The document on Blue Ocean Planning & Execution contains 8 tools for redesigning existing business models and making better decisions. Internal obstacles to realising highly successful ("blue ocean") models include poor business decisions, uninspiring business goals & targets, and Red Ocean ("Me Too") strategies and models. The presented tools will help you to systematically eliminate these obstacles. The tools can be used to visually redesign existing business models and value chains as well as facilitate decision making. Also, the tools can be used to simply visualize and model the (Blue Ocean) Strategy of a business.
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Blue Ocean Planning & Execution: 8 Tools for ReDesigning Business Models & Making Better Decisions
1. BLUE OCEAN PLANNING & EXECUTION
8 Tools for Redesigning Business Models & Making Better Decisions
Dr. Rod King
rodkuhnking@sbcglobal.net & http://businessmodels.ning.com
http://twitter.com/RodKuhnKing
2. 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 Exponentially Increase the Value Quotient for Core, Peripheral, and Remote
Customers As Well As Non-customers
• To Swim Out of the ‘Red Ocean’ and Make the Competition Irrelevant
• To Significantly Deliver More Value for Customers’ Jobs
• To Facilitate Mergers and Acquisitions
• To Respond to Competitive Pressures Including Commoditization
• To Take Advantage of Emerging Opportunities and Technology
• To Capture Greater Value (Profit) in the Value Chain and Network
• To Provide a More Sustainable and Defensible Competitive Advantage
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
3. HIGHLY SUCCESSFUL REDESIGNS OF CONVENTIONAL BUSINESS MODELS
Businesses With High Value Quotient (VQ)
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
4. WHAT IS THE VALUE QUOTIENT?
A Universal Metric of Success
Ideal VQ Strategy
Everyone to continuously maximize
benefit while minimizing cost
throughout the value chain
+ -
Note
Value Quotient
= Advantage/Disadvantage
= Benefit/Cost
= Strength/Weakness
= Opportunity/Threat
= Reward/Risk
= Positives/Negatives
= Delight/Pain
= Good/Bad
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
5. CUSTOMER JOBS COMPASS: What Jobs Must You Facilitate or Do In a Hierarchy of Customer Needs or ‘Jobs’?
Google Search
Customer Jobs Compass for ELEMENTS OF LONG TERM-BUSINESS MODEL:
Google Search & Facebook
(for Developing Tools to Make Customers Happier As Well As for
Determining What ‘Jobs’ or Niche(s) of Total Happiness to Focus on) Long-term Competitive Advantage Scenarios
• Increase performance of/develop/acquire
software applications that customers hire to do
Physical 'Job' ‘Physical Jobs’
10 • Increase performance of/develop/acquire
software applications that customers hire to do
8 ‘Emotional/Social Jobs’
6
• Increase performance of/develop/acquire
software applications that customers hire to do
4 ‘Intellectual Jobs’
• (Increase performance of/develop/acquire
2 software applications that customers hire to do
Spiritual 'Job' 0 Emotional/Social 'Job' ‘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
Intellectual 'Job' 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 =
Ideal Software (Tool/Internet) Google Search Facebook ‘Perfect 10’
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
6. 8 Tools for Redesigning Business Models & Making Better Decisions
BLUE OCEAN MAP: Global View BLUE OCEAN RADAR: 200,000ft BOND: 100,000ft
• Illustration of Current and Desired • Illustration of Ideal Business Result Ways to Reduce Obstacles to Goal:
Positions of You & Your Competitors • Illustration of “Cost vs. Benefit” • Facilitation of Decision-making
• Illustration of IVQ and Market Seg- Trade-offs (Contradictions) & Trends • Visualization of Strategy
ments Including Red and Blue Oceans • Basic Elements of Value Quotient • Modeling and Testing of Strategy
BLUE OCEAN COMPASS: 60,000ft STRATEGY RADAR: 40,000ft
• Visualization of Shape as well as
TOOLS FOR REDESIGNING • Illustration of Detailed Shape of
Trends of Competing, Desired, and BUSINESS MODELS & Competing, Desired, and Ideal
Ideal Business Results (Models) MAKING BETTER DECSIONS Business Results (Models)
• Design of Value Proposition
VISIONARY PLAN: Strategic View IDEAL VALUE CHAIN: Tactical View WHEEL OF OBSTACLES
• Elements and Resources for • Visualization of Ideal Value Chain • Illustration of Internal Obstacles
Pursuing Goal of Ideal Value Quotient (Business Model) for IVQ Strategy and Constraints to Achieving the
(Blue Ocean), Achieving Blue Ocean • Flows of Information (Cost and Ideal Value Quotient for the Value
Plan, and Totally Engaging Employees Revenue) & Resources Within a Chain or Business Model
and Other Stakeholders Value Chain or Business Model
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
7. 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
∞
BLUE OCEAN
Value Google Search
Quotient
(VQ)
Highly differentiated and
premium-priced/free value chain
Blue Ocean Plan
(+):
DELIGHT
RED OCEAN
* “Me Too” Search Engine
Strategic Lowly differentiated and
Choice Red Ocean Plan low-cost value chain
(Uncontested Experience, Market Space, or New Category) (-): PAIN No. of Competitors
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
8. BLUE OCEAN RADAR: 200,000ft View of the Value Quotient
for Comparing, Evaluating, and Redesigning Business Models As Well As Products and Services
BENEFIT Blue Ocean Radar Showing “Cost vs. Benefit” Trade-offs
(Revenue) Ideal Value Quotient(Blue Ocean) Object/Core Job: ………………………………..…….
10
(cf. Goal of IVQ to
Moore’s Law &
8 Desired VQ = 8/2= “Singularity”)
4
6
4
2 Existing VQ = 2/6=
0.33 < 1
0
(Free)
0 2 4 COST 6 8 10
Value Quotient (VQ) = Benefit/Cost = Revenue/Cost = Ideal Value Quotient (Blue Ocean) Ideal Final Result
of Continuously Implementing IVQ Decisions
Revenue to Cost Ratio = Slope of Value Quotient Line Job To Be Done (JBTD) at No Cost & With No Negative Effect
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
9. Moore’s Law As A Special Case of Law of Increasing Value Quotient
“The number of transistors on an integrated circuit roughly doubles every two years”
BENEFIT Blue Ocean Radar Showing “Cost vs. Benefit” Trade-offs for Computing Power
(Transistors) Ideal Value Quotient (Blue Ocean or “Singularity”) Object/Core Job: Integrated Circuit Board
10
(cf. Goal of IVQ to
Moore’s Law &
8 “Singularity”)
VQ = 8/1= 8
6
4
VQ = 4/1= 4
2
VQ = 2/1= 2
0
(Free) COST
0 2 4 (Size) 6 8 10
Value Quotient (VQ) = Benefit/Cost = Revenue/Cost = Ideal Value Quotient (Blue Ocean) Ideal Final Result
of Continuously Implementing IVQ Decisions
Revenue to Cost Ratio = Slope of Value Quotient Line Job To Be Done (JBTD) at No Cost & With No Negative Effect
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
10. 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”
BENEFIT Blue Ocean Radar Showing “Cost vs. Benefit” Trade-offs in Computing
(Performance) Ideal Value Quotient (INTERNET or “Singularity”) Object/Core Job: Computer/Storage Devices
10
IVQ –Problem Solving
Look within and across
8 industries as well as in
nature for similar or
analogous resolution of
trade-off
6
4
2
0
(Free) COST
0 2 4 (Size) 6 8 10
Value Quotient (VQ) = Benefit/Cost = Revenue/Cost = Ideal Value Quotient (Blue Ocean) Ideal Final Result
of Continuously Implementing IVQ Decisions
Revenue to Cost Ratio = Slope of Value Quotient Line Job To Be Done (JBTD) at No Cost & With No Negative Effect
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
11. 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”
BENEFIT Blue Ocean Radar Showing “Cost vs. Benefit” Trade-offs in Transportation
(Speed) Ideal Value Quotient (LIGHT or Blue Ocean) Object/Core Job: Vehicles
10
IVQ –Problem Solving
Look within and across
8 industries as well as in
nature for similar or
analogous resolution of
trade-off
6
4
2
0
(Free) COST
0 2 4 (Size) 6 8 10
Value Quotient (VQ) = Benefit/Cost = Revenue/Cost = Ideal Value Quotient (Blue Ocean) Ideal Final Result
of Continuously Implementing IVQ Decisions
Revenue to Cost Ratio = Slope of Value Quotient Line Job To Be Done (JBTD) at No Cost & With No Negative Effect
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
12. Using the Blue Ocean Radar to Creatively Resolve Trade-offs
“Someone, Somewhere May Have Already Resolved Your Trade-off or Contradiction”
BENEFIT Blue Ocean Radar Showing “Cost vs. Benefit” Trade-offs in Information Processing
(Amt of Info) Ideal Value Quotient (Blue Ocean or “Infinite Genius”) Object/Core Job: Linear Page
10
IVQ –Problem Solving
Look within and across
8 industries as well as in
nature for similar or
analogous resolution of
trade-off
6
4
2
0
(Free) COST
0 2 4 (Processing Time) 6 8 10
Value Quotient (VQ) = Benefit/Cost = Revenue/Cost = Ideal Value Quotient (Blue Ocean) Ideal Final Result
of Continuously Implementing IVQ Decisions
Revenue to Cost Ratio = Slope of Value Quotient Line Job To Be Done (JBTD) at No Cost & With No Negative Effect
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
13. Using the Blue Ocean Radar to Creatively Resolve Trade-offs
“Someone, Somewhere May Have Already Resolved Your Trade-off or Contradiction”
BENEFIT Blue Ocean Radar Showing “Cost vs. Benefit” Trade-offs in Production
(Quality) Ideal Value Quotient (Blue Ocean or “Singularity”) Object/Core Job: Vehicles
10
IVQ –Problem Solving
Look within and across
8 industries as well as in
nature for similar or
analogous resolution of
trade-off
6
4
2
0
(Free) COST
0 2 4 6 8 10
Value Quotient (VQ) = Benefit/Cost = Revenue/Cost = Ideal Value Quotient (Blue Ocean) Ideal Final Result
of Continuously Implementing IVQ Decisions
Revenue to Cost Ratio = Slope of Value Quotient Line Job To Be Done (JBTD) at No Cost & With No Negative Effect
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
14. Blue Ocean Network Diagram (BOND)
for Quickly Making Better Decisions, Goals, and Strategies in Business (Projects)
“Exponentially increase the
BENEFIT
business’s Value Quotient
(= Benefit/Cost)”
Quality
24x7
Personalization/ CUSTOMERS
COST (Price)
Customization (Sales/Revenue)
Business Action …
Differentiation
(Simplicity/Brand/
Novelty)
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
15. Blue Ocean Network Diagram (BOND)
for Visualizing Blue Ocean Goals & Strategy: Case of Google Search
“Exponentially increase the
BENEFIT
business’s Value Quotient
(= Benefit/Cost)”
Quality (Speed):
INCREASE
24x7
Personalization: CUSTOMERS
COST (Price):
INCREASE (Sales/Revenue) REDUCE
Business Action …
Differentiation
(Simplicity/Brand):
INCREASE
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
16. Blue Ocean Network Diagram (BOND)
for Modeling Blue Ocean Strategy and Assumptions: Case of Google Search
“Exponentially increase the
business’s Value Quotient
+ (= Benefit/Cost)”
?
Quality (Speed)
+
+
+ + -
24x7
+ + CUSTOMERS
Personalization/ + -
COST (Price)
Customization (Sales/Revenue)
+ +
+
+ -
+
+
Business Action …
Differentiation
+ (Simplicity/Brand/ +
Novelty)
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
17. Blue Ocean Network Diagram (BOND)
for Scoring Elements of the Value Quotient for a Business (Project)
BENEFIT
Quality:
(1-10)
24x7
Personalization: CUSTOMERS
COST (Price):
(1-10) (Sales/Revenue) (1-10)
Business Action …
Differentiation
(Simplicity/Brand):
(1-10)
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
18. How to Quickly Develop an IVQ Strategy and Value Quotient
1. Obtain, from customer interviews or questionnaires, scores for the existing
performance of each element or “value quotient factor” 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)
2. 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.
3. Explore scenarios for desired or future profiles that are strongly differentiated
from “Red Ocean” profiles as well as lie closer to the “ideal” Blue Ocean.
4. 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.
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
19. BLUE OCEAN COMPASS: 60,000ft View of the Value Quotient
Google Search
Blue Ocean Compass for 4 ELEMENTS OF BUSINESS MODEL:
“Me Too” Search Engine and Google Search Competitive Advantage Strategies
• Increase quality (speed) to level 9
(for Generally Redesigning a Business Model & Value Proposition)
• Maintain cost at free: level 1
• Increase differentiation (simplicity/relevance/
brand/novelty) to level 8
Quality (Speed) • Increase on-demand; 24x7/(personalization;
10 customization) services to level 8
8 Value Propositions (Innovative Processes)
6
• Higher quality (speed) and greater simplicity
• Higher differentiation (simplicity/relevance/
4 brand/novelty) at no additional cost
• Higher 24x7 personalization (for advertisers/
2 affiliates: AdWords; AdRank; AdSense)
On-demand; 24x7
0 Cost (Price)
(Personalization) Targeted Customer Segments (Niches)
• 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)
Differentiation • Benefit = Quality + Differentiation +
(Simplicity/Relevance) Personalization = (9 + 8 + 8)/3 = 25/3 = 8.3
• Cost = 1
• Value Quotient (VQ) = 8.3/1 = 8.3
Ideal Business Result Google Search "Me Too" Search Engine
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
20. STRATEGY RADAR: 40,000ft View of the Value Quotient
Southwest Airlines
Strategy Radar for 4 ELEMENTS OF BUSINESS MODEL:
the Average Airline and Southwest Airlines Competitive Advantage Strategies
Quality (Q)
(for More Specifically Redesigning a Business Model & Value Proposition)
• Increase speed to level 9
Cost ( C )
• Reduce ticket price to level 1.3
Speed (Q) Differentiation (D)
10 • Reduce lounges to level 1.2
• Reduce meals to level 2.1
8 • Increase friendly service to level 8.8
6
Personalization (P)
Seating Choice (P) Price ( C ) • Reduce personalization to level 1
4
Value Propositions (Innovative Processes)
2 • Higher speed at lower cost
0 • Friendlier service at lower cost
Targeted Customer Segments (Niches)
• Frequent/Low-cost traveler
• Early adopter/innovator; Non-customers
Friendly Service (D) Lounges (D)
Value Quotient (VQ)
• Benefit = Quality + Differentiation +
Customization = (9 + 1.2 + 2.1 + 8.8 + 1)/5 =
Meals (D) 22.1/5 = 4.42
• Cost = 1.3
• Value Quotient (VQ) = 4.52/1.3 = 3.4
Ideal Business Result Southwest Airlines Average Airline
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
21. BLUE OCEAN PLAN: Strategic View of the Business
for Facilitating IVQ Strategy Execution, Organizational Alignment, and Total Employee Engagement
COMPANY BACKGROUND INDUSTRY/BUSINESS PRODUCTS/SERVICES
• Location: Mountain View, California • Industry: Computer (Software); • Internet Search Engine: Google Search
• Founder(s): Sergey Brin; Larry Page Advertising • Online Bidding Platform: Adwords
• Revenue: US$21.79 billion (2008) • Niche: Internet Search; Online Ads • Online Syndicated Ads: Adsense
• No. of Direct Competitors: • Model: Business to Consumer (B2C); • Complementary Apps: Maps, etc.
Business to Business (B2B); Platform
CUSTOMER VALUE PROPOSITION CUSTOMER BENEFITS/EXPERIENCE
BLUE OCEAN PLAN FOR:
• Uncluttered, fast, free, accurate search GOOGLE SEARCH • Simple interface/Easy to use
engine results and experience • Fast, accurate, and relevant results
• Monetization of web page/site • Free search service
• Targeted, measurable, cost- • Unobtrusive ads; Site monetization
effective, and relevant online advertising • Targeted ads based on page’s content
MAIN GOAL/OBJECTIVE/STRATEGY VISION (“Future Headline”) MISSION/CORE VALUES
Blue Ocean Plan for providing an • Search engine platform; Software-as-a- • “To organize the world's information
unprecedented customer experience Service (platform) and make it universally accessible and
• (See Blue Ocean Compass & Blue • Advertising platform useful”
Ocean Map; Value Chain Model; Blue • Gateway to world’s knowledge-base • “Don’t Be Evil”
Ocean Dashboard)
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
22. Ideal Value Chain (Business Model): Tactical View
“Perfect, Free, Simple, and Personalized (PFSP)”
S: SUPPLIERS/MATERIALS E: EMPLOYEES/KNOWLEDGE ASSETS/ M: MACHINERY/EQUIPMENT/
CULTURE FACILITY
• Computers • Highly Productive/Creative workers External
• Servers • (Experienced) Management •Efficient Data Centers/Scalable
• Other Items • Patented PageRank Algorithm Architecture/Server Farms
• Android: Operating System • WiFi Infrastructure
• Software Development Kits (SDK) • Satellite
E: ENVIRONMENT GOOGLE’S VALUE CHAIN P: PROCESSES/STRATEGIES
• Competitors: Yahoo; AOL; MSN; etc. (Business Model) • Procurement; HR Mngt; Operations
• Non-customers/Non-consumers • Technology/R & D/Innovn/Production
• Partners/Complementors • Marketing/Branding/PR/Sales
• Investors/Board of Directors • Distribution/Logistics/Partnering
• Gov./Community (Open Source)/Env. “PFSP” • Customer Service (Relationship Mngt)
C: CUSTOMERS/CONSUMERS R: RETAILERS/DISTRIBUTORS/ O: OUTPUTS/PRODUCT/SERVICE
CHANNELS
• Web Users/Searchers: Desktop/Mobile • Website Owners • Google Search Engine/Search platform
• Website Owners • Content Providers: Individuals/ • Bidding & Advertising Platform:
• Advertisers - > Revenue Corporations (Portals) AdWords; AdSense; AdRank
• Enterprises (Search) -> Revenue • Affiliates; Partners: OEMs; Browsers • Other Products/Apps such as Google
• Software/API Developers Appliance
KEY Revenue (Information Flow) Strategic Question: What is the Value Quotient (VQ) of
elements of the value chain as well as the entire value chain?
Cost (Information Flow)
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
23. Template for Ideal Value Chain (Business Model)
Flows & Resources for “Perfect, Free, Simple, and Personalized (PFSP)”
S: SUPPLIERS/MATERIALS E: EMPLOYEES/KNOWLEDGE ASSETS/ M: MACHINERY/EQUIPMENT/
CULTURE FACILITY
E: ENVIRONMENT IDEAL VALUE CHAIN P: PROCESSES/STRATEGIES
• Competitors (BUSINESS MODEL): • Procurement; HR Mngt; Operations
• Non-customers/Non-consumers Flows & Resources - • Technology/R & D/Innovn/Production
• Partners • Marketing/Branding/PR/Sales
• Investors
“Perfect, Free, Simple, and • Distribution/Logistics/Partnering
• Gov./Community/Society/Environment Personalized” • Customer Service (Relationship Mngt)
C: CUSTOMERS/CONSUMERS R: RETAILERS/DISTRIBUTORS/ O: OUTPUTS/PRODUCT/SERVICE
CHANNELS/INTERFACE
KEY Revenue (Information Flow) Strategic Question: What is the Value Quotient (VQ) of
elements of the value chain as well as the entire value chain?
Cost (Information Flow)
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
24. WHEEL OF OBSTACLES
3 Internal Obstacles to Realizing the Ideal Value Quotient (IVQ) or Blue Ocean
AIG Denver Airport
Poor
Business
Decisions
Enron
Alaska’s Road to Nowhere
“Me Too” Search Engines Detroit Automakers
WHEEL OF
OBSTACLES
Red Ocean Uninspiring
(“Me Too”) Business
Strategies Goals &
& Models Targets
Traditional Airlines Healthcare
“Mom and Pop” Businesses
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
25. INNOVATIVE PROCESSES FOR REDESIGNING BUSINESS MODELS &
PURSUING THE IDEAL VALUE QUOTIENT
(Achieving apparently impossible business goals, strategies, and 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 Collaboration/Long Tail (80-20) • ‘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 INNOVATIVE PROCESSES FOR DOMAIN-PROCESSES/FUNCTIONALITY
• Partnering/Complementing/Feedback REDESIGNING BUSINESS • Digitalization/Idealization/Downsizing
• Merging/(De)Centralizing/Integration MODELS & PURSUING THE • Virtualization/Customization/DIY/JIT
• Networking/Volunteering/Recycling • Zero Defect/Lean/Six Sigma/Analytics
• Convergence/(De)Regulation
IDEAL VALUE QUOTENT • Automatic/Outsourcing/Scalability
• 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/Discounts
• Auction/Co-creation/Collaboration • Distributorship/Affiliates/Network • Fixed product (shell) and recurring/
• Advertising/Freemium/Licensing • Advertising/Auction Platform/Partners replaceable/upgradeable component
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
26. 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
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
27. 4 Axioms of the Ideal Value Quotient (VQ)
1. Every object, which has sustainable growth, generally increases its Value
Quotient (VQ) over time. Otherwise, the object declines and eventually dies.
2. 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.
3. 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.
4. Over time, a species or an ecosystem of real-world objects evolves towards the
ideal object. Otherwise, the species declines and becomes extinct.
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
28. 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)
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
29. 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
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
30. Space-Time Template for the Evolution of a System
For Facilitating the Making of Scenarios (for Business/Product) in Space and Time
Environment
(Supersystem)
PRESENT SYSTEM:
SPACE
System
Elements
INITIAL
ELEMENT Past Present Future
(“SEED”)
TIME
Copyright 2009. Dr. Rod King. rodkuhnking@sbcglobal.net & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
31. REFERENCES
1. Battelle, J. (2005) The Search. New York: Portfolio.
2. Chesbrough, H. (2006) Open Business Models. Boston: Harvard Business School (HBS) Press.
3. Christensen, C.; Raynor, M.E. (2003) The Innovator’s Solution. Boston: Harvard Business School
(HBS) Press.
4. Jarvis, J. (2009) What Would Google Do?. New York: HarperCollins.
5. Kim, W.C.; Mauborgne, R. (2005) Blue Ocean Strategy. Boston: Harvard Business School (HBS)
Press.
6. King, R. (2009) The Infinitely Zoomable Pagelet: How Knowledge Workers Can Overcome
Information Overload in Multi-disciplinary Teams, Projects, and On The Internet. Fresno: Ideal-
Solution Management.
7. 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
Editor's Notes
The most successful businesses and individuals have the highest Value Quotient (in a sea that has no direct competitors).