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Where is the business trying to get to in the long-term (direction) Which markets should a business compete in and what kind of activities are involved in such markets? (markets; scope) How can the business perform better than the competition in those markets? (advantage)? What resources (skills, assets, finance, relationships, technical competence, facilities) are required in order to be able to compete? (resources)? What external, environmental factors affect the businesses' ability to compete? (environment)? What are the values and expectations of those who have power in and around the business? (stakeholders)
Formulating An Strategy
Strategy need a process. Strategy is a science not an art. Methods of strategy Formulation PESTEL Analysis Porters Five Forces Blue Ocean Analysis SWOT Analysis
Value Innovation
Value innovation is created in the region where a companys actions favorably affect both its cost structure and its value proposition to buyers. Cost savings are made by eliminating and reducing the factors an industry competes on. Buyer value is lifted by raising and creating elements the industry has never offered. Over time, costs are reduced further as scale economies kick in due to the high sales volumes that superior value generates.
Costs
Value Innovation
Buyer Value
Formulation Principles
Reconstruct market boundaries Focus on the big picture, not the numbers Reach beyond existing demand Get the strategic sequence right
Evaluation principles
O ercome key organizational hurdles Build execution into strategy
Eliminate
Which of the factors that the industry takes for granted should be eliminated?
Create
Which factors should be created that the industry has never offered?
Raise
Eliminate Enological terminology and distinctions Aging qualities Above-the-line marketing Reduce Wine complexity Wine range Vineyard prestige
The eliminate-reduce-raise-create grid pushes companies not only to ask all four questions in the four actions framework but also to act on all four to create a new value curve. By driving companies to fill in the grid with the actions of eliminating, reducing, raising, and creating, the grid provides four immediate benefits: it pushes them to simultaneously pursue differentiation and low costs; identifies companies who are only raising and creating thereby raising costs; makes it easier for managers to understand and comply; and it drives companies to scrutini e every factor the industry competes on.
Compare your business with your competitors by drawing your as is strategy canvas. See where your strategy needs to change
Go into the field to explore the six paths to creating blue oceans. Observe the distinctive advantages of alternative products and services. See which factors you should eliminate, create, or change.
Draw your to be strategy canvas based on insights from field observations. Get feedback on alternative strategy canvases from customers, competitors customers, and noncustomers. Use feedback to build the best to be future strategy.
Distribute your beforeand-after strategic profiles on one page for easy comparison. Support only those projects and operational moves that allow your company to close the gaps to actuali e the new strategy.
Pioneers
Migrators
Settlers
Today
Tomorrow
Second Tier
Third Tier
An important part of blue ocean strategy is to get the strategic sequence right. This sequence fleshes out and validates blue ocean ideas to ensure their commercial viability. This can then reduce business model risk. In this model, potential blue ocean ideas must pass through a sequence of buyer utility, price, cost, and adoption. At each step there are only two options: a yes answer, in which case the idea may pass to the next step, or no. If an idea receives a no at any point, the company can either park the idea or rethink it until you get a yes.
Yes
Price
Is your price easily accessible to the mass of buyers? No-- Rethink Yes
Cost
Can you attain your cost target to profit at your strategic price? Yes No-- Rethink
Adoption
What are the adoption hurdles in actuali ing your business idea? Are you addressing them up front? Yes
No-- Rethink
In which stage are the biggest blocks to customer productivity? In which stages are the biggest blocks to simplicity? In which stage are the biggest blocks to convenience?
Environmental Friendliness:
High degree of legal and resource protection Difficult to imitate Some degree of legal and resource protection Low degree of legal and resource protection Easy to imitate
Mid-level pricing
High degree of legal and resource protection Difficult to imitate Price Corridor of the Mass Some degree of legal and resource protection Low degree of legal and resource protection Easy to imitate
Mid-level pricing
Partnering
Pricing Innovation
Philips Motorola Iridium CD-i Utility Is there exceptional utility? Are there compelling reasons to buy your offering? Is your price easily accessible to the mass of buyers? Does your cost structure meet the target cost? Have you addressed adoption hurdles up front? -
Price
Cost
Adoption
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