2.5 Blue Ocean Strategy: Main Tools and Frameworks
Kim and Mauborgne presented a number of practical tools, methodologies, and frameworks in order to formulate and execute Blue Ocean strategies as well as to guide organizations toward the pursuit of value innovation. In this way, the two co-authors turned the Blue Ocean Strategy into a process that may be deemed to be systematic and repeatable.
2.5.1The Strategy Canvas
The Strategy Canvas is a visual diagnostic and action framework adopted by companies to conceive a value-innovating Blue Ocean Strategy (Kim & Mauborgne, 2005). Figure 3 describes the tool in graphic form. More precisely, the horizontal axis lists the range of factors that the industry competes with and invests in the industry structure from the market perspective; while the vertical axis shows the offering level the company proposes to buyers with respect to each competing factor included in the horizontal axis (Kim & Mauborgne, 2005). In particular, a high offering level may be regarded as consistent investments the company makes in order to offer buyers more with respect to the corresponding competing factor (Kim & Mauborgne, 2005).
Figure 3 “Strategy Canvas” Source: (Blue Ocean Strategy, 2015)
Strategy Canvas is meant to serve two purposes. In primary instance, it distinguishes the present state of play in the known market space, so that users can understand the factors that the industry competes on and where rivals invest in (Kim & Mauborgne, 2005). Secondly, it serves to reorient users’ strategic focus for action by shifting attention from competitors to alternatives and from customers to non customers of the industry.
The value curve is the basic component of the Strategy Canvas and it is a graphic depiction of a company’s relative performance across its industry’s factors of competition (Kim & Mauborgne, 2005).
2.5.2 The Four Actions Framework
Organizations make use of the Four Actions Framework to reconstruct buyers’ value components in establishing a new value curve (Kim & Mauborgne, 2005). To end of choosing between differentiation and/or low-cost and to create a new value curve, the framework presents four key questions, displayed in Figure 4, to challenge the strategic logic an industry is lodged in (Kim & Mauborgne, 2005). The Four Actions Framework is a tool strictly related to the Strategy Canvas. In fact, it would not be possible to consistently build a value curve without first answering appropriately to the four questions posed by the tool.
The goal of the “eliminate” factor is to cut costs used for competition and which are impact less. The goal of the “reduce” factor is to limit the product and services to those which are “successful”. Companies don’t need to focus on products which are not working and costing money just to have a larger ranger. The goal of the “raise” factor is to understand what are the customers’ standards and go upon them to make them more than just satisfied. The goal of the “create” factor is to find what will create a new demand/market. These entire factors combine will lead a company to create a blue ocean1
Figure 4 “The Four Actions Framework” Source: (Blue Ocean Strategy, 2015)
2.5.3 The ERRC Grid
The Eliminate-Reduce-Raise-Create (ERRC) Grid serves as collateral elements of the Four Actions Framework. In particular, it pushes companies not only to examine the questions involved in the Four Actions Framework but also to act on them to build a new value curve, which is indispensable to unlock a new blue ocean (Kim & Mauborgne, 2005). By making companies to fill in the grid (See Figure 5) with the actions of eliminating and reducing together with raising and creating, the grid gives companies various benefits. First of all, it pushes companies to simultaneously pursue differentiation and low cost to achieve value innovation (Bologna, 2014). Secondly, it immediately marks companies to focus only on raising and creating, thereby which are used to only lift the cost structure as well as over-engineer products and services – a dilemma for many companies. (Bologna, 2014) Besides, it easy to understand by executives, creating a high degree of engagement in its application. Finally, as completing the grid is a baffling task, it drives companies to consistency scrutinize each factor the industry competes with, helping them to discover the range of implicit assumptions they make unconsciously in competing. (Bologna, 2014)
Figure 5 “The ERRC Grid” (Blue Ocean Strategy, 2015)
Moreover, there are several cases that refer to a business which using blue ocean strategy to create a new market for them to make profit in the industry. Bologna, (2014) studies about how the Eataly case that creates blue ocean by following the framework and logic to be profitable in Italy food industry. Kim and Mauborgne, (2005) show numerous blue ocean case studies such as the Yellow tail case in the US. wine industry or automobile industry in the US over the past hundred years. Kim, Yang, and Kim, (2007) demonstrate the case of CJ-Global Logistics Service in a South Korean third-party logistic system industry that uses blue ocean strategy to becoming successful. Chang, (2010) uses the blue ocean strategy, proposed by Kim and Mauborgne, to confirm the applicability of the blue ocean strategy of a Bandit cell phone case that can grow their sale volume in Chinese mobile industry. Lindic?a, Bavdaz?a, and Kovaci?c?b, (2012) suggested implication for Slovenia’s economic policy by using blue ocean strategy. Hollensen, (2013) shows the necessity to create a dynamic strategy in order to stay in the blue ocean and not to go back to red ocean ever again by the case of Nintendo Wii that their competitors can imitate them because they are not able to generate enough competitiveness safe-guarding tools to prevent competitors to poach their ocean.
According to the previous studies, blue ocean strategy can be useful to outperform their competitors by creating a new territory as we can see in many cases. By using frameworks and logic to examine success and unsuccessful case will help us to formulate a new business plan for the Co Cooking Space which follows blue ocean strategy and prevent the idea from imitated by competitors by raising value that could survive in the market.
The following chapter presents the steps for finding the answer to the question that which value would be the answer to create a new business idea- the Co Cooking Space- which integrating with blue ocean strategy.