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We learnt in the previous instalments that value innovation occurs whenever companies align innovation with utility, price and cost benefits for customers. Companies that achieve value innovation pursue differentiation and low cost simultaneously. It means to grow the market significantly by converting non-customers into customers.
So, how do you actually go about developing a blue ocean strategy? There are a few key tools that can be used:
Tool #1 – Strategy Canvas
When developing their go-to-market strategies, many firms tend to take a product-oriented focus. They think of the product as a set of features and benefits and then look for technical and business needs that can be matched by those features. If you want your company to be successful companies, however, you have to define your strategy from a customer focus.
The development of a customized strategy canvas will give your company a clearer picture of your target market as defined in your opportunity maps, the targets’ business needs associated with your capabilities, how those needs are being filled by current products/services and the gaps in the current offerings.
It will also give you a view of how your customers perceive your products and their relative strengths and shortcomings; identify the real competition and how your offerings stack up against them; demonstrate areas of strength and weakness; and define ways in which your customers would like to use your capabilities going forward.
From this information, you’ll be better able to more effectively position your offerings and determine market-driven sales, marketing and product development strategies. This will enable your company to better concentrate its resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage.
You or an outsourced company can conduct primary research with your customers, prospects and respected industry resources to prepare a tailored strategy canvas for your firm, which takes the following information into consideration: Customer perception of your firm’s capabilities: How do they currently use your product/technology? What business problems does your technology solve?
How does the use of your capabilities break down by user type? What are the key values they obtain? What part of the market do you share with the competition? What areas are underserved by the competition? What areas are well-served by the competition? What areas are already commoditized and which represent opportunities for commoditization?
Are your customers using or considering using capabilities in a way you’ve yet to consider? How can you expand your technology based on that information? Where can you add features and capabilities that will increase usage? Peripheral market opportunities: Where can you expand your business to create new opportunities in new and existing markets?
This information will generate entirely different ideas from those which will be produced when you focus too much solely on attempting to develop better solutions than what your competitors are currently offering customers.
Tool #2 – Four Actions Framework
A firm must have a clear vision in the form of a strategy to define who it is and where it wants to go. Sometimes somewhere along the way, this strategy gets blurred and its customers can’t differentiate it from its competitors. The four actions framework asks four questions to sharpen the focus and realign the firm’s game plan.
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Which of the factors that the industry takes for granted should be eliminated?
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Which factors should be reduced well below the industry’s standard?
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Which factors should be raised well above the industry’s standard?
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Which factors should be created that the industry has never offered?
The four actions framework can also be used to reconstruct customer value in an industry to identify a gap or find new value.
iPad
Let’s apply this to a case study- it is about Apple’s iPad (or reconstruction of the personal computer industry).
Apple saw the blue ocean and took a deep dive into it. Rest is history. We all know how iPad has reinvigorated the tablet space and how it now commands close to 1040 percent market share worldwide. It’s the ability to think out of the box and create new products and markets that has kept Apple on course to become the world’s first trillion dollar company. Blue Ocean Strategy no doubt has played a big role in it.
The Apple iPad is a perfect example of how this process can be applied in the real world. This best-selling product is a modification of a laptop computer. A brief
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examination of what has been eliminated, reduced, augmented and created from a basic laptop shows us how Steve Jobs and his team have been able to create a brand new category in the computer space.
This is how Steve Jobs viewed the personal computer industry in the late 2000s.
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Low PC sales growth
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Global competition
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Commoditization of PC: R&D arms race and price war
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Segmentation strategy
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Netbook: Low-end laptop
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Threats from substitutes: Smartphones
This is how the Blue Ocean strategic thinking was applied to iPad.
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Instead of further segmenting within the PC industry, can we create a third category that is neither PC nor smartphone?
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Instead of offering high-valued laptops or lower-valued netbooks, can we make a new product that provides breakthroughs in value for PC users?
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Instead of further segmenting within the PC industry, can we create a third category that is neither PC nor smartphone?
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Instead of offering high-valued laptops or lower-valued netbooks, can we make a new product that provides breakthroughs in value for PC users?
And, then Apple tackles the ‘Four Actions Framework’.
Eliminate
The following features have been eliminated: The top cover, the mouse, the physical keyboard and the USB connectors.
Raise
The features that have been augmented are: The start-up speed, ease of use, intuitive navigation, ease of viewing and the ability to navigate (through the use of your fingers). Also, non-PC functions (e.g. handheld gaming, E-book reader), etc. were raised.
Reduce
The following features have been reduced: The footprint, the memory, the screen size and the price. The lower price is the cornerstone of Blue Ocean Strategy, since this is how a true Blue Ocean is created. When one realizes that the iPad is lower priced than most upmarket laptops, one understands how important this factor has been in its success. Functions were also reduced by using embedded software applications.
Create
The final piece of the puzzle is the creation of new features or services. This is where Steve and his team have exceeded expectations. The App store and the ability to sync through iTunes is what enable even the most inexperienced computer user to easily navigate and work in the iPad.
There were hardware add-ons (e.g. SD card reader, physical keyboard) and style and fin. This has expanded the market exponentially and brought new computer users into the market space. The ability to expand the market is another key success factor in Blue Ocean Strategy.
Steve and his team might not call the process Blue Ocean Strategy but they have certainly utilized all its principles to create the iPad and the iPad.
(To be continued next week)
(The writer, a corporate director with over 25 years’ senior managerial experience, can be contacted at lionwije@live.com)
