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Many companies use insane amounts of resources to battle with their competitors for market space. What if you could avoid this? The strategy canvas is based on the idea that long lasting business success will not be found in this red ocean of fierce competition. Instead, businesses should try to open up new “blue oceans” and thereby tap into unexplored markets.
The Strategy Canvas concept was made popular by Kim and Mauborgne in their best selling book "Blue Ocean Strategy: How To Create Uncontested Market Space And Make The Competition Irrelevant".
The strategy canvas gives you an easy way to visualize the key aspects of your competitors’ strategy. This gives you the opportunity to differentiate yourself against them by focusing on other factors. Also, by combining competitors’ focus points in new and innovative ways, you can develop new strategies to attract and retain customers.
While many existing strategies focus strongly on how to compete better in existing markets (either through differentiation or through a cost advantage), the idea behind the Blue Ocean Strategy is to find completely new markets. This also means to find customers who’s pain points have not been addressed so far and solve their unsatisfied demand in creative ways. In order to to this, it is also not always necessary to choose between a focus on differentiation or on cost advantage. Instead you can find new ways to differentiate, while still having a low cost business model. The concept is exactly about that: finding new and creative ways to combine different factors and create new business models.
In order to use the strategy canvas, we’ve created a template for you to directly put your strategy on paper. Of course you are also welcome to just use our template for inspiration and draw your own canvas. In the following, we will explain the canvas in detail and show you how to use it for your business.
The strategy canvas consists of a row of factors that determine competition, lines and dots for each competing product or service that you want to compare and a scoring system on top. But let’s explain that in some more detail...
The horizontal axis on the canvas shows a range of factors that are critical for competition in a specific industry or market. This could include things such as price level, quality of the products, size of products or customer service.
The vertical axis is a simple scoring range (in this case from 0-5 but you are of course welcome to change that), which is used to rate every factor for each competing product or service. On top you see a small legend with three different lines and dots. These represent the 3 different competing products / services (offerings) that you want to compare with each other.
When you draw a dot in each factor column for one of the offerings and connect these dots, you get a product’s or service’s value curve.
Pro tip: The Strategy Canvas is all about comparison. Find at least one product or service that you want to compare with your own offering. We would also advise that you don’t choose more than two or three competing products, in order to keep the canvas clean.
The strategy canvas thereby has two purposes:
There are four simple steps in order to create your strategy canvas.
In the following, all steps are explained in detail, so that you can easily apply the template for your own strategy.
The first step to draw the strategy canvas is to figure out who you want to compare yourself to. The most straightforward choice are your direct competitors in the industry. Nevertheless, you might also consider to focus on offerings from other industries who address the same customer needs. For example, if you are an airline, the obvious choice would be other airlines. However, you could also include a Virtual Reality company that addresses the customer need to see new and exotic places around the world. Southwest airlines for example looked at cars and compared them to other airlines in order to define a new strategy. Check out their canvas here in a Harvard article: https://hbr.org/2002/06/charting-your-companys-future
When identifying your competition for the strategy canvas, it is thus crucial to always look at it from a customer point of view: Which customer need do I want to focus on and who addresses that need? Choose one, two or max. three competitors that you want to focus on and write them down. If possible, have a different color ready for each of them to put them into the canvas.
In the second step, you continue to look at the offerings from a customer perspective: What do the customers value the most? What are key aspects for them? If you are a car manufacturer, these aspects might be comfort of the car, price, maneuverability and maybe technology. Here you should have your own customers in mind, but also the customers of the competitive offers that you chose in Step 1 to focus on. What are factors that are important to the customers of all the products / services you chose in Step 1?
Here it makes sense to go out and talk to customers to find out what factors are the most important to them. Be aware though that customers might not always know themselves what drives their buying decisions. Use a concept such as the Empathy Map to find out about the true customer needs.
If you are struggling with how to find out about true customer needs, check out this podcast by Harvard Business Review:
Now that you decided who to compare against and which factors to base the comparison on it is time to go to the strategy canvas! Print out our template or draw an empty canvas yourself. Start with one of the offerings you want to compare against and evaluate it according to the scale on your template (in our template you would rank the offering from 1-5 for each factor). Draw a dot or a small cross into each of the factor-columns and then connect these dots with a line. This is your first value curve, which shows how value is created for the customers! Repeat the process for the other products or services you chose to compare against.
Pro tip: don’t do the evaluation alone! Discuss within your team how the different products / services rank. You might have a very subjective point of view! Also don’t forget to include actual customer feedback!
Your canvas might now look something like this:
Now it is time to define your own strategy. Therefore you need to analyze the strategy canvas and identify opportunities to differentiate yourself from existing offerings. You want to draw a line that is clearly different than the ones of your competitors. If some competitor is good in one factor and another competitor is bad in this factor but good in a second one, then think about how you can be in between. How can you combine this factors? Pick a combination of factors that could appeal to a whole customer segment. See where you could be better than the competition and where it is maybe not necessary to be better. Afterwards, use the Business Model Canvas to map out your new strategy in detail.
The Strategy Canvas can be a powerful tool to avoid fierce competition and instead find new market opportunities. In order to make the most out of the tool:
If you feel like you still haven’t quite understood the concept of blue ocean strategy, check out this video by Harvard Business Review:
Check out other Resources on https://www.reallygoodinnovation.com/ and become part of our Innovator Community on Slack!
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