Archive for the ‘Strategy’ Category
To understand how you can create compelling new propositions, you must first truly understand your current proposition.
Most existing marketplaces are “well–defined”. In other words each player who competes in that space understands in detail the customers’ needs, how they have developed over time and the size of the market. What is not always clear is how your proposition differs, or does not really differ, from your immediate competitors or indeed from a group of your immediate competitors. What genuinely makes your product/service stand out?
To help our clients understand this we use a tool called the strategy canvas, which is a graphical representation of your value proposition compared to your competitions. The strategy canvas is a simple 2-dimensional graph that has on the x-axis the “key competitive factors” that relate to your offering. Think of key competitive factors as the real reasons why your customers buy your product. The y-axis represents value, absolute or perceived.
So, put yourself in the position where your MD or CEO asks you to define the 5 or 6 reasons why your core customers buy your product and how important they are. The first is always price and the position on the graph is absolute. The rest are plotted in terms of value from the customers’ perspective. If your product offers a lot of very important or highly desirable features that might be represented on the graph as high value, whilst a competitor’s basic low function device with minimal features would be represented as low value.
You then carry out the same exercise for your competitors’ products and look at the results to see how they compare. Where there are a large number of competitors, you may group them (as referred to in para 2 above) for example into high priced alternatives and budget alternatives. Then ask yourself the question, “Does our offering really stand out – is it really all that different?”
One of the problems with differentiation in an existing mature marketplace is that it is typically a process of providing more value / features for the same price, or providing similar value / features for a lower price. Both of these approaches remove value for you, the provider. Although you might well argue the customer gets a better deal, this approach eats into your current margins.
And that is where the Blue Ocean concept differs, focussing on creating new marketplaces as opposed to continuing to battle on in the red ocean.
One of the biggest challenges facing organisations today is the task of standing out from the crowd; how can they be different – and successful?
Most organisations compete in what are often termed “red oceans”, the analogy being that as they fight to maintain their share of a defined market space, everyone suffers and has to make painful decisions. Hence the ocean is, metaphorically, covered in blood.
The concept of Blue Ocean Strategy as a methodology was developed by Chan Kim and Renée Mauborgne at INSEAD and is the result of 15 years of research. What Kim and Mauborgne did was seek out and learn from what was common to organisations who had successfully redefined their markets and enjoyed the very significant advantages that come from such an approach. Their objective was to work out how such results could be replicated or achieved in a systematic manner.
In the “blue ocean” , companies redefine their markets, creating a space where, for a period of time at least, they can make their competitors irrelevant.
The product or service stands out from the crowd because it satisfies often unperceived needs that no-one else addresses. It will frequently compete based on different factors and even where the factors are common, the offering is still different enough to stand out.
Often discussed in parallel is the concept of value innovation. “Value Innovation” is the identification and implementation of strategic change that delivers real competitive advantage, by simultaneously seeking out reductions in cost and increases in customer value. One of the main challenges put forward against such an aspiration is that you can do one or the other but not both. Experience shows however that you can do both and that when you do, you will operate in a market space that you control; where the competition will struggle to participate, at least in the short to medium term.
Over the next month or two we will post here a series of articles that will cover some of the concepts and tools, based on what we view as the four key stages of the process:
- Current State Analysis;
- Exploration; and