IBM Executive
Development Programme
IBM Global Services and the IBM Executive Business Institute
Strategic Innovation
Strategy Canvas &
The Four Actions Framework
© Copyright IBM Corporation 2005
VN-v21
IBM Executive
Development Programme
IBM Global Services and the IBM Executive Business Institute
Flow of Seminar
Ideas
and
Customers
Tools and
Methods
Business
Design
Assessment
Innovation
Capability
Assessment
Action Plan
Page 2
© Copyright IBM Corporation 2005
IBM Executive
Development Programme
IBM Global Services and the IBM Executive Business Institute
In this module we’ll help you identify and appreciate the
importance of a strategy canvas and how it helps define your
strategy creating and sustaining differentiated business models.
Objectives:
ƒ To explore the potential benefits of a Blue Ocean strategy approach.
ƒ List the current and future key competitive value elements for your
organization and your key competitors.
ƒ Create and construct a first draft of a high level strategy canvas for your
current organization and associated four Actions Framework Grid.
ƒ Create and construct a first draft of a high level strategy canvas for your future
organization and associated four Actions Framework Grid.
Page 3
© Copyright IBM Corporation 2005
IBM Executive
Development Programme
IBM Global Services and the IBM Executive Business Institute
Agenda
ƒ
ƒ
ƒ
ƒ
ƒ
Red & Blue Ocean strategy and the associated six guiding principles
Four actions framework and grid (ERRC)
Align strategic intent with selected value elements
Map your organization and your competitor’s current strategy canvas
Map your organization’s future strategy canvas
Page 4
© Copyright IBM Corporation 2005
IBM Executive
Development Programme
IBM Global Services and the IBM Executive Business Institute
Red oceans and blue oceans differ; The “Blue Ocean” approach is
a strategic tool that helps innovation strategists asses current and
desired future strategic states; Red Ocean is a current state.
RED OCEAN:
• All of the industries in existence today
• Boundaries are defined and accepted
• It is the known marketspace
• Competition is based upon an established rules
• Value elements are identified and generally convergent
BLUE OCEAN:
• ‘Strategically divergent’ method of positioning/visualizing strategy
• Boundaries are undefined and generally unknown
• Competition is irrelevant because the industry is not defined
• Value elements are not identified, represent divergence
• Products and services are deliberately chosen as a unique set of value
characteristics on which to invest
Page 5
Source: “Blue Ocean Strategy”, Kim and Maubourgne
© Copyright IBM Corporation 2005
IBM Executive
Development Programme
IBM Global Services and the IBM Executive Business Institute
Research indicates a significant profit opportunity for
organization’s that effectively employ blue oceans as they account
for a disproportionate impact on profit for many organizations.
Business Launches
Revenue
100%
P e rc e n t
80%
Profit impact
70%
60%
60%
40%
50%
20%
40%
60%
0%
30%
50%
20%
40%
10%
30%
Red Ocean
Blue Ocean
70%
0%
20%
Red Ocean
Blue Ocean
10%
0%
Red Ocean
Blue Ocean
NOTE: Blue Oceans account for a
disproportional contribution to profit.
Page 6
Source: “Blue Ocean Strategy”, Kim and Maubourgne
© Copyright IBM Corporation 2005
IBM Executive
Development Programme
IBM Global Services and the IBM Executive Business Institute
The ‘Blue Ocean” approach has several key principles and
associated assumptions that help organizations create compelling,
sustaining and differentiating strategies.
BLUE OCEAN PRINCIPLES
Formulation principles
1. Reconstructs market boundaries and the competitive industry aspects
2. Focuses on the big picture, not the numbers
3. Reaches beyond existing demand, creates new demand paradigm
BLUE OCEAN ASSUMPTIONS
•
Market boundaries and industry structure are not a ‘given’ and can be
changed
•
Designed to create new and uncontested marketspace
•
Focuses on making competition irrelevant
Page 7
© Copyright IBM Corporation 2005
IBM Executive
Development Programme
IBM Global Services and the IBM Executive Business Institute
The strategy canvas is a high level depiction of current and future
strategic position based on the key Blue Ocean principles; it helps
strategists examine value creation, value capture and opportunity.
The Strategy Canvas:
• Graphically depicts your, and your competitors, value elements (value
proposition investments).
• Suggests areas of opportunity on which to escape/eliminate
competition.
• Captures the current and future state of activity within a marketspace.
• Documents current and future competitive investment.
Page 8
© Copyright IBM Corporation 2005
IBM Executive
Development Programme
IBM Global Services and the IBM Executive Business Institute
Value Elements are those value creating components an organization
invests in including resources, processes and capabilities and
entails strategic choices and strategic intent.
Value Elements…:
ƒ can be derived from direct or indirect analysis of an organization.
ƒ help form the basis for value creation and value capture.
ƒ can be used for the basis of differentiation and competition.
ƒ are a high level graphical depiction used to communicate strategic
intent.
ƒ require a deliberate choice for the allocation of organization resources.
ƒ change over time with the adaptation of value propositions and
strategy.
Page 9
Source: “Blue Ocean Strategy”, Kim and Maubourgne
© Copyright IBM Corporation 2005
IBM Executive
Development Programme
IBM Global Services and the IBM Executive Business Institute
Here is an example of Southwest Airlines depicting its chosen
value elements for its unique strategy canvas in relation to one
selected key competitor.
Southwest Airlines Strategy Canvas
High
One Competitor
ep
ar
t
D
P2
P
er
vi
ce
S
Sp
ee
d
Fr
eq
C
ub
H
Fr
ie
nd
ly
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ct
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i ty
ho
ic
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C
Se
at
in
g
Lo
un
ge
s
M
ea
ls
Pr
ic
e
Low
Focus on Value Element
Southwest
Value Elements
Page 10
© Copyright IBM Corporation 2005
IBM Executive
Development Programme
IBM Global Services and the IBM Executive Business Institute
High
Strategy Canvas: Luxury Car Market
Your Value Curve
Industry Value Curve
Lo
an
er
C
ar
s
Q
ua
lit
y
C
on
ve
ni
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ce
R
ep
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at
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in
g
Br
an
d
Fi
na
nc
Se
rv
ic
es
Ex
tra
Se
rv
ic
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Pr
ic
e
Low
Focus on Value Element
Mapping your company and several key competitor’s value
elements onto a strategy canvas may provide greater insight into
strategy choices and indicate the industry’s value curve.
Value Elements
Page 11
© Copyright IBM Corporation 2005
IBM Executive
Development Programme
IBM Global Services and the IBM Executive Business Institute
Let’s attempt to draw your strategy canvas for your existing
product as it relates to key competitors.
Current Strategy Canvas Activity:
ƒ Identify and record on the following page:
- Plot your EXISTING product’s top 6-8 value elements in which you currently compete.
- Plot your key competitor’s top 6-8 value elements.
ƒ Be prepared to discuss these questions.
-
The similarities and/or differences between your and your competitor’s canvasses?
The competitive assumptions made about your industry’s value elements?
The strategic implications for your organization, competitors and industry?
Any general patterns? (i.e., convergence or divergence on value elements?)
Timing:
- Preparation Tonight
- Workshop discussion
tomorrow morning
Page 12
30 min
15-20 min
© Copyright IBM Corporation 2005
IBM Executive
Development Programme
IBM Global Services and the IBM Executive Business Institute
High
Low
Focus on Value Element
Current Strategy Canvas
Value Elements
Page 13
© Copyright IBM Corporation 2005
IBM Executive
Development Programme
IBM Global Services and the IBM Executive Business Institute
A helpful tool in crafting a future strategy canvas is the ‘Four
Actions Framework’ as it facilitates identifying the value elements to
be created, increased, decreased, or eliminated.
Reduce
Which factors should
be reduced well
below the industry’s
standards?
Eliminate
Which factors the
industry takes for
granted should be
eliminated?
Future
Value
Curve
Create
Which factors should
be created that the
industry has never
created?
Raise
Which factors should
be raised well above
the industry’s
standards?
Page 14
Source: “Blue Ocean Strategy”, Kim and Maubourgne
© Copyright IBM Corporation 2005
IBM Executive
Development Programme
IBM Global Services and the IBM Executive Business Institute
Strategic innovators use the Four Actions Framework with the use
of a supplementary tool, the ERRC Grid, in order to help examine
value elements with which they elect to invest in.
The E-R-R-C Grid
ELIMINATE
ƒ Value Element 6
ƒ Value Element 9
ƒ Value Element 10
ƒ Value Element 11
RAISE
ƒ Value Element 1
ƒ Value Element 4
REDUCE
ƒ Value Element 3
ƒ Value Element 8
ƒ Value Element 12
Page 15
CREATE
ƒ Value Element 2
ƒ Value Element 5
ƒ Value Element 7
ƒ Value Element 13
© Copyright IBM Corporation 2005
IBM Executive
Development Programme
IBM Global Services and the IBM Executive Business Institute
This illustration of a sample organization’s previous value
elements chart mapped to a basic strategy canvas shown with
current and future value curves.
Strategy Canvas: Current State Vs. Future State
High
El
em
en
t8
El
em
en
t7
El
em
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t6
El
em
en
t5
El
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t4
El
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t3
El
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t2
Low
Current Curve
El
em
en
t1
Focus on Value Element
Future Curve
Value Elements
Page 16
© Copyright IBM Corporation 2005
IBM Executive
Development Programme
IBM Global Services and the IBM Executive Business Institute
An actual example of the outcome of a facilitated strategy session
using the Four Actions Framework tool and associated value
elements for EFS (European Financial Services company).
ELIMINATE
ƒ Relationship Management
REDUCE
ƒ Account Executives
ƒ Corporate Dealers
Page 17
Source: “Blue Ocean Strategy”, Kim and Maubourgne
RAISE
ƒ Ease of Use
ƒ Security
ƒ Accuracy
ƒ Speed
ƒ Market Commentary
CREATE
ƒ Confirmation
ƒ Tracking
© Copyright IBM Corporation 2005
IBM Executive
Development Programme
IBM Global Services and the IBM Executive Business Institute
This is a graphical illustration of EFS’s value elements chart
mapped to a Strategy Canvas shown with current and future value
curves.
Focus on Value Element
Low
High
EFS: Before and After
Tr
ac
ki
ng
om
m
en
ta
ry
C
on
frm
at
io
n
et
C
Sp
ee
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M
ar
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p
Pr
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M
an
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ag
co
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ti v
or
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el
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rs
Ea
se
of
U
se
Se
cu
rit
y
Ac
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cy
Current Curve
el
at
io
ns
R
Page 18
Future Curve
Value Elements
© Copyright IBM Corporation 2005
IBM Executive
Development Programme
IBM Global Services and the IBM Executive Business Institute
Creating Your New Innovation Strategy Canvas: Let’s take your ‘new’
idea and use the same approach we used mapping the strategy canvas for
your current product but enhance it using ERRC techniques.
New Innovation Strategy Canvas and ERRC Activity:
1) Make a copy of your current strategy canvas (with competitors).
2) List your future value elements with thoughts to strategic innovation and
differentiation on the ERRC grid .
3) Apply ERRC thinking to your value elements and then map the resulting value
elements onto your current and industry strategy canvas.
a) Do not get caught up on the ‘how’ or associated deeper execution questions.
b) However, do remember open innovation thinking to capture capabilities and ideas your
organization does not have natively
4) Once the first draft is completed, take time to answer:
a)
b)
c)
d)
Page 19
What are your industry’s general value elements (plot them if you have time)?
Is your industry convergent or divergent on the selected value elements?
Would Open Innovation thinking change your idea or its value elements ?
What are the strategic implications of your new idea for your organization ?
© Copyright IBM Corporation 2005
IBM Executive
Development Programme
IBM Global Services and the IBM Executive Business Institute
High
Low
Focus on Value Element
Future Strategy Canvas for Your Innovative Idea
Value Elements
Page 20
© Copyright IBM Corporation 2005
IBM Executive
Development Programme
IBM Global Services and the IBM Executive Business Institute
Creating Your New Innovation Strategy Canvas
The E-R-R-C Grid
ELIMINATE
ƒ…
ƒ…
RAISE
ƒ…
ƒ…
REDUCE
ƒ…
ƒ…
Page 21
CREATE
ƒ…
ƒ…
© Copyright IBM Corporation 2005
IBM Executive
Development Programme
IBM Global Services and the IBM Executive Business Institute
New Innovation Strategy Canvas Questions
1) What are your industry’s general value elements (plot them if you have
time)?
2) Is your industry convergent or divergent on the selected value elements?
3) Would Open Innovation thinking change your idea or its value elements ?
4) What are the strategic implications of your new idea for your organization
?
Page 22
© Copyright IBM Corporation 2005