Very few products and services are used in a vacuum. Most of the time, other products and services affect their value. But, in most industries, products or services converge are within the bounds of their industry’s product and service offerings.

Take a look at movie theaters. The cost of getting a babysitter and parking the car affect the perceived value of going to the movies. However, these complimentary services are beyond the bounds of the movie theater industry as normally defined. Movie theatre operators worry about how hard or costly it is for people to get babysitters. Imagine a movie theatre with babysitters services. 

Untapped value can often be hidden in complementary products and services. The key is to define the total solution buyers seek when they choose a product or service. A simple way to do this is to think about what happens before, during, and after your product is used. 

Think airline industry and ground transportation, or trucks that used to be purchased and how much they cost rather than the total cost. Peterbilt is the most expensive and the least expensive over the road truck in overall cost.   

Use the strategy canvas.

Think about these issues:

What is the context in which your product or service is used?

What happens before, during, and after the use of your product or service?

Can you identify all the pain points?

Can you eliminate these pain points through a complementary product or service offering?

 

Path Three: Look Across Your Chain Of Buyers

In most industries, competitors converge around a standard definition of who the target buyer is. In reality, though, there is a chain of buyers directly or indirectly involved in the buying decision. The purchasers you pay for the product or service are different from the actual users, and in some cases, there are Important influencers. When they do overlap, they frequently all have different definitions of value.

The corporate purchasing agent may be more concerned with costs—the corporate user, who is likely to be far more concerned with the ease of use. Similarly, a retailer may value a manufactures just in time stock replenishment and innovative financing.  

Companies generally target customer segments as large versus small customers. But the industry typically converges on a single buyer group. The pharmaceutical industry, for example, focuses primarily on influencers, the doctors. Sometimes there is a solid economic reason for doing so. But often, the buyer is never questioned and the practice is never questioned.  

Challenge Your Buyer Group

Challenging conventional wisdom about which buyer group to target can lead to discovering a new Blue Ocean. If you look across buyer groups, companies can gain new insights into redesigning their value curves to focus on the previously overlooked set of buyers.

For example, Novo Nordisk went from selling insulin to doctors to selling an insulin pen to the users – the patients themselves — and created a new market. Novo sold a pre-filled, disposable insulin injection pen with a dosing system. They provided users with even greater convenience and ease of use.

Novo Nordisk created a Blue Ocean strategy that shifted the industry landscape and transformed the company from an insulin producer to a diabetes care company.

You may find an opportunity to create a new market by questioning conventional definitions of who can and should be the target. 

Canon copiers created a small desktop copier industry by shifting the target customer of the copier industry from corporate purchasers to individual users.

Questions For You

Who are the buyers you automatically or typically focus on?   

Does everyone in your industry focus on those buyers?  

If you shifted the buyer groups of your industry, how could you unlock new value?

 

Groups here refer to companies within the same industry group that have a very similar strategy. In most industries, the strategic differences among industry players are captured by a small number of strategic groups.

Strategic groups can generally be ranked in two dimensions: price and performance. Each increase in price tends to bring a corresponding jump in some performance measurement.  

Most companies are inward-looking

Most companies are focused on improving their competitive position within a strategic group. For example, Mercedes, BMW, and Jaguar try to outcompete one another in the luxury car segment. Economy car makers focus on excelling in their strategic group. Neither strategic group ever pays much attention to the other groups. 

To break away from competitors, you need to look across different groups

The key to competing in a Blue Ocean market across existing groups is to break out of this tunnel vision by understanding which factors determine consumer’s decisions to trade up or down from one group to another.

Consider Curves, the Texas-based women’s fitness company. Its growth was triggered almost entirely through word of mouth and referrals. Curves entered an oversaturated market in its inception, gearing its offering to customers who would not want it.  

In reality, however, Curves created a new demand in the US fitness industry, unlocking an untapped market if women were struggling and failing to keep in shape through sound fitness. Curves were built under the decisive advantages of two strategic groups in the US fitness industry, traditional health clubs and home exercise programs, eliminating or reducing everything else.

At one extreme were the costly health clubs mainly in the suburbs that catered to wealthy people who could pay $100 a month or more for membership. It had all the facilities they wanted juice bars, sauna instructors, etc. At the other extreme was a group of home exercise programs including exercise videos, books, and magazines which were a small fraction of the cost, and generally required little or no exercise equipment.  

What made women choose between the traditional health club and at-home exercise programs? It turns out that most women don’t trade up to health clubs for all the machines, locker rooms, etc., and the chance to meet men. The average female non-athlete does not even want to run into men when she’s working out. She’s not inspired to lineup behind machines in which she needs to change weights and adjust their incline angles. Also, you have to spend one or two hours at a health club several times a week.

It turns out that most women move up to health clubs because, at home, it is too easy to find a reason not to work out. Working with a group is enjoyable and motivating. Plus, working out at home saves time, costs less, and is more private.  

Curves built a Blue Ocean strategy by drawing on the distinctive strengths of these two strategic groups, eliminating and reducing everything else. The experience in the Curves club was entirely different. Members could talk and support each other in a non-judgmental atmosphere.   

There were few if any mirrors and no men to stare at you. Members moved around the circle of machines in 30 minutes which completed the whole workout. The price was $30 a month. According to Kim and Mauborgne, their tagline could have been “For the price of a cup of coffee a day; you can obtain the gift of health through proper exercise.” Curves created a new market. 

What are some of the different groups you could look at?

 

The first step in the Blue Ocean Strategy is to reconstruct the market boundaries to break from the competition and create blue oceans. The challenge is to identify commercially compelling Blue Ocean opportunities out of all the possibilities that exist.

There are six basic approaches to re-making market boundaries. Authors Chan and Mauborgne call these approaches the six paths framework. None of these paths require exceptional vision or foresight about the future. They are all based on current but from a different viewpoint. 

These six paths challenge the six fundamental assumptions underlying many companies’ strategies. These six assumptions keep companies trapped in very competitive markets. Companies often: 

1. Define their industry similar to competitors and focus on being the best
2. See their industry through the lens of generally accepted groups (luxury automobiles, economy cars, and family vehicles) and strive to stand out in their strategic group.
3. Focus on the same buyer groups, the purchase, the user (as in the clothing industry), or the influencer (as in the pharmaceutical industry).
4. Defined the scope of the products and services offered by their industry similarly
5. Accept the industry functional or emotional orientation.
6. Focus on current competitive threats in formulating strategy.

The more a company shares this conventional wisdom about competing, the more similar they are.  

To break out of the excepted boundaries that define how they compete, you need to look systematically across them to create Blue Oceans. 

Do you need to look across alternative industries, across strategic groups, across buyer groups, across complementary product and service offerings, across the functional, emotional orientation of an industry, and even across time? 

This analysis gives companies keen insight into how to reconstruct market realities to open up Blue Oceans.

Path one: look across alternative industries 

In a broader sense, a company competes with the other firms in their industry and that produce alternative products or services. Alternative products are wider than substitutes. Products may have different forms but offer the same functionality or utility can substitute for one another. Also, alternatives include products or services with different functions and forms with the same purpose.

For example, people can buy and install a financial software package, hire a CPA, use pencil and paper, or a financial app to sort out their finances. All of these are substitutes for each other. They have different forms, but the same function.  

Also, products or services can take different forms and perform other functions, serving the same objective—for example, movie theatres vs. restaurants. While they have few physical features in common with movie theatres and fill a distinct role: they provide conversational and gastronomical pleasure. This role is a very different experience from the visual entertainment offered by cinemas. 

Despite differences in form and function, however, people go to a restaurant for the same objective they go to a movie: to enjoy a night out. These are not substitutes, but alternatives they can choose.

Alternative decisions

In making purchase decisions, buyers implicitly way their alternatives, often unconsciously. Should we go to the movie or should we get a massage or read a book. This thought process is intuitive for individual consumers and industrial buyers alike.

For some reason, we forget about this intuitive process when we are sellers. Seldom do sellers think consciously about how their customers make trade-offs across alternative industries?

Yet, the space between alternative industries provides opportunities for value innovation.

Consider NetJets, owned by Berkshire Hathaway. Business people didn’t want to use commercial flights because they were uncomfortable and time-consuming. Yet, they didn’t want to buy a jet because it’s costly upfront.

Net Jets created the concept of selling fractions of jets which can be as small as 1/16 ownership of an aircraft in the United States. This ownership entitles them to 50 flight hours per year starting at just over $400,000 (plus pilot, maintenance, and other monthly costs) for an aircraft that cost 7 million dollars.   

Owners get the convenience of a private jet at the price of first-class air travel. When you consider all the other expenses, NetJets is less expensive than first class. Also, because it is a smaller airplane, you can use smaller regional airports, and limited staff help to keep costs low.  

 By offering the best commercial travel and private jets and illuminating and reducing everything else, NetJets opened up a multibillion-dollar Blue Ocean where customers get the convenience and speed of a private plane with low fixed costs and lower variable costs.  

Home Depot is another example and offers expertise to professional home contractors at markedly lower prices than hardware stores. They also made ordinary homeowners into doing it your self customers. Today is the world’s largest home retail improvement store. 

What are the alternative industries in your industry? 

Why do customers trade across alternatives?  

If you focus on the key factors that lead buyers to sell across alternative industries and reduce everything else, is one way to create a Blue Ocean market.

 

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.  

 

 

This article continues our discussion of creativity and innovation. In Part One, we talked about the creative process. In part two, we are going to talk about turning creativity into innovations.  

Creativity is coming up with novel, useful ideas

Innovation is creativity for commercial ideas

I need to start this section on innovation with a word of caution. Fear (of an uncertain outcome) is often the reason people don’t implement their ideas. You have to accept some risk with something new.

Start By Asking Good Questions

 Ask lots of questions starting by rethinking your market, products, and services and the value customers get from your products and services. Also, how you frame the question matters, even flip the question around, for example, positively to negatively. For example:

Where are you in the process of going from selling to innovators and early adopters to the late Mainstreet market? Each of these steps has different problems and opportunities.

In the early stages of marketing, is your market niche too broad-based? Does your niche include people who talk to each other, so they tell others about your unique product or service?  

What “value” are your customers looking for when they buy your product.? Do they all have the same “value”?  BMW is a luxury car, and its customers are looking for “the ultimate driving machine.” Rolls-Royce, made by BMW, is also a luxury car, but its value is “super luxury” and prestige. 

The questions you ask are related to the problem or opportunity but don’t limit your overall perspective.   

 Some Paths To Creativity And Innovation

1. An intuitive approach (based on what one feels to be true even without conscious reasoning) is recommended by Stephen Schwartz, a futurist.
2. You need to master the craft you are to get the perceptions and judgment you will need.
3. Continue to believe there is a solution to your problem
4. Be willing to surrender your biases so that you can look at new ideas.
5. Have a technique to look inward (meditation, relaxing) to get an instant picture.
6. Focus and concentrate on your question, problem, or opportunity. 
7. Explain your insight and repeat the process for additional ideas.   

Dr. Travis Bradberry, a co-author of “Emotional Intelligence,” offers advice on the habits of exceptionally creative people.

1. Give yourself time to produce junk. Every idea will not be a breakthrough.
2. Don’t take failure seriously. Commit to a process. You want to see things that others don’t see. New ideas are bringing together two old ideas. Connect and combine.
3. Force yourself to create consistently. Don’t wait for the idea to come to you. Creativity is a process.
4. Create for yourself, not just for money. You are more creative when it’s for yourself.
5. Be Productive. You are never more than one great idea away from a breakthrough
6. Focus and concentrate on your issue or opportunity.  
7. Explain your idea, and then start the process over again.  

Here are a few more that I believe are important:

1. Creative people don’t make decisions quickly; they delay and defer
2. Attitude more important than intelligence
3. Stay with the problem until you get a  solution.
4. Look for alternatives rather than an answer
5. Create a hypothesis so you can test your idea
6. You find the answer you are seeking, or you learn.

Turning Creative Thinking Into Innovation

Following are some critical points of Guy Kowalski, Silicon-Valley based author, speaker, and entrepreneur, which are essential to turn ideas into innovations.

1. You need the desire to change things, not just make money. Create value for your customers. 
2. Have a core story or Mantra about why you are doing this “project,” not a fluffy mission statement.  
3. Make sure you have a clear perspective about what you are doing. Your goal is to change the curve (make a big jump, not an incremental jump) and then keep improving your product or service over time so you can lead the market forward.   
4. Roll The dice. New products are risky, but you have to take risks if you make significant changes. 
5. Don’t worry, be crappy. Don’t wait for everything to be perfect. Ship things.
6. Let customers use your product the way they want to and learn from it, Apple introduced the Mac computer as a spreadsheet machine, but customers used it as a page maker. 
7. Make your product for a specific audience. You only care about the ones who like the product.  
8. Churn (keep innovating: 1.0, 2.0, 3.0, etc.) 
9. Strive to keep your product or service unique and valuable.   
10. Perfect your pitch. Customize it for every audience. 

Conclusion

This information and Part One will hopefully give you some background on creativity to begin using some of the creative tools in the strategy and innovation section. Go there and pick a technique and try it. I think you will be surprised at the number of results you get. 

See also Part One, “Why Everyone Has The Capability To Be Creative.” 

Next, try to use some creative techniques on a problem or opportunity you have. 

 

Why Everyone Has The Capability To Be Creative

Let’s Start With A Little Humour

Humor is by far the most significant behavior of the human brain. Humor indicates the nature of an information system that gives rise to perception and how you see the world better than any other mental behavior. Existing perceptions set up in one way can suddenly be reconfigured in another way. Humour is the essence of creativity.

Story from Winston Churchill

“If I were married to you, I should put poison in your coffee. “

“And if I were married to you, I should drink the coffee. “

We are born creative; we have to learn how to turn concepts and ideas into innovations. We can only recognize ideas that have a logical link back to the original point. Therefore, all valuable creative ideas must be logical in hindsight.  

Why We Need Creativity

Creativity opens up the entire world to us. It helps your business grow with new strategies, products and processes, and new marketing strategies.  

Creativity can make things better. Without creativity, we cannot make full use of the information and experience that already exists is readily and is locked up in old structures, patterns, concepts, and all perceptions.

Our Two Types Of Information Systems

We have both a passive system and an active system. In passive systems, information and the recording of that information is passive. Any activity comes from an external organizer that relates the data and moves it around. Language on the left side and creativity on the right side of our brain

In an active system, the information and the recording are dynamic, and the info organizes itself without the help of an external organizer. Our nerve networks in the brain allow incoming information to organize itself into a sequence of temporary stable states that succeed each other to give a series of related events.  

Over time, the sequence of activity becomes a sort of preferred path or pattern. Once established, these patterns are most valuable because they allow us to recognize things. Then, once a pattern has been triggered, we see things in terms of our previous experience.

So whenever we look at the world, we see the world in terms of our existing patterns. These existing patterns are why analysis alone doesn’t produce new ideas. The brain only sees what it is prepared to see –our existing information and patterns. So when we analyze data, we can only pick out the ideas we already have.

Asymmetry

However, if we entered the pattern from a different point, we could follow that point back to the starting point. It is this asymmetry pattern that gives rise to both humor and creativity. In telling a joke, we are moving along the known pathway. Suddenly we are shifted to a new viewpoint, and immediately we see a different path we could take. 

Here is an example from Phil Davis, a U.K. author. You could think of this process as the old telephone system. 

1. The telephone operator connects two different people. By combining two patterns of thinking, you can create new ideas.
2. Established patterns are the enemy of creativity (there is only one way)
3. Tools are there to break these patterns  

We can only recognize ideas that have a logical link back to the original point. Therefore, all valuable creative ideas must be logical in hindsight.  

In summary, the brain is a beautiful device for allowing incoming information to organize itself into patterns. Once these patterns are formed, we use those patterns in the process known as perception. The patterns are not symmetric. This lack of symmetry gives rise to both humor and creation.

An Illustration Of The Time Sequence Process  

We collect information over time. The information does not all arrive at once but in dribs and drabs. At every moment, the system tries to make the best use of the information available. This system resembles individuals, institutions, corporations, and cultures.

 As we receive information:

The first letter is A

A is followed by T to give the word AT

The following letter is R, which is added AT to give RAT.

Letters representing incoming information and the total available information make up a word.

The following letter is E to give the word RATE.

The next letter is G, which gets added to give a GRATE.

So far, the new information has been easily added to the existing structures.

The following letter is T. There is no easy way to add T to the pattern. You can only form a new word by going back and disrupting existing structures to reassemble the letters to give TARGET.

In this example, we can see how the time sequence of arrival of the information sets up structures that have to be disrupted to put things together differently. This process is a helpful definition of creativity. Without creativity, we cannot move forward in such a system.

After a while, these items of information are no longer separate letters in the game. For example, the cluster RAT has survived so long that it has become a solid piece and resists disruption. And why our basic perceptions resist disruption.

Some Characteristics Of Creative People 

Tina Seeling, author and professor at Stanford, offers these characteristics of creative people:

1. Knowledge of an area. You need to work with information. Pay attention to things.
2. Imagination (reframe the programmed issue). Example 5+5=10. But many other ways to get to 10, 1+9, etc. Connect and combine things. Challenge assumptions.
3. Attitude needs to be positive,
4. Habitat (rules people you work with, physical space)
5. Resources (money, time, etc.) When thinking, don’t limit yourself.
6. Culture. You need to infuse creativity into the entire organization. You call failure “data.” Rapid prototype and experiment again.

Conclusion

Bottom line. The nature of creativity: If you don’t put your idea into action, the idea is of no value.

See also Part Two: “Turning Creativity Into Innovations.” Comments and questions are appreciated.