Team 6
•Bryan
Fetterman
•Molly Murdock
•John
Fletcher
•Reece Macdonald
•Will
Kerlick

Strategy Canvas

Four Actions Framework

3 Characteristics of Good Strategy

Reading the Value Curve

Strategy canvas is both a diagnostic and an
action framework for building a compelling
blue ocean strategy. It serves TWO purposes

1) Captures the understanding of the range of factors
the industry competes and invests in (i.e. price,
quality, marketing, differentiation, etc.)

2) Captures the offering level that buyers receive
across these competitive factors

Historically, the U.S. wine industry has faced
intense competition from domestic and
international competitors. The range of factors it
competes on are as followed:
1) Price / bottle
2) Image
3) Marketing
4) Aging quality
5) Vineyard prestige and legacy
6) Complexity
7) Wine range (chardonnay, merlot, etc.)


The value curve is the basic component of the
strategy canvas. It is a graph depiction of a
company’s relative performance across its
industry’s factors of competition.
A high score indicates that a company offers
buyers more or in other words invests more in
that competing factor.

In the late 1990s, the value curves for premium and
budget wines were essentially straight across in the
level of investment for each of the competing factors,
just at different price levels.

Reorient strategic focus from competitors to
alternatives and from customers to
noncustomers of the industry.


This allows you to redefine the problem the industry
focuses on and reconstruct buyer value elements that
reside across industry boundaries.
WHAT NOT TO DO:


Offer more for less
Extensive customer research


To reconstruct buyer value elements in crafting a new
value curve, one should focus on the Four Actions
Framework.
Four key questions should be asked to break the
barrier between cost leadership and differentiation




1) Which of the factors that the industry takes for granted
should be eliminated?
2) Which factors should be reduced well below industry
standards?
3) Which factors should be raised well above industry
standards?
4) Which factors should be created that the industry has never
offered?

Eliminate: forces companies to eliminate factors that
competitors in industry have long competed on. Often,
these factors are taken for granted even though they no
longer have value or may even detract from value.


Ex: Yellow Tail eliminated aging qualities and above-the-linemarketing factors.
Reduce: Forces companies to decide whether products
or services have been overdesigned in the race to
match or beat the competition.

Ex: Yellow Tail- reduced wine complexity, wine range, and vineyard
prestige.

Raise: forces the company to uncover and eliminate
the compromises your industry forces customers to
make.


Ex: Yellow Tail- increased retail store involvement
Create: helps the company to discover entirely new
sources of value for buyers and to create new demand,
therefore shifting the strategic pricing of the industry.

Ex: Yellow Tail- instilled new demand by creating ease of
selection and easy drinkability.
Eliminate-Reduce-Raise-Create Grid: The Case of Yellow Tail
Eliminate
Raise
Enological terminology and distinctions
Price versus budget wines
Aging Qualities
Retail store involvement
Above-the-line marketing

Reduce
Create
Wine Complexity
Easy Drinking
Wine Range
Vineyard prestige
Ease of Selection
Fun and Adventure
This grid emphasizes the importance that
“GOOD is the enemy to GREAT”, in which
companies should not be complacent with their
value in the industry.




Pushes companies to pursue differentiation
and low cost to break the value/cost tradeoff.
Immediately flags companies that are only
focused on raising and creating, thereby lifting
their cost structure.
Easily understood by managers creating a high
level of engagement in its application.
Drives companies to scrutinize every factor the
industry competes on.




Created new combo of wine characteristics that
appealed to mass amounts of alcohol drinkers.
Offered only two wines (chardonnay and merlot).
Captured market share of premium and low cost
wine drinkers.
By mid-2003, Yellow Tail’s average annual sales
were 4.5 million.



1) Focus
2) Divergence
3) Compelling Tagline
*Together, these characteristics provide a
“litmus test” of the commercial viability of Blue
Ocean ideas.


According to Jim Collins’ Good to Great, part of the Black
Box is knowing what to do and what not to do, which ties
directly into a company’s strategic focus.
Blue Ocean Strategy elaborates on this idea by adding that
every strategy needs to have a specific focus on what they
plan to do, what they plan not to do, and how they plan to
achieve it.

Ex: Southwest Airlines





Friendly service
Speed
Frequent “point-to-point” Departures
No extra investments in meals, lounges, & seating choices.
This allows Southwest to charge cheaper rates, and makes it difficult for other
airlines to compete on price.



What makes our value curve different from others?
With Blue Ocean Strategies, divergence occurs not by
benchmarking a companies competitors, but by examining the
alternatives that can be taken advantage of.
Reactive Strategies lead to a loss in uniqueness.
Southwest Airlines

Point-to-point travel between midsize cities
Yellow Tail
 Started with only 2 wines (Red & Chardonnay)
 Advertised to the average drinker vs. the wine connoisseur
“A good tagline must not only deliver a clear message but also
advertise an offering truthfully, or else customers will lose trust
and interest.”
Southwest Airlines
“The speed of a plane at the price of a car—Whenever you need it.”
“Ding, you are now free to fly-about the country”
“Want to get away!?”
Academy Sporting Goods
“The Right stuff, the RIGHT price, Academy!’
Dos-Equis
“STAY THIRSTY, my Friends!”

The strategy canvas enables companies to see
the future in the present.


To achieve this, companies must understand how to
read value curves.
Value curves of an industry are embedded with a
wealth of strategic knowledge on the current status
and future of a business.

Value curves ask, “Does the business deserve
to be a winner?”

Three criteria:
 Focus
 Divergence
 Compelling tagline that speaks to the market

If criteria is met, the company is on the right
track of defining a good blue ocean strategy.
If company’s value curve
 Lacks focus - its cost structure will tend to be
and business model complex will lack
implementation and execution.

Lacks divergence – a company’s strategy is a
too, with no reason to stand apart in the
marketplace.

Lacks a compelling tagline to buyers – it is
likely to be internally driven.
high
me-


When a company’s value curve converges with its
competitors, it signals that a company is likely caught
within the red ocean of bloody competition.
Company is competing on the basis of cost and quality
through explicit and implicit strategies.
 This typically signals slow growth, unless by the grace of
luck, a company benefits from being in an industry that is
growing on its own accord.
 When creating a strategy: Alan Wurtzel of Circuit City said,
“The number one factor was luck” -Good to Great

If a company’s value curve is delivering high
levels across all factors, the question is,
“Does the company’s market share and
profitability reflect these investments?”


If not, the company may be oversupplying the
customers.
In order to value-innovate, a firm must conclude
which factors should be reduced or eliminated to
construct a divergent value curve.

Independent substrategies are most likely the
cause of an incoherent strategy.
These substrategies may make sense individually,
but to do provide a clear strategic vision.
 Independent substrategies must distinguish a
company from the best competitor.


Often a reflection of a company with divisional
or functional silos.

Strategic contradictions arise when a company
offers a high level on one competing factor
while ignoring others that support that factor.

Example: “Investing heavily in making a company’s
Web site easy to use but failing to correct the site’s
slow speed of operation.”

How does a company label the industry’s
competing factors?
 Example: “Does it use the word megahertz instead of
speed, or thermal water temperature instead of hot
water?”

Strategic vision can be built on two perspectives:
 Outside-in - driven by the demand side.
 Inside-out – operationally driven.

Analyzing the language of the strategy canvas helps
a company understand how far it is from creating
industry demand.