Most strategic plans involve the production of massive documents. A mishmash of data is pulled from all over an organisation from people with conflicting agendas and poor communication. Usually a full budget is also attached, as are lavish graphs and a surfeit of spreadsheets. No wonder so few strategic plans turn into meaningful action; executives are paralysed by the muddle.
We’ve found a better way that we’ve used for a number of years. It’s not our original idea but it’s drawn from W Chan Kim’s and Renée Mauborgne’s excellent book, Blue Ocean Strategy. It involves drawing a picture called a “strategy canvas” – one picture on a single sheet of paper. This approach produces strategies that are easy to understand and communicate, that engage more people within an organisation and unlocks the creativity of those involved in the strategy process.
The strategy canvas is the central diagnostic and action framework for building a compelling business strategy. The horizontal axis captures the range of factors that the industry competes on and invests in and the vertical axis captures the offering level that buyers receive across these key competing factors. A relatively low position means a company offers less and, hence, invests less in that factor—or, in the case of price, asks for less.
The strategy canvas serves two purposes:
First, it captures the current state of play in the known market space. This allows you to understand where the competition is currently investing and the factors that the industry competes on.
Secondly, it propels you to action by reorienting your focus from competitors to alternative industries and from customers to non-customers.
The value curve is the basic component of the strategy canvas. It is a graphic depiction of a company's relative performance across its industry's factors of competition.
Let’s take a look at one of Kim and Mauborgne’s examples and their commentary to show how the process works. It’s a little dated now, about ten years old but it does show how this process works very clearly. It’s based on Southwest airlines:
“By connecting the dots across all the factors for each player, you reveal the strategic profiles of Southwest, its direct competitors, and its main alternative, the car.
Southwest Airline's profile is a perfect example of a good strategy, because it shows the three complementary qualities that characterise an effective strategy: focus, divergence, and a compelling tag line. If your company's strategic profile does not clearly reveal those qualities, your strategy will likely be muddled, undifferentiated, and hard to communicate.
Focus. Every great strategy has focus - a company's strategic profile or value curve, should clearly show it. Looking at Southwest's profile, for example, you can see at once that the company emphasises just three factors: friendly service, speed, and frequent point-to-point departures. By focusing in this way, Southwest has been able to price against car transportation; it doesn't make extra investments in meals, lounges, and seating choices. By contrast, Southwest's traditional competitors invest in all the airline industry's competitive factors, which makes it much more difficult for them to match Southwest's prices. Across-the-board investing is often a sign that competitors' moves are setting a company's agenda.
Divergence. When a company's strategy is formed reactively as it tries to keep up with the competition, it loses its uniqueness. Consider the similarities in most airlines' meals and business-class lounges. On the strategy canvas, therefore, reactive strategists tend to share a profile. Indeed, in the case of Southwest, we found that the value curves of the company's competitors were virtually identical, which is why they share the same value curve in the exhibit. By contrast, the value curves of innovators' strategies always stand apart. They might eliminate or substantially reduce investments in certain factors, or they might dramatically increase investments in others. Sometimes they even create new factors, thereby changing the industry's overall profile. Southwest, for instance, pioneered point-to-point travel between midsize cities; previously, the industry operated through hub-and-spoke systems.
Compelling tag line. The final test of a good strategy picture is how well it lends itself to a tag line. "The speed of the plane at the price of the car—whenever you need it." That could be the tag line of Southwest Airlines. What could Southwest's competitors say? Even the most proficient ad agency would have difficulty reducing the conventional offering of lunches, seat choices, lounges, and hub links with standard service, slower speeds, and higher prices into a memorable tag line. A good tag line must not only deliver a clear message but also advertise an offering truthfully, or else customers will lose trust and interest. If you can't come up with a strong and authentic tag line, chances are you don't have a strong strategy either.
Drawing a strategy canvas is not, of course, the only part of the strategic-planning process. At some stage, numbers and documents must be compiled and discussed. But we believe that the details will fall into place more easily if managers start with the big picture...and it will greatly improve your chances of coming up with a winning formula.
As Aristotle pointed out: "The soul never thinks without an image.""
Bibliography
Acknowledgements: This post is based on published materials © Copyright W. Chan Kim, Renee Mauborgne and Harvard Business School.
Sources:
Blue Ocean Strategy 2005 Harvard Business School Publishing Corporation
Charting Your Company’s Future – Harvard Business Review Vol. 80, no. 6, June 2002
blue ocean strategy®
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