Notes

The Strategy Canvas
The strategy canvas is both a diagnostic and an action framework
for building a compelling blue ocean strategy. It 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, the factors the industry currently competes on
in products, service, and delivery, and what customers receive from
the existing competitive offerings on the market. Figure 2-1 captures
all this information in graphic form. The horizontal axis captures
the range of factors the industry competes on and invests in.
In the case of the U.S. wine industry, there are seven principal
factors:
These factors are viewed as key to the promotion of wine as a
unique beverage for the informed wine drinker, worthy of special
occasions.
That is the underlying structure of the U.S. wine industry from
the market perspective. Now let’s turn to the vertical axis of the
strategy canvas, which captures the offering level that buyers receive
across all these key competing factors. A high score means
that a company offers buyers more, and hence invests more, in that
factor. In the case of price, a higher score indicates a higher price.
We can now plot the current offering of wineries across all these
factors to understand wineries’ strategic profiles, or value curves.
The value curve, the basic component of the strategy canvas, is a
graphic depiction of a company’s relative performance across its
industry’s factors of competition.
Figure 2-1 shows that, although more than one thousand six
hundred wineries participate in the U.S. wine industry, from the
buyer’s point of view there is enormous convergence in their value
curves. Despite the plethora of competitors, when premium brand
wines are plotted on the strategy canvas we discover that from the
market point of view all of them essentially have the same strategic
profile. They offer a high price and present a high level of offering
across all the key competing factors. Their strategic profile follows
a classic differentiation strategy. From the market point of view,
however, they are all different in the same way. On the other hand,
budget wines also have the same essential strategic profile. Their
price is low, as is their offering across all the key competing factors.
These are classic low-cost players. Moreover, the value curves of
premium and low-cost wines share the same basic shape. The two
strategic groups’ strategies march in lockstep, but at different altitudes
of offering level.
To set a company on a strong, profitable growth trajectory in the
face of these industry conditions, it won’t work to benchmark competitors
and try to outcompete them by offering a little more for a
little less. Such a strategy may nudge sales up but will hardly drive
a company to open up uncontested market space. Nor is conducting
extensive customer research the path to blue oceans. Our research
found that customers can scarcely imagine how to create uncontested
market space. Their insight also tends toward the familiar “offer me
more for less.” And what customers typically want “more” of are those
product and service features that the industry currently offers.
To fundamentally shift the strategy canvas of an industry, you
must begin by reorienting your strategic focus from competitors to
alternatives, and from customers to noncustomers of the industry.1
To pursue both value and cost, you should resist the old logic of
benchmarking competitors in the existing field and choosing between
differentiation and cost leadership. As you shift your strategic
focus from current competition to alternatives and noncustomers,
you gain insight into how to redefine the problem the industry focuses
on and thereby reconstruct buyer value elements that reside
across industry boundaries. Conventional strategic logic, by contrast,
drives you to offer better solutions than your rivals to existing
problems defined by your industry.
In the case of the U.S. wine industry, conventional wisdom caused
wineries to focus on overdelivering on prestige and the quality of
wine at its price point. Overdelivery meant adding complexity to
the wine based on taste profiles shared by wine makers and reinforced
by the wine show judging system. Wine makers, show judges,
and knowledgeable drinkers concur that complexity—layered personality
and characteristics that reflect the uniqueness of the soil,
season, and wine maker’s skill in tannins, oak, and aging processes—
equates with quality.
By looking across alternatives, however, Casella Wines, an Australian
winery, redefined the problem of the wine industry to a new
one: how to make a fun and nontraditional wine that’s easy to drink
for everyone. Why? In looking at the demand side of the alternatives
of beer, spirits, and ready-to-drink cocktails, which captured
three times as many U.S. consumer alcohol sales as wine,
Casella Wines found that the mass of American adults saw wine as
a turnoff. It was intimidating and pretentious, and the complexity
of wine’s taste created flavor challenges for the average person even
though it was the basis on which the industry fought to excel. With
this insight, Casella Wines was ready to explore how to redraw the
strategic profile of the U.S. wine industry to create a blue ocean. To
achieve this, it turned to the second basic analytic underlying blue
oceans: the four actions framework.