Following are three analytical tools used in the formulation of a Blue Ocean Strategy. The three tools we will look at are:
- Strategy Canvas
- Four Actions Framework
- Eliminate-Reduce-Raise-Create Grid
The Strategy Canvas
The Strategy Canvas is both a diagnostic tool and an action framework. From a diagnostic point of view, it is used to capture what is happening in the existing market space. The following example from the book describes the US wine market prior to Casella Wines introduction of Yellow Tail.
This paints a picture of where the competition is currently investing and the factors they compete on in products, services, delivery and what customers receive from the existing offerings.
Four Actions Framework
The Four Actions Framework asks four key questions to challenge an industry’s preexisting norms.
The eliminate and reduce questions lead you to gaining an insight into how to drop your cost structure while the create and raise questions lead you to gaining an understanding into how to increase customer value and generate new customer demand.
The third tool supplements the second encouraging action. The example below shows how Casella Wines answered those four key questions.
This resulted in a strategy canvas that looked like the following for Casella Wines’ new Yellow Tail brand in the US wine market.
You can see from the above picture, Yellow Tails curve has three very important characteristics.
- Focus: efforts were not diffused across all key factors of the competition
- Divergent: the value curve diverges from the competition
- Compelling Tagline: ‘a fun and simple wine to be enjoyed every day’
I have recently read the “international bestseller” Blue Ocean Strategy and found it a very insightful read. A blue ocean is essentially an uncontested market space where there are no competitors allowing the company that creates it to excel. However, a blue ocean strategy is not just about delivering something customers want that hasn’t been delivered before, its also about delivering a value innovation for the company as well.
Typically main stream strategy theory suggests companies must either choose a high cost differentiation strategy or a low cost price led strategy. Companies that create blue oceans however simultaneously achieve low cost and differentiation.
Red Ocean Strategy
- Compete in existing market space
- Beat the competition
- Exploit existing demand
- Make the value-cost trade-off
- Align the whole system of a firms activities with its strategic choice of differentiation or low cost
Blue Ocean Strategy
- Create uncontested market space
- Make the competition irrelevant
- Create and capture new demand
- Break the value-cost trade-off
- Align the whole system of a firms activities in pursuit of differentiation and low cost
While a company competing in a red ocean fights for existing customers that that market, a company competing in a blue ocean cultivates an entirely new set of customers as it creates an entirely new market space.
For example Cirque du Soleil didn’t just enter the existing market space of traditional circuses, it created an all new market and captured customers whom were not typically customers of the circus but customers whom were looking to be entertained.
It also reduced its costs when compared to traditional circuses by removing big name star performers and animals.
When Casella Wines introduced its ‘easy to drink’, ‘to be enjoyed by everyone’ wine Yellow Tail, to the US market, it took customers from the two distinctive wine markets – the high end and ultra cheap – and combined them with customers whom would normally drink beer, alcopops or cocktails, to create an entirely new market space.
It also reduced its costs by initially creating only one red and one white and bottling them in the same type bottle. Traditionally red wine and white wine had always been sold in two different styles of wine bottle.
In my next post I’ll explore some of the tools and frame works that have been created to both help identify and execute a blue ocean strategy.
Just as businesses start focusing on being ‘customer centric’ and developing a ‘customer experience’ that will ensure customers want to repeatedly do business with them, there are many arguing that to be ‘customer centric’, is really to be ‘human centric’ and the same can also be applied to staff.
Some companies, like Airbnb, are redefining the role of the HR department to be broader and replacing the senior most HR role with a ‘Chief Employee Experience Officer’ role.
Mark Levy’s new role of Chief Employee Experience Officer at Airbnb combines traditional HR functions of recruiting and talent development with marketing, real estate, facilities, social responsibility, and communications.
What is clear is that this move quite visibly positions the employee experience as critical to the business, not HR. This is absolutely right, in my view, and gives practitioners the confidence and belief to know that HR is no longer a support function within the business, because the employee experience, to a large extent, is the business.
…how easy would it be for you to follow Airbnb and co in creating a function dedicated to the employee experience that brings together multiple functions (or silos if they are starting to hinder collective progress), which all play a major organisational role and get them all aligned and driving your business forward?
In a recent interview with Tech2, Ashutosh Sharma, VP and research director at technology and market research company Forrester, decreed that organisations “need to go beyond customer-centric to become customer-obsessed” as part of the ongoing digital transformation.
…digital transformation is the process that businesses need to go through, at the end of which they are able to exploit digital technologies to create new sources of value for customers, as well as increase operational agility in service of customers.”
but to date, Sharma argues…
…companies were able to get away with displaying limited customer empathy and customer centricity at touch points that were most visible to the customer. It was only skin-deep. A successful digital transformation requires that all the functions within the company, even behind the line of visibility, are as customer-obsessed as the rest of the organisation,”
and it has to be led from the very top…
Unlike previous transformations, this time it is not about improving the efficiencies or reducing the costs which can be effectively led by functional heads. Being a customer-obsessed enterprise takes the whole village. The CEO needs to lead from the front and formulate the vision and the strategy for the entire organisation”
Read the full interview here.
Whether you’re talking about a consumer or a corporation, a hassle map defines all of the actual steps that characterize the negative experiences of the customer. Think about these questions: Where are the emotional hot spots, the irritations, the frustrations, the time wasted, the delay? Where are the economic hot spots? And then think about this: What are the ways that businesses can radically improve the hassle map for both the customer and themselves?
They sound very similar to customer journey maps and possibly frame the “problem” differently in a way that may work better for different types of people who see and think differently.
Creating a hassle map view of the customer experience would help some question every step of the process as if it was a negative and not fall into the trap of brushing it aside because “that’s the way its always been done”.
Each extra step, wasted moment, avoidable risk, needless complication, less-than-optimal solution, awkward compromise, and disappointing outcome is a friction point on the hassle map. And each represents an opportunity for a creative organization to create new demand by eliminating the friction or even reversing it, turning hassle into delight.
Read Annette’s full blog post here.
Read the original Adrian Slywotzky inerview on Inc. here.
I’d like to highlight a recent post by Kimberley Crofts of Meld Studios which captures one of the core problems with legacy corporates and their adoption of a Customer Centric mindset. It’s “the problem with product-led thinking in a service-dominant world”.
Crofts references Lynn Shostack from 1984…
…these procedures (Gantt charts etc) provide managers with a way to visualise a process and to define and manipulate it at arm’s length. What they miss is the consumer’s relationship to, and interaction with, services. They make no provision for people-rendered services that require judgement and a less mechanical approach. They don’t account for the service’s products that must be managed simultaneously with the process” (Shostack, 1984).
Croft then goes on to contrast an Artisans way of thinking and working versus an industrialist or production line.
Where the artisan is guided by stories of past use to guide their making, the industrial worker is “bound to the execution of step-by-step sequences of determinate motions”
Croft continues to question how organisations might take an approach more like an Artisan.
You can read the full post here.
People with skills in service design, human-centered design, design thinking, experience design, as well as innovationists and customer engagement specialists are all in high demand. Everyone wants them but suitable candidates are a rare find. This is largely due to the explosion of organisations now seeking to use the toolset of design to produce human- centred strategies, business models, brands, organisational cultures, products and services. The relatively few tertiary courses focused specifically on this type of design in Australia compounds the scarcity issue.
Franklin suggests looking for individuals from nearby domains such as “ndustrial design, user experience, market research, organisational psychology, graphic design, and business consulting”.
And then “selecting individuals who think and behave in ‘designerly ways’”.
- True empathy matched with a passion to improve the way people interact with the world
- The ability to understand and shape other’s needs and behaviours
- A curious, open mind
- The ability to see patterns and make inferences based on these (known as abductive reasoning)
- Enough resilience to sit with not knowing the answer right now, but persevering regardless
- A desire to experiment, reflect and iterate
- The ability to paint a picture that allows others to digest what needs to be communicated
- Integrity and the strength to hold an informed point of view
- The skill and will to bring others on the journey.
- Upon finding individuals with a mix of these attributes, the program you put together to expose these individuals to immersive design projects – supported by formal learning and development activities – is a critical next step to meeting your recruiting needs.
You can read the full post here.
A recent opinion piece, “Why ‘Design Thinking’ is becoming a game changer for many enterprises” by Dmitri Khanine on cio.com, articulates how Design Thinking can be leveraged to improve, if not transform, the typical legacy IT Software/Solution Delivery Lifecycle (i.e. the SDLC process).
“Design Companies” have learned to appreciate what is now called the Human Factors — facts like that business requirements are created by humans and often given out in form of solutions, which may or may not be ideal and represent just one of all possible options… facts like asking business users what they want may lead a project going in a wrong direction… facts like that different types of users, different roles and personalities may have completely different ways of interacting with your systems and very different requirements.
On Requirements Management
Recent PMI study quotes that 47 percent of projects that are in trouble today are there because of a slip in requirements management.
Think about it. Out of all projects that failed to hit the mark — across all industries — virtually every second one is in trouble because of requirement management. Business users are called upon to do something that they have never signed up to do — design solutions. Business Analysts just come and ask them what would they like to see in a finished product…
Placing business users on development teams helps to better translate their vision to code but offers no protection against ineffective solutions and occasionally, going after completely wrong business goals.
Wrong solutions are being procured, implemented and developed. Years of effort are spent creating customizations, just to realize that they don’t fit very well with the way users are interacting with the system or that they’re solving the non-critical issue, while the most critical ones are left unaddressed. And that also creates confusion about scope and direction…
On Scope Creep
If you hang out with PMs, you hear a lot of complaints about the Scope Creep common phenomena – when new requirements are coming out of the woodwork long after a project is initiated and wrecking havoc in schedules and budgets. There’s also another related project risk – stakeholder management. That one is about managing expectations and dealing with ‘difficult’ people who cause Scope Creep by coming up with all of these ‘unforeseen’ requirements.
But why are they doing this?
You see, when business requirements or an RFP is created based on a ‘download’ from one stakeholder, there’s a very good chance that they will later realize that they’ve forgotten something. Other stakeholders and other business units will also pick up on missing pieces. And you have little control over when these insights can occur and whether or not this process based on spontaneous realizations will lead you to a complete and effective solution in the end.
Now what if we take most of this volatility out of user requirements? What if you could ‘magically’ extract the knowledge out of your key stakeholders and flesh out complete requirements in just a few days? What if you could also include the end users in the process to further insure against missing things – without stretching the process a lot longer?
If we do that – wouldn’t that just slash this 47 percent project failure rate down to low 5s for you? What would that mean for your current projects in terms of dollars saved and improved user productivity?
Now what if I could show you the processes your BAs can follow to get all of this done in just a few days, often before a project is started? Wouldn’t that be something you’d like to learn?
You can read the full article here.
A recent article on Marketing, was an interview with Telstra’s head of design practice, Cecilia Hill, discussing how she is integrating Design Thinking into Telstra.
Following is a slightly abridged version of the article. You can read the full article here.
- has been in place for three years
- is charged with energising the business around the concept of design thinking
- built upon existing UI and UX teams
- expanded its ability to respond to requests from the business to use design by reaching into product innovation and service design
How did the design practice get started at Telstra?
Three years ago, the product group in Telstra was headed by Kate McKenzie, who’s our COO now. She and I were talking about what design thinking could do, and how it could help product innovation and design.
On a trip to the US, she met with IDEO and a few other key players in the space. She came back and said, ‘Cecilia, is this what you’re talking about?’ I said, ‘Yes, it is,’ and she gave me the opportunity to run a project, to look at some innovative new solutions for our customers.
We came up with an idea where we allow our customers to take their home broadband allowance with them on the go, and use it on a mobile with a Wi-Fi network – that was essentially the idea behind Telstra Air.
Kate became the executive sponsor. Her and I then took it to [then-CEO] David Thodie, and three months after that project said, ‘Hey, this is what we should be doing more of… this is how design thinking can help in innovation and product design,’ and we recommended that we set up a practice to do it.
Does your work reach into internal processes and structures and things like that?
Absolutely. To be able to deliver great customer experience, which is the outcome of doing design properly, we have to make sure that our processes are right: that our front-line staff can sell what we produce, they have the right systems they can use and our call centres know how to support our staff.
We work in a very hybrid approach, so when we design a new idea, we make sure we have people from strategy, product, channels and marketing all in the same room. We go through a really rapid exercise of prototyping and testing, both with internal processes and people, as well as with customers.
Has your design thinking model or the methodology evolved?
Yes, we are learning how to best embed it into the business. We know that a pure design approach would not work. It would take too long. You have to take people on the journey, essentially, and you have to meet business outcomes.
If every single time [you have an idea], you have to go and spend four weeks in customers’ homes to really understand their needs, problems and behaviours, then we will only be doing four projects a year. We still do that, but sometimes we actually go into prototyping and testing rather than ethnographic research.
When you started the practice three years ago, it must have seemed like a humongous task?
And it still is. We have just scratched the surface.
What are the key challenges?
The key challenges are how we message internally and the speed that we need to get things to market in a competitive landscape.
Change is constant and having the right capability internally is very, very hard. It’s very difficult to attract the right people, to keep them and to say to senior leaders, ‘We need to double the size of the team.’
Is the type of staff very different compared to who would have been working at Telstra 10 years ago?
Absolutely, definitely. I employ not just pure designers, I employ industrial designers, visual designers, interaction designers, experience designers, service designers. But I also employ people who come from a strategy background, for example, who understand the concept of design and think that way but can’t necessarily put pen to paper and do drawings.
For us it’s about the right mindset, and that mindset is what’s different. Asking questions like the ‘what if?’ and ‘how might we?’ and not accepting the status quo – that’s what we’re looking for.
What key takeaways from your experience can you give to others who might be considering or conducting a similar project in terms of trying to change how things work within a business?
My biggest learning is just don’t give up. Essentially, you need to change the culture of the organisation: that’s what you’re trying to do. That is not something you can do in six months. That is probably a five-year journey.
A recent Harvard Business Review article, Revolutionising Customer Service, has articulated four recommendations aimed at doing things differently, or in other words, doing the opposite to “conventional wisdom”. The summary is as follows:
Don’t start with customer facing employees…
After all, customer service reps usually understand the importance of satisfied customers; often the real problem lies with logistics, IT, or some other back-end function that isn’t meeting frontline colleagues’ needs…So include everyone in service training, and focus special attention on internal service providers.
Don’t focus training on specific skills or scripts…
Educate employees more generally about what “service excellence” means…highly scripted employees are often less able to be imaginative or empathetic about a customer’s true needs. A better approach is to persuade employees to commit to a holistic definition of service: creating value for others, outside and within the organization. Teach them to first appreciate customers’ concerns and only then to take action.
Don’t pilot changes…
Conventional wisdom calls for limited experiments that, if successful, are later rolled out more broadly. That can work for small tweaks, but for more-sweeping reforms, firms must create momentum fast and set their sights high.
Don’t track traditional metrics…
Instead of worrying about typical customer satisfaction measures such as share of wallet and net promoter scores, organizations should look at the number of new value-adding service ideas put into practice.
Read the full article here.