http://www.youtube.com/watch?v=
QBN-Iolxa1o
• Sean Haight - Strategy Canvas
• Weston Waldo – Four Action Framework
• Matt McKanna – Eliminate, Reduce, Create,
Raise Grid
• Jack Johns – Characteristics of a Good Strategy
Discussion Questions?
• Can a company in a red ocean still create blue
oceans?
Analytical Tools and Frameworks
• Effective Blue Ocean
Strategy should be about
risk minimization and not
risk taking.
• “All our dreams can
come true, if we have
the courage to pursue
them.” Walt Disney
Snow White and the Seven
Dwards
Snow White and the Seven Dwarfs was the first full-length cel animated
feature film. Walt Disney started in 1934 on production of Snow White and
even his brother and wife tried to convince him to not make it. His initial
budget was ten times greater than anything he had produced so far and he had
to mortgage his house to produce the film. It was the highest grossing film of
1938 and when adjusted for inflation is still one of the top ten highest grossing
films of all time in the US. The success led to Disney building a new facility in
Burbank and began production on the films Pinocchio, Fantasia, Dumbo,
Bambi, Alice in Wonderland, and Peter Pan.
The Strategy Canvas
• 2 Purposes
• 1) Captures the Current State of play in the
known market space.
• 2) Allows one to understand where
competition is investing, factors the current
industry competes on(products, service, and
delivery) and what customers receive from the
existing competition
Example: U.S. Wine Industry
• Price per bottle
• Elite and refined image on the bottle
• Above-the line marketing to try and give
prominence to a particular wine house
• Aging Quality
• Vineyard Prestige and Legacy
• Wine Complexity
• Wine Range
Horizontal and Vertical Axis
• The Horizontal Axis shows the range of factors
that the industry competes and invests on.
• The Vertical Axis captures the offering level the
buyer receives across all these competing factors.
• The Value Curve is a graphic depiction of a
company’s relative performance across its
industry's factors of competition and is the basic
component of the strategy canvas.
• A high score means that a company offers buyers
more and also invests more in that factor.
What not to do
• Do not try to benchmark competitors and
outcompete them by offering a little more for
a little less
• Do not conduct extensive customer research
(customers can scarcely imagine how to create
uncontested market space)
Fundamentally shift the Strategy
Canvas
• Reorient your strategic focus from competitors
to alternatives and from customers to
noncustomers of the industry, and look for
alternatives.
• Gain insight into how to redefine the problem
and reconstruct buyer value elements
Application to Other Classes
• A strategy canvas is similar to a SWOT Analysis
that we learned in marketing in that one
analyses what your strengths and weaknesses
are and what your competitors are doing.
• In accounting one tracks how much a
company invests it’s money and in what
projects it’s investing its money in.
Casella Wines
• How to make a fun and nontraditional wine,
easy to drink for everybody?
• Saw that American’s 3 to 1 preferred alcohol
over wine because they thought it was a
turnoff and pretentious.
• It saw this as an opportunity and to achieve
this turned to the second basic analytical tool,
The Four Actions Framework.
The Four Action Framework
2. Reduce
Which factors should be
reduced well below the
industry standard?
1. Eliminate
Which factors that the
industry takes for
granted should be
eliminated?
A New Value
Curve
3. Raise
Which factors should be
raised well above the
industry standard?
4. Create
Which factors should be
created that the industry
has not seen before?
Figure 2-2
The Four Actions Framework
1. Eliminate:
•
Eliminate factors your company competes on
2. Reduce:
•
Product and Service overdesigned
3. Raise:
•
Eliminate industry forced customer compromises
4. Create:
•
Creating new sources of value and demand
• Toy Story Trailer
Creating the Blue Market for computer
animation films
• In 1988 Disney approached Pixar to make a full length animated
feature using computer-animation. Disney reached a deal with Pixar
in 1991 where Disney would own the picture, have creative control,
with an option to do 2 more films with Pixar and Pixar would earn
12.5% of the revenues.
• In 1993 Tom Hanks and Tim Allen signed on to do the voices of Buzz
and Woody.
• It took over 300 computer processors to make the film
• In total, the film required 800,000 machine hours and 114,240
frames of animation
• Film made over $350 million dollars in 1995 and started the
computer animated movie trend.
• Started a partnership with Disney and Pixar, till Disney bought Pixar
for 7.4 billion dollars in 2006.
Class Application
• Relevant to any entrepreneurship class
• Entrepreneurs must master the framework
• Apply to any business model to result in
success
• Four Action Strategy used to promote
innovation
The Eliminate-Reduce-Raise-Create Grid
The grid is designed to assist companies on
certain factors that should be eliminated and
reduced, as well as factors that can be raised or
even created.
Eliminate
Raise
-What factors can be eliminated that companies
within the industry have long competed on?
-What compromises that your industry forces you
to make can be raised?
Reduce
Create
-What components of the industry can be reduced
to create a blue ocean?
-What factors can be created to discover entirely
new sources of value for buyers?
The Eliminate-Reduce-Raise-Create Grid
• The grid creates a connection from the four questions in the four actions
framework to the actual implementation of eliminating, reducing, raising,
and creating different factors.
–
–
–
–
Pursue differentiation and low costs (Simplicity)
Forces companies to eliminate and reduce factors that were previously ignored
Easily understood by managers at any level
Helps drive decision making on factors the industry competes on, rather than specific
competitors.
• Yellow Tail example
–
–
–
–
Eliminate Aging qualities and above-the-line marketing
Reduce Wine complexity and wine range
Raise price versus budget wines
Create Ease of selection and easy drinking
Walt Disney
There are certain characteristics of the grid that Walt Disney
has followed to become the successful company that they
are.
• Raise- Target audience
• Create- Multiple business segments (Theme parks, studio
entertainment, and consumer products)
Walt Disney has created value in their company by making
people happy. This value has expanded by increasing the
target audience and creating new business segments that
were once untouched.
• Lion King Broadway
In 1994 Disney first brought Beauty and
The Beast to Broadway and in it’s run
worldwide run it made 1.4 billion dollars
and soon followed the biggest Broadway
musical of all time The Lion King having
made $853.8 million and counting.
Characteristics of a Good Strategy
• When expressed through a value curve, then,
an effective blue ocean strategy has three
complementary qualities:
– Focus
– Divergence
– Compelling tagline
Characteristics of a Good Strategy
• Yellow Tail example:
– Focus – company does not diffuse its efforts across all key factors of
competition
– Diverging – the shape of their value curve diverges from the other
players by looking for alternatives
– Compelling Tagline – a fun and simple wine to be enjoyed everyday
• Southwest Airlines example:
– Focus – friendly service, speed, and frequent point-to-point
departures
– Divergence – single value curve because their competitors value
curves are virtually identical to theirs
– Compelling Tagline – “the speed of a plane at the price of a carwhenever you need it”
Disney Key Strategies
• Focus on family entertainment and media:
–
–
–
–
–
Networks
Parks and Resorts
Studio Entertainment
Consumer Products
Interactive Media
• Diverge
• Compelling Tagline: “where dreams come true”
Reading the Value Curves
•
•
•
•
•
•
A Blue Ocean Strategy
A Company Caught in the Red Ocean
Over delivery Without Payback
An Incoherent Strategy
Strategic Contradictions
An Internally Driven Company
Creating A Blue Market
http://www.youtube.com/watch?v=Dz6Qi5Y210A
Creating a Blue Ocean
• In 1994 Disney released it’s first direct to
video animated sequel feature Return of Jafar
to much success and it continued this trend
with Aladdin and the King of Thieves making
over $186 million dollars and The Lion King 2
selling over 15 million copies.
Discussion Recap
Does Disney still create blue oceans while
being in a red ocean?
Answer
• Yes, based on our research Disney’s past
projects have shown a continuous expansion
for the entertainment market, and other
outlets.