simpler tools for redesigning business models and making better decisions
TRANSCRIPT
BLUE OCEAN PLANNING & EXECUTIONSimply Redesigning Business Models & Making Better Decisions
Dr. Rod King
[email protected] & http://businessmodels.ning.comhttp://twitter.com/RodKuhnKing
Value Quotient (VQ) Management
“BLUE OCEAN” as an Adjective (Attribute) of the IdealSuccess Criteria for Quick Classification, Design, and Evaluation of “Blue Ocean” Objects
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
“BLUE OCEAN”
Extraordinary
Accessible
Uncontested
Personalized
Blue Ocean PLANNING
Blue Ocean Mission
Blue Ocean Service (Design)
Blue Ocean Plan
Blue Ocean Product (Design)
Blue Ocean Strategy
Blue Ocean Objective
Blue Ocean Goal
Blue Ocean ProjectBlue Ocean Vision
Blue Ocean BUSINESS MODEL
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
WHY REDESIGN EXISTING BUSINESS MODELS?”Greater Competition, Digitalization, and Globalization are Creating Bloody ‘Red Oceans’ for Businesses”
• To Exponentially Increase Business Growth and Profitability
• To Avoid ‘Ad Hoc’, Reactive, and Uncoordinated Tweaks to Existing Business Model
• To Swim Out of the ‘Red Ocean’ and Make the Competition Irrelevant
• To Perfectly Align a Business With Customers’ Demand for Higher Value (Quotient)
• To Take Advantage of Emerging Opportunities and Technology
• To Significantly Redesign Customer Experience for a Higher Value Quotient
• To Facilitate Alignment in Mergers and Acquisitions
• To Respond to Competitive Pressures Including Commoditization
• To Capture Greater Value (Profit) in the Value Chain and Network
• To Provide a More Sustainable and Defensible Competitive Advantage
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
HIGHLY SUCCESSFUL REDESIGNS OF CONVENTIONAL BUSINESS MODELSBusinesses With High Value Quotient (VQ)
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
WHAT IS THE VALUE QUOTIENT?A Universal Metric of Success and Zoomable Decision-making
+ -
Ideal VQ StrategyEveryone to continuously maximize benefit while minimizing cost throughout the value chain
NoteValue Quotient = Advantage/Disadvantage= Benefit/Cost= Revenue/Cost= Strength/Weakness= Opportunity/Threat= Reward/Risk= Relevant Content/Noise= Positives/Negatives= Delight/Pain= Good/Bad
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
Blue Ocean Plans for a Business Model”Value Quotient Management (VQM) and Zoomable Decision-making”
• Customer Jobs Plan• Global Job Plan• 200,000ft Plan• 100,000ft Plan• 60,000ft Plan
• 40,000ft Plan• Strategic Plan
• Tactical Plan• Customer Result-Aligned Model (CRAM)
• Performance Dashboards
VISIONARY LEVEL
STRATEGIC LEVEL
OPERATIONAL LEVEL(Value Chain)
Process of Blue Ocean Planning & Execution for Business Models“A Simpler Way of Managing the Value Quotient Towards the Ideal”
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
SSTART
Choose (Another) Level and Type of Blue Ocean Plan for• Existing Business Model (Product/Service)
• Competitors’ Business Models (Products/Services)
Determine Value Quotient Factors for• Existing /Desired Business Model (Product/Service)• Competitors’ Business Models (Products/Services)
Draw Shape of Business Models. Then, Outline Competitive Strategies. Next, Calculate Value Quotient (VQ) of
Existing/Desired Business Models (Product/Service)
Prepare and Implement Tactical Blue Ocean Plans & Monitor VQ of Blue Ocean Projects & Model
Visionary & Strategic Blue Ocean
Plans Done?
No
Yes
Physical 'Job'
Emotional/Social 'Job'
Intellectual 'Job'
Spiritual 'Job' 0
5
10
Customer Jobs Compass for Google Search & Facebook
Ideal Software (Tool/Internet) Google Search Facebook
Google SearchELEMENTS OF CUSTOMER JOBS-BUSINESS MODEL:
Long-term Competitive Advantage Scenarios• Increase performance of/develop/acquire software applications that customers hire to do ‘Physical Jobs’• Increase performance of/develop/acquire software applications that customers hire to do ‘Emotional/Social Jobs’• Increase performance of/develop/acquire software applications that customers hire to do ‘Intellectual Jobs’• (Increase performance of/develop/acquire software applications that customers hire to do ‘Spiritual Jobs’???)
Long-term Value Proposition• ‘Total Happiness’ For All Customer Jobs on the Internet
Targeted Customer Segments (Niches)• ‘Short and Long Tail’ of Users on the Internet
Existing Impact of Google Search on Total Jobs• Average Impact of Google on Total Jobs = (6 + 2 + 5.5 + 2)/4 = 4.3
Impact of Ideal Software on Total JobsImpact of Ideal Software on Total Jobs =‘Perfect 10’
CUSTOMER JOBS COMPASS: What Jobs Must You Facilitate or Do In a Hierarchy of Customer Needs or ‘Jobs’?
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
(for Developing Tools to Make Customers Happier As Well As for Determining What ‘Jobs’ or Niche(s) of Total Happiness to Focus on)
BLUE OCEAN COMPASS: 60,000ft …
• Visualization of Shape as well as Trends of Competing, Desired, and Ideal Business Results (Models)• CUSTOMER JOBS COMPASS
TOOLS FOR REDESIGNING BUSINESS MODELS &
MAKING BETTER DECISIONS
STRATEGY RADAR: 40,000ft Plan
• Illustration of Detailed Shape of Competing, Desired, and Ideal Business Results (Models)• Design of Value Proposition
IDEAL VALUE CHAIN: Tactical Plan
• Visualization of Ideal Value Chain (Business Model) for IVQ Strategy• Flows of Information (Cost and Revenue) & Resources Within a Value Chain or Business Model
BLUE OCEAN RADAR: 200,000ft Plan
• Illustration of Ideal Business Result• Illustration of “Cost vs. Benefit” Trade-offs (Contradictions) & Trends• Basic Elements of Value Quotient
BLUE OCEAN STRATEGIC PLAN
• Elements and Resources for Pursuing Goal of Ideal Value Quotient (Blue Ocean), Achieving Blue Ocean Plan, and Totally Engaging Employees and Other Stakeholders
WHEEL OF OBSTACLES
• Illustration of Internal Obstacles and Constraints to Achieving the Ideal Value Quotient for the Value Chain or Business Model
BLUE OCEAN MAP: Global Job Plan
• Illustration of Current and Desired Positions of You & Your Competitors• Illustration of IVQ and Market Seg-ments Including Red and Blue Oceans
BOND: 100,000ft Plan
Ways to Reduce Obstacles to Goal:• Facilitation of Decision-making• Visualization of Strategy• Modeling and Testing of Strategy
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
REDESIGNING BUSINESS MODELS & MAKING BETTER DECISIONS
∞
(-): PAIN
IDEAL VALUE QUOTIENT (BLUE OCEAN)
Value Quotient
(VQ)
(Uncontested Experience, Market Space, or New Category)
Lowly differentiated and low-cost value chain
Highly differentiated and
premium-priced/free value chain
(+):DELIGHT
Blue
Oce
an P
lan
Red Ocean PlanStrategic Choice
BLUE OCEAN Google Search
RED OCEAN * “Me Too” Search Engine
No. of Direct Competitors
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
Fractal Market Segmentation (Niches) of Search Engine Market
BLUE OCEAN MAP: Global View of the Value Quotientfor Determining Where You and Your Competitors Currently Are & Where You Must Go
BLUE OCEAN RADAR: 200,000ft View of the Value Quotientfor Comparing, Evaluating, and Redesigning Business Models As Well As Products and Services
0 2 4 6 8 100
2
4
6
8
10
Blue Ocean Radar Showing “Cost vs. Benefit” Trade-offsBENEFIT (Revenue)
COST
Desired VQ = 8/2= 4
Existing VQ = 2/6= 0.33 < 1
Value Quotient (VQ) = Benefit/Cost = Revenue/Cost = Revenue to Cost Ratio = Slope of Value Quotient Line
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
Ideal Value Quotient(Blue Ocean)
Ideal Value Quotient (Blue Ocean) Ideal Final Result of Continuously Implementing IVQ Decisions Job To Be Done (JBTD) at No Cost & With No Negative Effect
(Free)
Object/Core Job: ………………………………..…….
(cf. Goal of IVQ to Moore’s Law & “Singularity”)
Moore’s Law As A Special Case of the Law of Increasing Value Quotient “The number of transistors on an integrated circuit roughly doubles every two years”
0 2 4 6 8 100
2
4
6
8
10
Blue Ocean Radar Showing “Cost vs. Benefit” Trade-offs for Computing PowerBENEFIT (Transistors)
COST(Size)
VQ = 8/1= 8
Value Quotient (VQ) = Benefit/Cost = Revenue/Cost = Revenue to Cost Ratio = Slope of Value Quotient Line
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
Ideal Value Quotient (Blue Ocean or “Singularity”)
(Free)
Object/Core Job: Integrated Circuit Board
(cf. Goal of IVQ to Moore’s Law & “Singularity”)
Ideal Value Quotient (Blue Ocean) Ideal Final Result of Continuously Implementing IVQ Decisions Job To Be Done (JBTD) at No Cost & With No Negative Effect
VQ = 4/1= 4
VQ = 2/1= 2
0 2 4 6 8 100
2
4
6
8
10
Blue Ocean Radar Showing “Cost vs. Benefit” Trade-offs in ComputingBENEFIT (Performance)
COST(Size)
Value Quotient (VQ) = Benefit/Cost = Revenue/Cost = Revenue to Cost Ratio = Slope of Value Quotient Line
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
Ideal Value Quotient (INTERNET or “Singularity”)
(Free)
Object/Core Job: Computer/Storage Devices
Ideal Value Quotient (Blue Ocean) Ideal Final Result of Continuously Implementing IVQ Decisions Job To Be Done (JBTD) at No Cost & With No Negative Effect
Using the Blue Ocean Radar to Illustrate Trends in the Evolution of Technology
“The Ideal Object Uses Its Internal and “Free” Resources to Instantly Do Its Job at No Cost and Without Any Negative Effect”
IVQ –Problem Solving Look within and across industries as well as in nature for similar or analogous resolution of trade-off
Old Mainframe Computer
Mini-computer
Desktop Computer
Laptop Computer
Palmtop Computer
0 2 4 6 8 100
2
4
6
8
10
Blue Ocean Radar Showing “Cost vs. Benefit” Trade-offs in TransportationBENEFIT (Speed)
COST(Size)
Value Quotient (VQ) = Benefit/Cost = Revenue/Cost = Revenue to Cost Ratio = Slope of Value Quotient Line
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
Ideal Value Quotient (LIGHT or Blue Ocean)
(Free)
Ideal Value Quotient (Blue Ocean) Ideal Final Result of Continuously Implementing IVQ Decisions Job To Be Done (JBTD) at No Cost & With No Negative Effect
Using the Blue Ocean Radar to Illustrate Trends in the Evolution of Technology
“The Ideal Object Uses Its Internal and “Free” Resources to Instantly Do Its Job at No Cost and Without Any Negative Effect”
IVQ –Problem Solving Look within and across industries as well as in nature for similar or analogous resolution of trade-offRocket
Aircraft
CarBicycle
Object/Core Job: Vehicles
Ship
Train
Using the Blue Ocean Radar to Creatively Resolve Trade-offs “Someone, Somewhere May Have Already Resolved Your Trade-off or Contradiction”
0 2 4 6 8 100
2
4
6
8
10
Blue Ocean Radar Showing “Cost vs. Benefit” Trade-offs in Information Process-ingBENEFIT
(Amt of Info)
COST(No. of Pages)
Existing Paradigm (VQ = 6/8 = 0.75)
Value Quotient (VQ) = Benefit/Cost = Revenue/Cost = Revenue to Cost Ratio = Slope of Value Quotient Line
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
Ideal Value Quotient (Blue Ocean or Zoomable Page)
(Free)
Ideal Value Quotient (Blue Ocean) Ideal Final Result of Continuously Implementing IVQ Decisions Job To Be Done (JBTD) at No Cost & With No Negative Effect
Breakthrough Paradigm
VQ = 8/2 = 4
IVQ –Problem Solving Look within and across industries as well as in nature for similar or analogous resolution of trade-off
Object/Core Job: Linear Page
Using the Blue Ocean Radar to Creatively Resolve Trade-offs “Someone, Somewhere May Have Already Resolved Your Trade-off or Contradiction”
0 2 4 6 8 100
2
4
6
8
10
Blue Ocean Radar Showing “Cost vs. Benefit” Trade-offs in Information Process-ing
BENEFIT (Relevance of Content)
COST(‘Noise’)
Existing Paradigm (VQ = 6/8 = 0.75)
Value Quotient (VQ) = Benefit/Cost = Revenue/Cost = Revenue to Cost Ratio = Slope of Value Quotient Line
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
Ideal Value Quotient (Blue Ocean or Zoomable Page)
(Free)
Ideal Value Quotient (Blue Ocean) Ideal Final Result of Continuously Implementing IVQ Decisions Job To Be Done (JBTD) at No Cost & With No Negative Effect
Breakthrough Paradigm
VQ = 8/2 = 4
IVQ –Problem Solving Look within and across industries as well as in nature for similar or analogous resolution of trade-off
Object/Core Job: Web Interface
Using the Blue Ocean Radar to Creatively Resolve Trade-offs “Someone, Somewhere May Have Already Resolved Your Trade-off or Contradiction”
0 2 4 6 8 100
2
4
6
8
10
Blue Ocean Radar Showing “Cost vs. Benefit” Trade-offs in ProductionBENEFIT (Quality)
COST
Existing VQ = 6/4= 1.5
Value Quotient (VQ) = Benefit/Cost = Revenue/Cost = Revenue to Cost Ratio = Slope of Value Quotient Line
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
Ideal Value Quotient (Blue Ocean or “Singularity”)
(Free)
Ideal Value Quotient (Blue Ocean) Ideal Final Result of Continuously Implementing IVQ Decisions Job To Be Done (JBTD) at No Cost & With No Negative Effect
Optimum VQ = 8/4= 2
Conventional Thinking VQ = 8/7= 1.1
IVQ –Problem Solving Look within and across industries as well as in nature for similar or analogous resolution of trade-off
Object/Core Job: Vehicles
BLUE OCEAN NETWORK DIAGRAM: 100,000ft View of the Value Quotientfor Quickly Making Better Decisions, Goals, and Strategies in Business (Projects)
Quality
COST (Price)
24x7 Personalization/ Customization
Differentiation (Simplicity/Brand/
Novelty)
CUSTOMERS (Sales/Revenue)
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
Business Action …
BENEFIT Ideal VQ StrategyEveryone to continuously maximize benefit while minimizing cost throughout the value chain
BLUE OCEAN NETWORK DIAGRAM: 100,000ft View of the Value Quotientfor Visualizing Goals & Strategy for IVQ : Case of Google Search
Quality (Speed):INCREASE
COST (Price): REDUCE
24x7 Personalization:
INCREASE
Differentiation (Simplicity/Brand):
INCREASE
CUSTOMERS (Sales/Revenue)
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
Business Action …
BENEFIT Ideal VQ StrategyEveryone to continuously maximize benefit while minimizing cost throughout the value chain
Quality (Speed)
COST (Price)
24x7 Personalization/ Customization
Differentiation (Simplicity/Brand/
Novelty)
CUSTOMERS (Sales/Revenue)
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
Business Action …
+
+
+
+ + -
+
+
+
+
+
-
-
+
+
+
+
?
+
+
BLUE OCEAN NETWORK DIAGRAM: 100,000ft View of the Value Quotientfor Modeling Strategy & Assumptions of IVQ: Case of Google Search
Ideal VQ StrategyEveryone to continuously maximize benefit while minimizing cost throughout the value chain
BENEFIT
Quality:(1-10)
COST (Price):(1-10)
24x7 Personalization:
(1-10)
Differentiation (Simplicity/Brand):
(1-10)
CUSTOMERS (Sales/Revenue)
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
Business Action …
BLUE OCEAN NETWORK DIAGRAM: 100,000ft View of the Value Quotientfor Scoring Elements of the Value Quotient for a Business (Project)
Quality (Speed)
Cost (Price)
Differentiation (Simplicity/Relevance)
On-demand; 24x7 (Personalization) 0
5
10
Blue Ocean Compass for “Me Too” Search Engine and Google Search
Ideal Business Result Google Search "Me Too" Search Engine
Google Search4 ELEMENTS OF BUSINESS MODEL:
Competitive Advantage Strategies• Increase quality (speed) to level 9• Maintain cost at free: level 1• Increase differentiation (simplicity/relevance/ brand/novelty) to level 8• Increase on-demand; 24x7/(personalization; customization) services to level 8
Value Propositions (Innovative Processes)• Higher quality (speed) and greater simplicity• Higher differentiation (simplicity/relevance/ brand/novelty) at no additional cost• Higher 24x7 personalization (for advertisers/ affiliates: AdWords; AdRank; AdSense)
Targeted Customer Segments (Niches)• Students/Researchers/Internet Users who directly and quickly want information• Early adopter/innovator; Non-customers• Low cost-Advertisers• Website Owners/Content Providers
Value Quotient (VQ)• Benefit = Quality + Differentiation + Personalization = (9 + 8 + 8)/3 = 25/3 = 8.3• Cost = 1• Value Quotient (VQ) = 8.3/1 = 8.3
BLUE OCEAN COMPASS: 60,000ft View of the Value Quotient
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
(for Generally Redesigning a Business Model & Value Proposition)
Speed (Q)
Price ( C )
Lounges (D)
Meals (D)
Friendly Service (D)
Seating Choice (P)
0
5
10
Strategy Radar for the Average Airline and Southwest Airlines
Ideal Business Result Southwest Airlines Average Airline
Southwest Airlines4 ELEMENTS OF BUSINESS MODEL:
Competitive Advantage StrategiesQuality (Q) • Increase speed to level 9Cost ( C )• Reduce ticket price to level 1.3Differentiation (D)• Reduce lounges to level 1.2• Reduce meals to level 2.1• Increase friendly service to level 8.8Personalization (P)• Reduce personalization to level 1
Value Propositions (Innovative Processes)• Higher speed at lower cost• Friendlier service at lower cost
Targeted Customer Segments (Niches)• Frequent/Low-cost traveler• Early adopter/innovator; Non-customers
Value Quotient (VQ)• Benefit = Quality + Differentiation + Customization = (9 + 1.2 + 2.1 + 8.8 + 1)/5 = 22.1/5 = 4.42• Cost = 1.3• Value Quotient (VQ) = 4.42/1.3 = 3.4
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
STRATEGY RADAR: 40,000ft View of the Value Quotient
(for More Specifically Redesigning a Business Model & Value Proposition)
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
1. Obtain, from customer interviews or questionnaires, scores for the existing performance of each element or “value quotient factor” on the Blue Ocean Network Diagram (BOND) and for the surveyed or “Red Ocean” company.
Score each element of Value Quotient using a scale from 1 (low) to 10 (high):• Quality: (1-10)• Cost: (1-10)• Differentiation: (1-10)• Personalization (Customization): (1-10)
2. Plot, on a Blue Ocean Compass, the average score for each element. Then, draw the profile or radar chart for the existing performance of the surveyed company.
3. Explore scenarios for desired or future profiles that are strongly differentiated from “Red Ocean” profiles as well as lie closer to the “ideal” Blue Ocean.
4. Choose the Blue Ocean profile with the highest Value Quotient (VQ). Then, derive corresponding IVQ (Blue Ocean) strategies for competitive advantage and value propositions for segments (“niches”) of customers.
How to Quickly Develop an IVQ Strategy and Value Quotient
CUSTOMER VALUE PROPOSITION
• Uncluttered, fast, free, accurate search engine results and experience• Monetization of web page/site• Targeted, measurable, cost-effective, and relevant online advertising
BLUE OCEAN STRATEGIC PLAN FOR: GOOGLE SEARCH
CUSTOMER BENEFITS/EXPERIENCE
• Simple interface/Easy to use• Fast, accurate, and relevant results• Free search service• Unobtrusive ads; Site monetization• Targeted ads based on page’s content
VISION (“Future Headline”)
• Search engine platform; Software-as-a-Service (platform)• Advertising platform• Gateway to world’s knowledge-base
INDUSTRY/BUSINESS • Industry: Computer (Software); Advertising• Niche: Internet Search; Online Ads• Model: Business to Consumer (B2C); Business to Business (B2B); Platform
MAIN GOAL/OBJECTIVE/STRATEGY
Blue Ocean Strategic Plan for providing an unprecedented customer experience• (See Blue Ocean Compass & Blue Ocean Map; Blue Ocean PAD; Value Chain Model; Blue Ocean Dashboard)
MISSION/CORE VALUES
• “To organize the world's information and make it universally accessible and useful”• “Don’t Be Evil”
COMPANY BACKGROUND
• Location: Mountain View, California• Founder(s): Sergey Brin; Larry Page• Revenue: US$21.79 billion (2008)• No. of Direct Competitors:
PRODUCTS/SERVICES
• Internet Search Engine: Google Search• Online Bidding Platform: Adwords• Online Syndicated Ads: Adsense• Complementary Apps: Maps, etc.
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
BLUE OCEAN STRATEGIC PLAN: Strategic View of the Businessfor Facilitating IVQ Strategy Execution, Organizational Alignment, and Total Employee Engagement
CUSTOMER VALUE PROPOSITION
“The speed of a plane at the price of a car …”
Targeted Customer Segment: Frequent/low-cost travelers
BLUE OCEAN STRATEGIC PLAN FOR: SOUTHWEST AIRLINES
CUSTOMER BENEFITS/EXPERIENCE
• Faster travel at lower cost
• Simple fare structure
VISION (“Future Headline”)
“Do the right thing.”
INDUSTRY/BUSINESS
• Industry: Airline/Transportation• Niche: Short-haul, low-cost air travel• Model: Point-to-point air travel with ‘no frills’ to secondary city-airports (cf. hub-and-spokes model with meal)
MAIN GOAL/OBJECTIVE/STRATEGY
Blue Ocean Strategic Plan for quickly reaching destination at the lowest price• (See Blue Ocean Compass & Blue Ocean Map; Blue Ocean PAD; Value Chain Model; Blue Ocean Dashboard)
MISSION/CORE VALUES
“Dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.”
COMPANY BACKGROUND
• Location: Dallas, Texas (USA)• Founder(s): Herb Kelleher; Rollin King (1967 inc.; first flight in 1971)• Revenue: $11 Billion (2008)• No. of Direct Competitors:
PRODUCTS/SERVICES
• Airline• Aircrafts• Air travel/transportation
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
BLUE OCEAN STRATEGIC PLAN: Strategic View of the Businessfor Facilitating IVQ Strategy Execution, Organizational Alignment, and Total Employee Engagement
E: ENVIRONMENT
• Competitors: Yahoo; AOL; MSN; etc.• Non-customers/Non-consumers• Partners/Complementors• Investors/Board of Directors• Gov./Community (Open Source)/Env.
GOOGLE’S VALUE CHAIN (Business Model)
P: PROCESSES/STRATEGIES
• Procurement; HR Mngt; Operations• Technology/R & D/Innovn/Production• Marketing/Branding/PR/Sales• Distribution/Logistics/Partnering• Customer Service (Relationship Mngt)
R: RETAILERS/DISTRIBUTORS/ CHANNELS• Website Owners• Content Providers: Individuals/ Corporations (Portals)• Affiliates; Partners: OEMs; Browsers
E: EMPLOYEES/KNOWLEDGE ASSETS/ CULTURE• Highly Productive/Creative workers• (Experienced) Management• Patented PageRank Algorithm• Android: Operating System • Software Development Kits (SDK)
C: CUSTOMERS/CONSUMERS
• Web Users/Searchers: Desktop/Mobile• Website Owners• Advertisers - > Revenue• Enterprises (Search) -> Revenue• Software/API Developers
O: OUTPUTS/PRODUCT/SERVICE
• Google Search Engine/Search platform• Bidding & Advertising Platform: AdWords; AdSense; AdRank• Other Products/Apps such as Google Appliance
S: SUPPLIERS/MATERIALS
• Computers• Servers• Other Items
M: MACHINERY/EQUIPMENT/ FACILITYExternal • Efficient Data Centers/Scalable Architecture/Server Farms• Wi-Fi Infrastructure• Satellite
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
Ideal Value Chain (Business Model): Tactical View“Perfect, Free, Simple, and Personalized (PFSP)”
KEY Revenue (Information Flow)
Cost (Information Flow)
Strategic Question: What is the Value Quotient (VQ) of elements of the value chain as well as the entire value chain?
“PFSP”
E: ENVIRONMENT
• Competitors• Non-customers/Non-consumers• Partners• Investors /Board of Directors• Gov./Community/Society/Environment
SOUTHWEST AIRLINES’S VALUE CHAIN (Business Model)
P: PROCESSES/STRATEGIES
• Point-to-point Travel: Flying Multiple, Quick, Short Trips• Quick Turnaround Processes• Employee-profit-sharing• Hedging of Fuel Prices
R: RETAILERS/DISTRIBUTORS/ CHANNELS/INTERFACE• Website (www.southwest.com)• Google Search (AdWords)• TV ads
E: EMPLOYEES/KNOWLEDGE ASSETS/ CULTURE• Pilots• Affable (Friendly) Stewardesses• Management• Other Employees
C: CUSTOMERS/CONSUMERS
• Low-cost Travelers• Frequent Travelers• Intercity Travelers
O: OUTPUTS/PRODUCT/SERVICE
• Air Travel Ticket/eTicket/Service• Website (www.southwest.com)• Rapid Rewards Program• 2/3 Customer Luggage for Free• No frills-meal: ‘Snack Pack’
S: SUPPLIERS/MATERIALS
• Fuel Suppliers• Aircrafts and Parts
M: MACHINERY/EQUIPMENT/ FACILITY• One Type of Aircraft: Boeing 737• IT/Online Infrastructure• Wi-Fi
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
KEY Revenue (Information Flow)
Cost (Information Flow)
Strategic Question: What is the Value Quotient (VQ) of elements of the value chain as well as the entire value chain?
Ideal Value Chain (Business Model): Tactical View“Perfect, Free, Simple, and Personalized (PFSP)”
“PFSP”
E: ENVIRONMENT
• Competitors• Non-customers/Non-consumers• Partners• Investors • Gov./Community/Society/Environment
IDEAL VALUE CHAIN (BUSINESS MODEL):Flows & Resources -
“Perfect, Free, Simple, and Personalized”
P: PROCESSES/STRATEGIES
• Procurement; HR Mngt; Operations• Technology/R & D/Innovn/Production• Marketing/Branding/PR/Sales• Distribution/Logistics/Partnering• Customer Service (Relationship Mngt)
R: RETAILERS/DISTRIBUTORS/ CHANNELS/INTERFACE
E: EMPLOYEES/KNOWLEDGE ASSETS/ CULTURE
C: CUSTOMERS/CONSUMERS O: OUTPUTS/PRODUCT/SERVICE
S: SUPPLIERS/MATERIALS M: MACHINERY/EQUIPMENT/ FACILITY
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
Template for Ideal Value Chain (Business Model)Flows & Resources for “Perfect, Free, Simple, and Personalized (PFSP)”
KEY Revenue (Information Flow)
Cost (Information Flow)
Strategic Question: What is the Value Quotient (VQ) of elements of the value chain as well as the entire value chain?
SWOT Resources in Value Chain for:
W: WEAKNESSES T: THREATS
S: STRENGTHS O: OPPORTUNITIES
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
SWOT Resources in Value Chainfor Identifying Resources for Projects and Plans to Achieve the Desired or Ideal Value Quotient
Value Chain’s OBJECT/TASK/PROJECT:
C: COSTS R: RISKS
B: BENEFITS (Now) R: REWARDS (Later)
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
BCRR Impacts in Value Chainfor Assessing the Impacts and Feasibility of Objects, Tasks, and Projects
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
WHEEL OF OBSTACLES3 Internal Obstacles to Realizing the Ideal Value Quotient (IVQ) or Blue Ocean
WHEEL OF OBSTACLES
Enron
Traditional Airlines
“Me Too” Search Engines
AIG
Healthcare
Detroit Automakers
Alaska’s Road to Nowhere
Denver Airport
“Mom and Pop” Businesses
Business does not have access to easy-to-learn-and-use tools for Blue Ocean Planning, Strategy, Execution, and Monitoring.
WHY MANY BUSINESSES ARE NOT ACHIEVING
BLUE OCEAN SUCCESS
The business’s resources especially employees are not effectively engaged and aligned with Blue Ocean Planning, Strategy, and Execution.
Business uses an ‘ad hoc’, reactive, and uncoordinated approach to redesigning business model (in contrast to systematic Blue Ocean Planning, Strategy, Execution and Monitoring).
Business does not have a tacit or an explicit Blue Ocean Plan and Strategy.
Business is experiencing the 3 obstacles to Blue Ocean Success: inadequate decision-making; uninspiring business goals and targets; Red Ocean (“Me Too”)-strategies and business models.
Extraordinary, no contest-success follows the 4% rule: exceptional and unique success is achieved by 20% of 20% of a given set; this is an iterative application of the 80-20 (Pareto) Principle.
Business does not have and live by Blue Ocean Vision, Value Proposition, and Value Quotient Management.
Business does not have access to a metric for easily defining, measuring, and managing decisions towards the Ideal Value Quotient (Blue Ocean Success) at every level in an organization.
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
Why Many Businesses Are Not Achieving Blue Ocean-SuccessHow to Determine Whether You Need to Adopt Blue Ocean Planning, Strategy, and Execution
APPENDICES
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
• Innovative Processes for Redesigning Business Models & Pursuing the Ideal Value Quotient (VQ)
• Blue Ocean Network Diagram (BOND): What and Why?
• 4 Axioms of the Ideal Value Quotient (VQ)
• Related Concepts of the Ideal Value Quotient (VQ)
• The Law of Increasing Value Quotient
• Customer Result-Alignment Model (CRAM)
• Space-Time Template for the Evolution of a System
ENVIRONMENT/SUPPLIER PROCESSES
• Partnering/Complementing/Feedback• Merging/(De)Centralizing/Integration• Networking/Volunteering/Recycling• Convergence/(De)Regulation• Distributorship/Affiliates/Network
INNOVATIVE PROCESSES FOR REDESIGNING BUSINESS
MODELS & PURSUING THE IDEAL VALUE QUOTENT
DOMAIN-PROCESSES/FUNCTIONALITY • Digitalization/Idealization/Downsizing• Virtualization/Customization/DIY/JIT• Zero Defect/Lean/Six Sigma/Analytics• Automatic/Outsourcing/Scalability• Restructuring/Inventive Principles
CHANNEL/WHOLESALERS PROCESSES
• Multiple Channels/Syndication/Chain• Pyramid/Multi-level Markets/Wheel• Digitalization/Online/Word-of-mouth• Distributorship/Affiliates/Network• Advertising/Auction Platform/Partners
EMPLOYEE PROCESSES
• Specialization/IP Creation-Protection• Outsourcing/Sub-contracting/Agents• ‘Star’ Performers/Top grading/Fun• Wisdom of the Crowd/Co-creation• Cross-functional Teams/Downsizing
CUSTOMER PROCESSES
• Segmentation/Direct Selling/Branding• Cross-subsidy/Hybridized Markets• Subscription/Leasing/After Sale• Auction/Co-creation/Collaboration• Advertising/Freemium/Licensing
PRODUCT/SERVICE PROCESSES
• Product/Service-Platform/Package• Service-focus/Servicing/Upgrading• Performance-based Pricing/Discounts• Fixed product (shell) and recurring/ replaceable/upgradeable component
GENERAL PROCESSES
• Vertical/Horizontal Integration• Extension/Compression/Removal• Open Collaboration/Long Tail (80-20)• Unbundling/De-integration/Bundling• Convergence/Standardization/Self-X
MACHINERY/FACILITY PROCESSES
• Franchise/Leasing/Rental• Localization/Substitution/Reversal• Modularization/Standardization• Asymmetry/’Poka Yoke’/Nesting• Attributes Interdependency
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
INNOVATIVE PROCESSES FOR REDESIGNING BUSINESS MODELS & PURSUING THE IDEAL VALUE QUOTIENT
(Achieving apparently impossible business goals, strategies, and value propositions)
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
BLUE OCEAN NETWORK DIAGRAM (BOND)What and Why?
What is the Blue Ocean Network Diagram (BOND)?• A tool for redesigning business models, pursuing the Ideal Value Quotient (IVQ), and making better decisions • Universal tool and visual framework for quickly and systematically eliminating 3 critical obstacles to the Ideal Value Quotient (IVQ): poor business decisions; uninspiring business goals and targets; Red Ocean (“Me Too”) strategies & models• Global view of “What customers want” or “Voice of the Customer”
Why Blue Ocean Network Diagram (BOND)?• Facilitates decision-making for management and employees as well as board of directors• Facilitates organizational alignment and engagement especially for employees; everyone is on the same page and using the same metrics• Provides simple framework for visualizing Blue Ocean Strategy and IVQ• Provides simple visual framework for modeling as well as reviewing business strategies, objectives, models, assumptions, trade-offs, and decisions• Provides transparency in the selection and weighting of “value quotient factors” or decision-making criteria for evaluating possible business choices• Facilitates calculation of the value quotient for a business
4 Axioms of the Ideal Value Quotient (VQ)
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
1. Every object, which has sustainable growth, generally increases its Value Quotient (VQ) over time. Otherwise, the object declines and eventually dies.
2. A real-world object exhibits trade-offs or contradictions: advantages accompa-nied by disadvantages; benefits accompanied by costs; positives accompanied by negatives; delight accompanied by pain; good accompanied by evil.
3. An ideal object has an ideal Value Quotient (VQ), that is, lives in a “Blue Ocean” with no trade-off or contradiction: infinite advantages and no disadvantage; infinite benefits and no cost; infinite positive effects and no negative effect; infinite delight and no pain; good without any bad. The ideal object has zero mass and uses its internal and ‘free’ resources to perfectly do its job at no extra cost, at any time, and without any disadvantage.
4. Over time, a species or an ecosystem of real-world objects evolves towards the ideal object. Otherwise, the species declines and becomes extinct.
Related Concepts of the Ideal Value Quotient (VQ)
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
• Value Quotient (Value Engineering)
• Ideal Final Result (IFR); Ideality (TRIZ); SWOT Analysis (Business Planning)
• Benefit/Cost Ratio; Revenue to Cost Ratio (Financial Planning)
• Moore’s Law (Gordon Moore); Law of Accelerating Returns; Singularity (Ray Kurzweil)
• Disruptive Innovation (Clayton Christensen)
• Decision Theory: Rationality; Optimality; Satisficing Behavior (Economics)
• Invisible Hand; Market Forces (Economics); 80-20 Rule (Vilfredo Pareto)
• Theory of Evolution (Charles Darwin)
The Law of Increasing Value Quotient
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
The Value Quotient (VQ) of a technological device as well as living system tends to follow the shape of an envelope of S-Curves that progresses towards a point of infinite Value Quotient. Otherwise, the technological device or living system declines and dies.
Value Quotient (VQ)
Time
Envelope of S-Curves
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
Customer Result-Alignment Model (CRAM) For Ensuring That Customer’s Desired Result Aligns With Value Proposition & Tool of Business Model
CUSTOMER (Segment)
• Description/Profile• Problems/Needs• Needs/Jobs/Goals• Core Values/Ideals
OBJECT (Interface)
• Material (Features)• Product (Features)• Service (Features)• Personnel/Business
DRIVING FORCE
• Tangibles: Profit• Intangibles: Culture• Vision/Mission• Core Values/Ideals
TOOL
• Business (Chain)• Product• Service• Personnel
DISADVANTAGES (-)
• Cost• Harmful Effect• Threat• Risk/Penalty
ADVANTAGES (+)
• Benefit (Revenue)• Useful Effect• Opportunity• Reward
RESULT/OUTPUT
• Tangible Results• Intangible Results• Value Proposition
Competitors/ Environment
Valu
e Q
uotie
nt (V
Q) =
Adv
anta
ges/
Dis
adva
ntag
es
that provides(operates on)
THAT YIELDS
choose
s/hire
s
(pay
s for)
enables
WANTS (on demand)
obtainsprovides
provides
obta
ins
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
Customer Result-Alignment Model (CRAM)Case of Google Search
CUSTOMER
Web user/researcher
OBJECT (Interface)
Uncluttered list of relevant and ordered search results in response to query
DRIVING FORCE
• Tangibles: Profit• Intangibles: Culture• Vision/Mission• Core Values/Ideals
TOOL
Google Search
DISADVANTAGES (-)
• Results cannot be easily saved on hard disk• Limited interactivity with search results
ADVANTAGES (+)
• Fast service; time saving• Increase in productivity• Free service• Greater expertise
RESULT/OUTPUT
• High quality information • Fast answer to query• Deeper knowledge• (Real-time) News
Competitors/ Environment
Valu
e Q
uotie
nt (V
Q) =
Adv
anta
ges/
Dis
adva
ntag
es
that provides THAT YIELDS
choose
s/’hire
s’
enables
WANTS (on demand)
obtainsthat provides
that provides
obtains
INITIAL ELEMENT(“SEED”)
TIME
Past Present Future
Elements
System
Environment (Supersystem)
SPAC
E
PRESENT SYSTEM:
Space-Time Template for the Evolution of a SystemFor Facilitating the Making of Scenarios (for Value Quotient of Business/Product) in Space and Time
Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing
1. Battelle, J. (2005) The Search. New York: Portfolio. 2. Chesbrough, H. (2006) Open Business Models. Boston: Harvard Business School (HBS) Press. 3. Christensen, C.; Raynor, M.E. (2003) The Innovator’s Solution. Boston: Harvard Business School
(HBS) Press.4. Jarvis, J. (2009) What Would Google Do?. New York: HarperCollins.5. Kim, W.C.; Mauborgne, R. (2005) Blue Ocean Strategy. Boston: Harvard Business School (HBS)
Press.6. King, R. (2009) The Zoomable Page for Innovative Thinking in Space and Time: How Geniuses
and World-class Innovators Really Think … And How Anyone Can Do So in 1 Minute or Less.Fresno: Value Quotient Management.
7. Shuen, A. (2008) Web 2.0. California: O’Reilly.
Dr. Rod King
Speaker, Consultant, and Trainer on Business Model Analysis, Design, and Innovation
[email protected] & http://businessmodels.ning.comhttp://twitter.com/RodKuhnKing
REFERENCES