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Kindle Notes & Highlights
by
W. Chan Kim
Read between
August 6 - August 26, 2018
this focus on the competition all too often keeps companies anchored in the red ocean. It puts the competition, not the customer, at the core of strategy. As a result, companies’ time and attention get focused on benchmarking rivals
The only way to beat the competition is to stop trying to beat the competition.
Yet the overriding focus of strategic thinking has been on competition-based red ocean strategies. Part of the explanation for this is that corporate strategy is heavily influenced by its roots in military strategy. The very language of strategy is deeply imbued with military references—chief executive “officers” in “headquarters,”
They reveal that for major product and service categories, brands are generally becoming more similar, and as they are becoming more similar, people increasingly select based on price.
In short, Cirque du Soleil offers the best of both circus and theater, and it has eliminated or reduced everything else.
Value innovation is created in the region where a company’s actions favorably affect both its cost structure and its value proposition to buyers. Cost savings are made by eliminating and reducing the factors an industry competes on. Buyer value is lifted by raising and creating elements the industry has never offered.
Effective blue ocean strategy should be about risk minimization and not risk taking.
Which of the factors that the industry takes for granted should be eliminated? Which factors should be reduced well below the industry’s standard? Which factors should be raised well above the industry’s standard? Which factors should be created that the industry has never offered?
[yellow tail] hit a home run in ease of selection when it made retail shop employees the ambassadors of [yellow tail] at its launch by giving them Australian outback clothing, including bushman’s hats and oilskin jackets to wear at work. The retail employees were inspired by the branded clothing and having a wine they themselves did not feel intimidated by, and recommendations to buy [yellow tail] flew out of their mouths. In short, it was fun to recommend [yellow tail].
Eliminate-reduce-raise-create grid: The case of [yellow tail]
It immediately flags companies that are focused only on raising and creating and thereby lifting their cost structure
A good strategy has a clear-cut and compelling tagline. “The speed of a plane at the price of a car—whenever you need it.” That’s the tagline of Southwest Airlines, or at least it could be.
the three criteria that define a good blue ocean strategy—focus, divergence, and a compelling tagline that speaks to the market—the company is on the right track.
Rarely do sellers think consciously about how their customers make trade-offs across alternative industries.
Trade journals, trade shows, and consumer rating reports reinforce the vertical walls between one industry and another. Often, however, the space between alternative industries provides opportunities for value innovation.
Why do customers trade up for the higher group, and why do they trade down for the lower one?
Untapped value is often 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 so is to think about what happens before, during, and after your product is used.
Industries have trained customers on what to expect. When surveyed, they echo back: more of the same for less.
QB House then went one step further, eliminating the traditional time-consuming wash-and-dry practice by creating the “air wash” system—an overhead hose that is pulled down to “vacuum” every cut-off hair. This new system works much better and faster, without getting the customer’s head wet.
Cemex complemented the winnings with the delivery of the cement to the winner’s home, construction classes on how to effectively build rooms, and a technical adviser who maintained a relationship with the participants during their project.
What trends have a high probability of impacting your industry, are irreversible, and are evolving in a clear trajectory?
From head-to-head competition to blue ocean creation
we have found that drawing a strategy canvas not only visualizes a company’s current strategic position in its marketplace but also helps it chart its future strategy. By building a company’s strategic planning process around a strategy canvas, a company and its managers focus their main attention on the big picture rather than becoming immersed in numbers and jargon and getting caught up in operational details.2
The four steps of visualizing strategy
A common mistake is to discuss changes in strategy before resolving differences of opinion about the current state of play.
The field research overturned many of the conclusions managers had reached in the first step of the strategy creation process.
EFS’s teams were then sent back to the drawing board. This time, though, they had to propose a new strategy. Each team had to draw six new value curves using the six path framework
any idea that takes more than ten minutes to communicate is probably too complicated to be any good.
They should use innovation because, without it, companies are stuck in the trap of competitive improvements. They should use value because innovative ideas will be profitable only if they are linked to what buyers are willing to pay for.
To reach beyond existing demand, think noncustomers before customers; commonalities before differences; and desegmentation before pursuing finer segmentation.
Again, it took noncustomers to shed insight into the implicit assumptions of the industry that could be challenged and rewritten to create a leap in value for all.
Is your offering priced to attract the mass of target buyers so that they have a compelling ability to pay for your offering?
When the target cost cannot be met, you must either forgo the idea because the blue ocean won’t be profitable, or you must innovate your business model to hit the target cost.
FIGURE 6-3 The buyer experience cycle FIGURE 6-4 Uncovering the blocks to buyer utility
As a result of this phenomenon, called network externalities, many products and services are increasingly an all-or-nothing proposition: either you sell millions at once, or you sell nothing at all.
The cost and risk of developing an innovative idea are borne by the initiator, not the follower.
The key here is not to pursue pricing against the competition within an industry but rather to pursue pricing against substitutes and alternatives across industries and nonindustries.
Companies should work with employees to find ways of defusing the threats so that everyone in the company wins, despite shifts in people’s roles, responsibilities, and rewards.
Monsanto’s mistake has been to let others take charge of the debate. The company should have proactively educated the environmental groups as well as the public
FIGURE 7-1 The four organizational hurdles to strategy execution
Tipping point leadership builds on the rarely exploited corporate reality that in every organization, there are people, acts, and activities that exercise a disproportionate influence on performance.
Insisting on stretch goals encourages abuse in the budgetary process. This, in turn, creates hostility and suspicion between the various parts of an organization.
Salespeople on commission, for example, are seldom sensitive to the costs of the sales they produce.
To tip the cognitive hurdle, not only must you get your managers out of the office to see operational horror, but you also must get them to listen to their most disgruntled customers firsthand. Don’t rely on market surveys.
The more removed people are from the top and the less they have been involved in the creation of the strategy, the more this trepidation builds.
Engagement means involving individuals in the strategic decisions that affect them by asking for their input and allowing them to refute the merits of one another’s ideas and assumptions. Engagement communicates management’s respect for individuals and their ideas.
Explanation means that everyone involved and affected should understand why final strategic decisions are made as they are. An explanation of the thinking that underlies decisions makes people confident that managers have considered their opinions and have made decisions impartially in the overall interests of the company.
Employees sat in stunned silence, with no understanding of the rationale behind the change. The managers mistook this for acceptance, forgetting how long it had taken them over the preceding few months to get comfortable with the idea of shifting to cellular manufacturing to execute the new strategy.
