According to authors Kim and Mauborgne, in their book, Blue Ocean Strategy, “when expressed through a value curve, an effective Blue Ocean strategy has three complementary qualities: focus, divergence, and a compelling tagline.”
Focus
Every great strategy has focus, and the company’s strategic profile, or value curve, should clearly show it. For example, Southwest Airline’s profile emphasized only three factors: friendly service, speed, and frequent point-to-point departures. This focus allowed them to price against car transportation. Its competitors invested in meals, seating choices, etc.
Divergence
When a company strategy is formed reactively to keep up with the competition, it loses its uniqueness. On a strategy canvas, reactive strategies tend to share the same strategic profile. In the case of Southwest Airlines, the value curves of their competitors are virtually identical. In contrast, the value curves of the Blue Ocean strategy always stand apart.
A Compelling tagline
A good strategy has a compelling tagline. For example, Southwest Airlines: “The speed of a plane at the price of a car whenever you need it.” A good tagline not only delivers a clear message but also advertises an offering truthfully, or else customers will lose trust and interest. An excellent way to test the effectiveness and strength is to determine whether it contains a strong and authentic tagline.
Reading the value curves.
A strategy canvas enables you to visualize the industry. These value curves contain a wealth of strategic knowledge, current status, and the future of a business.
The Blue Ocean strategy
The first question on the value curve answers is whether a business deserves to be a winner? When a company’s value curve or its competitors meets the three criteria that define an excellent Blue Ocean strategy (focus, divergence, and a compelling tagline that speaks to the market), it shows the company is on track toward a viable Blue Ocean idea.
However, when a company’s value curve lacks focus, its cost structure will tend to be high and have a complex business model. When it lacks the divergence, the company strategy is a Me-too with no reason to stand apart. When there is no compelling tagline,it signals an internally oriented innovation with little commercial potential and no natural takeoff capability.
Don’t get caught in the red ocean.
When the company’s value curve converges with its competitors, it signals that a company is likely caught in bloody competition. Thi signals slow growth unless the industry is growing rapidly.
Over delivery without payback
When a company’s value curve on the strategy canvas shows high levels across all factors, the question is, do the company’s market share and profitability reflect all of these costs? If the answer is no, the strategy canvas signals that the company may be oversupplying its customers, offering too many elements that add incremental value to buyers. The company must then decide which factors to eliminate and reduce, and not just those to raise and create a divergent value curve.
Strategic contradictions
Are there strategic contradictions? These are areas where a company offers a high level on one competing factor or ignores other competing factors. For example, investing heavily to make the company’s website easy to use, but not considering its slow loading time. Or an inconsistency between the value of an offering and its price.
An internally driven company
How does the company label the industry competing components? Do you use jargon or words that all customers will understand and value?. The kind of language used in the strategy canvas gives insight into whether the company’s strategic vision is built on an outside-in perspective, by the demand side, or an inside-out perspective that is operationally driven.
