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


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The Value Quotient (VQ) is a simple metric for designing, evaluating, and managing any type of project. This document presents a generic definition of the VQ and shows it at 60,000ft and 40,000ft levels. Southwest Airlines is used as an example and its VQ is calculated.

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

  1. 1. BLUE OCEAN PROJECT MANAGEMENTA Simple Metric for Designing and Managing Blue Ocean Projects  Dr. Rod King<br />Value Quotient (VQ) Management<br />
  3. 3. WHAT IS “BLUE OCEAN”?<br />Blue Ocean PLANNING<br />Blue Ocean Strategy<br />Blue Ocean Mission<br />Blue Ocean Plan<br />Blue Ocean Project<br />Blue Ocean Vision<br />Blue Ocean Product (Design)<br />Blue Ocean Goal<br />Blue Ocean Service (Design)<br />Blue Ocean Objective<br />Blue Ocean BUSINESS MODEL<br />Copyright 2009. Dr. Rod King. & &<br />
  4. 4. BLUE OCEAN MAP: Global View of the Value Quotient<br />for Determining Where You and Your Competitors Currently Are & Where You Must Go<br />IDEAL VALUE QUOTIENT (BLUE OCEAN) <br />Fractal Market Segmentation (Niches) of Short-haul Transportation Market<br />∞<br /> Highly differentiated and premium-priced/free value chain<br />BLUE OCEAN Southwest Airlines<br />Value Quotient (VQ)<br />Blue Ocean Plan<br />(+):<br />DELIGHT<br />Lowly differentiated and low-cost value chain<br />RED OCEAN * Average (“Me Too”) Airline<br />* Car/Bus Transportation<br />Strategic Choice<br />Red Ocean Plan<br />(-): PAIN <br /> (Uncontested Experience, Market Space, or New Category)<br /> No. of Direct Competitors<br />Copyright 2009. Dr. Rod King. & &<br />
  5. 5. WHAT IS THE VALUE QUOTIENT?A Universal Metric of Success and Decision-making<br />+<br />-<br />Note<br />Value Quotient <br />= Advantage/Disadvantage<br />= Benefit/Cost<br />= Revenue/Cost<br />= Strength/Weakness<br />= Opportunity/Threat<br />= Reward/Risk<br />= Relevant Content/Noise<br />= Positives/Negatives<br />= Delight/Pain<br />= Good/Bad<br />Copyright 2009. Dr. Rod King. & &<br />
  6. 6. BLUE OCEAN RADAR for Southwest Airlines200,000ft View of the Value Quotient<br />Ideal Value Quotient (Blue Ocean Transportation)<br />Object/Core Job: Aircraft/Cars<br />Ideal VQ = ‘Perfect 10’<br />Look within and across industries as well as in nature for similar or analogous resolution of trade-off<br />Southwest (VQ = 3.4)<br />Average Airline (VQ = 5.8/6 = 1.0)<br />Car (VQ = 0.9)<br />(Free)<br />COST<br />Value Quotient (VQ) = Benefit/Cost = Revenue/Cost = <br />Reward/Risk = Slope of Value Quotient Line<br />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<br />Copyright 2009. Dr. Rod King. & &<br />
  7. 7. STRATEGY RADAR: 40,000ft View of the Value Quotient (Factors)<br />Southwest Airlines<br />4 ELEMENTS OF BUSINESS MODEL:<br />Competitive Advantage Strategies<br />Quality (Q)<br /><ul><li> Increase speed to level 9</li></ul>Cost ( C )<br /><ul><li> Reduce ticket price to level 1.3</li></ul>Differentiation (D)<br /><ul><li> Reduce lounges to level 1.2
  8. 8. Reduce meals to level 2.1
  9. 9. Increase friendly service to level 8.8</li></ul>Personalization (P)<br /><ul><li> Reduce seating choice to level 1</li></ul>Value Propositions (Innovative Processes)<br /><ul><li> Higher speed at lower cost
  10. 10. Friendlier service at lower cost</li></ul>Targeted Customer Segments (Niches)<br /><ul><li> Frequent/Low-cost traveler
  11. 11. Early adopter/innovator; Non-customers</li></ul>Value Quotient (VQ)<br /><ul><li> Benefit = Quality + Differentiation + Customization = (9 + 1.2 + 2.1 + 8.8 + 1)/5 = 22.1/5 = 4.42
  12. 12. Cost = 1.3
  13. 13. Value Quotient (VQ) = 4.42/1.3 = 3.4</li></ul>Copyright 2009. Dr. Rod King. & &<br />
  14. 14. BLUE OCEAN STRATEGIC PLAN: Strategic View of the Business<br />INDUSTRY/BUSINESS<br /><ul><li> Industry: Airline/Transportation
  15. 15. Niche: Short-haul, low-cost air travel
  16. 16. Model: Point-to-point air travel with ‘no frills’ to secondary city-airports (cf. hub-and-spokes model with meal)</li></ul>COMPANY BACKGROUND<br /><ul><li> Location: Dallas,Texas (USA)
  17. 17. Founder(s): Herb Kelleher; Rollin King (1967 inc.; first flight in 1971)
  18. 18. Revenue: $11 Billion (2008)
  19. 19. No. of Direct Competitors:</li></ul>PRODUCTS/SERVICES<br /><ul><li> Airline
  20. 20. Aircrafts
  21. 21. Air travel/transportation</li></ul>CUSTOMER VALUE PROPOSITION<br />“The speed of a plane at the price of a car …”<br />Targeted Customer Segment: Frequent/low-cost travelers<br />BLUE OCEAN STRATEGIC PLAN FOR: SOUTHWEST AIRLINES<br />CUSTOMER BENEFITS/EXPERIENCE<br /><ul><li> Faster travel at lower cost
  22. 22. Simple fare structure</li></ul>VISION (“Future Headline”)<br />“Do the right thing.” <br />MAIN GOAL/OBJECTIVE/STRATEGY<br />Blue Ocean Strategic Plan for quickly reaching destination at the lowest price<br /><ul><li> (See Blue Ocean Compass & Blue Ocean Map; Blue Ocean PAD; Value Chain Model; Blue Ocean Dashboard)</li></ul>MISSION/CORE VALUES<br />“Dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.”<br />Copyright 2009. Dr. Rod King. & &<br />
  23. 23. REFERENCES<br />Chesbrough, H. (2006) Open Business Models. Boston: Harvard Business School (HBS) Press. <br />Christensen, C.; Raynor, M.E. (2003) The Innovator’s Solution. Boston: Harvard Business School (HBS) Press.<br />Kim, W.C.; Mauborgne, R. (2005) Blue Ocean Strategy. Boston: Harvard Business School (HBS) Press.<br />King, R. (2009) The Zoomable Page for Innovative Thinking in Space and Time:How Geniuses<br /> and World-class Innovators Really Think … And How Anyone Can Do So in 1 Minute or Less.<br /> Fresno: Value Quotient Management.<br />Dr. Rod King<br /> <br />Speaker, Consultant, and Trainer on Business Model Analysis, Design, and Innovation<br /> &<br /><br />