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Blue ocean
- 1. Presenter:
- 2. A very long document made up of mishmash data from different people of lengthy description of current industry conditions and competitive situations followed by a discussion of how to increase market shares, capture new segments, or cut costs. Then an outline of goals and budgets with graphs and spreadsheets
- 3. Develop a clear picture of how to break from the competition No ‘muddle’— easy to understand and communicate for effective execution Focus on the big picture, not the numbers • Lessens chance that strategy will be a red ocean move • No documents, only a canvas • Consistent in unlocking employee creativity to blue ocean strategy
- 4. Drawing a strategy canvas does 3 things: Shows strategic profile of an industry by clearly depict the factors (and possible future factors) that affect competition among industry players Shows strategic profile of current and potential competitors and which factors they invest in strategically Shows company’s value curve depicting how it invests in the factors of competition and how it might invest in the future
- 5. Had been struggling for a long time with an ill-defined and poorly communicated strategy Deeply Divided : Began the strategy process by bringing together upper management from Europe, N. American, Asia, and Australia corporate culture =“Nuts in the field, brains in the center”
- 6. 1. Visual Awakening 2. Visual Exploration 3. Visual Strategy Fair 4. Visual Communication
- 7. Compare your business with your competitors’ by drawing your “as is” strategy canvas. See where your strategy needs to change. Discussing strategy before resolving differences Executives are reluctant to accept change
- 8. Price Risk management consultancy Corporate dealers Flexible payment terms Speed Relationship management Ease of use Responsiveness Knowledge EFS and its Nonbank Competitors Banks Offerings Competitive Factors High Low
- 9. Price Electronic data interchange Real-time rates Customer support Web site attractiveness Speed Ease of use Accuracy Security EFS Online ClearSkies Other Online Competitors Offerings Competitive Factors High Low
- 10. Send team hands on approach. • How people use or don’t use products or services. Managers cannot outsource the face to face interaction. • Often rely on reports from people who are not directly impacted. • “ A company should never outsource its eyes. There is not substitute for seeing for yourself.”
- 11. EFS sent managers into the field to explore the paths to create a blue ocean. Interviewed people involved with corporate foreign exchange. Involved people and companies who could benefit from using their services. Looked at subordinate products and services that their customers used.
- 12. • Speedy confirmation of transactions was item that customers valued most. • What they thought was important turned out not to be what the customer thought was important. • Because of these findings, EFS was able to reformulate new strategies. • Redid the value curves and formulated new compelling taglines that fit their business model. Managers research showed that conclusions were inaccurate.
- 13. For each visual strategy team had to write compelling tagline. Led to competition between the two teams and process was more enjoyable in developing blue ocean strategies Hands on approach with fieldwork is important for managers. “When you keep your hands on the objects in view, it gives you a far better idea about the object than if seen otherwise.” Washington University psychologists Great strategic insight come from seeing what is beyond the boundaries and borders
- 14. Following the visual strategy fair, the teams were able to draw a value curve that was a truer likeness of the existing strategic profile than anything they had produced earlier. They realized that 1/3 of what they had thought were key competitive factors were, in fact, marginal to customers. Another 1/3 either were not well articulated or had been overlooked in the visual awakening phase. It then became clear that the executives needed to reassess things such as EFS’s separation of its online & traditional business. After all 12 strategies were presented, each judge was given 5 sticky notes and told to put them next to his/her favorite, then explain why they did not choose certain curves. Attendees included… senior corporate executives noncustomers customers of competitors demanding EFS customers (6 by the online group/6 by the offline group) Both teams presented their strategy canvases at a visual strategy fair.
- 15. EFS : Before and After EFS After Strategy Tagline The Federal Express of corporate foreign exchange : •Easy , reliable ,fast and track able Offerings Competitive Factors High Low EFS After Strategy EFS and Other Traditional Competitors Before Strategy
- 16. The new value curve exhibited the criteria of a successful strategy, and it displayed more focus than the previous strategy Figure summarize EFS’s 4 actions (Eliminate-Reduce- Raise-Create Grid) to create value innovation, which is the cornerstone of blue ocean strategy. Eliminate Relationship Management Raise Ease of use Security Accuracy Speed Market commentary Reduce Account Executives Corporate Dealers Create Confirmation Tracking
- 17. EFS received a level of feedback they never expected. 1/3 of what they thought were key factors were in fact marginal to customers They learned that they needed to reevaluate long-held assumptions.
- 18. They were able to draw a value curve that was a truer likeness of the existing strategic profile than anything they had produced earlier. They were in a position to draw a future distinct strategy. They were able to shift focus from account executives to integration with online services. They could offer payment tracking similar to FedEx and UPS do for parcels “The FedEx of corporate foreign exchange: easy, reliable, fast, and trackable.”
- 19. This last step is important because you are to communicate the future strategy in a way for all employees to understand. When communicating the future strategy, you need to “dumb it down”. All employees, in all departments, need to understand. Use only one page for easy comprehension. Make sure everyone understands. Support only plans in the direction of the new strategy.
- 20. History has shown it to be very helpful to put the firm’s new and old strategic profiles on one page. This makes it easier for all employees to see where their company has been, and where it needs to go. Used the one-page picture to demonstrate to all employees Employees could see clearly where the company was and where it needed to focus to have a promising future. Senior managers held meetings discussing the picture and what needed to be eliminated and raised to pursue a blue ocean.
- 21. Visualizing strategy can help managers predict and plan the company’s future growth Pioneers: •Offer unprecedented value •Mass following of customers •Blue ocean strategists: most powerful sources of profitable growth Settlers : “Me-too businesses” •Conform to basic shape of the industry •Confined to Red Oceans with low growth trajectory Migrators •Give customers more for less, don’t alter basic shape •Offer improved value but not innovative value •Fall between red and blue oceans •Reasonable growth expected, but not exploiting potential growth
- 22. A useful exercise for corporate management profitable growth is to plot the company’s current and planned portfolios on PMS map If current and planned portfolios consist mainly of settlers then: • (red ocean) and needs to push for value innovation If current and planned portfolios consist mainly of migrators then: • Reasonable growth can be expected but they are not exploiting its potential fro growth The more an industry is populated by settlers, the greater is the opportunity to value-innovate and create a blue ocean of new market space Pioneers Migrators Settlers Today Tomorrow
- 23. Traditional strategic planning can be ridiculous waste of time due to: • Being documentation driven • Number crunching • Excessive bargaining • inflexibility However, managers have an appetite for change
Editor's Notes
- Kim, W. C. and R. Mauborgne. 2002. Charting your company's future. Harvard Business Review (June): 77-83. Summary by Neil Escalante Master of Accountancy Program University of South Florida, Summer 2003 This article is mainly a blueprint for making a visual chart of a company’s strategy. The authors of the article believe that seeing a visual chart is vital for easy communication of strategic plans and company goals. This chart is known as a strategy canvas. Drawing strategy canvases achieves three main objectives. First, it displays the present and tries to predict future factors that affect competition in an industry thereby showing the industry’s strategic profile. Second, it presents the strategic factors that are present and that potential competitors invest in, thus giving their strategic profile. And finally, it illustrates the company’s strategic profile (also known as the value curve) by showing which factors of competition the company invests in currently and possibly in the future. This value curve is the basic component of the strategy canvas. The graphic below illustrates the strategy canvas of the short-haul airline industry and Southwest Airline’s unique strategy within the industry.
- The experience: Europe vs. America The power of the website EFS strategy vs. competitors (Clearskies) The authors believe that a good strategy has three qualities: focus, divergence, and a compelling tag line. Every strategy must have a focus. This should be easily identifiable when looking at a value curve. In the example above, it is plain to see that Southwest Airline puts more emphasis on service, speed and frequent departures than its competitors. While other things like meals, lounges, and seating options are offered at a bare minimum. Looking at the value curve also reveals the divergence of the company’s strategy. While other airlines have similar strategies, Southwest has become a pioneer by providing faster and more frequent flights. In fact, the revolutionary strategy of not investing in meals and seating options has allowed Southwest to set the price of its tickets way below the industry standard. A compelling tag line is evidence of a strong strategy. The article defines the Southwest tag line as “The speed of the plane at the price of the car – whenever you need it.” Clearly this reflects the company’s strategy of speed convenience and price. The competitors cannot offer any tag line that would demonstrate a unique strategy. The authors continue to provide considerable detail on how to go about drawing a strategy canvas. It gives account of how a company, under the pseudonym European Financial Services (EFS), brought together more than 20 of its senior managers from all over the world and had them produce value curves for the company’s traditional form of business as well as their online business. According to the account, it was very difficult for the executives to determine their current corporate strategy. Also, it was hard to establish what changes needed to be made to keep the company competitive. Kim and Mauborgne indicate that there are four steps involved in visualizing strategy: visual awakening, visual exploration, visual strategy fair, and visual communication. The purpose of the first part of the EFS story was to bring about the concept of Visual Awakening. The idea is that you need to be able to recognize your current strategy. This should be compared to what you perceive your competitors’ strategies to be. These should be charted and compared to see if any apparent changes need to be made. This step produced two strategy canvases that revealed defects in the company's strategy. An adaptation of one of these illustrations appears below.
- The Four Steps of Visualizing Strategy: A summary Visual Awakening – Compare your business with competitors’ businesses by creating an “as is” strategy canvas. Discuss what changes should be made. Visual Exploration – Management must go into the field and decide where best to implement the 6 paths of Blue Oceans. Observe advantages and disadvantages of new products and services. Decide which factors to keep, eliminate, or modify. Visual Strategy Fair – Draw a second strategy canvas based on observations from time spent in the field. Receive feedback from customers, competitors’ customers, and employees. Use this feedback to construct your final canvas. Visual Communication – Distribute all drafts of your strategy canvas on a single page for comparison. Accept projects and operational moves only if they are in-line with your new strategy.
- Step 1: Helping Executives Understand Ask them to draw the value curve of their company’s strategy bring home the need for change This can be a forceful wake-up call for companies to challenge their existing strategies Common Mistakes: Discussing changes in strategy before resolving differences of opinion about the current state of play Executives are often reluctant to accept the need for change Executives’ answer: A highly determined leader or a crisis
- The second stage in visualizing a strategy is Visual Exploration. During this stage you have to actually perform some field work. It is now necessary to study customers’ wants, needs, preferences and methods of transacting with the company. Direct observation of customers may be required to get a full understanding of these factors. Feedback is also vital for understanding if this strategy is working and how to perfect it. In addition, you will need to get some awareness of the benefits of alternatives to your company that customers may prefer. EFS actually sent its managers into the field for four weeks to observe ten people who were involved in corporate foreign exchange to determine whether they used EFS or some other substitute. This research yielded some interesting results. EFS realized that some aspects of its strategy (e.g., relationship management) were not important to their customers while some things that were never implemented (such as instant confirmations of transactions) could greatly increase customer satisfaction and efficiency. The third stage is a Visual Strategy Fair. This stage is a lot like brainstorming. New ideas are pushed out. Many new value curves are drawn expressing a wide variety of choices for a new company strategy. These new ideas are exposed to customers, competitors’ customers, lost customers and maybe even employees and management. Feedback is collected to determine the optimal new strategy or to develop an optimal one if further changes are to be made. An adaptation of the value curves developed at the end of this step are presented in the illustration below. Their tag line became, "The Federal Express of corporate foreign exchange: Easy, reliable, fast and trackable."
- Examine the strategic need first focus on customers . Identify the product or service can lead to bundling opportunities. Ex: AT&T bundling wireless, internet, and cable Alternative ways of that carry advantages and characteristics. Ex: Driving is alternative to Flying.
- 2 groups presented six strategies. Each group had 10 minutes Pictures of the strategy curves were hung on the wall for all to see.
- Visualizing Strategy At A Corporate Level Using a strategy canvas aides in informing individual business units throughout the corporation about the necessary path to a blue ocean When business units present their strategy canvases to one another, they deepen their understanding of the other businesses in the corporate portfolio transfer of strategic best practices across units Do your business heads lack an understanding of the other businesses in your corporate portfolio? Are your strategic best practices poorly communicated across your business units? Are your low-performing units quick to blame their competitive situations for their results?
- Gave every employee a one-page picture showing the new and old strategies. This allowed the employees to focus their efforts on the future. Meetings were held to explain what needed to be reduced, raised, eliminated and created to get them into a blue ocean EFS employees were so motivated by this plan that they even hung up the one-page picture in their cubes. All investment decisions had to fit this picture. Used the one-page picture to demonstrate to all employees Senior managers held meetings discussing the picture and what needed to be eliminated and raised to pursue a blue ocean. Employees began a positive chain passing the senior managers’ messages along. By having a clear game plan, employees were excited and actually hung the picture up in their cubicles to remind them of new priorities. This one-page reference point makes it easier for all companies to continue in the same direction. It reminds employees of the common goals of the firm and changes bad habits into good habits. Visualizing Strategy at the Corporate Level Greatly inform the dialogue among individual business units and the corporate center in transforming a company from a red ocean to a blue ocean player Strategy canvases The understanding of the other businesses in the corporate portfolio
- The vast majority of managers out there see Strategic Planning as a ridiculous waste of time. B/c most strategic planning is about documentation, and number-crunching, and bargaining, and not flexible enough to motivate employees to do great things for company. Instead this number crunching means employees focus on the pure numbers and not the substance. Example – No Child Left Behind and the Taks Test. This being said most managers have a vast appetite for positive change but no outlet to provide for creativity in strategic management. However, strategic planning is one of the most important business exercises because it keeps the company moving in a positive direction. Building the process around a picture addresses many of managers discontents with existing SP exercises. The process allows managers and employees to look at their business from a much larger, more strategic way than focusing on the details.