Blue Ocean Strategy Chapter 4

Blue Ocean StrategyChapter 4 Focus on the Big Picture, Not the Numbers February 10, 2009 Group 1 Anna Sterling Clay Jones Johnnie Davis Kimberly Smith Nolan Bosworth Shaina Weaver Zane Barnes

Focusing on the Big Picture • Draw your company’s Strategy Canvas: • Shows the strategic profile of the industry by divulging factors of competition the shape the industry. • Shows the strategic profile of current and potential competitors and what factors they concentrate on. • Shows your own company’s strategic profile against those or you competitors and the factors your organization focuses on.

Drawing Your Strategy Canvas • 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.

Drawing Your Strategy Canvas (Cont.) • The Four Steps of Visualizing Strategy: A summary • 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: Visual Awakening • 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

Step 1: Continued, 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 • Example: EFS

EFS: European Financial Services • Had been struggling for a long time with an ill-defined and poorly communicated strategy • Began the strategy process by bringing together upper management from Europe, N. American, Asia, and Australia • 2 Teams: Value curve production and emerging online foreign exchange business

EFS: Continued • The experience: Europe vs. America • The power of the website • EFS strategy vs. competitors (Clearskies)

Step 2: Visual Exploration: EFS Example • EFS sent managers out for four weeks to gather information. • They had to interview ten people involved in corporate foreign exchange. • Also reached outside the industry’s traditional boundaries to other companies that did not yet use corporate foreign exchange.

Step 2: Visual Exploration: EFS Example • EFS Findings: • 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.

Step 3: Visual Strategy Fair • Both teams presented their strategy canvases at a visual strategy fair. • (6 by the online group/6 by the offline group) • Attendees included… • senior corporate executives • noncustomers • customers of competitors • demanding EFS customers • 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. • 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. • 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.

Step 3: Visual Strategy Fair

Step 3: Visual Strategy Fair • Figure 4-5 summarizes EFS’s 4 actions to create value innovation, which is the cornerstone of blue ocean strategy. • Figure 4-5: Eliminate-Reduce-Raise-Create Grid: The Case of EFS

Step 3: Visual Strategy Fair • The new value curve exhibited the criteria of a successful strategy, and it displayed more focus than the previous strategy. • By collapsing its online & traditional businesses into 1 offering, EFS substantially cut the operational complexity of its business model, making systematic execution far easier.

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

Step 4: VISUAL COMMUNICATIONEasily Understood • 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.

Step 4: VISUAL COMMUNICATIONWhat EFS did… • 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.

Visualizing Strategy at a Corporate Level • Samsung Electronics of Korea • used strategy canvases at 2000 corporate conference • seventy top managers attended, including CEO • unit heads presented canvases and implementation plans with focus towards a blue ocean

Visualizing Strategy at a Corporate Level • Samsung Electronics has institutionalized the use of the strategy canvas through its establishment of the Value Innovation Program (VIP) Center • equipped with 20 project rooms • teams discuss strategic projects focusing on strategy canvases

Visualizing Strategy at a Corporate Level • 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?

Using the Pioneer-Migrator-Settler (PMS) Map • PMS Map- helps visualize, plan, and predict a companies future growth and profit. • Pioneers- business that offer unprecedented value and are powerful sources of profitable growth. Their value curves are different form the competitions on a strategy canvas. All pioneers are blue oceans. • Migrators- are in between pioneers and settlers. They offer improved value, but not innovative value. • Settlers- do not contribute to much future growth and are stuck in a red ocean. Their value curves match the basic shape of the industry.

Example PMS Map

Overcoming the Limitations of Strategic Planning • Big picture (use a strategy canvas, and PMS map) • Use creative components • Be motivational, invoking commitment • Discuss number-crunching and documents “The soul never thinks without an image”, Aristotle

Takeaways • Step 1: Visual Awakening – Compare your business with competitors’ businesses by creating an “as is” strategy canvas. Discuss what changes should be made. • Step 2: 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.

Takeaways Step 3: Visual Strategy Fair • First, draw your “to be” strategy canvas based on insights from field observations • Second, get feedback on alternative strategy canvases from customers, competitors’ customers, and noncustomers • Third, use feedback to build the best “to be” future strategy

Takeaways • Step 4: Visual Communication • Distribute your before-and-after strategic profiles on one page for easy comparison. • Support only those projects and operational moves that allow your company to close the gaps to actualize the new strategy.

Takeaways • Make a Pioneer-Migrator-Settler (PMS) Map to identify strengths and weakness.

Blue Ocean Strategy Chapter 4