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Ch2 - Analytical Tools and Frameworks

The document discusses analytical tools and frameworks for developing a blue ocean strategy including the strategy canvas, four actions framework, eliminate-reduce-raise-create grid, and characteristics of a good strategy. It provides examples of how Casella Wines and Cirque du Soleil used these tools to shift their industries by eliminating non-value factors, reducing others, raising value in new areas, and creating entirely new factors. The value curve can reveal insights about a company's strategy and whether it has truly created a blue ocean or is stuck in red oceans.

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95 views33 pages

Ch2 - Analytical Tools and Frameworks

The document discusses analytical tools and frameworks for developing a blue ocean strategy including the strategy canvas, four actions framework, eliminate-reduce-raise-create grid, and characteristics of a good strategy. It provides examples of how Casella Wines and Cirque du Soleil used these tools to shift their industries by eliminating non-value factors, reducing others, raising value in new areas, and creating entirely new factors. The value curve can reveal insights about a company's strategy and whether it has truly created a blue ocean or is stuck in red oceans.

Uploaded by

taghavi1347
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Blue Ocean Strategy:

Analytical Tools and


Frameworks
Team 6:
Jessica Aragon
Raynee Bradley
John Cayo
Kirk Griffith
Cole Naylor
Jessica Wilson
Brandy Wolfe
Chapter 2: Analytical Tools and
Frameworks
 The Strategy Canvas
 The Four Actions Framework
 The Eliminate-Reduce-Raise-Create Grid
 Three Characteristics of a Good Strategy
 Reading the Value Curves
The Strategy Canvas
 The strategy canvas is both a diagnostic and an action framework
for building a compelling blue ocean strategy.

 It captures the current state of play in the known market space.


This allows you to understand where the competition is currently
investing, the factors the industry currently competes on in products,
service, and delivery, and what customers receive from the existing
competitive offerings on the market.

 The strategic canvas enables companies to see the future in the


present.
The Strategy Canvas of the U.S. Wine Industry in the Late 1990s

•The horizontal axis captures the range of factors the industry competes on
an invests in.
•The vertical axis captures the offering level that buyers receive across all
these key competing factors.
•The value curve then provides a graphic depiction of a company’s relative
performance across its industry’s factors of competition.
High Premium Wines

Budget Wines

Low
Above-the-line Vineyard prestige Wine range
Price Use of
enological marketing Aging and legacy Wine
terminology quality complexity
Explaining value curves
 There are more than 1600 wineries that participate in the U.S. wine
industry, however from the buyer’s point of view there is enormous
convergence in their value curves.
 When premium brand wines are plotted on the strategy canvas we
discover that essentially all of them have the same strategic profile.
 They offer a high price and present a high level of offering across all factors.
 Their strategic profile follows a classic differentiation strategy.
 Budget wines also have the same essential strategic profile.
 Their price is low, as is their offering across all the key competing factors.
 They follow a low-cost strategy.
 The value curves of premium and low-cost wines share the same
basic shape. The two strategic groups march in lockstep but at
different altitudes of offering level.
Shifting the strategy canvas
 To shift the strategy canvas of an industry, you must begin by
reorienting your strategic focus from competitors to alternatives, and
from customers to noncustomers of the industry.
 To pursue both value and cost, companies need to resist focusing
on just cost leadership and differentiation. Instead they need to
focus on alternatives and noncustomers. By doing this companies
are able to gain insight into how to redefine the problem the industry
faces.
 Research found that many consumers thought wine was too
complex and that beer, spirits, and cocktails, captured three times
as many U.S. consumer alcohol sales as wine.
 Casella Wines decided to make a fun and non traditional wine that
was easy to drink for everyone.
 To achieve this Casella Wines turned to the second basic analytic
underlying blue oceans: The four actions framework
The Four Actions Framework
 The four actions framework was developed to
reconstruct buyer value elements in crafting a
new curve.
Creating a new value curve
 To break the trade-off between differentiation
and low cost and to create a new value
curve, there are four key questions to
challenge an industry’s strategic logic and
business model:
1. Which of the factors that the
industry takes for granted should be
eliminated?

 This question forces you to consider


eliminating factors that companies in your
industry have long competed on.
2. Which factors should be reduced
well bellow the industry’s standard?

 This question forces you to determine


whether products or services have been over
designed in the race to match and beat the
competition.
3. Which factors should be raised
well above the industry’s standard?

 This question pushes you to uncover and


eliminate the compromises your industry
forces customers to make.
4. Which factors should be created
that the industry has never offered?

 This questions helps you to discover entirely


new sources of value for buyers and to create
new demand.
Casella Wines Example
 Casella Wines acted on all four actions –
eliminate, reduce, raise, and create- to unlock
uncontested market space that changed the
face of the U.S. wine industry in a span of
two years.
Casella Wines
 Created yellow tail-broke from the
competition and created a blue ocean.

 A social drink accessible to everyone.

 It offers simplicity: sweet and fruity, red


(Shiraz) or white (Chardonay)

 They eliminated everything else.


Casella Wines
 These actions reduced or eliminated all the
factors the wine industry had long competed
on.

 This also reduced the cost of capital.

 It raised value and created new demand.


The Eliminate-Reduce-Raise-Create Grid

• Represents the 3rd tool that is key to the creation of blue


oceans

• Pushes companies not only to ask all four questions in


the four actions frameworks, but also to ACT on all four
to create a new value curve

• Allows companies to have a full scale view of their


industry and their niche within it, while also highlighting
new areas for improvement or advancement based on
shareholder, customer, employee, and industry demands
The Eliminate-Reduce-Raise-Create Grid

The Case of: Yellow Tail Wines

Eliminate Raise
Enological Terminology Price vs. Budget Wines
Aging Qualities Retail Store Involvement
Above-the-line Marketing

Reduce Create
Wine Complexity Easy Drinking
Wine Range Ease of Selection
Vineyard Prestige Fun and Adventure
The Eliminate-Reduce-Raise-Create Grid

The Case of: Cirque du Soleil

Eliminate Raise
Star Performers Unique Venue
Animal Shows
Aisle Concession Sales
Multiple Show Arenas

Reduce Create
Fun & Humor Theme
Thrill & Danger Refined Environment
Multiple Productions
Artistic Music & Dance
The Eliminate-Reduce-Raise-Create Grid

Four Immediate Benefits:


1. Pushes to simultaneously pursue differentiation and low costs
to break the value-cost trade-off
2. Immediately flags companies that are focused only on raising
and creating, and thereby lifting cost structure which often
leads to over engineering products and services
3. Easily understood by managers at any level, thus creating a
high level of engagement in its application
4. Because completing the grid is a challenging task, it drives
companies to robustly scrutinize every factor in the industry
competes on, making them discover the range of implicit
assumptions they make unconsciously when competing
3 Characteristics of
a Good Strategy
- Focus
- Divergence

- Compelling Tagline
Focus
 The company does not diffuse its efforts
across all key factors of competition

 Value curve should clearly show it


Divergence
 The shape of the value curve diverges
from that of the competition

 The value curve of blue ocean strategies


always stand apart
Compelling Tagline
 Good strategy has a clear-cut and
compelling tagline

 Must deliver clear message and advertise


and offering truthfully
Southwest Airlines
 Focus: emphasized only 3 factors – friendly
service, speed, and frequent point-to-point
departures.

 Divergence: pioneered point-to-point travel


between mid-sized cities

 Compelling tagline: could be something like “The


speed of a plane at the price of a car-whenever you
need it.”
Cirque du Soleil
 Set itself apart by applying noncircus
themes, multiple productions, refined
watching environment, and artistic music
and dance.
Reading the Value Curve
 The value curve can reveal strategic knowledge
on the current and future status of an industry.
 Provide insight
Revealing Factors:
 A Blue Ocean Strategy
 Company Caught in the
Red Ocean
 Overdelivery Without Payback
 Incoherent Strategy
 Strategic Contradictions
 Internally or Externally Driven
✕
Reading the Value Curve cont’d
A Blue Ocean Strategy
 Q: Does a business deserve to be a winner?
 Right Track: Focus, Divergence, and a Compelling Tagline.
*Initial test of commercial viability of blue ocean ideas
Ex:
 Wrong Track:
 Lack of Focus – High cost structure/Complex business
model
 Lack of Divergence – Strategy is “me-too” with no reason
to stand apart.
 Lack of Compelling Tagline – Internally driven with no
great commercial potential or takeoff capability.
 (i.e. innovation for innovations sake)
Ex: *Europe
Reading the Value Curve cont’d
Company Caught in the Red Ocean
 Q: Does the value curve converge with competitors?
 Yes = Strategy tends to be trying to outdo competition on cost or
quality.
 Signals slow growth or luck if the business is in an industry that is
growing.
 Divergence:

Overdelivery Without Payback


 Q: Does the company’s market share and profitability reflect
these investments?
 Oversupplying customers with
value adding elements. *Premium wines
 Solution: Value-Innovate to create divergence.
 Eliminate and reduce NOT raise and create.
 [yellow-tail]
Reading the Value Curve cont’d
Reading the Value Curve cont’d
An Internally Driven Company
 Q: How does a company label the industry’s competing
factors?
 i.e. megahertz vs. speed (or) thermal water temperature vs.
hot water
*Comparable to writing with an active voice using short, simple
sentences.
 Q: Are the competing factors stated in terms buyers
can understand and value, or operational jargon?
 Outside in (driven by demand)
 Inside out (operationally driven)
 Analyzing the language helps a company
understand how far it is from creating
industry demand.
Summary
 The Strategy Canvas

 Four Actions Framework


 Eliminate, reduce, raise, and create

 Eliminate-Reduce-Raise-Create Grid
 Supplementary analytic to the four actions
framework
Summary cont’d
 Three Characteristics of a Good Strategy
 Focus, Divergence, Compelling Tagline

 Reading the Value Curves


 A Company Caught in the Red Ocean
 Overdelivery Without Payback

 An Incoherent Strategy

 Strategic Contradictions

 An Internally Driven Company


References
“About curves.” Curves.com. 25 January 2009.
<http://www.curves.com>.

Lasher, Lemuel. “Blue Ocean Strategy.” CSC.com. 25


January 2009.
<http://www.csc.com/cscworld/072005/dep/br001.ht
ml>.

Mendonza, Morice. “In search of blue oceans: AOL


(Europe).” Knowledge.insead.edu. 25 January 2009.
<http://knowledge.insead.edu/aoleurope.cfm>.

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