Blue Ocean Strategy Ch. 4

1. Blue Ocean StrategyCh. 4 Focus on the Big Picture Not the Numbers

2. Focusing on the Big Picture • Need to focus on STRATEGYrather than tactics. • The Principle of Focus on the big picture, not the Numbers: • Produces strategies that unlock the creativity of a wide range of people within an organization, open companies’ eyes to blue oceans, and are easy to understand and communicate for effective execution. • Forces management to focus on the big picture rather than becoming immersed in numbers and jargon and getting caught up in operational details.

3. Drawing a Strategy Canvas • 3 Main things: • Shows the strategic profile of an industry by depicting very clearly the factors that affect competition among the industry. • Shows the strategic profile of current and potential competitors, identifying which factors they invest in strategically • Shows the companies value curve • Other factors.. • Not only visualizes a companies current strategic position in its market place but also helps it chart its future strategy. • European Financial Services (EFS) adopted financial strategy. • Saw 30% boost of revenue in its initial year

4. The Visual Awakening Strategy • Step 1: Visual Awakening • Compare your business with your competitors’ by drawing your “as is” strategy canvas • “as is” Strategy Canvas: Leaders must come to a consensus of the problems that exist with the company’s current strategy.

5. Example: European Financial Services (EFS) • brought together more than 20 senior managers, and split them into 2 teams. • One team drew up EFS’s current value curve depicting their current strategy in its traditional foreign exchange business relative to its competitors. • The other team had the same task for EFS’s emerging online FX business. • They were each given 90 minutes, because if a strategy was clear it would emerge quickly… • The result was intense debate on both teams. Europeans and Americans valued things differently, while some carried their own pet projects as highly important. • Despite the disagreement, they each presented their ideas to the entire group.

6. EFS Continued… • The end result was a clear picture of what was defective in their strategy. • Both teams’ results showed: • Lack of focus • Very similar to competitors • Conflicting strategies • All of these factors combined motivated Management to form a clear and concise strategy

7. Step 2: Visual Exploration • Send managers into the field to get face-to-face with what they must make sense of: How people use or don’t use your products or services • A company should always do this themselves. There’s no substitute for seeing with your own eyes. • Also target non-customers to find out why they don’t utilize your products or services.

8. Visual Exploration Cont. • Observe the distinctive advantages of alternative products and services. • EFS did this for 4 weeks, exploring the six paths to creating blue oceans. • See what factors you should eliminate, create, or change within your own business. • At the end of 4 weeks, field research had overturned many of the conclusions EFS managers had come up with in their initial meetings. • Viewed strengths turned out to be weaknesses, and things they thought unimportant were viewed as highly important by customers.

9. Step 3: Visual Strategy Fair • Teams presented strategy canvases -Attendees included senior level corporate executives - Most were representatives of EFS’s external constituencies - The pictures were hung on walls for everyone to see Each judge was given five sticky notes to put on their favorite - The transparency and immediacy of this approach freed it from the politics that seem common to the strategic planning process. Judges were asked to explain their picks as well as why they didn’t chose other canvasses The teams blended the judges common likes and dislikes • one-third of competitive factors were marginal to customers • one-third were not well articulated or have been overlooked in the visual awakening phase

10. Visual Strategy Fair (Cont.) -Buyers had a basic set of needs and expected similar services. -If met, customers will let everything else slide Teams were able to draw a value curve that was more like their strategic profile -The new curve ignored the misleading distinction between online and offline businesses

11. Visual Strategy Fair

12. Visual Strategy Fair

13. Visualizing Strategy at the Corporate Level • Different business units should present their strategy canvases to one another to better understand the entire business portfolio and the big picture • Samsung as an Example • Used strategy canvases at 2000 corporate conference • Each of the Unit heads presented their canvases to senior executives and to one another • Poor performing units argued that the freedom to form future strategies was constrained by the degree of competition they faced. This argument was proved false when the mobile phone business presented its canvas. This business unit was one of the fastest growing units and not only did it have a distinctive value curve, but it also faced the most intense competition.

14. Samsung as an Example • Samsung institutionalized the use of strategy canvas by establishing the Value Innovation Program (VIP) • Core cross functional team members of different business units come together in the VIP center to discuss their strategic projects, typically focusing on strategy canvases. • Successes: • Completed over 80 strategic projects • World’s leading forty-inch LCD TV in December 2002 • World’s best selling mobile phone The key to the successes of Samsung and their value innovation program is the cross functional involvement of department heads which has led to an understanding of the big company picture.

15. Using the Pioneer-Migrator-Settler (PMS) Map • Pioneer- the businesses that offer unprecedented value • Their value curve diverges from the competition of the strategy Canvas • Settler - the businesses whose value curves conform to the basic shape of the industry’s • Settlers do little to contribute to a company’s future growth • Migrators- lie somewhere in between the pioneers and the settlers, and fall between red oceans and blue oceans.

16. Using the Pioneer-Migrator-Settler (PMS) Map • You should plot your company’s current and planned portfolios on a pioneer-migrator-settler (PMS) Map

17. Using the Pioneer-Migrator-Settler (PMS) Map • You should be well aware that even though settlers have marginal growth potential, they are frequently today’s cash generators. • Pioneers have maximum growth potential but often consume cash to finance growth as they expand. • Cash flow should be taken into account when evaluating your PMS Plot when managing the portfolio of the businesses.

18. Overcoming the Limitations of Strategic Planning • The strategic planning process should not be solely document-driven, and strictly analysis-driven, but have a creative component. • Managers should start with the big picture of how to break away from the competition. The details come later.