Chapter 6 Chapter 4 focuses on the big picture rather than the numbers
After understanding the various paths to creating blue oceans, the next question is how to coordinate your strategic planning process, focus on the big picture, and apply this perspective to formulate blue ocean strategy when mapping the company's strategic layout.This is no small challenge.Our research shows that most companies' strategic planning processes still focus on the red ocean, tending to drive companies to compete within existing market spaces.
Imagine a typical strategic plan.The plan begins with a lengthy description of the state of the industry and the state of competition.The second is to discuss how to increase market share, capture new market share or reduce costs.This is followed by an outline plan of numerous goals and recommendations.The entire budget is almost unchanged and completed according to the plan. The plan is full of pictures and texts, with rich pictures and too many spreadsheets.This process reaches its peak when preparing some large files.These documents are often derived from data sets provided by people from different departments, who often have conflicting agendas and lack adequate communication.In the process, managers spend a lot of time thinking about strategy filling in the blanks and numbers instead of thinking beyond the table and developing a clear picture of how to avoid competition.If you asked companies to present their strategic plans in a few slides, you would not be surprised to find that very few companies presented a clear or convincing strategic thread.
No wonder so few strategic plans lead to the creation and implementation of blue oceans.The reason may be that the management is paralyzed by the state of chaos, or that employees are at the bottom and have little understanding of the company's strategy.But after further understanding, it is found that most companies lack strategic vision when formulating plans, and only list some specific measures. These measures seem to be meaningful individually, but they are not an organic whole. Stand out, let alone avoid competition.Does this sound like your company's strategy?
This brings us to the second principle of blue ocean strategy: focus on the big picture, not the numbers.The key to this principle is to reduce planning risks and avoid investing a lot of energy and time, but still formulate a plan for the Red Ocean strategy.Here we have developed a method to replace the traditional strategic planning process. This method is not through writing documents, but through drawing a strategic layout map, continuously formulating and adjusting strategies, so that more employees can improve creativity and expand the company's blue ocean vision .Strategic roadmaps are easier to understand and communicate, resulting in more effective execution.
In our research and consulting work, we have found that strategic mapping can not only show a company's current strategic situation in the market, but also help the company map its future strategy.By building a corporate strategic planning process around a strategic map, companies and their managers can focus their efforts on the big picture rather than getting bogged down in numbers, terms, and operational details.As the previous chapters revealed, drawing a strategic map means doing three things.First of all, it is necessary to clearly describe the factors that affect the competition among enterprises in the industry (and the factors that may appear in the future), and show the strategic outline of the industry.Second, to show the strategic profile of existing and potential competitors and identify the strategic factors in which they focus their investment.Finally, to show the company's strategic profile or value curve, depicting what competitive factors the company is investing in and how the company will invest in these factors in the future.As discussed in Chapter 2, there are three other complementary characteristics of blue ocean strategies that are more likely to be successful: focused, differentiated, and compelling themes.If a company's strategy profile does not clearly reveal these characteristics, the strategy may be too vague, featureless, difficult to communicate, and potentially expensive to execute.
Mapping a strategic landscape is not easy, and even identifying the key elements of competition is far from easy.As you can see, the final diagram is often quite different from the first draft.
Evaluating how well your company and your competitors perform on different competitive factors is equally challenging in some ways.Most managers' understanding of competitors' practices is limited to the work scope of their own departments, and few managers can clearly see the general dynamics of their industry.For example, an airline's catering manager is highly sensitive to how other airlines compare in beverages.But this focus on the local may cause him to lose sight of the forest for the trees.What seems important to a food and beverage manager may not seem important to customers, because customers focus on the overall service provided by the airline.Some managers define competitive factors in terms of internal returns.For example, a chief information officer (CIO) can take pride in the data-mining capabilities of an IT infrastructure, while this baffles customers, who are more concerned with speed and ease of use.
Over the past 10 years, we have developed a coherent process for mapping and articulating the strategic landscape to facilitate the transformation of corporate strategy to the blue ocean.A 150-year-old financial services group, let's call it European Financial Services (EFS), used this process to develop a strategy to get out of competition.The result was a 30% revenue growth for EFS Group in its first year.The process is based on the six paths to creating blue oceans and involves many visually motivating components to inspire creativity.The process has the following four steps (see Table 4-1).
A common mistake is to start discussing changes in strategy before there is agreement on the current state of the competitive landscape.Another problem is that managers are often reluctant to embrace change, either because they have a vested interest or feel that time will ultimately prove their choice.Indeed, when we ask corporate managers what would help them set out to find blue oceans and introduce change, they usually say that it takes a strong-willed leader and a serious crisis as a breakthrough.
Fortunately, we have found that asking business managers to map the value curve of their corporate strategy can lead them to recognize the need for change.Like a wake-up call, it can be a powerful wake-up call for businesses to challenge their existing strategies.This is like the EFS Group, which had a clear and well-communicated strategy for a long time, and the company was also divided because of this. The senior managers of the EFS regional branch hated the arrogant attitude of the head of the headquarters. They believed that the management method of the headquarters was to treat "the grassroots as fools" and only "the head office has brains."This contradiction makes it more difficult for EFS Group to recognize its own strategic problems.Before a company can map out a new strategy, however, a shared understanding of the current state of strategic positioning is critical.
EFS Group began to gather more than 20 senior managers from global branches in Europe, North America, Asia, Australia, etc., and then divided them into two groups.One group is primarily responsible for producing the company's value curve, which outlines the EFS Group's existing strategy relative to its competitors in terms of traditional corporate foreign exchange trading business.Another group was tasked with doing the same for EFS Group's emerging online foreign exchange trading business.Only 90 minutes were given to both groups, because if the EFS Group's strategy is clear enough, it will definitely be drawn soon.
It was a painful experience.The two groups debated vigorously about what constituted a competing factor and what those primes were.Different factors appear to be of varying importance in different regions, and even in different customer groups.For example, the European Region believes that in the traditional foreign exchange business, EFS Group must provide consulting services for risk management based on the risk aversion psychology of customers.However, the United States believes that this factor is not very important, and they emphasize the value of speed and convenience of use.Many people believe that only their own thinking is the only correct one.For example, an online business manager believes that providing customers with instant confirmation of transactions can attract and retain customers, while others believe that this service is unnecessary.
Despite these difficulties, both teams completed their assignments and presented their drawings in front of all participants.The results are shown in Figures 4-2 and 4-3.
Table 4-2 Strategic Layout of Enterprise Foreign Exchange Trading (Traditional Business)
Table 4-3 Strategic Layout of Enterprise Foreign Exchange Trading (Online Business)
These pictures clearly reveal the absence of corporate strategy. The value curves of both EFS Group's traditional businesses and its online businesses are severely lacking in focus, with the company investing in a variety of factors in its business operations.Moreover, the two curves of EFS Group are very similar to those of competitors.Not surprisingly, neither group was able to come up with an impressive pitch for the group's value curve.
The graph also shows where its strategy is paradoxical.The online business, for example, has invested heavily in the ease of use of the site, which has won several awards for it, but speed has clearly been overlooked. EFS Group's website is the slowest in the industry, which may explain why such a well-regarded website is relatively poor at attracting customers and converting them into actual sales.
Perhaps the biggest shock came from the comparison of EFS Group's strategy with that of its competitors.The Online Business Group realized that the strongest competitor, what we called: "clearskies" already had a focused, unique, and easy-to-communicate strategy: "One-Click Convenience Forex" (One- click EZ FX).Clearskies are growing fast and are getting rid of the Red Sea territory.
It was no longer possible for EFS Group executives to justify their unclear, non-novel, and difficult-to-communicate strategy in the face of direct evidence of the company's shortcomings.Mapping the strategic landscape can demonstrate the need for change better than arguments based on numbers and words, and this creates a strong desire in top management to seriously rethink the company's existing strategy.
Sounding the alarm is only the first step.The next step is to send a team to the ground floor and confront management with what they have to figure out: Why exactly do people use or don't use their products and services.This step may seem simple, but we have found that managers often outsource this part of the strategy development process and rely on reports from outsiders.
A company should not outsource its eyes to others.There is no substitute for hands-on observation.Good painters don't paint from someone else's description or from a photograph, they observe things for themselves.The same is true for strategists.Before Michael Bloomberg became the mayor of New York City, he was known as a business visionary because he realized that providers of financial information needed to provide users with online analysis tools to help them analyze data.Although he is the first to tell you this conclusion, the idea is already obvious to anyone who uses the Reuters or Dow Jones index trading system.Before Bloomberg, traders used paper, pen, and calculators to copy down quotes and perform calculations.This approach is time-consuming, costly, and error-prone.
Great strategic insight like this is not so much the result of natural talent as it is the result of going down to the grassroots and challenging the boundaries of competition.In Bloomberg's case, his insights came from shifting the industry's focus from buyers to users: traders and analysts.This allows him to see things that others cannot see.
Obviously, what the chief needs to know is the customer.But it must not stop there.You should also learn more about non-customers.When customers and users are not the same group of people, you have to extend the observation to users like Bloomberg.You don't just talk to these people, you watch them in action.Recognizing complementary products that you offer alongside your own may also inspire you and create business opportunities.For example, parents who go to the movies need to find babysitters for their children. As the European theater operator Kinepolis Group has discovered, increasing childcare services in theaters can increase attendance.Finally, you need to look at how consumers find alternative ways to fulfill the needs that your products and services satisfy.For example, driving a car is an alternative to air travel, so you should also check out its unique benefits and features.
EFS Group sent managers to the grassroots for four weeks to explore six paths to creating blue oceans.During the process, each will interview and observe 10 individuals related to the corporate foreign exchange business, including past clients, new clients, competitors of EFS Group, and clients in alternative industries.Managers also go beyond the company's traditional industry boundaries to reach companies that have not yet used corporate foreign exchange trading services, but may in the future, such as Amazon, which conducts global business based on the Internet.They interviewed the end users of corporate foreign exchange transactions - the corporate accounting and cashier departments.Finally, they looked specifically at ancillary products and services customers use—financial management and pricing systems.
Ground-level research overturns many of the conclusions that managers reached in the first steps of the strategy creation process.For example, it turns out that the account manager, which almost everyone agrees on, is the key to success and that EFS Group is proud of.Now it's proving to be the company's Achilles' heel: Customers hate wasting time with account managers.For the buyer, the account manager is the person sent to remedy the relationship because EFS Group failed to deliver the promised service.
Surprisingly, the most important factor for customers is getting fast transaction confirmation.Only one manager thought it was important before. EFS managers found that the client's accountant was spending a lot of time on the phone to check if the payment had been made and when it would be received.Clients receive many calls every day with the same questions, and to answer their inquiries, they have to call the foreign exchange service provider, ie EFS Group or its competitors, which takes even more time.
Next, the team of EFS managers was sent to the drawing board.This time, they had to come up with a new strategy.Each group must draw six new value curves using the six-path framework introduced in Chapter 3, and each new value curve must describe a strategy that differentiates the company in the marketplace.By asking each group to create six strategic maps, we hope to push managers to come up with innovative proposals that push beyond the boundaries of their traditional thinking.
Each team must write a compelling pitch for each visual strategy that captures the essence of the strategy and directly appeals to buyers.The proposals of the team members include: "Leave it to us", "Make Me Smarter", "Transactions in Trust".A strong sense of competition between the two groups made the process fun and motivating, driving both groups to develop blue ocean strategies.
After two weeks of iterative drawing, both groups presented their strategic layout maps at the Visual Strategy Showcase.Participants included corporate executives, but consisted mainly of a group of customer representatives outside the EFS Group, including non-customers, competitor customers and EFS Group's most critical customers that managers interviewed in field research.Each group only has 10 minutes to show each curve, because if it is more than 10 minutes and it is not clear, it may be too complicated to be useful.The strategic layout is hung on the wall and is easily visible to the audience.
Once the 12 strategy layouts had been demonstrated, each referee—who was an invited participant—was given five sticky notes to stick next to their favorite strategy.Judges can also stick all five slips next to a strategy if they find it particularly convincing.The transparency and immediacy of this approach avoids the corporate political entanglements that are common in the strategic planning process.Managers can gain buy-in only by the uniqueness, clarity, and effectiveness of their pitches in their value curves.For example, one strategy begins: "Our strategy is so clever, you won't be our customer, you'll be our groupie."
After the slips were posted, we added another layer of feedback to the strategy-making process by asking the referees to explain their choices.We also asked judges to explain why they did not vote for other value curves.
When the two groups combined the referee's choices, they realized that 1/3 of what they thought was the key competitive factor was actually irrelevant to the client, and 1/3 was not during the visual arousal phase. fully expressed and neglected.It was clear that managers needed to reassess their long-held assumptions, such as the separation of EFS Group's online and traditional businesses.
They also learned that customers across markets have a basic set of needs and expect similar service.If you satisfy these common needs, customers will be happy to forego other requirements.Only when these basic needs are different can we talk about geographical differences.This is certainly a new discovery for many who claim that their area has unique needs.
After the strategy presentation, the groups were finally able to complete their missions.They have drawn a value curve that more faithfully reflects the value curve of the existing strategic contours than what they have drawn before, in part because the new strategic map puts aside EFS Group's past disregard for online and traditional businesses. reasonable distinction.What's more, managers are now able to map out future strategies that differentiate themselves while meeting the real but hidden needs of the market.Figure 4-4 shows a stark contrast between a company's current strategy and its future strategy.
As shown in the figure, EFS Group's future strategy eliminates customer support, reduces investment in account managers, and instead only equips account managers for "AAA" customers.This measure has significantly reduced costs for EFS Group, as account managers are the most expensive part of running their business. EFS Group's future strategy emphasizes ease of use, security, accuracy and speed.These factors will be computerized and allow customers to enter data directly without having to fax EFS.
This approach also saves time for the client company's traders.Much of the time used to be spent on documentation and error correction is now able to provide richer market commentary, a key success factor. EFS Group uses the Internet to send automatic confirmation letters to all customers and provide payment tracking and inquiry services, just like packages sent by FedEx and UPS.Previously, the forex trading industry never offered these services.Figure 4-5 summarizes the four actions of EFS Group to complete value innovation.And value innovation is the cornerstone of blue ocean strategy.
The new value curve demonstrates the criteria for a successful strategy.Compared with the previous strategy, the strategic focus of this curve is more prominent, and various investments are more assured than before. Compared with the strategic curve of industry competitors, it is obviously different, and it has a convincing publicity theme: "Enterprise foreign exchange The FedEx of the Industry: Easy, Reliable, Fast, and Trackable."By combining online and traditional businesses, EFS Group has greatly reduced the complexity of the business operation model, making strategy execution easier.
After the future strategy is determined, the last step is to communicate in an appropriate way so that employees can easily understand it. EFS Group sends each employee a picture showing the outlines of the old and new strategies, enabling them to see where the company is now and where it needs to focus its efforts to create a bright future.The senior managers involved in developing these strategies communicate directly with their reports, helping them read the picture and explaining what needs to be eliminated, reduced, increased, and created in order to create blue oceans.Employees were encouraged by this clear plan of action, and many pinned pictures to their workplace walls to remind themselves of EFS's new focus and the gaps that needed to be filled.
The new strategic layout map is the reference for investment decisions.Only those measures that will help EFS Group move from the old value curve to the new value curve will be released.For example, when local divisions asked IT to add links to their sites, which had no objection in the past, IT departments now asked them to explain how these new links would help EFS Group move toward a new strategic profile.If the local division cannot provide an explanation, the request will be denied, and doing so makes the site clearer rather than cluttered.Likewise, when an IT department recommends a multimillion-dollar back-office system to senior management, the system's ability to meet the strategic needs of a new value curve is the primary judging metric.
When an enterprise transforms from a red ocean to a blue ocean, visualizing the strategy is also conducive to the dialogue between various business departments of the enterprise and the headquarters.When business units show each other the strategic landscape, they can deepen their understanding of the rest of the company's business.In addition, the process facilitates the transfer of the most effective strategic practices across business units.
In order to understand the process of operation, let's take a look at how Samsung Electronics of South Korea used the strategic layout map in its 2000 company meeting.The meeting was attended by more than 70 senior managers, including the company's CEO.Heads of business departments presented their strategic layout and implementation plans to senior management and heads of other departments, and the discussions were very lively.Some department heads noted that their contributions to shaping future strategies were limited due to the intense competition faced by the businesses they were responsible for.Underperforming divisions feel they have no choice but to offer the same products and services as their competitors.Those views were proven wrong when one of Samsung's fastest-growing units, the mobile phone division, laid out a strategic map.Not only does this segment have a distinctive value curve, it also faces the toughest competition.
Samsung Electronics established the Value Innovation Program Center (VIP) in 1998 to institutionalize the use of strategic roadmaps in major business decisions.The core members of Samsung's various business departments and functional teams gathered in the VIP center to discuss their strategic plans.These discussions are ultimately reflected in the strategic map.
The VIP center is equipped with 20 project rooms, which use self-developed value innovation knowledge to help business departments make product and service-related project decisions.In 2003, the center completed more than 80 strategic projects and opened more than 10 VIP branches to meet the growing business needs of various departments.For example, the world's leading 40-inch LCD TV launched in December 2002 is the result of a project team's 4-month effort at the center.The same goes for the world's best-selling SGH T-100 mobile phone, with more than 10 million units sold to date.
Since 1999, Samsung Electronics has held the Annual Meeting of Value Innovation Enterprises, which is chaired by the company's top managers.At the annual meeting, people shared Samsung's successful value innovation project experience through demonstrations and exhibitions, and the best projects were rewarded.In this way, Samsung Electronics established a common internal language, injected new corporate culture and strategic norms into the company, and transformed the company's business structure from the red ocean to the blue ocean [7].
Does your business unit leader lack understanding of other businesses?Are your best strategic practices poorly communicated across other departments?Are underperforming divisions eager to attribute poor performance to competitive dynamics?If the answer to every question is yes, then try to redraw the strategic map and share the strategic map for each business unit.
Strategic visualization can help managers responsible for corporate strategy predict and plan for the company's future growth and profits.In our research, all companies that create blue oceans are already leaders in their industries, not necessarily technically, but pushing the value they provide to customers to new frontiers.Using the metaphor of the leader makes it easy to discuss the growth potential of existing and future businesses.
A company's leaders are those business projects that provide unprecedented value.They are your blue ocean strategic unit and the most powerful source of profit growth.These businesses are widely supported by customers, and their value curves are very different from those of competitors on the strategic map.At the other extreme are the status quo players, whose business value curve follows the basic shape of the industry.These are "me too (me -too)" type of business.The status quo people usually don't contribute much to the company's future growth, and they are deep in the red ocean.
The potential of migrators lies between the above two. These business items are further exerted on the value curve by various factors, providing customers with more things at a lower price, but without changing the basic shape of the value curve.These business projects bring growth, but not innovative value, and thus sit strategically between a red ocean and a blue ocean.
A useful exercise for the management team of a business pursuing profitable growth is to plot the company's existing and planned businesses on a PMS map.In order to facilitate the practice, first explain the relevant vocabulary.Status quo refers to “me-too” businesses, Migrators are businesses that outperform most competitors in the market, and Leaders are defined as businesses that have broad customer support.
If the existing and planned business composition is mainly composed of those who are content with the status quo, then the company's growth level will be low, basically confined to the red ocean, and efforts must be made to promote value innovation.Although some business projects that are content with the status quo can still make money at present, they may have fallen into the trap of competitors comparing, imitating, and price competition.
Reasonable growth is possible if the existing business includes many migrators.However, the company lacks the potential to explore growth, and there is a risk of being excluded by other innovative value companies.We found that the more people in an industry are content with the status quo, the greater the opportunity for value innovation and the blue ocean opportunity for creating new market space.
This exercise is especially valuable for managers who want their business to go beyond today's performance.Revenues, profit margins, market share, and customer satisfaction are measures of where a company is now, but unlike traditional strategic thinking, these measures cannot point to the future.The environment changes too fast.Market share today is simply how a business has performed in the past.Consider the strategic reversal and market share disruption wrought by CNN's entry into the US news market.ABS, CBS, and NBC, which historically had huge market shares, were hit hard.
Top managers should regard value and innovation as important metrics for managing the business.Innovation is used as an indicator because without innovation, companies will fall into the trap of making small improvements over the competition.Value is used as an indicator because only when innovative ideas are linked to buyers' willingness to buy can profits be created.
Obviously, what senior managers should do is to tilt the future business composition of the company to the leaders, which is the way to increase profits.The PMS map in Table 4-6 depicts this transformation trajectory, with scatter points marking the composition of a company's business.The 12 points in the figure represent the 12 existing major businesses of the company, and their focus is shifting from those who are content with the status quo to those who are migrating and leading.
However, in the process of moving the business into a frontrunner, senior managers should realize that while the status quo has little growth potential, they are today's cash generators.Frontrunners, on the other hand, while having the greatest growth potential, tend to burn through cash in the initial stages of growth and expansion.Obviously, the goal of senior management should be to manage the business structure of the enterprise so that the enterprise maintains the right balance between profit growth and cash flow.
Managers often express dissatisfaction with existing strategic plans, explicitly or implicitly.For them, strategic planning should be a brainstorming process, not a top-down or bottom-up process.They felt that the strategic planning process should have had more dialogue rather than being driven by documentation.The process should focus on the big picture, not drill numbers.It should be a creative process, not an idea on paper.It should be inspiring and mobilize everyone's consciousness and enthusiasm, not a negotiation process of bargaining.However, despite the great expectations for change, little research has proposed alternatives to existing approaches to strategic planning.Strategic planning is arguably the most basic management task not just any company has to do, but it should take months of painstaking effort every year to complete the process.
Table 4-6 Test the growth potential of the business portfolio
The process around building a new strategic map that can address the dissatisfaction many business managers have with the existing approach to strategic planning has yielded some good results.As Aristotle pointed out: "The soul always thinks in images."
Of course, mapping the strategic landscape and PMS is not all that is part of the strategic planning process.At a certain stage, researching data and writing documents are also necessary.But we believe that if managers can start thinking about how to break away from the big picture of competition, it will be easier to deal with the details.The strategy visualization series we suggest will bring the strategy itself into strategic planning, and they will greatly improve your chances of creating blue oceans.
How to maximize the blue ocean you create?This is the question to be discussed in the next chapter.
A common mistake is to start discussing changes in strategy before there is agreement on the current state of the competitive landscape.Another problem is that managers are often reluctant to embrace change, either because they have a vested interest or feel that time will ultimately prove their choice.Indeed, when we ask corporate managers what would help them set out to find blue oceans and introduce change, they usually say that it takes a strong-willed leader and a serious crisis as a breakthrough.
Fortunately, we have found that asking business managers to map the value curve of their corporate strategy can lead them to recognize the need for change.Like a wake-up call, it can be a powerful wake-up call for businesses to challenge their existing strategies.This is like the EFS Group, which had a clear and well-communicated strategy for a long time, and the company was also divided because of this. The senior managers of the EFS regional branch hated the arrogant attitude of the head of the headquarters. They believed that the management method of the headquarters was to treat "the grassroots as fools" and only "the head office has brains."This contradiction makes it more difficult for EFS Group to recognize its own strategic problems.Before a company can map out a new strategy, however, a shared understanding of the current state of strategic positioning is critical.
EFS Group began to gather more than 20 senior managers from global branches in Europe, North America, Asia, Australia, etc., and then divided them into two groups.One group is primarily responsible for producing the company's value curve, which outlines the EFS Group's existing strategy relative to its competitors in terms of traditional corporate foreign exchange trading business.Another group was tasked with doing the same for EFS Group's emerging online foreign exchange trading business.Only 90 minutes were given to both groups, because if the EFS Group's strategy is clear enough, it will definitely be drawn soon.
It was a painful experience.The two groups debated vigorously about what constituted a competing factor and what those primes were.Different factors appear to be of varying importance in different regions, and even in different customer groups.For example, the European Region believes that in the traditional foreign exchange business, EFS Group must provide consulting services for risk management based on the risk aversion psychology of customers.However, the United States believes that this factor is not very important, and they emphasize the value of speed and convenience of use.Many people believe that only their own thinking is the only correct one.For example, an online business manager believes that providing customers with instant confirmation of transactions can attract and retain customers, while others believe that this service is unnecessary.
Despite these difficulties, both teams completed their assignments and presented their drawings in front of all participants.The results are shown in Figures 4-2 and 4-3.
Table 4-2 Strategic Layout of Enterprise Foreign Exchange Trading (Traditional Business)
Table 4-3 Strategic Layout of Enterprise Foreign Exchange Trading (Online Business)
These pictures clearly reveal the absence of corporate strategy. The value curves of both EFS Group's traditional businesses and its online businesses are severely lacking in focus, with the company investing in a variety of factors in its business operations.Moreover, the two curves of EFS Group are very similar to those of competitors.Not surprisingly, neither group was able to come up with an impressive pitch for the group's value curve.
The graph also shows where its strategy is paradoxical.The online business, for example, has invested heavily in the ease of use of the site, which has won several awards for it, but speed has clearly been overlooked. EFS Group's website is the slowest in the industry, which may explain why such a well-regarded website is relatively poor at attracting customers and converting them into actual sales.
Perhaps the biggest shock came from the comparison of EFS Group's strategy with that of its competitors.The Online Business Group realized that the strongest competitor, what we called: "clearskies" already had a focused, unique, and easy-to-communicate strategy: "One-Click Convenience Forex" (One- click EZ FX).Clearskies are growing fast and are getting rid of the Red Sea territory.
It was no longer possible for EFS Group executives to justify their unclear, non-novel, and difficult-to-communicate strategy in the face of direct evidence of the company's shortcomings.Mapping the strategic landscape can demonstrate the need for change better than arguments based on numbers and words, and this creates a strong desire in top management to seriously rethink the company's existing strategy.
Sounding the alarm is only the first step.The next step is to send a team to the ground floor and confront management with what they have to figure out: Why exactly do people use or don't use their products and services.This step may seem simple, but we have found that managers often outsource this part of the strategy development process and rely on reports from outsiders.
A company should not outsource its eyes to others.There is no substitute for hands-on observation.Good painters don't paint from someone else's description or from a photograph, they observe things for themselves.The same is true for strategists.Before Michael Bloomberg became the mayor of New York City, he was known as a business visionary because he realized that providers of financial information needed to provide users with online analysis tools to help them analyze data.Although he is the first to tell you this conclusion, the idea is already obvious to anyone who uses the Reuters or Dow Jones index trading system.Before Bloomberg, traders used paper, pen, and calculators to copy down quotes and perform calculations.This approach is time-consuming, costly, and error-prone.
Great strategic insight like this is not so much the result of natural talent as it is the result of going down to the grassroots and challenging the boundaries of competition.In Bloomberg's case, his insights came from shifting the industry's focus from buyers to users: traders and analysts.This allows him to see things that others cannot see.
Obviously, what the chief needs to know is the customer.But it must not stop there.You should also learn more about non-customers.When customers and users are not the same group of people, you have to extend the observation to users like Bloomberg.You don't just talk to these people, you watch them in action.Recognizing complementary products that you offer alongside your own may also inspire you and create business opportunities.For example, parents who go to the movies need to find babysitters for their children. As the European theater operator Kinepolis Group has discovered, increasing childcare services in theaters can increase attendance.Finally, you need to look at how consumers find alternative ways to fulfill the needs that your products and services satisfy.For example, driving a car is an alternative to air travel, so you should also check out its unique benefits and features.
EFS Group sent managers to the grassroots for four weeks to explore six paths to creating blue oceans.During the process, each will interview and observe 10 individuals related to the corporate foreign exchange business, including past clients, new clients, competitors of EFS Group, and clients in alternative industries.Managers also go beyond the company's traditional industry boundaries to reach companies that have not yet used corporate foreign exchange trading services, but may in the future, such as Amazon, which conducts global business based on the Internet.They interviewed the end users of corporate foreign exchange transactions - the corporate accounting and cashier departments.Finally, they looked specifically at ancillary products and services customers use—financial management and pricing systems.
Ground-level research overturns many of the conclusions that managers reached in the first steps of the strategy creation process.For example, it turns out that the account manager, which almost everyone agrees on, is the key to success and that EFS Group is proud of.Now it's proving to be the company's Achilles' heel: Customers hate wasting time with account managers.For the buyer, the account manager is the person sent to remedy the relationship because EFS Group failed to deliver the promised service.
Surprisingly, the most important factor for customers is getting fast transaction confirmation.Only one manager thought it was important before. EFS managers found that the client's accountant was spending a lot of time on the phone to check if the payment had been made and when it would be received.Clients receive many calls every day with the same questions, and to answer their inquiries, they have to call the foreign exchange service provider, ie EFS Group or its competitors, which takes even more time.
Next, the team of EFS managers was sent to the drawing board.This time, they had to come up with a new strategy.Each group must draw six new value curves using the six-path framework introduced in Chapter 3, and each new value curve must describe a strategy that differentiates the company in the marketplace.By asking each group to create six strategic maps, we hope to push managers to come up with innovative proposals that push beyond the boundaries of their traditional thinking.
Each team must write a compelling pitch for each visual strategy that captures the essence of the strategy and directly appeals to buyers.The proposals of the team members include: "Leave it to us", "Make Me Smarter", "Transactions in Trust".A strong sense of competition between the two groups made the process fun and motivating, driving both groups to develop blue ocean strategies.
After two weeks of iterative drawing, both groups presented their strategic layout maps at the Visual Strategy Showcase.Participants included corporate executives, but consisted mainly of a group of customer representatives outside the EFS Group, including non-customers, competitor customers and EFS Group's most critical customers that managers interviewed in field research.Each group only has 10 minutes to show each curve, because if it is more than 10 minutes and it is not clear, it may be too complicated to be useful.The strategic layout is hung on the wall and is easily visible to the audience.
Once the 12 strategy layouts had been demonstrated, each referee—who was an invited participant—was given five sticky notes to stick next to their favorite strategy.Judges can also stick all five slips next to a strategy if they find it particularly convincing.The transparency and immediacy of this approach avoids the corporate political entanglements that are common in the strategic planning process.Managers can gain buy-in only by the uniqueness, clarity, and effectiveness of their pitches in their value curves.For example, one strategy begins: "Our strategy is so clever, you won't be our customer, you'll be our groupie."
After the slips were posted, we added another layer of feedback to the strategy-making process by asking the referees to explain their choices.We also asked judges to explain why they did not vote for other value curves.
When the two groups combined the referee's choices, they realized that 1/3 of what they thought was the key competitive factor was actually irrelevant to the client, and 1/3 was not during the visual arousal phase. fully expressed and neglected.It was clear that managers needed to reassess their long-held assumptions, such as the separation of EFS Group's online and traditional businesses.
They also learned that customers across markets have a basic set of needs and expect similar service.If you satisfy these common needs, customers will be happy to forego other requirements.Only when these basic needs are different can we talk about geographical differences.This is certainly a new discovery for many who claim that their area has unique needs.
After the strategy presentation, the groups were finally able to complete their missions.They have drawn a value curve that more faithfully reflects the value curve of the existing strategic contours than what they have drawn before, in part because the new strategic map puts aside EFS Group's past disregard for online and traditional businesses. reasonable distinction.What's more, managers are now able to map out future strategies that differentiate themselves while meeting the real but hidden needs of the market.Figure 4-4 shows a stark contrast between a company's current strategy and its future strategy.
As shown in the figure, EFS Group's future strategy eliminates customer support, reduces investment in account managers, and instead only equips account managers for "AAA" customers.This measure has significantly reduced costs for EFS Group, as account managers are the most expensive part of running their business. EFS Group's future strategy emphasizes ease of use, security, accuracy and speed.These factors will be computerized and allow customers to enter data directly without having to fax EFS.
This approach also saves time for the client company's traders.Much of the time used to be spent on documentation and error correction is now able to provide richer market commentary, a key success factor. EFS Group uses the Internet to send automatic confirmation letters to all customers and provide payment tracking and inquiry services, just like packages sent by FedEx and UPS.Previously, the forex trading industry never offered these services.Figure 4-5 summarizes the four actions of EFS Group to complete value innovation.And value innovation is the cornerstone of blue ocean strategy.
The new value curve demonstrates the criteria for a successful strategy.Compared with the previous strategy, the strategic focus of this curve is more prominent, and various investments are more assured than before. Compared with the strategic curve of industry competitors, it is obviously different, and it has a convincing publicity theme: "Enterprise foreign exchange The FedEx of the Industry: Easy, Reliable, Fast, and Trackable."By combining online and traditional businesses, EFS Group has greatly reduced the complexity of the business operation model, making strategy execution easier.
After the future strategy is determined, the last step is to communicate in an appropriate way so that employees can easily understand it. EFS Group sends each employee a picture showing the outlines of the old and new strategies, enabling them to see where the company is now and where it needs to focus its efforts to create a bright future.The senior managers involved in developing these strategies communicate directly with their reports, helping them read the picture and explaining what needs to be eliminated, reduced, increased, and created in order to create blue oceans.Employees were encouraged by this clear plan of action, and many pinned pictures to their workplace walls to remind themselves of EFS's new focus and the gaps that needed to be filled.
The new strategic layout map is the reference for investment decisions.Only those measures that will help EFS Group move from the old value curve to the new value curve will be released.For example, when local divisions asked IT to add links to their sites, which had no objection in the past, IT departments now asked them to explain how these new links would help EFS Group move toward a new strategic profile.If the local division cannot provide an explanation, the request will be denied, and doing so makes the site clearer rather than cluttered.Likewise, when an IT department recommends a multimillion-dollar back-office system to senior management, the system's ability to meet the strategic needs of a new value curve is the primary judging metric.
When an enterprise transforms from a red ocean to a blue ocean, visualizing the strategy is also conducive to the dialogue between various business departments of the enterprise and the headquarters.When business units show each other the strategic landscape, they can deepen their understanding of the rest of the company's business.In addition, the process facilitates the transfer of the most effective strategic practices across business units.
In order to understand the process of operation, let's take a look at how Samsung Electronics of South Korea used the strategic layout map in its 2000 company meeting.The meeting was attended by more than 70 senior managers, including the company's CEO.Heads of business departments presented their strategic layout and implementation plans to senior management and heads of other departments, and the discussions were very lively.Some department heads noted that their contributions to shaping future strategies were limited due to the intense competition faced by the businesses they were responsible for.Underperforming divisions feel they have no choice but to offer the same products and services as their competitors.Those views were proven wrong when one of Samsung's fastest-growing units, the mobile phone division, laid out a strategic map.Not only does this segment have a distinctive value curve, it also faces the toughest competition.
Samsung Electronics established the Value Innovation Program Center (VIP) in 1998 to institutionalize the use of strategic roadmaps in major business decisions.The core members of Samsung's various business departments and functional teams gathered in the VIP center to discuss their strategic plans.These discussions are ultimately reflected in the strategic map.
The VIP center is equipped with 20 project rooms, which use self-developed value innovation knowledge to help business departments make product and service-related project decisions.In 2003, the center completed more than 80 strategic projects and opened more than 10 VIP branches to meet the growing business needs of various departments.For example, the world's leading 40-inch LCD TV launched in December 2002 is the result of a project team's 4-month effort at the center.The same goes for the world's best-selling SGH T-100 mobile phone, with more than 10 million units sold to date.
Since 1999, Samsung Electronics has held the Annual Meeting of Value Innovation Enterprises, which is chaired by the company's top managers.At the annual meeting, people shared Samsung's successful value innovation project experience through demonstrations and exhibitions, and the best projects were rewarded.In this way, Samsung Electronics established a common internal language, injected new corporate culture and strategic norms into the company, and transformed the company's business structure from the red ocean to the blue ocean [7].
Does your business unit leader lack understanding of other businesses?Are your best strategic practices poorly communicated across other departments?Are underperforming divisions eager to attribute poor performance to competitive dynamics?If the answer to every question is yes, then try to redraw the strategic map and share the strategic map for each business unit.
Strategic visualization can help managers responsible for corporate strategy predict and plan for the company's future growth and profits.In our research, all companies that create blue oceans are already leaders in their industries, not necessarily technically, but pushing the value they provide to customers to new frontiers.Using the metaphor of the leader makes it easy to discuss the growth potential of existing and future businesses.
A company's leaders are those business projects that provide unprecedented value.They are your blue ocean strategic unit and the most powerful source of profit growth.These businesses are widely supported by customers, and their value curves are very different from those of competitors on the strategic map.At the other extreme are the status quo players, whose business value curve follows the basic shape of the industry.These are "me too (me -too)" type of business.The status quo people usually don't contribute much to the company's future growth, and they are deep in the red ocean.
The potential of migrators lies between the above two. These business items are further exerted on the value curve by various factors, providing customers with more things at a lower price, but without changing the basic shape of the value curve.These business projects bring growth, but not innovative value, and thus sit strategically between a red ocean and a blue ocean.
A useful exercise for the management team of a business pursuing profitable growth is to plot the company's existing and planned businesses on a PMS map.In order to facilitate the practice, first explain the relevant vocabulary.Status quo refers to “me-too” businesses, Migrators are businesses that outperform most competitors in the market, and Leaders are defined as businesses that have broad customer support.
If the existing and planned business composition is mainly composed of those who are content with the status quo, then the company's growth level will be low, basically confined to the red ocean, and efforts must be made to promote value innovation.Although some business projects that are content with the status quo can still make money at present, they may have fallen into the trap of competitors comparing, imitating, and price competition.
Reasonable growth is possible if the existing business includes many migrators.However, the company lacks the potential to explore growth, and there is a risk of being excluded by other innovative value companies.We found that the more people in an industry are content with the status quo, the greater the opportunity for value innovation and the blue ocean opportunity for creating new market space.
This exercise is especially valuable for managers who want their business to go beyond today's performance.Revenues, profit margins, market share, and customer satisfaction are measures of where a company is now, but unlike traditional strategic thinking, these measures cannot point to the future.The environment changes too fast.Market share today is simply how a business has performed in the past.Consider the strategic reversal and market share disruption wrought by CNN's entry into the US news market.ABS, CBS, and NBC, which historically had huge market shares, were hit hard.
Top managers should regard value and innovation as important metrics for managing the business.Innovation is used as an indicator because without innovation, companies will fall into the trap of making small improvements over the competition.Value is used as an indicator because only when innovative ideas are linked to buyers' willingness to buy can profits be created.
Obviously, what senior managers should do is to tilt the future business composition of the company to the leaders, which is the way to increase profits.The PMS map in Table 4-6 depicts this transformation trajectory, with scatter points marking the composition of a company's business.The 12 points in the figure represent the 12 existing major businesses of the company, and their focus is shifting from those who are content with the status quo to those who are migrating and leading.
However, in the process of moving the business into a frontrunner, senior managers should realize that while the status quo has little growth potential, they are today's cash generators.Frontrunners, on the other hand, while having the greatest growth potential, tend to burn through cash in the initial stages of growth and expansion.Obviously, the goal of senior management should be to manage the business structure of the enterprise so that the enterprise maintains the right balance between profit growth and cash flow.
Managers often express dissatisfaction with existing strategic plans, explicitly or implicitly.For them, strategic planning should be a brainstorming process, not a top-down or bottom-up process.They felt that the strategic planning process should have had more dialogue rather than being driven by documentation.The process should focus on the big picture, not drill numbers.It should be a creative process, not an idea on paper.It should be inspiring and mobilize everyone's consciousness and enthusiasm, not a negotiation process of bargaining.However, despite the great expectations for change, little research has proposed alternatives to existing approaches to strategic planning.Strategic planning is arguably the most basic management task not just any company has to do, but it should take months of painstaking effort every year to complete the process.
Table 4-6 Test the growth potential of the business portfolio
The process around building a new strategic map that can address the dissatisfaction many business managers have with the existing approach to strategic planning has yielded some good results.As Aristotle pointed out: "The soul always thinks in images."
Of course, mapping the strategic landscape and PMS is not all that is part of the strategic planning process.At a certain stage, researching data and writing documents are also necessary.But we believe that if managers can start thinking about how to break away from the big picture of competition, it will be easier to deal with the details.The strategy visualization series we suggest will bring the strategy itself into strategic planning, and they will greatly improve your chances of creating blue oceans.
How to maximize the blue ocean you create?This is the question to be discussed in the next chapter.