chapter 2 analytical tools and frameworks presentation by: courtney karcasinas, robert brinkmann,...
TRANSCRIPT
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
Pric
e
Term
inol
ogy
Abov
e th
e lin
e
mar
ketin
g
Agin
g Q
ualit
yPr
estig
e an
d
Lega
cy
Com
plex
ity
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
Term
inol
ogy
Above
the
Line
Mark
etin
g
Aging
Qua
lity
Prest
ige
and L
egac
y
Compl
exity
Range
Ease
of D
rinkin
g
Ease
of S
elect
ion
Fun a
nd Adv
entu
reLow
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 Soleil
Eliminate 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
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