Simpler Tools for Redesigning Business Models and Making Better Decisions

BLUE OCEAN PLANNING & EXECUTIONSimply Redesigning Business Models & Making Better Decisions Dr. Rod Kingrodkuhnking@sbcglobal.net & http://businessmodels.ning.comhttp://twitter.com/RodKuhnKing
Value Quotient (VQ) Management

“BLUE OCEAN” as an Adjective (Attribute) of the IdealSuccess Criteria for Quick Classification, Design, and Evaluation of “Blue Ocean” Objects
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
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net &http://businessmodels.ning.com & http://twitter.com/RodKuhnKing

WHY REDESIGN EXISTING BUSINESS MODELS?”Greater Competition, Digitalization, and Globalization are Creating Bloody ‘Red Oceans’ for Businesses”

To Exponentially Increase Business Growth and Profitability
To Avoid ‘Ad Hoc’, Reactive, and Uncoordinated Tweaksto Existing Business Model
To Swim Out of the ‘Red Ocean’ and Make the Competition Irrelevant
To Perfectly Align a Business With Customers’ Demand for Higher Value (Quotient)
To Take Advantage of Emerging Opportunities and Technology
To Significantly Redesign Customer Experience for a Higher Value Quotient
To Facilitate Alignment in Mergers and Acquisitions
To Respond to Competitive Pressures Including Commoditization
To Capture Greater Value (Profit) in the Value Chain and Network
To Provide a More Sustainable and Defensible Competitive Advantage

HIGHLY SUCCESSFUL REDESIGNS OF CONVENTIONAL BUSINESS MODELSBusinesses With High Value Quotient (VQ)

WHAT IS THE VALUE QUOTIENT?A Universal Metric of Success and Zoomable Decision-making
Ideal VQ Strategy
Everyone to continuously maximize benefit while minimizing cost throughout the value chain
+
-
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 Plans for a Business Model”Value Quotient Management (VQM) and Zoomable Decision-making”
VISIONARY LEVEL

Customer Jobs Plan
Global Job Plan
200,000ft Plan
100,000ft Plan
60,000ft Plan

STRATEGIC LEVEL

40,000ft Plan
Strategic Plan

OPERATIONAL LEVEL
(Value Chain)

Tactical Plan
Customer Result-Aligned Model (CRAM)
Performance Dashboards

Process of Blue Ocean Planning & Execution for Business Models“A Simpler Way of Managing the Value Quotient Towards the Ideal”
SSTART
Choose (Another) Level and Type of Blue Ocean Plan for

Existing Business Model (Product/Service)
Competitors’ Business Models (Products/Services)

Determine Value Quotient Factors for

Existing /Desired Business Model (Product/Service)
Competitors’ Business Models (Products/Services)

Draw Shape of Business Models. Then, Outline Competitive Strategies. Next, Calculate Value Quotient (VQ) of
Existing/Desired Business Models (Product/Service)
Visionary & Strategic Blue Ocean Plans Done?
No
Yes
Prepare and Implement Tactical Blue Ocean Plans & Monitor VQ of Blue Ocean Projects & Model

CUSTOMER JOBS COMPASS: What Jobs Must You Facilitate or Do In a Hierarchy of Customer Needs or ‘Jobs’?
Google Search
ELEMENTS OF CUSTOMER JOBS-BUSINESS MODEL:
Long-term Competitive Advantage Scenarios

Increase performance of/develop/acquire software applications that customers hireto do ‘Physical Jobs’
Increase performance of/develop/acquire software applications that customers hire to do ‘Emotional/Social Jobs’
Increase performance of/develop/acquire software applications that customers hire to do ‘Intellectual Jobs’
(Increase performance of/develop/acquire software applications that customers hire to do ‘Spiritual Jobs’???)

Long-term Value Proposition

‘Total Happiness’ For All Customer Jobs on the Internet

Targeted Customer Segments (Niches)

‘Short and Long Tail’ of Users on the Internet

Existing Impact of Google Search on Total Jobs

Average Impact of Google on Total Jobs =

(6 + 2 + 5.5 + 2)/4 = 4.3
Impact of Ideal Software on Total Jobs
Impact of Ideal Software on Total Jobs =
‘Perfect 10’
(for Developing Tools to Make Customers Happier As Well As for Determining What ‘Jobs’ or Niche(s) of Total Happiness to Focus on)

REDESIGNING BUSINESS MODELS & MAKING BETTER DECISIONS
BLUE OCEAN RADAR: 200,000ft Plan

Illustration of Ideal Business Result
Illustration of “Cost vs. Benefit” Trade-offs (Contradictions) & Trends
Basic Elements of Value Quotient

BLUE OCEAN MAP: Global Job Plan

Illustration of Current and Desired Positions of You & Your Competitors
Illustration of IVQ and Market Seg-ments Including Red and Blue Oceans

BOND: 100,000ft Plan
Ways to Reduce Obstacles to Goal:

Facilitation of Decision-making
Visualization of Strategy
Modeling and Testing of Strategy

BLUE OCEAN COMPASS: 60,000ft …

Visualization of Shape as well as Trends of Competing, Desired, and Ideal Business Results (Models)
CUSTOMER JOBS COMPASS

TOOLS FOR REDESIGNING BUSINESS MODELS & MAKING BETTER DECISIONS
STRATEGY RADAR: 40,000ft Plan

Illustration of Detailed Shape of Competing, Desired, and Ideal Business Results (Models)
Design of Value Proposition

IDEAL VALUE CHAIN: Tactical Plan

Visualization of Ideal Value Chain (Business Model) for IVQ Strategy
Flows of Information (Cost and Revenue) & Resources Within a Value Chain or Business Model

BLUE OCEAN STRATEGIC PLAN

Elements and Resources for Pursuing Goal of Ideal Value Quotient (Blue Ocean), Achieving Blue Ocean Plan, and Totally Engaging Employees and Other Stakeholders

WHEEL OF OBSTACLES

Illustration of Internal Obstacles and Constraints to Achieving the Ideal Value Quotient for the Value Chain or 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 Search Engine Market
∞
Highly differentiated and premium-priced/free value chain
BLUE OCEAN Google Search
Value Quotient (VQ)
Blue Ocean Plan
(+):
DELIGHT
Lowly differentiated and low-cost value chain
RED OCEAN * “Me Too” Search Engine
Strategic Choice
Red Ocean Plan
(-): PAIN
(Uncontested Experience, Market Space, or New Category)
No. of Direct Competitors

BLUE OCEAN RADAR: 200,000ft View of the Value Quotientfor Comparing, Evaluating, and Redesigning Business Models As Well As Products and Services
Ideal Value Quotient(Blue Ocean)
Object/Core Job: ………………………………..…….
(cf. Goal of IVQ to Moore’s Law & “Singularity”)
Desired VQ = 8/2= 4
Existing VQ = 2/6= 0.33 < 1
(Free)
COST
Value Quotient (VQ) = Benefit/Cost = Revenue/Cost =
Revenue to Cost Ratio = 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

Moore’s Law As A Special Case of the Law of Increasing Value Quotient “The number of transistors on an integrated circuit roughly doubles every two years”
Ideal Value Quotient (Blue Ocean or “Singularity”)
Object/Core Job: Integrated Circuit Board
(cf. Goal of IVQ to Moore’s Law & “Singularity”)
VQ = 8/1= 8
VQ = 4/1= 4
VQ = 2/1= 2
(Free)
COST
(Size)

Using the Blue Ocean Radar to Illustrate Trends in the Evolution of Technology “The Ideal Object Uses Its Internal and “Free” Resources to Instantly Do Its Job at No Cost and Without Any Negative Effect”
Ideal Value Quotient (INTERNET or “Singularity”)
Object/Core Job: Computer/Storage Devices
IVQ –Problem Solving Look within and across industries as well as in nature for similar or analogous resolution of trade-off
Desktop Computer
Mini-computer
Laptop Computer
Palmtop Computer
Old Mainframe Computer
(Free)
COST
(Size)

Using the Blue Ocean Radar to Illustrate Trends in the Evolution of Technology “The Ideal Object Uses Its Internal and “Free” Resources to Instantly Do Its Job at No Cost and Without Any Negative Effect”
Ideal Value Quotient (LIGHT or Blue Ocean)
Object/Core Job: Vehicles
Rocket
Aircraft
Train
Car
Bicycle
Ship
(Free)
COST
(Size)

Using the Blue Ocean Radar to Creatively Resolve Trade-offs “Someone, Somewhere May Have Already Resolved Your Trade-off or Contradiction”
Ideal Value Quotient (Blue Ocean or Zoomable Page)
Object/Core Job: Linear Page
Existing Paradigm (VQ = 6/8 = 0.75)
Breakthrough Paradigm VQ = 8/2 = 4
(Free)
COST
(No. of Pages)

Ideal Value Quotient (Blue Ocean or Zoomable Page)
Object/Core Job: Web Interface
Existing Paradigm (VQ = 6/8 = 0.75)
Breakthrough Paradigm VQ = 8/2 = 4
(Free)
COST
(‘Noise’)

Ideal Value Quotient (Blue Ocean or “Singularity”)
Object/Core Job: Vehicles
Conventional Thinking VQ = 8/7= 1.1
Optimum VQ = 8/4= 2
Existing VQ = 6/4= 1.5
(Free)
COST

BLUE OCEAN NETWORK DIAGRAM: 100,000ft View of the Value Quotientfor Quickly Making Better Decisions, Goals, and Strategies in Business (Projects)
BENEFIT
Ideal VQ Strategy
Quality
24x7 Personalization/ Customization
CUSTOMERS (Sales/Revenue)
COST (Price)
Differentiation (Simplicity/Brand/ Novelty)
Business Action …

BLUE OCEAN NETWORK DIAGRAM: 100,000ft View of the Value Quotientfor Visualizing Goals & Strategy for IVQ : Case of Google Search
BENEFIT
Ideal VQ Strategy
Quality (Speed):
INCREASE
24x7 Personalization: INCREASE
COST (Price): REDUCE
Differentiation (Simplicity/Brand): INCREASE
Business Action …

BLUE OCEAN NETWORK DIAGRAM: 100,000ft View of the Value Quotientfor Modeling Strategy & Assumptions of IVQ: Case of Google Search
Ideal VQ Strategy
Quality (Speed)
+
?
+
+
+
+
-
24x7 Personalization/ Customization
COST (Price)
+
+
+
-
+
+
+
+
-
+
Differentiation (Simplicity/Brand/ Novelty)
+
Business Action …
+
+

BLUE OCEAN NETWORK DIAGRAM: 100,000ft View of the Value Quotientfor Scoring Elements of the Value Quotient for a Business (Project)
BENEFIT
Quality:
(1-10)
24x7 Personalization:
(1-10)
COST (Price):
(1-10)
Differentiation (Simplicity/Brand):(1-10)
Business Action …

BLUE OCEAN COMPASS: 60,000ft View of the Value Quotient
Google Search
4 ELEMENTS OF BUSINESS MODEL:
Competitive Advantage Strategies

Increase quality (speed) to level 9
Maintain cost at free: level 1
Increase differentiation (simplicity/relevance/ brand/novelty) to level 8
Increase on-demand; 24x7/(personalization; customization) services to level 8

Value Propositions (Innovative Processes)

Higher quality (speed) and greater simplicity
Higher differentiation (simplicity/relevance/ brand/novelty) at no additional cost
Higher 24x7 personalization (for advertisers/ affiliates: AdWords; AdRank; AdSense)

Students/Researchers/Internet Users who directly and quickly want information
Early adopter/innovator; Non-customers
Low cost-Advertisers
Website Owners/Content Providers

Value Quotient (VQ)

Benefit = Quality + Differentiation + Personalization = (9 + 8 + 8)/3 = 25/3 = 8.3
Cost = 1
Value Quotient (VQ) = 8.3/1 = 8.3

(for Generally Redesigning a Business Model & Value Proposition)

STRATEGY RADAR: 40,000ft View of the Value Quotient
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 personalization to level 1

Value Propositions (Innovative Processes)

Higher speed at lower cost
Friendlier service at lower cost

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

(for More Specifically Redesigning a Business Model & Value Proposition)

How to Quickly Develop an IVQ Strategy and Value Quotient
Obtain, from customer interviews or questionnaires, scores for the existing performance of each element or “value quotientfactor” on the Blue Ocean Network Diagram (BOND) and for the surveyed or “Red Ocean” company.
Score each element of Value Quotient using a scale from 1 (low) to 10 (high):

Quality: (1-10)
Cost: (1-10)
Differentiation: (1-10)
Personalization (Customization): (1-10)

Plot, on a Blue Ocean Compass, the average score for each element. Then, draw the profile or radar chart for the existing performance of the surveyed company.
Explore scenarios for desired or futureprofilesthat are strongly differentiated from “Red Ocean” profiles as well as lie closer to the “ideal” Blue Ocean.
Choose the Blue Ocean profile with the highest Value Quotient (VQ). Then, derive corresponding IVQ (Blue Ocean) strategies for competitive advantage and value propositions for segments (“niches”) of customers.

BLUE OCEAN STRATEGIC PLAN: Strategic View of the Business
for FacilitatingIVQ Strategy Execution, Organizational Alignment, and Total Employee Engagement
INDUSTRY/BUSINESS

Industry: Computer (Software); Advertising
Niche: Internet Search; Online Ads
Model: Business to Consumer (B2C); Business to Business (B2B); Platform

COMPANY BACKGROUND

Location: Mountain View, California
Founder(s): Sergey Brin; Larry Page
Revenue: US$21.79 billion (2008)
No. of Direct Competitors:

PRODUCTS/SERVICES

Internet Search Engine: Google Search
Online Bidding Platform:Adwords
Online Syndicated Ads: Adsense
Complementary Apps: Maps, etc.

CUSTOMER VALUE PROPOSITION

Uncluttered, fast, free, accurate search engine results and experience
Monetization of web page/site
Targeted, measurable, cost-effective, and relevant online advertising

BLUE OCEAN STRATEGIC PLAN FOR: GOOGLE SEARCH
CUSTOMER BENEFITS/EXPERIENCE

Simple interface/Easy to use
Fast, accurate, and relevant results
Free search service
Unobtrusive ads; Site monetization
Targeted ads based on page’s content

VISION (“Future Headline”)

Search engine platform; Software-as-a-Service (platform)
Advertising platform
Gateway to world’s knowledge-base

MAIN GOAL/OBJECTIVE/STRATEGY
Blue Ocean Strategic Plan for providing an unprecedented customer experience

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

MISSION/CORE VALUES

“To organize the world's information and make it universally accessible and useful”
“Don’t Be Evil”

BLUE OCEAN STRATEGIC PLAN: Strategic View of the Business
for FacilitatingIVQ Strategy Execution, Organizational Alignment, and Total Employee Engagement
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.”

Ideal Value Chain (Business Model): Tactical View
“Perfect, Free, Simple, and Personalized (PFSP)”
E: EMPLOYEES/KNOWLEDGE ASSETS/ CULTURE

Highly Productive/Creative workers
(Experienced) Management
Patented PageRank Algorithm
Android: Operating System
Software Development Kits (SDK)

S: SUPPLIERS/MATERIALS

Computers
Servers
Other Items

M: MACHINERY/EQUIPMENT/ FACILITY
External

Efficient Data Centers/Scalable Architecture/Server Farms
Wi-Fi Infrastructure
Satellite

E: ENVIRONMENT

Competitors: Yahoo; AOL; MSN; etc.
Non-customers/Non-consumers
Partners/Complementors
Investors/Board of Directors
Gov./Community (Open Source)/Env.

GOOGLE’S VALUE CHAIN (Business Model)
P: PROCESSES/STRATEGIES

Procurement; HR Mngt; Operations
Technology/R & D/Innovn/Production
Marketing/Branding/PR/Sales
Distribution/Logistics/Partnering
Customer Service (Relationship Mngt)

“PFSP”
R: RETAILERS/DISTRIBUTORS/ CHANNELS

Website Owners
Content Providers: Individuals/ Corporations (Portals)
Affiliates; Partners: OEMs; Browsers

C: CUSTOMERS/CONSUMERS

Web Users/Searchers: Desktop/Mobile
Website Owners
Advertisers - > Revenue
Enterprises (Search) -> Revenue
Software/API Developers

O: OUTPUTS/PRODUCT/SERVICE

Google Search Engine/Search platform
Bidding & Advertising Platform: AdWords; AdSense; AdRank
Other Products/Apps such as Google Appliance

KEY
Revenue (Information Flow)
Cost(Information Flow)
Strategic Question: What is the Value Quotient (VQ) of elements of the value chain as well as the entire value chain?

Ideal Value Chain (Business Model): Tactical View
“Perfect, Free, Simple, and Personalized (PFSP)”

Pilots
Affable (Friendly) Stewardesses
Management
Other Employees

Fuel Suppliers
Aircrafts and Parts

One Type of Aircraft: Boeing 737
IT/Online Infrastructure
Wi-Fi

E: ENVIRONMENT

Competitors
Partners
Investors /Board of Directors
Gov./Community/Society/Environment

SOUTHWEST AIRLINES’S VALUE CHAIN (Business Model)

Point-to-point Travel: Flying Multiple, Quick, Short Trips
Quick Turnaround Processes
Employee-profit-sharing
Hedging of Fuel Prices

“PFSP”
R: RETAILERS/DISTRIBUTORS/ CHANNELS/INTERFACE

Website (www.southwest.com)
Google Search (AdWords)
TV ads

Low-cost Travelers
Frequent Travelers
Intercity Travelers

Air Travel Ticket/eTicket/Service
Website (www.southwest.com)
Rapid Rewards Program
2/3 Customer Luggage for Free
No frills-meal: ‘Snack Pack’

KEY
Cost (Information Flow)

Template for Ideal Value Chain (Business Model)
Flows & Resources for “Perfect, Free, Simple, and Personalized (PFSP)”
E: ENVIRONMENT

Competitors
Partners
Investors
Gov./Community/Society/Environment

IDEAL VALUE CHAIN (BUSINESS MODEL):
Flows & Resources -
“Perfect, Free, Simple, and Personalized”

Procurement; HR Mngt; Operations
Technology/R & D/Innovn/Production
Marketing/Branding/PR/Sales
Distribution/Logistics/Partnering
Customer Service (Relationship Mngt)

R: RETAILERS/DISTRIBUTORS/ CHANNELS/INTERFACE
KEY
Cost (Information Flow)

SWOT Resources in Value Chain
for Identifying Resources for Projects and Plans to Achieve the Desired or Ideal Value Quotient
S: STRENGTHS
O: OPPORTUNITIES
SWOT Resources
in Value Chain for:
W: WEAKNESSES
T: THREATS

BCRR Impacts in Value Chain
for Assessing the Impacts and Feasibility of Objects, Tasks, and Projects
B: BENEFITS (Now)
R: REWARDS (Later)
Value Chain’s OBJECT/TASK/PROJECT:
C: COSTS
R: RISKS

WHEEL OF OBSTACLES3 Internal Obstacles to Realizing the Ideal Value Quotient (IVQ) or Blue Ocean
AIG
Denver Airport
Enron
Alaska’s Road to Nowhere
“Me Too” Search Engines
Detroit Automakers
Traditional Airlines
Healthcare
“Mom and Pop” Businesses

Why Many Businesses Are Not Achieving Blue Ocean-Success
How to Determine Whether You Need to Adopt Blue Ocean Planning, Strategy, and Execution

Business does not have a tacit or an explicit Blue Ocean Plan and Strategy.
Business does not have and live by Blue Ocean Vision, Value Proposition, and Value Quotient Management.
Business does not have access to a metric for easily defining, measuring, and managing decisions towards the Ideal Value Quotient (Blue Ocean Success) at every level in an organization.
Business does not have access to easy-to-learn-and-use tools for Blue Ocean Planning, Strategy, Execution, and Monitoring.

WHY MANY BUSINESSES ARE NOT ACHIEVING BLUE OCEAN SUCCESS

The business’s resources especially employees are not effectively engaged and aligned with Blue Ocean Planning, Strategy, and Execution.
Business uses an ‘ad hoc’, reactive, and uncoordinated approach to redesigning business model (in contrast to systematic Blue Ocean Planning, Strategy, Execution and Monitoring).
Business is experiencing the 3 obstacles to Blue Ocean Success: inadequate decision-making; uninspiring business goals and targets; Red Ocean (“Me Too”)-strategies and business models.
Extraordinary, no contest-success follows the 4% rule: exceptional and unique success is achieved by 20% of 20% of a given set; this is an iterative application of the 80-20 (Pareto) Principle.

APPENDICES

Innovative Processes for Redesigning Business Models & Pursuing the Ideal Value Quotient (VQ)
Blue Ocean Network Diagram (BOND): What and Why?
4 Axioms of the Ideal Value Quotient (VQ)
Related Concepts of the Ideal Value Quotient (VQ)
The Law of Increasing Value Quotient
Customer Result-Alignment Model (CRAM)
Space-Time Template for the Evolution of a System

INNOVATIVE PROCESSES FOR REDESIGNING BUSINESS MODELS & PURSUING THE IDEAL VALUE QUOTIENT
(Achieving apparently impossible business goals, strategies, and value propositions)
EMPLOYEE PROCESSES

Specialization/IP Creation-Protection
Outsourcing/Sub-contracting/Agents
‘Star’ Performers/Top grading/Fun
Wisdom of the Crowd/Co-creation
Cross-functional Teams/Downsizing

GENERAL PROCESSES

Vertical/Horizontal Integration
Extension/Compression/Removal
Open Collaboration/Long Tail (80-20)
Unbundling/De-integration/Bundling
Convergence/Standardization/Self-X

MACHINERY/FACILITY PROCESSES

Franchise/Leasing/Rental
Localization/Substitution/Reversal
Modularization/Standardization
Asymmetry/’Poka Yoke’/Nesting
Attributes Interdependency

ENVIRONMENT/SUPPLIER PROCESSES

Partnering/Complementing/Feedback
Merging/(De)Centralizing/Integration
Networking/Volunteering/Recycling
Convergence/(De)Regulation
Distributorship/Affiliates/Network

INNOVATIVE PROCESSES FOR REDESIGNING BUSINESS MODELS & PURSUING THE IDEAL VALUE QUOTENT
DOMAIN-PROCESSES/FUNCTIONALITY

Digitalization/Idealization/Downsizing
Virtualization/Customization/DIY/JIT
Zero Defect/Lean/Six Sigma/Analytics
Automatic/Outsourcing/Scalability
Restructuring/Inventive Principles

CHANNEL/WHOLESALERS PROCESSES

Multiple Channels/Syndication/Chain
Pyramid/Multi-level Markets/Wheel
Digitalization/Online/Word-of-mouth
Distributorship/Affiliates/Network
Advertising/Auction Platform/Partners

CUSTOMER PROCESSES

Segmentation/Direct Selling/Branding
Cross-subsidy/Hybridized Markets
Subscription/Leasing/After Sale
Auction/Co-creation/Collaboration
Advertising/Freemium/Licensing

PRODUCT/SERVICE PROCESSES

Product/Service-Platform/Package
Service-focus/Servicing/Upgrading
Performance-based Pricing/Discounts
Fixed product (shell) and recurring/ replaceable/upgradeable component

BLUE OCEAN NETWORK DIAGRAM (BOND)What and Why?
What is the Blue Ocean Network Diagram (BOND)?

A tool for redesigning business models, pursuing the Ideal Value Quotient (IVQ), and making better decisions
Universal tool and visual framework for quickly and systematically eliminating 3 critical obstacles to the Ideal Value Quotient (IVQ): poor business decisions; uninspiring business goals and targets; Red Ocean (“Me Too”) strategies & models
Global view of “What customers want” or “Voice of the Customer”

Why Blue Ocean Network Diagram (BOND)?

Facilitates decision-making for management and employees as well as board of directors
Facilitates organizational alignment and engagement especially for employees; everyone is on the same page and using the same metrics
Provides simple framework for visualizing Blue Ocean Strategy and IVQ
Provides simple visual framework for modeling as well as reviewing business strategies, objectives, models, assumptions, trade-offs, and decisions
Provides transparency in the selection and weighting of “value quotient factors” or decision-making criteria for evaluating possible business choices
Facilitates calculation of the value quotient for a business

4 Axioms of the Ideal Value Quotient (VQ)
Every object, which has sustainable growth, generally increases its Value Quotient (VQ) over time. Otherwise, the object declines and eventually dies.
A real-world object exhibits trade-offs or contradictions: advantages accompa-nied by disadvantages; benefits accompanied by costs; positives accompanied by negatives; delight accompanied by pain; good accompanied by evil.
An ideal object has an ideal Value Quotient (VQ), that is, lives in a “Blue Ocean” with no trade-off or contradiction: infinite advantages and no disadvantage; infinite benefits and no cost; infinite positive effects and no negative effect; infinite delight and no pain; good without any bad. The ideal object has zero mass and uses its internal and ‘free’ resources to perfectly do its job at no extra cost, at any time, and without any disadvantage.
Over time, aspecies or an ecosystem of real-world objects evolves towards the ideal object. Otherwise, the species declines and becomes extinct.

Related Concepts of the Ideal Value Quotient (VQ)

Value Quotient (Value Engineering)
Ideal Final Result (IFR); Ideality (TRIZ); SWOT Analysis (Business Planning)
Benefit/Cost Ratio; Revenue to Cost Ratio (Financial Planning)
Moore’s Law (Gordon Moore); Law of Accelerating Returns; Singularity (Ray Kurzweil)
Disruptive Innovation (Clayton Christensen)
Decision Theory: Rationality; Optimality; Satisficing Behavior (Economics)
Invisible Hand; Market Forces (Economics); 80-20 Rule (Vilfredo Pareto)
Theory of Evolution(Charles Darwin)

The Law of Increasing Value Quotient
The Value Quotient (VQ) of a technological device as well as living system tends to follow the shape of an envelope of S-Curves that progresses towards a point of infinite Value Quotient. Otherwise, the technological device or living system declines and dies.
Value Quotient (VQ)
Envelope of S-Curves
Time

Customer Result-Alignment Model (CRAM) For Ensuring That Customer’s Desired Result Aligns With Value Proposition & Tool of Business Model
CUSTOMER (Segment)

Description/Profile
Problems/Needs
Needs/Jobs/Goals
Core Values/Ideals

ADVANTAGES (+)

Benefit (Revenue)
Useful Effect
Opportunity
Reward

Value Quotient (VQ) = Advantages/Disadvantages
chooses/hires
(pays for)
WANTS (on demand)
obtains
provides
OBJECT (Interface)

Material (Features)
Product (Features)
Service (Features)
Personnel/Business

TOOL

Business (Chain)
Product
Service
Personnel

RESULT/OUTPUT

Tangible Results
Intangible Results
Value Proposition

that provides
(operates on)
THAT YIELDS
provides
enables
obtains
DRIVING FORCE

Tangibles: Profit
Intangibles: Culture
Vision/Mission
Core Values/Ideals

DISADVANTAGES (-)

Cost
Harmful Effect
Threat
Risk/Penalty

Competitors/ Environment

Customer Result-Alignment Model (CRAM)Case of Google Search
CUSTOMER
Web user/researcher
ADVANTAGES (+)

Fast service; time saving
Increase in productivity
Free service
Greater expertise

Value Quotient (VQ) = Advantages/Disadvantages
chooses/’hires’
WANTS (on demand)
obtains
that provides
OBJECT (Interface)
Uncluttered list of relevant and ordered search results in response to query
TOOL
Google Search
RESULT/OUTPUT

High quality information
Fast answer to query
Deeper knowledge
(Real-time) News

that provides
THAT YIELDS
that provides
enables
obtains
DRIVING FORCE

Tangibles: Profit
Intangibles: Culture
Vision/Mission
Core Values/Ideals

DISADVANTAGES (-)

Results cannot be easily saved on hard disk
Limited interactivity with search results

Competitors/ Environment

Space-Time Template for the Evolution of a System
For Facilitating the Making of Scenarios (for Value Quotient of Business/Product) in Space and Time
Environment (Supersystem)
SPACE
PRESENT SYSTEM:
System
Elements
INITIAL ELEMENT
(“SEED”)
Past
Present
Future
TIME
BOBM8. Blue Ocean-Business Models. Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com

REFERENCES
Battelle, J. (2005) The Search. New York: Portfolio.
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.
Jarvis, J. (2009) What Would Google Do?. New York: HarperCollins.
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.
Shuen, A. (2008) Web 2.0. California: O’Reilly.
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