling/Branding Multiple Channels/Syndication/Chain Product/Service-Platform/Package Cross-subsidy/Hybridized Markets Pyramid/Multi-level Markets/Wheel Service-focus/Servicing/Upgrading Subscription/Leasing/After Sale Digitalization/Online/Word-of-mouth Performance-based Pricing Auction/Co-creation/Collaboration Distributorship/Affiliates/Network Fixed product (shell) and recurring/ Advertising/Freemium/Licensing Advertising/Auction Platform replaceable/upgradeable component BOBM. Blue Ocean-Business Models. Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com
  11. 11. 8 QUESTIONS FOR UNCOVERING OPPORTUNITIES FOR EXPONENTIAL PERFORMANCE IMPROVEMENT & BUSINESS GROWTH 1. TRADITIONAL CUSTOMERS 2. JOBS TO BE COMPLETED 3. CUSTOMER OBSTACLES Who are traditional customers/ What jobs or tasks are traditional What are obstacles, inconveniences, or consumers/competitors of the products customers trying to get completed while interruptions to traditional customers and services? What are other (task-based) using the products and services? Why, while trying to get jobs completed? ways of describing traditional customers/ why, why? How, how, how? Where do the obstacles, inconveniences, consumers/competitors? or interruptions occur? When? 4. ALTERNATIVE PROCESSES & TOOLS 5. SUCCESS CRITERIA In how many and different ways can 8 QUESTIONS FOR UNCOVERING How do customers and other traditional and non-traditional customers OPPORTUNITIES FOR stakeholders know that the jobs are get the jobs completed? What comple- EXPONENTIAL PERFORMANCE successfully completed? mentary jobs can traditional and non- IMPROVEMENT & traditional customers get completed? BUSINESS GROWTH 6. IDEAL PROCESSES & TOOLS 7. BEST BUSINESS MODEL FOR JOB 8. VALUE CHAIN OF CUSTOMERS How can existing/future processes and What are business model and value chain What jobs are the value chains of tools help traditional and non-traditional resources for most efficiently and traditional and non-traditional customers customers to better get the jobs effectively getting complete the most deeply trying to complete? What jobs completed without obstacles, inconve- critical or profitable jobs for customers? precede and succeed the jobs that nience, interruptions, or other pains? customers are trying to complete? BOBM. Blue Ocean-Business Models. Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com
  12. 12. REFERENCES 1. Chesbrough, H. (2006) Open Business Models. Boston: Harvard Business School (HBS) Press. 2. Christensen, C.; Raynor, M.E. (2003) The Innovator’s Solution. Boston: Harvard Business School (HBS) Press. 3. Kaplan, R.S.; Norton, D.P. (1996) The Balanced Scorecard. Boston: Harvard Business School (HBS) Press. 4. Kaplan, R.S.; Norton, D.P. (2008) The Execution Premium. Boston: Harvard Business School (HBS) Press. 5. Kim, W.C.; Mauborgne, R. (2005) Blue Ocean Strategy. Boston: Harvard Business School (HBS) Press. 6. King, R. (2009) The Infinitely Zoomable Page: The Ideal Tool for Business Model Thinking, Design, and Innovation. Fresno: Ideal-Solution 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
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