CHAPTER 2ANALYTICAL TOOLS AND FRAMEWORKSPresentation By:Courtney Karcasinas, Robert Brinkmann, Stephen Gonzalez, Adam Hall & Justin Weden
Objectives Strategy Canvas The Four Actions Framework The Eliminate-Reduce-Raise-Create Grid Three Characteristics of a Good Strategy Reading the Value Curves
Creation of Blue Oceans Importance of Analytics
Focus on risk minimization not risk taking
Don’t compete with rivals – Make them irrelevant
Critical Questions for Strategists How do we break out of this red ocean of bloody competition
to make the competition irrelevant? How do we open up and capture a blue ocean of
uncontested market space?
Strategy Canvas Diagnostic and an action framework for building a
compelling Blue Ocean Strategy
Horizontal Axis Captures the range of factors the industry competes on and
invests in. Vertical Axis
Captures the offering level that the buyers receive across all these key competing factors.
Value Curve The graphic depiction of a company’s relative performance
across its industry’s factors of competition.
The U.S. Wine Industry
3rd largest aggregate consumption of wine worldwide
$20 billion industry is intensely competitive
The week, poorly run companies are increasingly being swept aside
Intense competition has fueled ongoing industry consolidation
Strategy Canvas of the U.S. Wine Industry in the Late 1990’s
High
Low
Price
Term
inolog
yAb
ove t
he lin
e
marketi
ng
Aging
Qua
lityPre
stige
and
Lega
cy
Comple
xity
Rang
e
PremiumWine
Budget Wine
Shifting the Strategy Canvas Reorient the strategic focus
Competitors to Alternatives Customers to Noncustomers
Gain insight How to redefine the problem the industry focuses on Thereby reconstruct buyer value elements that reside across
industry boundaries Conventional strategic logic
Drives you to offer better solutions than rivals to existing problems defined by the industry
To redraw the strategic profile Four Actions Framework
The Four Actions Framework Which factors should be eliminated? Which factors should be reduced well
below the company standard? Which factors should be raised above
the industry’s standard? Which factors should be created that the
industry has never offered?
Elimination Eliminate factors your industry have long
competed on. Vineyard prestige and legacy
Factors may longer have value or even detract value. Wine complexity and aging
Reduction What products or services have been
overdesigned? Tannins, oak, complexity, and aging
Gain insight into how to drop your cost structure compared to competitors.
Rarely managers systematically set out to eliminate and reduce factors the industry competes on
Results in mounting cost structures and complex business models
Creation Discover entirely new sources of value
for customers. Fun and Adventure
Create new demand
Shift strategic pricing of the industry
Raise Above Uncover and eliminate compromises
your industry makes.
Provides insight into how to lift buyer value and create new demand.
Offer buyers a new experience while keeping your cost structure low. Easy Drinking
Casella Wines [yellow tail] Wine as Wine Created a social drink accessible to
everyone Beer drinkers, cocktail drinkers
Within 2 years it was the fastest growing brand of wine and even surpassed Italy and France
By 2003 annual sales over 4.5 million cases
How? Large wine companies have strong brands
Did not use a promotional campaign, mass media, or consumer advertising.
Steal sales from competitors?
Grew the market
Grew the market Brought non-wine drinkers into the
market. Novice wine drinkers drank more Jug wine drinkers moved up Expensive wine drinkers moved down to
become consumers of [yellow tail].
Three New Factors Easy Drinking
Soft in taste and primary fruit flavors Kept the palate fresher
Easy to Select Chardonnay and Shiraz
Fun and Adventure
Easy Drinking [yellow tail] reduced and eliminated
traditional factors the industry had long competed with. Tannins, oak, complexity, and aging
Instead they made a simple fruity wine that many customers enjoyed.
Ease of Selection Instead of over complicating there image
with industry awards and jargon, [yellow tail] kept it simple.
Offering only two choices, a Chardonnay and a Shiraz
Fun and Adventure [yellow tail] enticed retailers by making
them ambassadors of [yellow tail] through unique merchandising.
By changing how the product was presented as well as the product itself, the product went from something the public thought was intimidating to something laid back and fun.
[yellow tails] Strategy Canvas
Price
Termino
logy
Above t
he Li
ne Mar
ketin
g
Aging Q
uality
Presti
ge and
Lega
cy
Comple
xity
Range
Ease of
Drin
king
Ease of
Selecti
on
Fun and
Adve
nture
Low
High
Budget Wines
Premium Wines
[yellow tail]
Eliminate-Reduce-Raise-Create
A supplementary analytic to the four actions framework.
This tool forces companies to not only answer all parts of the framework but to act on them as well.
Providing them with four immediate benefits.
Four Benefits Pushes companies to pursue
differentiation and low costs. Immediately flags companies focused
on raising and creating. Understood by managers at any level. Forces companies to scrutinize every
factor, allowing them to discover the implicit assumptions they make.
The Case of [yellow tail]Eliminate Raise
Enological terminology and Distinctions
Aging QualitiesAbove-the-line marketing
Price versus Budget Wines
Reduce Create
Wine complexityWine Range
Vineyard Prestige
Easy DrinkingEase of Selection
Fun and Adventure
The Case of Cirque du SoleilEliminate Raise
Star PerformersAnimal Shows
Aisle Concession SalesMultiple Show Arenas
Unique Venue
Reduce Create
Fun and HumorThrill and Danger
ThemeRefined EnvironmentMultiple Productions
Artistic Music and Dance
Characteristic of Good Strategy Focus Divergence Compelling Tagline
Southwest Airlines Focus
Friendly Service and Speed
Divergence Point-to-point travel, not hub-and-spoke system
Compelling Tagline “The speed of a plane at the price of a car –
whenever you need it.”
Lacking a Good Strategy? No focus - high cost structure and
complex business model
No divergence – leads to a “me-too” strategy, won’t stand apart from competition
Poor taglines - motives are internal and not focused on the customers
A Blue Ocean Strategy If a company or its competitors meet the
three BOS criteria FOCUS DIVERGENCE COMPELLING TAGLINE
“Caught in the Red Ocean” If a company’s value curve converges
with competitor chances are it is a red ocean
Strategy lends itself to outdoing competition on cost and quality
Unless industry is independently growing this signals slow growth
“Overdelivery without Payback” Value curve on a strategy canvas shows
high levels on all factors Does company market share and
profitability reflect the investments? If not: company may be oversupplying
customers with these factors
“Incoherent Strategy” Company’s value curve can be described
as “low-high-low-high…” Signals there is no coherent strategy,
rather based on incoherent substrategies May make sense but does not
differentiate the company from competitors
“Strategic Conditions” Company offers high level on one
competing factor while ignoring others Inconsistencies can also be found
between price and offering
“Internally Driven Company” Language used in a company’s strategy
gives insight to how the vision is built Analyzing the language serves as a
timetable for creating industry demand