Chris Athens

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Blue Ocean Strategy
Chapter 4 Focus on the Big Picture, Not the
Numbers

• Team 1
• Chris Athens
• Ben Baker
• Chris Bolinger
• Josh Carver
• Jordan Guenther
• Justin Turner
• Jeff Ward

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Focus on the Big Picture, Not the Numbers

• This principle is key to mitigating the planning
  risk of investing lots of effort and lots of time
  but delivering only tactical red ocean moves.
• The book has developed an alternative approach
  which is not based on preparing a document but to
  draw a STRATEGIC CANVAS.
• This is proven to unlock new opportunities and
  ideas to break away from red oceans (existing
  markets).

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Focusing On The Big Picture

• This process helps to analyze the companies
  strategic position in the marketplace but also
  helps to chart its future strategy.
• By building around the strategy canvas the
  company and managers focus their main attention
  on the big picture and not the numbers and
  operational procedures.

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Strategic Canvas

• First, it shows a strategic profile of an
  industry by depicting very clearly the factors
  that can affect present and future competition.
• Second, it shows the strategic profile of current
  and potential competitors, identifying which
  factors they invest in strategically.
• Finally, it shows the companys strategic profile
  (value curve) depicting how it invests in the
  factors of competition

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Drawing Your Strategy Canvas

• There are four steps in creating your strategy
  canvas which is known as
• The Four Steps of Visualizing Strategy

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1. Visual Awakening

• Compare your business with your competitors by
  drawing your as is strategy canvas.
• See where your strategy needs to change.

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2. Visual Exploration

• Go into the field to explore the six paths to
  creating a blue ocean
• Observe the distinctive advantages and
  alternative products and services
• See which factors you should eliminate, create,
  or change

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3. Visual Strategy Fair

• Draw your to be strategy canvas based on
  insights from the field observations.
• Get Feedback
• Use feedback to build the best to be future
  strategy.

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Visual Communication

• Distribute your before and after strategic
  profiles on page for easy comparison.
• Support only those projects and operational moves
  that allow your company to close the gaps to
  actualize the new strategy.

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Step 1 Visual Awakening

• Compare your business with your competitors by
  drawing your as is strategy canvas
• See where your strategy needs to change

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Steps Leading to a Visual Awakening

• One problem is that executives are often
  reluctant to accept the need for change
• In the past, executives have said that it takes a
  highly determined leader or a serious crisis in
  order for them to seek out blue oceans and
  introduce change

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EFS and its Troubles

• EFS had been struggling for a long time with an
  ill-defined and poorly communicated strategy
• The company was also deeply divided
• This conflict made it all the more difficult for
  EFS to come to grips with its strategic problems

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EFSs Visual Awakening

• EFS began the strategy process by bringing
  together more than twenty senior managers from
  subsidiaries in Europe, North America, Asia, and
  Australia and splitting them into two teams
• Team 1 create a value curve depicting EFSs
  current strategic profile
• Team 2 charged with the same task for EFSs
  online foreign exchange business

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EFSs Visual Awakening (Cont.)

• The two teams were given 90 minutes , because if
  EFS had a clear strategy , surely it would emerge
  quickly
• The outcome was a painful experience
• Both teams had heated debates about what
  constituted a competitive factor and what those
  factors were
• Different factors were important in different
  regions

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What EFS Learned

• There were defects in the companys strategy
• EFSs two value curves were very similar to those
  of competitors
• Neither team could come up with a memorable
  tagline that was true to the teams value curve
• The evidence showed the companys shortcomings
  and EFSs executives could not defend what they
  had shown to be a weak, unoriginal, and poorly
  communicated strategy

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Visual Awakening Takeaways

• When people see a strategy canvas comparing
  themselves to their competitors, they quickly see
  where their strategy needs to change
• Visual thinking is 20 vision science, 20
  cognitive science, 20 psychology, 20
  information visualization, 15 show and tell, and
  about 5 poker.

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• Step 2 Visual Exploration

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Step 2 (cont)

• To understand customers, non-customers, and end
  users of a product, you must see how they
  function in the real world.
• Companies must put managers face-to-face with the
  people that make a difference.
• A master painter would not paint a masterpiece
  based upon a photograph from someone else.
• Before McDonalds introduced the McCafe, they
  observed and analyzed the individuals that go to
  other coffee shops. Part of the analysis focused
  on whether these individuals went to McDonalds
  for food and then went to other establishments
  for coffee. Through personal interviews, mass
  surveys, and internal research groups, McDonalds
  discovered that customers would prefer a
  high-quality lower price alternative to the chain
  of Starbucks. McDonalds opened the McCafe with
  the same philosophy of tasty options made from
  quality ingredients, served fast (at a fraction
  of the cost). Without the face-to-face approach
  to market research, McDonalds could have set
  themselves up for failure.

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Step 2 (cont)
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Step 2 (cont)

• According to the writers, Michael Bloomberg did
  not develop a product of genius, but rather
  challenged the boundaries of the current business
  by looking at the needs of end users.
• In 1982, he developed a concept that
  revolutionized the trading market. It integrated
  the tools and information of stock trading into
  one and allowed everyone to have near
  instantaneous data. The Bloomberg machines were
  released in 1984. With the continued advance of
  technology and staying current on industry needs,
  the company has grown by leaps and bounds.

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Step 2 (cont)

• European Financial Services sent their managers
  into the field for over 4 weeks. In step 1, the
  teams had determined that the account
  relationship managers were the key to success.
  After step 2, the teams found that the
  relationship managers were the companies
  Achilles heal. Customers felt as though the
  relationship managers were a waste of time.
  Because of the field research, the two teams were
  instructed to design 6 new proposals. This made
  them think outside the box and caused needed
  competition between the two teams.

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Step 2 (cont)
Highland Medical Center 2412 50th Street (50th
and University)
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Step 3 Visual Strategy Fair

• After two weeks of drawing and redrawing possible
  new strategies, the internal teams presented
  their strategy canvases at what we call a visual
  strategy fair
• Attendees included senior corporate executives
  but consisted mainly of representatives of EFSs
  external constituencies

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Step 3 Visual Strategy Fair

• The Visual Fair
• Teams presented all twelve value curves six by
  the online group, and six by the offline group
• Judges decided their favorites and where asked
  explain their picks

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Step 3 Visual Strategy Fair

• Teams learned
• One-third of the teams key factors where only
  marginal to consumers while another one-third
  were overlooked or not well articulated during
  the awakening phase
• Buyers had a basic set of needs and expected
  services
• Regional differences became significant only
  after problems with the basic needs

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Step 3 Visual Strategy Fair

• Following the Strategy Fair, teams were able to
  draw a value curve that was a truer likeness of
  the strategic profile than anything they had
  produced earlier
• More important, the Managers were now in a
  position to draw a future strategy that would be
  distinctive as well as speak to a true but hidden
  need in the marketplace

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Step 3 Visual Strategy Fair

• New Value Curve
• Exhibited the criteria for a successful strategy
• Displayed more focus than the previous strategy
• Stood apart from the industrys me-too curves

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Step 3 Visual Strategy Fair

• Three Basic Keys
• Draw your to be strategy canvas based on
  insights from field observations
• Get feedback on alternative strategy canvases
  from customers, competitors customers and
  noncustomers
• Use feedback to build the best to be future
  strategy

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Step 4 Visual Communication

• Communicate
• Easy to understand
• Simplicity
• Need to see the What How
• To be able to move from Old to New
• Future

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Visual Communication (cont.)

• Be able to move from Red Ocean to Blue Ocean
• Managers hold meetings to go through
  pictures/diagrams
• Question yourself
• Clear Cut Visions
• Example IT Webpage

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Visualizing Strategy at Corporate Level

• Visualizing Strategy
• -Moving from Red to Blue
• Strategy Canvas
• Example Samsung Electronics
• Value Innovation Programs (VIP)
• Example 40 inch LCD

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Pioneer-Migrator-Settler (PMS) Map

• All blue ocean companies have been PIONEERS in
  their industries.
• Didnt develop new technologies
• They instead, pushed customer value to new
  levels.
• A Companys PIONEERS are the businesses that
  offer value
• They are the sources of PROFITABLE GROWTH

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Pioneer-Migrator-Settler (PMS) Map

• PIONEERS (Blue Oceans)
• Value curves diverge from the competition on the
  strategy canvas.
• Have a mass following of customers
• SETTLERS (Red Oceans)
• Value curves conform to the basic shape of their
  industry.
• Dont contribute to future growth.
• MIGRATORS (In Between Red and Blue)
• Lie in between PIONEERS and SETTLERS
• Extend industrys curve, giving customers more
  for less, but dont alter its basic shape.
• Offer IMPROVED, but not INNOVATIVE value

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Pioneer-Migrator-Settler (PMS) Map

• A management team pursuing profitable growth
  should plot the CURRENT and PLANNED portfolio on
  a PMS Map.
• SETTLERS me-too businesses
• MIGRATORS businesses better than most in the
  marketplace
• PIONEERS Mass following of customers

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Pioneer-Migrator-Settler (PMS) Map

• If portfolio SETTLERS, then
• Low growth trajectory
• Confined to Red Oceans
• Should push for VALUE INNOVATION
• If portfolio MIGRATORS, then
• Expect reasonable growth
• Not exploiting all potential for growth
• Risks being marginalized by value innovative
  companies
• If portfolio PIONEERS, then
• Thats where you want to be.
• Great future growth and innovation

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Pioneer-Migrator-Settler (PMS) Map

• PMS Map is valuable for beyond todays
  performance.
• Conventional strategists consider REVENUE,
  PROFITABILITY, MARKET SHARE, AND CUSTOMER
  SATISFACTION to measure a companys current
  position.
• Should use value and innovation to measure their
  portfolio
• Without INNOVATION they are stuck in the trap of
  competitive improvements. But without VALUE
  customers wont buy it.

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Pioneer-Migrator-Settler (PMS) Map

• When pursuing PIONEERS, executives need to be
  aware that
• Though SETTLERS have little growth potential,
  they are todays cash generators.
• On the contrary, PIONEERS have maximum growth
  potential, but make cash as they grow and expand.
• THEREFORE, managers goal should be to manage a
  BALANCE between GROWTH and CASH FLOW at a given
  point in time.

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PMS Map
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Fortune Brands Company

• Behind our brands is a heritage of innovation few
  can match. In 1795, a grain mill operator named
  Jacob Beam filled his first barrel of bourbon ...
  and more than two centuries later, the bourbon
  that bears his great-grandson's name remains true
  to its unsurpassed authenticity. In 1904, a
  company founded by a jewelry repairman improved
  the workplace with the invention of the ring
  binder ... and Wilson Jones still sells hundreds
  of millions of them year after year. In 1924,
  Master Lock founder Harry Soref invented the
  laminated padlock ... and it remains the "Tough
  Under Fire" market leader today. In 1935, two
  college class-mates, Phil Young and Fred Bommer,
  set out to create a superior golf ball they
  named it Titleist and began the longest-running
  success story in golf. In 1937, a young inventor
  named Al Moen created the single-handle faucet
  billions of dollars in sales later, Moen is a
  household name and our single largest brand. The
  same spirit of innovation that inspired these
  pioneers runs through our operations today. We
  see building our brands for internal growth as
  our best investment. So to leverage the
  imagination of our inventors, researchers and
  developers, we invest heavily in product
  development to deliver next-generation
  innovations to consumers.
• http//www.fundinguniverse.com/company-histories/F
  ortune-Brands-Inc-Company-History.html

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Overcoming Strategic Planning Limitations

• Todays managers believe in CONVERSATIONAL
  STRATEGY instead of DOCUMENTATION, the existing
  strategic plan.
• Documentation includes analysis and number
  crunching.
• Building a picture brings about far better
  results, and addresses managers discontent with
  existing strategic planning.
• BOS believes details will fall into place more
  easily if one starts with the big picture of
  breaking away from the competition, which will
  bring about a Blue Ocean.