Chapter 2: Analytical Tools and Frameworks

Introduction: In this chapter, the authors introduce several analytical tools and frameworks that are instrumental in developing and implementing a Blue Ocean Strategy. These tools are designed to help businesses identify new market opportunities, understand customer needs, and create unique value propositions.

The Strategy Canvas: The Strategy Canvas is a central tool for analyzing the current state of a company’s offerings in the industry. It is a graphical representation that compares a company’s performance across various factors with that of its competitors. The factors may include price, product features, customer service, and other attributes relevant to the industry.

• Horizontal Axis: The Strategy Canvas plots the various factors along the horizontal axis.
• Vertical Axis: The customer’s perceived level of offering or value is represented along the vertical axis.

Creating a Blue Ocean: To create a Blue Ocean, companies must reconstruct their market boundaries and move away from the traditional competitive factors. By analyzing the Strategy Canvas, companies can identify areas where they are overinvesting and areas where they are underinvesting in relation to customer preferences.

The Four Actions Framework: The Four Actions Framework is a critical tool for challenging industry norms and creating new value for customers. It involves answering four key questions:

1. Which factors should be eliminated?
2. Which factors should be reduced well below industry standards?
3. Which factors should be raised well above industry standards?
4. Which factors should be created that the industry has never offered?

By addressing these questions, companies can design a new value proposition that sets them apart from the competition and attracts a new customer base.

The Six Paths Framework: The Six Paths Framework helps companies explore alternative market perspectives to uncover new Blue Ocean opportunities. It involves looking at six different angles:

1. Look across Alternative Industries: Analyzing how other industries address similar needs and challenges.
2. Look across Strategic Groups: Examining different strategic groups within the industry and their approaches.
3. Look across Buyer Groups: Identifying different buyer segments and their specific preferences.
4. Look across Complementary Products and Services: Understanding the broader context in which the product or service is used.
5. Look across Functional-Emotional Orientation: Addressing both functional and emotional aspects of the offering.
6. Look across Time: Analyzing how customer needs and market conditions may evolve over time.

By exploring these six paths, companies can discover unique insights and opportunities that can lead to the creation of a Blue Ocean market space.

Application of Analytical Tools: The chapter illustrates the practical application of these analytical tools through real-world examples, such as the case of Yellow Tail, the Australian wine company, which successfully created a Blue Ocean by challenging industry conventions and targeting a new customer base.