If you’re a strategy guy, I’m sure you’re familiar with the Blue Ocean approach to strategy, where you set out to create new value by not competing but rather creating and capturing new demand (new market) where you’re the only guy holding the flag.
In a nutshell, here’s what Blue Ocean Strategy proposes:
Sounds pretty damn good. But, the problem is it’s difficult to imagine and do. Worse yet, is it’s difficult to understand if you’re someone who’s not a CEO, strategist, consultant or marketer. To tackle this problem, I thought I’d uncover the hidden truth behind some of the key ideas of the approach.
Blue Ocean Strategy has two important tools: the strategy canvas and the 4 actions framework. I’ll explain both of these in big picture terms to help you understand how these concepts interact with and build on one another to help you get a better idea of your strategic position relative to your market, and then how to break out of it by finding or creating holes in it.
The Strategy Canvas
To understand the strategy canvas, imagine a music equalizer and think about it’s function: to get the desired overall frequency response for the sound you want to hear. Got it!
Now look at an example of the strategy canvas from one of the use cases in the book:
See the similarities?
Just like an equalizer lets a band see how their sound is tweaked, the strategy canvas let’s you visualize what your business strategy is and also see where you converge with competitors. If your strategy converges with competitors that means that you’re playing in the same market head on with no ‘distinction’ whatsoever between you and them, this means you’re engaged in a red ocean where the rules of competition are set and profits are scarce.
To break out you need to tinker with the existing rules and create your own, the second tool in Blue Ocean Strategy points you in that direction.
4 Actions Framework
So how do you find and create blue oceans of uncontested market space? You use the 4 actions framework or ERCR, see below:
*The competitive ‘factors’ in question are the key value generating attributes that the industry competes on from the customers perspective.
Now look at the subtractive thinking framework which can be used to create new products or services by creating something new, improve something that already exists, reducing to the bare essentials and eliminating something entirely.
See the similarities?
Again, just like music bands have a different sounds because they’ve added, removed, raised or created new things to their musical spectrum, your business can also differentiate itself by adding, removing, eliminating or improving stuff in its product or service.
Putting it all together…
As you can see these two concepts (equalizer + subtractive thinking) combine to produce a very potent creative framework to develop strategy,they can help you can visualize the current state and look for the holes where you can play by your own rules to create new value and demand. To do this you need to do two things:
- Define the rules
Discover the factors by which the rules of the industry are defined, this will require some research and field work as it’s not as easy as it seems. Once you get an idea of what those factors are, use the 4 actions framework (aka subtractive thinking) to tinker with the rules and try to uncover new opportunities for growth.
- Get tone and tweak it
The book’s authors suggest your strategy be focused, divergent and have a compelling tagline which means you have to tweak your current strategy like you would tweak the sound of music with an equalizer. For example look at the strategy canvas above and see how Yellowtail’s strategy has a different value curve than the rest. Now think about your business strategy, if it converges with what other’s are doing then you’re trapped in a head to head battle for position.
If you made it all the way down here and still don’t get it, I’ll drill it home some more with this statement:
Do you know how every pioneering musical band in the world had or has a distinct sound of their own? (Beatles, Zeppelin) Well, the same thing goes for your organizations business strategy. Your strategy has to be different from your competitors, and that means it must not only look different, but sound different too.
There’s more to it than just this, but hopefully I’ve uncovered some insight of how these two tools can help you fine tune your strategy, and put them to use right away. Please let me know what you think, and also what do you think of BOS? Do you have any experience using these tools? What did you think of the analogy?
—-> P.S. For a real live use case I and a thorough explanation of BOS I suggest you read Hubspot’s Blue Ocean Strategy small business case study, it’s worth the read!