Book Review - The Silver lining

Book Title: The Silver Lining: An Innovation Playbook for Uncertain Times

ISBN: 978-1-4221-3901-1
Author: Scott Anthony

Review: The first thing that captured my attention in this book is the fluid writing style, infused with numerous examples that provide supportively, brilliance to the analysis and the book as a whole. Scott provides insightful analysis and guiding tools that can support firms to come out stronger from the current tumultuous business environment -"Great Disruption" -, as an analogy of the "Great depression" of the 1930’s.

Since nobody can mention "disruption" without referring to one of Professor Clayton Christensen book "The innovator’s dilemma", Scott starts with describing the disruption mechanisms as related by Christensen; "… Subsequent research and fieldwork have identified more than 200 disruptive developments over the past 50 years across a range of industries. Some disruptions, like retailing (Wal-Mart), low-cost automobiles (Toyota), Steel mini-mills (Nucor), and digital music (Apple), reshape existing markets. Other disruptions, like personal computers, online advertising (Google), and online auctions (eBay), create entirely new markets…"

Chapter 1: The Great Disruption - "…Tough economic times are going to force innovators to do what they should have been doing already... The challenge is reinvention, or transformation... Perpetual transformation is the only way to thrive during the Great Disruption…"

“The book is intended to be a guide for executives and innovators seeking to seize the silver lining in today’s difficult times, for strategists and investors trying to spot industry winners and losers, and for individuals thinking about how to tighten their own belts or reinvent themselves.”

Chapter 2: Prune Prudently – “Which would you shut down? A project with first-year revenues of $220,000 or one project with first-year revenue of $200 million?” The first page of this chapter starts with this astonishing (and challenging) question. And then the answer is even more revealing! "What if you knew that the smaller project (Google) would change the world and the larger project (Vanilla Coke) would be discontinued."
The portfolio checkup is a good tool for determining the health of a firm's innovation/growth portfolio. Companies should stop taking portfolio decisions based only on first-year revenues, Net-Present-Value. A different approach is proposed.

The chapter describes things companies should stop doing. 

Chapter 3: Refeature to Cut Cost – When times get tough, innovators have to figure out how to improve the productivity and profitability of existing products, services, and processes.
Companies should follow a three-step process where they:

• Segment customers using the concept of job-to-be-done.
• Investigate discrete customer segments to determine thresholds and trade-offs.
• Refeature offerings so they are more aligned with customer demand.

Chapter 4: Increase Innovation Productivity - excellent chapter, as it helps to identify capabilities, constraints, weaknesses, structures.
Spearhead innovation!
Cisco has created an autonomous growth group, Cisco Systems Emerging Technology Group, which has the mandate of creating stand-alone billion-dollar businesses. One business that came from the group is TelePresence.

Try to do the “Innovation capabilities audit” exercise!

Chapter 5: Master Smart Strategic Experiments – “ Often, the reason that people perceive innovation to be risky and expensive is their failure to couple technical experimentation with strategic experimentation.”

A good perspective on technical experimentation vs. strategic experimentation.

Chapter 6: Share the Innovation Load - Entrepreneurs don't take risk; they manage risks.
The chapter describes things we need to do differently. Scott refers to Henry Chesbrough Open innovation paradigm.

Chapter 7: Learn to Love the Low End –a lesson on how to turn the disruptive threat into an opportunity.

Good Enough Can Be Great!

A very good chapter with a large list of examples of incumbent companies who launched low-end solutions.

Chapter 8: Drive Personal Reinvention – “Leaders face another important challenge beyond improving their own abilities: motivating creative, innovative employees who don’t land an exciting innovation project.”
This chapter describes things firms are not doing yet, but need to get started immediately. 

The last chapter 9: What's Next for Innovation - is an epilogue, which highlights ten specific disruptors. Here are some of them:

• Skype: 2008 revenues: $500 million; 2005-2008, growth rate: 2,116%. Why is it disruptive: simple, affordable, good enough telephone and video-conference.
• Cisco TelePresence: (launched in 2006). Why is it disruptive: realizes the promise of video-conferencing, cheaper and easier to people.
• LinkedIn (estimated 2008 revenues: $100 million). Why is it disruptive: makes it simpler and easier for people to manage professional networks.
• Alibaba.com (2008 revenues: $4000+ million. Why is it disruptive: allows small Asian businesses to reach much wider markets.

Conclusion:

I have truly enjoyed reading (am still digesting) the author's playbook.
It’s that kind of books that you have to read all over again and again in order to digest the massive volume of valuable information it contains.

Every manager, leader, executive or innovator should read the book at least once.

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Book Review - Open Services Innovation

Book Title: OPEN Services INNOVATION
ISBN: 0470905743
Author: Henry Chesbrough

Review: The book introduces the concept of Open services innovation, which "shortly" means that every activity that a firm undertakes to create economic value should transform product or service-oriented business into service-oriented one, in order to avoid the commoditization trap and achieve new growth and renewal.
This, as you can imagine, can be very hard to reach for industrial firms whose core business is selling products.


Henry Chesbrough starts the book with the conversation he had with Paul Horn former IBM R&D VP, and his answer - that intrigued Henry and stimulated him to start investigating this area - to the question “what is your biggest problem today?”
Paul Horn said that most of his department activities are geared to support IBM to make computer products and software and now most of the revenues are coming from services not from products. “I cannot sustain significant research activities that contribute for less than the half of IBM revenues going forward!”

The Four key concepts
Henry Chesbrough introduces four concepts and practices that are critical to leverage this open services innovation concept:

• Think of your business as a service, regardless if you offer products or services, in order to sustain profitability and achieve new growth
• Co-creation with customers to create more meaningful value propositions
• Use open innovation to speed up services innovation and shorten time to market
• Business model innovation to stimulate effective services innovations

Value chain
In order to succeed in this open services innovation concept Henry Chesbrough proposes to re-write Porter’s Value Chain, “Porter’s Value Chain, while very helpful when it came out in 1985, is now a roadmap to a dead end.”

Porter's Value Chain, 1985

This is definitely true if you start looking at your business as a service business. Porter’s Value chain contains a small activity for “services” at the end of the value chain. In Porter’s Value Chain, the product is the king. Thinking of your business as a service changes this focus entirely. The customer is central throughout the process of innovation.
“You don’t get all the customer’s needs identified at the outset, and then freeze them there for the rest of the process. Instead…. you create offers to invite customers into the process, and work iteratively and collaboratively to arrive at innovative outcomes.”

Open Services Value Chain

A brief summary of the chapters:

Part 1: A framework to spur innovation and growth
Probably the most interesting part of the book, where Henry Chesbrough lays out his 4 key concepts framework for open services innovation, Business as a service, Co-creation, open innovation and business model innovation.

Part 2: Open services innovation in practice
Through all the book, Henry Chesbrough provides several examples supporting his thinking, like Motorola’s Razr and Nokia. Several interesting cases are explained like KLM, Amazon, etc…

Conclusion:

Excellent book. Excellent 4 key concepts framework. Food for thoughts for firms who are still struggling to achieve new growth. I liked!

The book is valuable because it discusses innovation in areas where many firms are only getting started - innovation in processes, services, business models and customer experiences. So in that regard, a firm or individual new to innovation can pick up the book and learn a fair amount of innovation in services, business models and experiences, which is equally valuable and in fact is probably best suited for many firms.

Mobile broadband in Emerging markets, a powerful combination for disruptive innovations

India is the second largest country in the world in terms of population. India has also a large number of villages; more than 600.000 villages with poor transport infrastructure making movement of goods and people extremely difficult.

Retinopathy of Prematurity (ROP) is the leading cause of preventable infant blindness worldwide. India has the largest concentration of blind people in the world, 1 out of 3. Over 8% of 27 million births each year are at risk of this potentially blinding condition. The ratio of inhabitants to ophthalmologist is around 100,000:1. There's no way the number of qualified physicians will grow to match the need anytime soon. The challenge is to screen 250.000 infants a day. This problem requires a fast and efficient solution for screening infants especially in the rural areas where expertise is lacking.

Mobile Broadband
The whidespread availability of mobile networks and the steady growth of Mobile broadband are opening unexpected doors for fast, efficient and societal innovations.
Mobile broadband technology provides the possibility to transport data securely, conveniently, faster and while traveling.

A potential solution has been tested. The Postgraduate Institute of Ophthalmology has partnered with a software development company i2i TeleSolutions in Bangalore, and developed the solution and launched a pilot project. The solution consists of the availability of a portable (albeit in a van) retinal camera with a unique image capture design ideally suited for newborns. This camera allows trained technicians, not medical experts, to capture images and upload them (sometimes while traveling between remote locations) via a Mobile broadband dongle data card. The images and data are uploaded to a remote server. Once uploaded the images can be accessed and viewed by an ophthalmologist - who could be thousands miles away - using an IPHONE, an IPAD or any other PC.

i2itelesolutions

Feedback and corrective measures can then be provided back to the technician via the secure server. The window of opportunity for treatment is only a few days (72 hours). This scale of screening in such large numbers can only be possible through telemedicine using Mobile Broadband networks.
This model has now been adopted as part of the National Rural Health Mission (NRHM) in the state of Karnataka in India and is being deployed across eighteen health centers across six rural districts.

This is a typical case of reverse innovation, coined by Vijay Govindarajan (see also the post of Vijay below for more details). You can find all ingredients of Clayton Christensen for disruptive innovations; all ingredients of any game changer in serving unserved, undemanding group and identifying unsatisfied job-to-be-done; all ingredients of shared value, by creating economic value while at the same time creating societal benefits, introduced by Michael Porter.


References:
i2itelesolutions
Vijay Govindarajan, HBR blog

Shared Value concept for Redefining Capitalism

Professor Michael E. Porter coins here a brilliant idea with the new concept of shared value. This new concept of shared value might or will have undoubtedly a huge impact on how we do business, how we create economic value, in the coming decades.
This is the right time to begin with redefining capitalism, as a system of not only creating economic value but also creating societal benefits.

"The solution lies in the principle of shared value, which involves creating economic value in a way that also creates value for society by addressing its needs and challenges."

Read below the transcript - I have summarized - of the interview of Professor Porter for the Harvard Business Review on February 2011.
At the bottom of this post you can also enjoy the video and a link to the HBR article.
Join the discussion!

"We’ve gotten into a vicious cycle in terms of relationship between business and society; the benefit of business in meeting society needs, like improving peoples life. This vision has been narrowed, and companies are being perceived as making profit at the expense of the society or making profit that are not in benefits of communities."

A lot of companies would argue that what we do is run businesses, we hire people when we’re successful, and to have an agenda beyond that is out of our scope.
“That has been the increasingly well-articulated view of business and society during the last 30 years”. The simple act of profit maximization was good in itself; what was good for business, was good for society as well... But I think as we’ve seen the effect of business practices on healthcare, nutrition, the mortgage crisis; example after example... Profit is not inconsistent with society needs, but if you think about creating value in a more “narrow way”, if you don’t see the broader and longer term influences on the ultimate sustainability of a firm success, you can get into the situation where that profitability does come at the expense of the society."

Creating shared value, how does it work?
"...What’s good for business is good for society and what’s good for society is good for business. It sounds like a play on words but it’s really a quiet a profound difference in perspective..."

"Concept of shared value is focused on tremendous opportunities for creating economic value through creating societal benefits. Creating societal benefits is a powerful way of creating economic value..."
"Let’s get busy mobilizing capitalism to meet those needs and make money out of it."

Shared value vs Corporate Social Responsibility: An example?
"Don’t come up with volunteer programs to have people building houses, your petrol engineer cleaning up the beach on the week end, don’t give money to charity"

"Fair trade is a classic CSR idea: there is a fixed pie, fixed amount of wealth.
We just need to share more of that wealth with the farmers. If you do that you’re a good guy, you’re fair."
"Shared value is different; it’s about expanding the pie. To figure at how we can create more value, and therefore the farmer will get rewarded for the reality of participating and creating more value and everybody can benefit. Smart Companies understand this better, that if you train the farmers better, help them to get access to fertilizers & seeds, you can make farmers more productive, raise the quality of products. You can go improving the farmer’s income from 20% to improving 200%, but not through a charity, not being a good guy, but by expanding the pie, by creating economic value but also creating social value at the same time."

The Big Idea: Creating Shared Value - Harvard Business Review article

How to design a business model?

Alex Osterwalder outlines in his book “Business Model Generation” a five phase’s process for designing business models. I summarize in this post the most important steps and activities to be performed for a successful business model.


Design process
The Business model design process includes a 5 steps process; Mobilize, Understand, Design, Implement, and Manage.
All the activities during these steps are supported by the recommended tools below.

Business Model Generation - Design Process - 2010

Step 1 - Mobilize – Setting the scene
Activities
- Prepare for a successful business model design project
- Assemble all elements for the project
- Create the awareness for the need of a business model
- Describe the motivation behind and create a common language for design and analysis


Step 2 - Understand – Immersion
Activities
- Research and analyze elements needed for business model design project
- Immerse the team in different knowledge; customer, technology, market
and environment
- Collect information, data from experts
- Study customers, identify needs and jobs-to-be-done


Step 3 - Design – Inquiry
Activities
- Generate and test viable business model options and select the best one
- Transform the ideas and information from the previous phase into business model prototype that can be explored and tested
- Take the time during inquiry phase and select the most satisfactory
business model prototype


Step 4 - Implement – Execution
Activities
- Implement the business model prototype in the field


Step 5 - Manage – Evolution
Activities
- Adapt and modify the business model design in response to market
reaction
- Set up the management structure to continuously monitor, adapt and transform your business model based on market reaction


The Tools
There is a set of tools available that should be used during the business model design process.


- The Business Model Canvas: Designing a business model should be a team work and the best way to do it, is to print out the canvas on a large surface, plot it on a wall and let people jointly sketch out or use
post-it notes to discuss and analyze business models.
see my post here.

- The empathy map: Adapting the customer perspective is a guiding principle for the entire business model design process. What job(s) the customer needs to get done?
see my post here.


- Ideation: is the process of generating a number of business model ideas
- Visual thinking: is indispensable for business model design process
- Prototyping: is needed to test the business model in the field; the only way to be sure about your path. To be sure that you are not following a flawed path.
- Storytelling: combined with visual thinking is a powerful tool for explaining the business model
- Scenarios: make your business model more flexible, more agile. Makes also your prototyping and your test much easier.

What are Disruptive Innovations?

I recently viewed on the Harvard Business Press a bit old but not less interesting interview of Scott Anthony, former president of Innosight and writer of the Harvard Business review Innovation blog, on disruptive innovation, here is a transcript of the interview:

What is Disruptive innovation?

“Disruptive innovation is a particular type of innovation that occurs when an innovator brings to a market an innovation that is simple, convenient, accessible, and affordable; changing the game. Contrast this to sustaining innovation that takes what exists and makes it better.

A disruptive innovator transforms an existing market and creates a new one by playing the innovation game in a fundamentally different way”

Does Disruptive innovation have to be big? What is it about? Is it a new technology?
“Disruptive innovation will result in major changes but they don't often rely on technical innovation, in fact many times the technology is quite trivial, it's the business model, the way a company organizes and acts that
drives disruption; Take Wal-Mart for example, when it opened its first shop, it didn’t have better products than the established competition, it just changed the way it acts to deliver the products to the customers at a lower price points. It’s often times not the technology, it’s the business model. Another interesting case of  disruptive innovation example is Nintendo Wii.” See Nintendo case study in detail in my blog here 

How can firms generate disruptive innovations? Do they need to have a disruptive innovation department?

“Everyone within organizations has the ability to come up with disruptive ideas. Senior management must have to lead and create appropriate organization space for disruptive innovations to flourish. It is imperative to create a separate organization with own processes to support disruptive innovation. Otherwise any disruptive innovation will not survive the internal organization processes.

How to spot disruptive innovation opportunities?

“Look for markets where there is some kind of constraints that inhibits consumptions, where is there something that makes it difficult for people to solve problems in their life. Sometimes they don't have skills, money, access the solution and sometimes it just takes too long. Find one of those barriers to consumption and see how you can obliterate it”

“Try to identify where people have important unsatisfied jobs to be done, where there is a problem that the customer can’t adequately solve today. If you can find that frustrated customer and ease their pain, you often times have the ticket to disruptive innovation.”

“After you have looked for constraints consumptions and you have targeted that job to be done, think about how you can play the innovation game differently. Remember is not about doing it better, it’s about making it simpler, cheaper, more accessible, and more affordable, that's what disruption is all about”

Do you always to create or satisfy a need? How to you proceed?

“The customer can very rarely articulate the specific things they want or need”
"Think about the markets that you are going to analyze, looking not necessarily at the most demanding customer today, but thinking about people who are relatively undemanding, or people who are not consuming anything at all"

“Focus groups can be a simple way to begin a conversation with customers. Customer observation can be really powerful, because sometimes the customer simple can't tell you what you want. Sometimes you got to
give customers something, a very early prototype and let them co-develop the product or service with you.Sometimes you got to do more detailed quantitative research to really pinpoint what are the points of frustration in the market and where are opportunities to do things differently”

Do organizations need to invest a lot?
“Take a simple first step. Invest a little, learn a lot. Don't spend huge money upfront because the only thing you can be sure of is that your first strategy is wrong, so if you invest too much too soon, you are looking into a path that is fatally flawed”

Harvard Business Press Interview with Scott Anthony

Case study Hindustan Unilever: Reach untapped markets with a Corporate Social Responsibility Business Model

Hindustan Unilever Limited, Unilever's $3.9 billion subsidiary in India. Unilever is the corporation that produces Axe deodorant, Vaseline, Surf detergent, and Lipton tea, among many other everyday products.

India is the second largest country in the world in terms of population. India has also a large number of villages; more than 600.000 villages with poor transport infrastructure making shipments of goods extremely difficult. Most of these villagers don’t have access to the very basic hygiene products like soap, toothpaste, shampoo, etc. Many of them have even never used a tooth brush or washed their hairs with shampoo. Instead of investing in costly infrastructure, the Indian government decided to promote entrepreneurship in these villages, targeting women particularly. Hindustan Unilever saw an opportunity in this program and decided to develop a business model accordingly. Within their established organization Hindustan Unilever has created a leadership organization with total freedom for developing the business model. Hindustan Unilever launched the so-called Shakti Entrepreneurship Program. The value proposition was to create in each village and surrounding a chain of entrepreneurs for Hindustan Unilever products. These entrepreneurs (who are selected women) will not only distribute but also educate these villagers on the use of the different corporal hygiene products provided by Hindustan Unilever.

NGO’s have supported Hindustan Unilever with selecting these underprivileged women, to become the new Hindustan unilever distributers and the new promoted entrepreneurs. According to H.Unilever, at the beginning, there was a lot of hesitation, since these women were often illiterate or had no math skills. It turns out they were very quick to learn and smart-within 48 hours they would get it. Their motivation was so high that it compensated for any lack of ability.

Today H. Unilever employs between 60,000 and 70,000 women entrepreneurs in villages to sell Unilever products at affordable prices to the Base of the Pyramid (BoP). For the first time, villagers had access to soap, detergent, and toothpaste. The women entrepreneurs were also educating their communities on hygiene issues while selling their products - for example, by explaining how to brush children's teeth - and through community wide health awareness days.

Shakti is a good example of CSR. it created a whole new way of life for 60.000 to 70.000 women, with the opportunity to gain a good living. It had a direct effect on their social stature. And millions of people had access to personal care and home products. In terms of distribution and marketing, the business model is using the BoP to distribute products; so the BoP is definitely part of the solution. And it's self-sustaining from the business it generates.
Hindustan Unilever has managed to create a sustainable business for itself and for the women distributers, to reach untapped market and to reinforce its brand and its company internal and external culture. All this by using the BoP in a CSR business model.

Definitions
CSR means Corporate Social Responsibility
BoP means Base or Bottom of the Pyramid, the largetst and poorest population

Cloud $10b market by FY13, Merril Lynch Report Jan, 10th 2011

Merril Lynch has released a very detailed report on January 10th, 2011 on Cloud Computing, "Cloud" next big opportunity for IT service vendors, here is a summary of the most important findings:

Cloud: Key growth opportunity, potential game changer

• over the next 5 years, Cloud presents a great opportunity for IT services vendors.
• Shrinkage in certain revenue streams will be more than offset by new ones.
• Cloud is a game changer where winners will grow IP-based services.

Significant revenue opportunity near term
Cloud consulting, migration and management is forecast to be a new US$10bn market by FY13,
growing at a 5yr CAGR of over 40%. It could form 6-10% of revenue in five years from less than 2% today and could account for 15-30% of incremental revenue.

The IT services competitive landscape will be transformed. Increased competition could result in consolidation process.

Putting the Environmental Dimension into the Business Model Canvas

The Business Model Canvas, as described in Business Model Generation by Osterwalder and Pigneur (2010), presents an easy and general usable business model framework. I have been working on expanding the Business Model Canvas to describe and include the Environmental impact factor of a Business Model implementation.

This canvas does not change the core concepts or the language of Business Model Generation, but extends the canvas and introduces the concept of “Design for Environment” or DFE to be included in the Business Model. See figure below:

This ensures that the Business Model to be implemented will make sure to take into consideration the three concepts of DFE, which are summarized below:

• Design for environmental processing and manufacturing: This ensures that raw material [Resource extraction] (mining, drilling, etc.), processing (processing reusable materials, metal melting, etc.), manufacturing are done using materials and processes which are not dangerous to the environment or the employees working on said processes. This includes the minimization of waste and hazardous by-products, air pollution, and energy expenditure, among others.

• Design for environmental packaging: This ensures that the materials used in packaging are environmentally friendly, which can be achieved through the reuse of shipping products, elimination of unnecessary paper and packaging products, efficient use of materials and space, use of [Recycling|recycled] and/or recyclable materials.

• Design for disposal or reuse: The [End-of-life (product)|end-of-life] of a product is very important, because some products emit dangerous chemicals into the air, ground and water after they are disposed of in a landfill. Planning for the reuse or refurbishing of a product will change the types of materials that would be used, how they could later be disassembled and reused, and the environmental impacts such materials have.

I have of course included the environmental impact in the cost building block, measured nowadays with CO2e.

We see nowadays many companies focusing on sustainability and Environmental issues. Some of them have already started aligning/manufacturing their portfolio according to the Environmental requirements defined by Global initiatives like the UN Global Compact, The Climate Group, the Global e-Sustainability Initiative (GeSI).

 http://www.smart2020.org/ report

The Information Communications Technology (ICT) sector has an important role to play

in reducing environmental impact from these and other sectors. The wider deployment of communication networks and the addition of an underlying intelligence to existing infrastructure can reduce CO2e by 15% or more. ICT has been estimated to account for 2% of energy consumption and as a consequence 2% of CO2e emissions. While this figure is expected to increase over the coming years it is important not to underestimate the net benefit ICT can contribute by increasing efficiency.

Blue Ocean Strategy combined with the Business Model Canvas

I intend to publish series of article/study related to Blue Ocean Strategy in combination with the Business Model Canvas described in the book Business Model Generation by Osterwalder and Pigneur (2010). I will also try to provide examples from different industries and explain them using this interesting combination of Blue Ocean and Business Model Canvas. Before that, we need to have a good understandanding of the concepts around Blue Ocean Strategy and the Business Model Generation Canvas.

“Strategy is the determination of the basic long-term goals and objectives of an Enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals” (Chandler, 1962) or it is defined as “the direction and scope of an organization over a long term: which achieves advantage for the organization through its configuration of resources within a changing environment, to meet the needs of markets and to fulfill stakeholder’s expectations” (Johnson & Scholes, 1999).

This is in congruence with Michael Porter (1985) words on defining strategy as:
“How a business is going to compete, what its goals should be, and what policies will be needed to carry out those goals”.

Blue Ocean Strategy, (Chan Kim & Mauborgne, 2005)

Different companies adopt different strategies depending upon the industry and the environment they operate in. Creating a unique value proposition and attaining a competitive advantage is the heart of any strategy.

The metaphor of Red and Blue oceans describes the market space.

Red oceans strategy is where the industry boundaries are defined and accepted, and the competitive rules of the game are known. The companies try to outperform their rivals to grab a greater share of product or service demand. As the market space gets crowded, prospects for profits and growth are reduced. Products become commodities or niche, and cutthroat competition turns the ocean bloody.
There is a “value-cost” trade off of creating greater value to customer at a higher cost or creating reasonable value at a lower cost. This red ocean strategy involves the aligning of whole system of a firm’s activities with its strategic choice of differentiation or low cost.

Blue oceans, in contrast, denote all the industries not in existence today—the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. Many rapid and profitable opportunities for growth are available, away from the “value-cost” tradeoff. Instead of dividing up existing and often shrinking demand and benchmarking competitor, blue ocean strategy is about growing demand and breaking away from the competition.

The Strategy Canvas

The strategy canvas is both a diagnostic and an action framework for building a compelling blue ocean strategy. It captures the current state of play in the known market space. This allows you to understand where the competition is currently investing, the factors the industry currently competes on in products, service, and delivery, and what customers receive from the existing competitive offerings on the market. The horizontal axis captures the range of factors the industry competes on and invests in. The vertical axis captures the offering level that buyers receive across all these key competing factors. The value curve then provides a graphic depiction of a company’s relative performance across its industry’s factors of competition.



Strategy Canvas, (Chan Kim & Mauborgne, 2005)



The Four Actions Framework

The quest for “differentiation” and “low cost” at the same time is possible and can be understand through the four actions framework with 4 key “factored questions” as shown in the below diagram. In the red ocean, differentiation costs because firms compete with the same best-practice principle. Here, the strategic choices for firms are to pursue either differentiation or low cost. In the reconstructionist world, however, the strategic aim is to create new best-practice rules by breaking the existing value-cost trade-off and thereby creating blue ocean.

The four actions framework offers a technique that breaks the trade-off between differentiation and low cost and to create a new value curve. It answers the four key questions of what industry takes for granted and needs to be eliminated; what factors need to be reduced below industry standards; what factors need to be raised above industry standards; and what should be created that the industry has never offered.
This diagram sheds insights to challenge industry’s strategic business model and to break the trade-off between differentiation and low cost to create a new value curve (Chan Kim & Mauborgne, 2005). 

 In today’s rapid changes in environment and customer mindsets, the firms have to revisit their strategic options and move to blue ocean strategy by creating new & uncontested market space with less competition, and innovation is one of the ways to adapt to this blue ocean strategy.



The Four Actions Framework, (Chan Kim & Mauborgne, 2005)



The Eliminate-Reduce-Raise-Create grid pushes companies not only to ask all four questions in the four actions framework but also to act on all four to create a new value curve. By driving companies to fill in the grid with the actions of eliminating, reducing, raising, and creating, the grid provides four immediate benefits: it pushes them to simultaneously pursue differentiation and low costs; identifies companies who are only raising and creating thereby raising costs; makes it easier for managers to understand and comply; and it drives companies to scrutinize every factor the industry competes on.
 



The Four Actions Grid, (Chan Kim & Mauborgne, 2005)



Value Innovation

The corner-stone of Blue Ocean Strategy is Value Innovation. A blue ocean is created when a company achieves value innovation that creates value simultaneously for both the buyer and the company. The innovation (in product, service, or delivery) must raise and create value for the market, while simultaneously reducing or eliminating features or services that are less valued by the current or future market.

Value Innovation,(Chan Kim & Mauborgne, 2005)

Check the coming posts with concrete cases from different industries.