Blue Ocean Strategy: Chapter 4 Focus on the Big Picture, Not the Numbers Team 1 Jade Black Lauren Heldreth Taylor Hutcherson Roger May Kody Roach
The Challenge • How do you align your strategic planning process to focus on the big picture and apply these ideas in drawing your company’s strategy canvas to arrive at a blue ocean strategy?
The Typical Strategic Plan • Long description of current industry conditions and competitive situation • Discuss how to increase market share, capture new segments, or cut costs • Outline goals and initiatives • Full budget (many graphs/spreadsheets) • Done by those with poor communication or conflicting agendas Stop filling in the box!
Think Outside the Box • 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
The Technology Industry… • Very hard to break away into a blue ocean because industry is so fast-paced • Apple is trying to become a pioneer—strategies that have helped: • Individual stores • Innovation (i.e. ipod/itouch/iphone) • Brand management • Consistency (easy to adapt to each product)
Focusing on the Big Picture • Drawing a strategy canvas does 3 things: • Shows strategic profile of an industry by clearly depicting 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 • A strategic profile with high blue ocean potential has 3 complementary qualities: • Focus, divergence, and a compelling tagline • If not clear, strategy will be muddled, hard to communicate, and costly
Your Strategy Canvas • Planning around a strategy canvas • Visualize current strategic position • Helps chart future strategy • Can focus on big picture, not numbers, jargon, and operation details Try not to just focus on the scope of your own responsibilities because it makes consistent measurements of importance difficult—see the dynamics of your entire industry
Step 1: Visual Awakening • Reluctant to change • Agree on where you are at • Clarity of a strategy • True strategy v. Tactics
Step 2: Visual Exploration • Seeing yourself • Through the eyes of others • Alternatives • Rebuilding
Step 3: Visual Strategy Fair • Judges and individuals from field trips attended a fair where 12 strategies were presented • Attendees gave EFS feedback on their strategies and ranked their favorites • Management realized: • 1/3 of what they thought were competitive factors were actually marginal to customers • 1/3 of the strategy was either not well articulated or was overlooked in the visual awakening phase • Buyers from all markets have a basic set of needs and expect similar services; if these needs are met customers will forgo everything else
Cont. • Following the strategy fair management was able to: • Draw a value curve that was a truer likeness of the existing strategic profile • Create a future strategy that was distinctive • Major changes as a consequence of the strategy fair: • EFS eliminated relationship management and reduced investment in account executives • This dramatically reduced EFS’s costs • Emphasized ease of use, security, accuracy, and speed • Delivered via computerization and collapsing its online and traditional businesses into one compelling offer • These changes substantially cut the operational complexity of EFS’s business model
Step 4: Visual Communication • Communicate the strategy in a way that can be easily understood by any employee • EFS distributed a one-page picture showing its new and old strategic profiles • Picture served as a reference point for all investment decision • Only ideas that would move EFS from the old to new value curve were accepted • Employees had to be able to explain the relevance of investment ideas in relation to the new strategic plan
Visualizing Strategy at the Corporate Level • Can greatly inform the dialogue among individual business units and corporate center • Transforming from a red ocean to a blue ocean player • Fosters the transfer of strategic best practices across units • When strategy canvas is presented to one another, there is a better understanding of the other business
Using the Strategy Canvas • The strategy canvas is both a diagnostic and an action framework for building a compelling blue ocean strategy • EX: Samsung Electronics • Uses key strategy canvas in its key business creation decisions: established a Value Innovation Center (VIP) • Cross-functional team members come to discuss their strategic projects (focus on strategy canvas) • Establishes a common language system, instilling a corporate culture and strategic norm
Using the Pioneer-Migrator-Settler (PMS) MAP • 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
PMS MAP Depicts the scatter plot of a company’s portfolio of businesses
PMS Exercise • Valuable to managers who want to see beyond today’s performance • Today’s market share is reflective of historical performance • EX: CNN entered U.S. news market • Chief executives should use value and innovation as important parameters
In Review • Focus on the big picture, not the numbers. • Drawing your strategy canvas • Visual Awakening • Visual Exploration • Visual Strategy Fair • Visual Communication • Pioneer-Migrator- Settler Map • Settlers • Migrators • Pioneers
Overcoming the Limitations of Strategic Planning 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 Building the process around a picture changes process.