Strategic

Innovation

101

A Hybrid Application ofBlue Ocean StrategyJanuary 22, 2011

Today’s Agenda

Competitive Landscape

Four Actions Framework

Going to Market

Taking S.M.A.R.T. Action

Content Sources: Blue Ocean Strategy W. Chan Kim and Renee MauborgneFrameworks – http://slidesha.re/fN2z8R Case studies – http://www.blueoceanstrategy.com

Making it Work for You

Suggested Tips

1. Have fun

2. Use all time to keep

working

3. Go with first thoughts

3. Don’t over analyze

4. No wrong ideas

5. Be open to others

6. Get to first draft

Making it Work for You

Work Flow

1. Presentation of framework

2. 7’sh minutes personal

work

3. 15 minutes group

discussion

3. 20 minutes room

discussion

Take any item on your table – redefine what it could be

Ice Breaker

A pen could be

- A hair bun holder- A measuring tool- A window prop- A game item- A part of art work- Something to chew on- A storage unit- A weapon- Litter- Learning instrument

Competitive

Landscape

Products or services that have different forms but offer the same functionality or core utility are often substitutes for each other. Take the example of Intuit’s Quicken. To sort out their personal finances, people can buy and install a financial software package, hire a CPA, or simply use pencil and paper. The software, the CPA, and the pencil are largely substitutes for each other. They have very different forms but serve the same function: helping people manage their financial affairs.

Instead of benchmarking the competition Intuit created a blue ocean by looking to the pencil as the chief alternative to personal financial software to develop Quicken software. Intuit focused on bringing out both the decisive advantages that the computer had over the pencil – speed and accuracy; and the decisive advantages that the pencil had over computers – simplicity of use and low price - and eliminated or reduced everything else.

With Quicken’s user-friendly interface resembling the familiar chequebook, it was faster and more accurate than the pencil, yet almost just as simple to use. The program eliminated the accounting jargon and the sophisticated features traditional financial software offered, offering only the few basic functions that most customers use. Moreover, simplifying the software cut costs. Quicken retailed at about $90, a 70% price drop. Neither the pencil nor other software packages could compete.

Quicken – Industry Innovation

The goal of a competitive landscape map is to help you step out of how you see your business and look at what your competitors are doing that could be stifling your success.

Competitive Landscape

Industry Competing Factors

Demand

Saturation

Price

Features

Distribution

Service

Maturity

Advertising Spend

Sales Force

Database

Overheads

1.

Weighting

1. Less/Low

2. Same/Median

3. More/High

3.

A. 1st Competitor

B. 2nd Competitor

C. 3rd Competitor

D. You

Competitors

2.Identify where you are clearly different.

4.

Your Uniqueness

Competitive LandscapeIn

dust

ry C

om

peti

ng F

act

ors

Demand

Saturation

Price

Features

Distribution

Service

Maturity

Advertising Spend

Sales Force

Database

Overheads

A. __________________

B. __________________

C. __________________

D. You

Competitors

Less /Low

More /High

Same /Median

Weighting

YourUniqueness?

_________________________

_________________________

_________________________

_________________________

Value

Innovation

Costs

Buyer Value

Value Innovation

Value innovation is created in the region where a company’s actions favorably affect both its cost structure and its value proposition to buyers.

Cost savings are made by eliminating and reducing the factors an industry competes on. Buyer value is lifted by raising and creating elements the industry has never offered.

Over time, costs are reduced further as scale economies kick in due to the high sales volumes that superior value generates.

Value Innovation

At the heart of QB House’s blue ocean strategy is a shift in the Asian barbershop industry from an emotional industry to a highly functional one. In Japan the time it takes to get a man’s haircut hovers around one hour. Why? Numerous hot towels are applied, shoulders are rubbed and massaged, customers are served tea and coffee, and the barber follows a ritual in cutting hair, including special hair and skin treatments such as blow drying and shaving. The result is that the actual time spent cutting hair is a fraction of the total time. The price of this haircutting process is $27 to $45.

So QB House stripped away the emotional service elements of hot towels, shoulder rubs, and tea and coffee. It also dramatically reduced special hair treatments and focused mainly on basic cuts. QB House then went one step further, eliminating the traditional time-consuming wash-and-dry practice by creating the “air wash” system—an overhead hose that is pulled down to “vacuum” every cut-off hair. These changes reduced the haircutting time from one hour to ten minutes.

QB House was able to reduce the price of a haircut to $9 while raising the hourly revenue earned per barber nearly 50 percent, with lower staff costs and less required retail space per barber. QB House created this “no-nonsense” haircutting service with improved hygiene.

QB Hair Cutting – Service Innovation

The four actions framework offers a technique that breaks the trade-off between differentiation and low cost and to create a new value curve.

This framework 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

• transitions from being theory into a tool for creating true industry innovation

• and it drives companies to scrutinize what the industry competes on

ReduceWhich factors should

be reduced well below industry standards?

CreateWhich should be

created that the was never offered?

EliminateWhat does the

industry takes for- granted that should be

eliminated?

Four Actions Framework

A New Value Curve

RaiseWhich factors should be raised well above

the industry’s standard?

Reduce

Eliminate

Create

Raise

Which factors should be reduced well below

industry standards?

Which should be created that the was

never offered?

Which factors should be raised well above

the industry’s standard?

What does the industry takes for-

granted that should be eliminated?

Four Actions Framework – current offer

1.________________________________________________________________

2.________________________________________________________________

3.________________________________________________________________

4.________________________________________________________________

What can change?

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

Is it really innovation?

Take 7 minutes and create a fictitious product or software that could be

used in the office to save time at work. Give it a name.

Select 1 person to keep notes and present

7 minutes to create

3 minutes to present per group

Go!

Brain Liberator

Going

to

Market

Many industries afford similar opportunities to create blue oceans. By questioning conventional definitions of who can and should be the target buyer, companies can often see fundamentally new ways to unlock value.

Consider how traditional copy machine manufacturers targeted office purchasing managers. The purchasing manager wanted machines that were large, durable, fast, and required minimal maintenance. Defying the industry logic, Canon, the Japanese company, created the small desktop copier industry by shifting the target customer of the copier industry from corporate purchasers to users.

With their small, easy-to-use desktop printers Canon created new market space by focusing on the key competitive factors that the mass of noncustomers, the secretaries that used copiers wanted.

Canon Copier – Goods Innovation

3. Buyer Utility

What are the exceptional differences in your business idea?

4. Pricing - Price / Cost

Is your price easily accessible to the mass of buyers? What is your optimal volume of business to minimize cost?

5. Delivery

How can you get your offer to clients in a way that is different than your

competitors and delivers more value?

1. Adoption

What prevents the customer from seeing the value of your idea?

Going to Market

2. Advertising / Sales

How will you uniquely make your prospects aware of your offer?

When bringing an innovative concept into reality it is ideal to look at your concept from the customer’s perspective. At the same time we want to keep in mind:

• Innovative ideas need to transition into low effort, low cost, and easy to reproduce tangible outputs in order to achieve high profit margin success.

• The test of great innovation is not just how original the concept is but how effectively it can be brought into reality.

• Great innovation doesn’t shy away from rigorous review, in fact, true innovation shines brightest when it is under pressure.

Always ask yourself -

how would your target customer answer these questions?

Going to MarketCustomer’s view Out-of-the-box rethink?

3. Buyer Utility

What are the exceptional differences in your business idea?

4. Pricing - Price / Cost

Is your price easily accessible to the mass of buyers? What is your optimal volume of business to minimize cost?

5. Delivery

How can you get your offer to clients in a way that is different than your

competitors and delivers more value?

1. Adoption

What prevents the customer from seeing the value of your idea?

2. Advertising / Sales

How will you uniquely make your prospects aware of your offer?

Taking

S.M.A.R.T.

Action

Taking Action

Specific – don’t over-generalize about the outcome, be accountable

Measurable – stands up to anyone’s ability to review outcome

Achievable – do you have the resources, time, expertise

Realistic – keep it on par with past stretch goals

Timebound – have a date it has to be accomplished by

Taking Action

Product Development

In 6 months I will have completed the prototype and taken it to 20 qualified people to critique.

Prospect Identification

In 45 days I will have identified 50 potential customers and booked 5 demonstration meetings.

Revenue and Profit Goals

In 9 months we will have achieved $150,000 in closed contracts with an operating margin of 65%.

Taking Action

Specific Measurable Achievable Realistic Time-bound

1. Goal

2. Goal

3. Goal

How was

your

leap today?

Competitive LandscapeIn

dust

ry C

om

peti

ng F

act

ors

Demand

Saturation

Price

Features

Distribution

Service

Maturity

Advertising Spend

Sales Force

Database

Overheads

A. ____________________________

B. ____________________________

C. ____________________________

D. You

Competitors

Less /Low

More /High

Same /Median

Weighting

Your Uniqueness?

_______________________________

_______________________________

_______________________________

_______________________________

© Andrew Ballenthin 2011andrew@e-m-3.com

1. Reduce

2. Eliminate

3. Create

4. Raise

Which factors should be reduced well below industry standards?

Which should be created that the was never offered?

Which factors should be raised well above the industry’s standard?

What does the industry takes for- granted that should be eliminated?

1._________________________________________________________________________

2._________________________________________________________________________

3._________________________________________________________________________

4._________________________________________________________________________

___________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

What can change? Is it really innovation?

Four Actions Framework

© Andrew Ballenthin 2011andrew@e-m-3.com

Customer’s view

3. Buyer UtilityWhat are the exceptional differences in your idea?

4. Pricing - Price / CostIs your price appealing to the greatest mass of buyers?

5. DeliveryHow can you give your customers more value in the transaction than competitors?

1. AdoptionWhat prevents customers fromseeing the value of your idea?

2. Advertising / SalesHow will you uniquely make your prospects aware of your offer?

Going to MarketOut of the box rethink?

S.M.A.R.T.

Specific Measurable Achievable Realistic Time-bound

1. Goal

2. Goal

3. Goal

© Andrew Ballenthin 2011andrew@e-m-3.com