To understand how you can create compelling new propositions, you must first truly understand your current proposition.


the strategy canvas

Most existing marketplaces are “well–defined”. In other words each player who competes in that space understands in detail the customers’ needs, how they have developed over time and the size of the market. What is not always clear is how your proposition differs, or does not really differ, from your immediate competitors or indeed from a group of your immediate competitors. What genuinely makes your product/service stand out?

To help our clients understand this we use a tool called the strategy canvas, which is a graphical representation of your value proposition compared to your competitions. The strategy canvas is a simple 2-dimensional graph that has on the x-axis the “key competitive factors” that relate to your offering. Think of key competitive factors as the real reasons why your customers buy your product. The y-axis represents value, absolute or perceived.

So, put yourself in the position where your MD or CEO asks you to define the 5 or 6 reasons why your core customers buy your product and how important they are. The first is always price and the position on the graph is absolute. The rest are plotted in terms of value from the customers’ perspective. If your product offers a lot of very important or highly desirable features that might be represented on the graph as high value, whilst a competitor’s basic low function device with minimal features would be represented as low value.

You then carry out the same exercise for your competitors’ products and look at the results to see how they compare. Where there are a large number of competitors, you may group them (as referred to in para 2 above) for example into high priced alternatives and budget alternatives. Then ask yourself the question, “Does our offering really stand out – is it really all that different?"

One of the problems with differentiation in an existing mature marketplace is that it is typically a process of providing more value / features for the same price, or providing similar value / features for a lower price. Both of these approaches remove value for you, the provider. Although you might well argue the customer gets a better deal, this approach eats into your current margins.

And that is where the Blue Ocean concept differs, focussing on creating new marketplaces as opposed to continuing to battle on in the red ocean.