simpler tools for redesigning business models and making better decisions

BLUE OCEAN PLANNING & EXECUTIONSimply Redesigning Business Models & Making Better Decisions

Dr. Rod King

[email protected] & http://businessmodels.ning.comhttp://twitter.com/RodKuhnKing

Value Quotient (VQ) Management

mailto:[email protected]

http://businessmodels.ning.com/

http://twitter.com/RodKuhnKing

“BLUE OCEAN” as an Adjective (Attribute) of the IdealSuccess Criteria for Quick Classification, Design, and Evaluation of “Blue Ocean” Objects

Copyright 2009. Dr. Rod King. [email protected] & http://businessmodels.ning.com & http://twitter.com/RodKuhnKing

“BLUE OCEAN”

Extraordinary

Accessible

Uncontested

Personalized

Blue Ocean PLANNING

Blue Ocean Mission

Blue Ocean Service (Design)

Blue Ocean Plan

Blue Ocean Product (Design)

Blue Ocean Strategy

Blue Ocean Objective

Blue Ocean Goal

Blue Ocean ProjectBlue Ocean Vision

Blue Ocean BUSINESS MODEL





WHY REDESIGN EXISTING BUSINESS MODELS?”Greater Competition, Digitalization, and Globalization are Creating Bloody ‘Red Oceans’ for Businesses”

• To Exponentially Increase Business Growth and Profitability

• To Avoid ‘Ad Hoc’, Reactive, and Uncoordinated Tweaks to Existing Business Model

• To Swim Out of the ‘Red Ocean’ and Make the Competition Irrelevant

• To Perfectly Align a Business With Customers’ Demand for Higher Value (Quotient)

• To Take Advantage of Emerging Opportunities and Technology

• To Significantly Redesign Customer Experience for a Higher Value Quotient

• To Facilitate Alignment in Mergers and Acquisitions

• To Respond to Competitive Pressures Including Commoditization

• To Capture Greater Value (Profit) in the Value Chain and Network

• To Provide a More Sustainable and Defensible Competitive Advantage





HIGHLY SUCCESSFUL REDESIGNS OF CONVENTIONAL BUSINESS MODELSBusinesses With High Value Quotient (VQ)





WHAT IS THE VALUE QUOTIENT?A Universal Metric of Success and Zoomable Decision-making

+ -

Ideal VQ StrategyEveryone to continuously maximize benefit while minimizing cost throughout the value chain

NoteValue Quotient = Advantage/Disadvantage= Benefit/Cost= Revenue/Cost= Strength/Weakness= Opportunity/Threat= Reward/Risk= Relevant Content/Noise= Positives/Negatives= Delight/Pain= Good/Bad





Blue Ocean Plans for a Business Model”Value Quotient Management (VQM) and Zoomable Decision-making”

• Customer Jobs Plan• Global Job Plan• 200,000ft Plan• 100,000ft Plan• 60,000ft Plan

• 40,000ft Plan• Strategic Plan

• Tactical Plan• Customer Result-Aligned Model (CRAM)

• Performance Dashboards

VISIONARY LEVEL

STRATEGIC LEVEL

OPERATIONAL LEVEL(Value Chain)




Process of Blue Ocean Planning & Execution for Business Models“A Simpler Way of Managing the Value Quotient Towards the Ideal”


SSTART

Choose (Another) Level and Type of Blue Ocean Plan for• Existing Business Model (Product/Service)

• Competitors’ Business Models (Products/Services)

Determine Value Quotient Factors for• Existing /Desired Business Model (Product/Service)• Competitors’ Business Models (Products/Services)

Draw Shape of Business Models. Then, Outline Competitive Strategies. Next, Calculate Value Quotient (VQ) of

Existing/Desired Business Models (Product/Service)

Prepare and Implement Tactical Blue Ocean Plans & Monitor VQ of Blue Ocean Projects & Model

Visionary & Strategic Blue Ocean

Plans Done?

No

Yes




Physical 'Job'

Emotional/Social 'Job'

Intellectual 'Job'

Spiritual 'Job' 0

5

10

Customer Jobs Compass for Google Search & Facebook

Ideal Software (Tool/Internet) Google Search Facebook

Google SearchELEMENTS OF CUSTOMER JOBS-BUSINESS MODEL:

Long-term Competitive Advantage Scenarios• Increase performance of/develop/acquire software applications that customers hire to do ‘Physical Jobs’• Increase performance of/develop/acquire software applications that customers hire to do ‘Emotional/Social Jobs’• Increase performance of/develop/acquire software applications that customers hire to do ‘Intellectual Jobs’• (Increase performance of/develop/acquire software applications that customers hire to do ‘Spiritual Jobs’???)

Long-term Value Proposition• ‘Total Happiness’ For All Customer Jobs on the Internet

Targeted Customer Segments (Niches)• ‘Short and Long Tail’ of Users on the Internet

Existing Impact of Google Search on Total Jobs• Average Impact of Google on Total Jobs = (6 + 2 + 5.5 + 2)/4 = 4.3

Impact of Ideal Software on Total JobsImpact of Ideal Software on Total Jobs =‘Perfect 10’

CUSTOMER JOBS COMPASS: What Jobs Must You Facilitate or Do In a Hierarchy of Customer Needs or ‘Jobs’?


(for Developing Tools to Make Customers Happier As Well As for Determining What ‘Jobs’ or Niche(s) of Total Happiness to Focus on)




BLUE OCEAN COMPASS: 60,000ft …

• Visualization of Shape as well as Trends of Competing, Desired, and Ideal Business Results (Models)• CUSTOMER JOBS COMPASS

TOOLS FOR REDESIGNING BUSINESS MODELS &

MAKING BETTER DECISIONS

STRATEGY RADAR: 40,000ft Plan

• Illustration of Detailed Shape of Competing, Desired, and Ideal Business Results (Models)• Design of Value Proposition

IDEAL VALUE CHAIN: Tactical Plan

• Visualization of Ideal Value Chain (Business Model) for IVQ Strategy• Flows of Information (Cost and Revenue) & Resources Within a Value Chain or Business Model

BLUE OCEAN RADAR: 200,000ft Plan

• Illustration of Ideal Business Result• Illustration of “Cost vs. Benefit” Trade-offs (Contradictions) & Trends• Basic Elements of Value Quotient

BLUE OCEAN STRATEGIC PLAN

• Elements and Resources for Pursuing Goal of Ideal Value Quotient (Blue Ocean), Achieving Blue Ocean Plan, and Totally Engaging Employees and Other Stakeholders

WHEEL OF OBSTACLES

• Illustration of Internal Obstacles and Constraints to Achieving the Ideal Value Quotient for the Value Chain or Business Model

BLUE OCEAN MAP: Global Job Plan

• Illustration of Current and Desired Positions of You & Your Competitors• Illustration of IVQ and Market Seg-ments Including Red and Blue Oceans

BOND: 100,000ft Plan

Ways to Reduce Obstacles to Goal:• Facilitation of Decision-making• Visualization of Strategy• Modeling and Testing of Strategy


REDESIGNING BUSINESS MODELS & MAKING BETTER DECISIONS




∞

(-): PAIN

IDEAL VALUE QUOTIENT (BLUE OCEAN)

Value Quotient

(VQ)

(Uncontested Experience, Market Space, or New Category)

Lowly differentiated and low-cost value chain

Highly differentiated and

premium-priced/free value chain

(+):DELIGHT

Blue

Oce

an P

lan

Red Ocean PlanStrategic Choice

BLUE OCEAN Google Search

RED OCEAN * “Me Too” Search Engine

No. of Direct Competitors


Fractal Market Segmentation (Niches) of Search Engine Market

BLUE OCEAN MAP: Global View of the Value Quotientfor Determining Where You and Your Competitors Currently Are & Where You Must Go




BLUE OCEAN RADAR: 200,000ft View of the Value Quotientfor Comparing, Evaluating, and Redesigning Business Models As Well As Products and Services

0 2 4 6 8 100

2

4

6

8

10

Blue Ocean Radar Showing “Cost vs. Benefit” Trade-offsBENEFIT (Revenue)

COST

Desired VQ = 8/2= 4

Existing VQ = 2/6= 0.33 < 1

Value Quotient (VQ) = Benefit/Cost = Revenue/Cost = Revenue to Cost Ratio = Slope of Value Quotient Line


Ideal Value Quotient(Blue Ocean)

Ideal Value Quotient (Blue Ocean) Ideal Final Result of Continuously Implementing IVQ Decisions Job To Be Done (JBTD) at No Cost & With No Negative Effect

(Free)

Object/Core Job: ………………………………..…….

(cf. Goal of IVQ to Moore’s Law & “Singularity”)




Moore’s Law As A Special Case of the Law of Increasing Value Quotient “The number of transistors on an integrated circuit roughly doubles every two years”

0 2 4 6 8 100

2

4

6

8

10

Blue Ocean Radar Showing “Cost vs. Benefit” Trade-offs for Computing PowerBENEFIT (Transistors)

COST(Size)

VQ = 8/1= 8



Ideal Value Quotient (Blue Ocean or “Singularity”)

(Free)

Object/Core Job: Integrated Circuit Board

(cf. Goal of IVQ to Moore’s Law & “Singularity”)


VQ = 4/1= 4

VQ = 2/1= 2




0 2 4 6 8 100

2

4

6

8

10

Blue Ocean Radar Showing “Cost vs. Benefit” Trade-offs in ComputingBENEFIT (Performance)

COST(Size)



Ideal Value Quotient (INTERNET or “Singularity”)

(Free)

Object/Core Job: Computer/Storage Devices


Using the Blue Ocean Radar to Illustrate Trends in the Evolution of Technology

“The Ideal Object Uses Its Internal and “Free” Resources to Instantly Do Its Job at No Cost and Without Any Negative Effect”

IVQ –Problem Solving Look within and across industries as well as in nature for similar or analogous resolution of trade-off

Old Mainframe Computer

Mini-computer

Desktop Computer

Laptop Computer

Palmtop Computer




0 2 4 6 8 100

2

4

6

8

10

Blue Ocean Radar Showing “Cost vs. Benefit” Trade-offs in TransportationBENEFIT (Speed)

COST(Size)



Ideal Value Quotient (LIGHT or Blue Ocean)

(Free)


Using the Blue Ocean Radar to Illustrate Trends in the Evolution of Technology

“The Ideal Object Uses Its Internal and “Free” Resources to Instantly Do Its Job at No Cost and Without Any Negative Effect”

IVQ –Problem Solving Look within and across industries as well as in nature for similar or analogous resolution of trade-offRocket

Aircraft

CarBicycle

Object/Core Job: Vehicles

Ship

Train




Using the Blue Ocean Radar to Creatively Resolve Trade-offs “Someone, Somewhere May Have Already Resolved Your Trade-off or Contradiction”

0 2 4 6 8 100

2

4

6

8

10

Blue Ocean Radar Showing “Cost vs. Benefit” Trade-offs in Information Process-ingBENEFIT

(Amt of Info)

COST(No. of Pages)

Existing Paradigm (VQ = 6/8 = 0.75)



Ideal Value Quotient (Blue Ocean or Zoomable Page)

(Free)


Breakthrough Paradigm

VQ = 8/2 = 4


Object/Core Job: Linear Page





0 2 4 6 8 100

2

4

6

8

10

Blue Ocean Radar Showing “Cost vs. Benefit” Trade-offs in Information Process-ing

BENEFIT (Relevance of Content)

COST(‘Noise’)

Existing Paradigm (VQ = 6/8 = 0.75)



Ideal Value Quotient (Blue Ocean or Zoomable Page)

(Free)


Breakthrough Paradigm

VQ = 8/2 = 4


Object/Core Job: Web Interface





0 2 4 6 8 100

2

4

6

8

10

Blue Ocean Radar Showing “Cost vs. Benefit” Trade-offs in ProductionBENEFIT (Quality)

COST

Existing VQ = 6/4= 1.5



Ideal Value Quotient (Blue Ocean or “Singularity”)

(Free)


Optimum VQ = 8/4= 2

Conventional Thinking VQ = 8/7= 1.1


Object/Core Job: Vehicles




BLUE OCEAN NETWORK DIAGRAM: 100,000ft View of the Value Quotientfor Quickly Making Better Decisions, Goals, and Strategies in Business (Projects)

Quality

COST (Price)

24x7 Personalization/ Customization

Differentiation (Simplicity/Brand/

Novelty)

CUSTOMERS (Sales/Revenue)


Business Action …

BENEFIT Ideal VQ StrategyEveryone to continuously maximize benefit while minimizing cost throughout the value chain




BLUE OCEAN NETWORK DIAGRAM: 100,000ft View of the Value Quotientfor Visualizing Goals & Strategy for IVQ : Case of Google Search

Quality (Speed):INCREASE

COST (Price): REDUCE

24x7 Personalization:

INCREASE

Differentiation (Simplicity/Brand):

INCREASE



Business Action …

BENEFIT Ideal VQ StrategyEveryone to continuously maximize benefit while minimizing cost throughout the value chain




Quality (Speed)

COST (Price)

24x7 Personalization/ Customization

Differentiation (Simplicity/Brand/

Novelty)



Business Action …

+

+

+

+ + -

+

+

+

+

+

-

-

+

+

+

+

?

+

+

BLUE OCEAN NETWORK DIAGRAM: 100,000ft View of the Value Quotientfor Modeling Strategy & Assumptions of IVQ: Case of Google Search

Ideal VQ StrategyEveryone to continuously maximize benefit while minimizing cost throughout the value chain




BENEFIT

Quality:(1-10)

COST (Price):(1-10)

24x7 Personalization:

(1-10)

Differentiation (Simplicity/Brand):

(1-10)



Business Action …

BLUE OCEAN NETWORK DIAGRAM: 100,000ft View of the Value Quotientfor Scoring Elements of the Value Quotient for a Business (Project)




Quality (Speed)

Cost (Price)

Differentiation (Simplicity/Relevance)

On-demand; 24x7 (Personalization) 0

5

10

Blue Ocean Compass for “Me Too” Search Engine and Google Search

Ideal Business Result Google Search "Me Too" Search Engine

Google Search4 ELEMENTS OF BUSINESS MODEL:

Competitive Advantage Strategies• Increase quality (speed) to level 9• Maintain cost at free: level 1• Increase differentiation (simplicity/relevance/ brand/novelty) to level 8• Increase on-demand; 24x7/(personalization; customization) services to level 8

Value Propositions (Innovative Processes)• Higher quality (speed) and greater simplicity• Higher differentiation (simplicity/relevance/ brand/novelty) at no additional cost• Higher 24x7 personalization (for advertisers/ affiliates: AdWords; AdRank; AdSense)

Targeted Customer Segments (Niches)• Students/Researchers/Internet Users who directly and quickly want information• Early adopter/innovator; Non-customers• Low cost-Advertisers• Website Owners/Content Providers

Value Quotient (VQ)• Benefit = Quality + Differentiation + Personalization = (9 + 8 + 8)/3 = 25/3 = 8.3• Cost = 1• Value Quotient (VQ) = 8.3/1 = 8.3

BLUE OCEAN COMPASS: 60,000ft View of the Value Quotient


(for Generally Redesigning a Business Model & Value Proposition)




Speed (Q)

Price ( C )

Lounges (D)

Meals (D)

Friendly Service (D)

Seating Choice (P)

0

5

10

Strategy Radar for the Average Airline and Southwest Airlines

Ideal Business Result Southwest Airlines Average Airline

Southwest Airlines4 ELEMENTS OF BUSINESS MODEL:

Competitive Advantage StrategiesQuality (Q) • Increase speed to level 9Cost ( C )• Reduce ticket price to level 1.3Differentiation (D)• Reduce lounges to level 1.2• Reduce meals to level 2.1• Increase friendly service to level 8.8Personalization (P)• Reduce personalization to level 1

Value Propositions (Innovative Processes)• Higher speed at lower cost• Friendlier service at lower cost

Targeted Customer Segments (Niches)• Frequent/Low-cost traveler• Early adopter/innovator; Non-customers

Value Quotient (VQ)• Benefit = Quality + Differentiation + Customization = (9 + 1.2 + 2.1 + 8.8 + 1)/5 = 22.1/5 = 4.42• Cost = 1.3• Value Quotient (VQ) = 4.42/1.3 = 3.4


STRATEGY RADAR: 40,000ft View of the Value Quotient

(for More Specifically Redesigning a Business Model & Value Proposition)





1. Obtain, from customer interviews or questionnaires, scores for the existing performance of each element or “value quotient factor” on the Blue Ocean Network Diagram (BOND) and for the surveyed or “Red Ocean” company.

Score each element of Value Quotient using a scale from 1 (low) to 10 (high):• Quality: (1-10)• Cost: (1-10)• Differentiation: (1-10)• Personalization (Customization): (1-10)

2. Plot, on a Blue Ocean Compass, the average score for each element. Then, draw the profile or radar chart for the existing performance of the surveyed company.

3. Explore scenarios for desired or future profiles that are strongly differentiated from “Red Ocean” profiles as well as lie closer to the “ideal” Blue Ocean.

4. Choose the Blue Ocean profile with the highest Value Quotient (VQ). Then, derive corresponding IVQ (Blue Ocean) strategies for competitive advantage and value propositions for segments (“niches”) of customers.

How to Quickly Develop an IVQ Strategy and Value Quotient




CUSTOMER VALUE PROPOSITION

• Uncluttered, fast, free, accurate search engine results and experience• Monetization of web page/site• Targeted, measurable, cost-effective, and relevant online advertising

BLUE OCEAN STRATEGIC PLAN FOR: GOOGLE SEARCH

CUSTOMER BENEFITS/EXPERIENCE

• Simple interface/Easy to use• Fast, accurate, and relevant results• Free search service• Unobtrusive ads; Site monetization• Targeted ads based on page’s content

VISION (“Future Headline”)

• Search engine platform; Software-as-a-Service (platform)• Advertising platform• Gateway to world’s knowledge-base

INDUSTRY/BUSINESS • Industry: Computer (Software); Advertising• Niche: Internet Search; Online Ads• Model: Business to Consumer (B2C); Business to Business (B2B); Platform

MAIN GOAL/OBJECTIVE/STRATEGY

Blue Ocean Strategic Plan for providing an unprecedented customer experience• (See Blue Ocean Compass & Blue Ocean Map; Blue Ocean PAD; Value Chain Model; Blue Ocean Dashboard)

MISSION/CORE VALUES

• “To organize the world's information and make it universally accessible and useful”• “Don’t Be Evil”

COMPANY BACKGROUND

• Location: Mountain View, California• Founder(s): Sergey Brin; Larry Page• Revenue: US$21.79 billion (2008)• No. of Direct Competitors:

PRODUCTS/SERVICES

• Internet Search Engine: Google Search• Online Bidding Platform: Adwords• Online Syndicated Ads: Adsense• Complementary Apps: Maps, etc.


BLUE OCEAN STRATEGIC PLAN: Strategic View of the Businessfor Facilitating IVQ Strategy Execution, Organizational Alignment, and Total Employee Engagement




CUSTOMER VALUE PROPOSITION

“The speed of a plane at the price of a car …”

Targeted Customer Segment: Frequent/low-cost travelers

BLUE OCEAN STRATEGIC PLAN FOR: SOUTHWEST AIRLINES

CUSTOMER BENEFITS/EXPERIENCE

• Faster travel at lower cost

• Simple fare structure

VISION (“Future Headline”)

“Do the right thing.”

INDUSTRY/BUSINESS

• Industry: Airline/Transportation• Niche: Short-haul, low-cost air travel• Model: Point-to-point air travel with ‘no frills’ to secondary city-airports (cf. hub-and-spokes model with meal)

MAIN GOAL/OBJECTIVE/STRATEGY

Blue Ocean Strategic Plan for quickly reaching destination at the lowest price• (See Blue Ocean Compass & Blue Ocean Map; Blue Ocean PAD; Value Chain Model; Blue Ocean Dashboard)

MISSION/CORE VALUES

“Dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.”

COMPANY BACKGROUND

• Location: Dallas, Texas (USA)• Founder(s): Herb Kelleher; Rollin King (1967 inc.; first flight in 1971)• Revenue: $11 Billion (2008)• No. of Direct Competitors:

PRODUCTS/SERVICES

• Airline• Aircrafts• Air travel/transportation


BLUE OCEAN STRATEGIC PLAN: Strategic View of the Businessfor Facilitating IVQ Strategy Execution, Organizational Alignment, and Total Employee Engagement




E: ENVIRONMENT

• Competitors: Yahoo; AOL; MSN; etc.• Non-customers/Non-consumers• Partners/Complementors• Investors/Board of Directors• Gov./Community (Open Source)/Env.

GOOGLE’S VALUE CHAIN (Business Model)

P: PROCESSES/STRATEGIES

• Procurement; HR Mngt; Operations• Technology/R & D/Innovn/Production• Marketing/Branding/PR/Sales• Distribution/Logistics/Partnering• Customer Service (Relationship Mngt)

R: RETAILERS/DISTRIBUTORS/ CHANNELS• Website Owners• Content Providers: Individuals/ Corporations (Portals)• Affiliates; Partners: OEMs; Browsers

E: EMPLOYEES/KNOWLEDGE ASSETS/ CULTURE• Highly Productive/Creative workers• (Experienced) Management• Patented PageRank Algorithm• Android: Operating System • Software Development Kits (SDK)

C: CUSTOMERS/CONSUMERS

• Web Users/Searchers: Desktop/Mobile• Website Owners• Advertisers - > Revenue• Enterprises (Search) -> Revenue• Software/API Developers

O: OUTPUTS/PRODUCT/SERVICE

• Google Search Engine/Search platform• Bidding & Advertising Platform: AdWords; AdSense; AdRank• Other Products/Apps such as Google Appliance

S: SUPPLIERS/MATERIALS

• Computers• Servers• Other Items

M: MACHINERY/EQUIPMENT/ FACILITYExternal • Efficient Data Centers/Scalable Architecture/Server Farms• Wi-Fi Infrastructure• Satellite


Ideal Value Chain (Business Model): Tactical View“Perfect, Free, Simple, and Personalized (PFSP)”

KEY Revenue (Information Flow)

Cost (Information Flow)

Strategic Question: What is the Value Quotient (VQ) of elements of the value chain as well as the entire value chain?

“PFSP”




E: ENVIRONMENT

• Competitors• Non-customers/Non-consumers• Partners• Investors /Board of Directors• Gov./Community/Society/Environment

SOUTHWEST AIRLINES’S VALUE CHAIN (Business Model)


• Point-to-point Travel: Flying Multiple, Quick, Short Trips• Quick Turnaround Processes• Employee-profit-sharing• Hedging of Fuel Prices

R: RETAILERS/DISTRIBUTORS/ CHANNELS/INTERFACE• Website (www.southwest.com)• Google Search (AdWords)• TV ads

E: EMPLOYEES/KNOWLEDGE ASSETS/ CULTURE• Pilots• Affable (Friendly) Stewardesses• Management• Other Employees

C: CUSTOMERS/CONSUMERS

• Low-cost Travelers• Frequent Travelers• Intercity Travelers

O: OUTPUTS/PRODUCT/SERVICE

• Air Travel Ticket/eTicket/Service• Website (www.southwest.com)• Rapid Rewards Program• 2/3 Customer Luggage for Free• No frills-meal: ‘Snack Pack’

S: SUPPLIERS/MATERIALS

• Fuel Suppliers• Aircrafts and Parts

M: MACHINERY/EQUIPMENT/ FACILITY• One Type of Aircraft: Boeing 737• IT/Online Infrastructure• Wi-Fi





Ideal Value Chain (Business Model): Tactical View“Perfect, Free, Simple, and Personalized (PFSP)”

“PFSP”

http://www.southwest.com/

http://www.southwest.com/




E: ENVIRONMENT

• Competitors• Non-customers/Non-consumers• Partners• Investors • Gov./Community/Society/Environment

IDEAL VALUE CHAIN (BUSINESS MODEL):Flows & Resources -

“Perfect, Free, Simple, and Personalized”


• Procurement; HR Mngt; Operations• Technology/R & D/Innovn/Production• Marketing/Branding/PR/Sales• Distribution/Logistics/Partnering• Customer Service (Relationship Mngt)

R: RETAILERS/DISTRIBUTORS/ CHANNELS/INTERFACE

E: EMPLOYEES/KNOWLEDGE ASSETS/ CULTURE

C: CUSTOMERS/CONSUMERS O: OUTPUTS/PRODUCT/SERVICE

S: SUPPLIERS/MATERIALS M: MACHINERY/EQUIPMENT/ FACILITY


Template for Ideal Value Chain (Business Model)Flows & Resources for “Perfect, Free, Simple, and Personalized (PFSP)”







SWOT Resources in Value Chain for:

W: WEAKNESSES T: THREATS

S: STRENGTHS O: OPPORTUNITIES


SWOT Resources in Value Chainfor Identifying Resources for Projects and Plans to Achieve the Desired or Ideal Value Quotient




Value Chain’s OBJECT/TASK/PROJECT:

C: COSTS R: RISKS

B: BENEFITS (Now) R: REWARDS (Later)


BCRR Impacts in Value Chainfor Assessing the Impacts and Feasibility of Objects, Tasks, and Projects





WHEEL OF OBSTACLES3 Internal Obstacles to Realizing the Ideal Value Quotient (IVQ) or Blue Ocean

WHEEL OF OBSTACLES

Enron

Traditional Airlines

“Me Too” Search Engines

AIG

Healthcare

Detroit Automakers

Alaska’s Road to Nowhere

Denver Airport

“Mom and Pop” Businesses




Business does not have access to easy-to-learn-and-use tools for Blue Ocean Planning, Strategy, Execution, and Monitoring.

WHY MANY BUSINESSES ARE NOT ACHIEVING

BLUE OCEAN SUCCESS

The business’s resources especially employees are not effectively engaged and aligned with Blue Ocean Planning, Strategy, and Execution.

Business uses an ‘ad hoc’, reactive, and uncoordinated approach to redesigning business model (in contrast to systematic Blue Ocean Planning, Strategy, Execution and Monitoring).

Business does not have a tacit or an explicit Blue Ocean Plan and Strategy.

Business is experiencing the 3 obstacles to Blue Ocean Success: inadequate decision-making; uninspiring business goals and targets; Red Ocean (“Me Too”)-strategies and business models.

Extraordinary, no contest-success follows the 4% rule: exceptional and unique success is achieved by 20% of 20% of a given set; this is an iterative application of the 80-20 (Pareto) Principle.

Business does not have and live by Blue Ocean Vision, Value Proposition, and Value Quotient Management.

Business does not have access to a metric for easily defining, measuring, and managing decisions towards the Ideal Value Quotient (Blue Ocean Success) at every level in an organization.


Why Many Businesses Are Not Achieving Blue Ocean-SuccessHow to Determine Whether You Need to Adopt Blue Ocean Planning, Strategy, and Execution




APPENDICES


• Innovative Processes for Redesigning Business Models & Pursuing the Ideal Value Quotient (VQ)

• Blue Ocean Network Diagram (BOND): What and Why?

• 4 Axioms of the Ideal Value Quotient (VQ)

• Related Concepts of the Ideal Value Quotient (VQ)

• The Law of Increasing Value Quotient

• Customer Result-Alignment Model (CRAM)

• Space-Time Template for the Evolution of a System




ENVIRONMENT/SUPPLIER PROCESSES

• Partnering/Complementing/Feedback• Merging/(De)Centralizing/Integration• Networking/Volunteering/Recycling• Convergence/(De)Regulation• Distributorship/Affiliates/Network

INNOVATIVE PROCESSES FOR REDESIGNING BUSINESS

MODELS & PURSUING THE IDEAL VALUE QUOTENT

DOMAIN-PROCESSES/FUNCTIONALITY • Digitalization/Idealization/Downsizing• Virtualization/Customization/DIY/JIT• Zero Defect/Lean/Six Sigma/Analytics• Automatic/Outsourcing/Scalability• Restructuring/Inventive Principles

CHANNEL/WHOLESALERS PROCESSES

• Multiple Channels/Syndication/Chain• Pyramid/Multi-level Markets/Wheel• Digitalization/Online/Word-of-mouth• Distributorship/Affiliates/Network• Advertising/Auction Platform/Partners

EMPLOYEE PROCESSES

• Specialization/IP Creation-Protection• Outsourcing/Sub-contracting/Agents• ‘Star’ Performers/Top grading/Fun• Wisdom of the Crowd/Co-creation• Cross-functional Teams/Downsizing

CUSTOMER PROCESSES

• Segmentation/Direct Selling/Branding• Cross-subsidy/Hybridized Markets• Subscription/Leasing/After Sale• Auction/Co-creation/Collaboration• Advertising/Freemium/Licensing

PRODUCT/SERVICE PROCESSES

• Product/Service-Platform/Package• Service-focus/Servicing/Upgrading• Performance-based Pricing/Discounts• Fixed product (shell) and recurring/ replaceable/upgradeable component

GENERAL PROCESSES

• Vertical/Horizontal Integration• Extension/Compression/Removal• Open Collaboration/Long Tail (80-20)• Unbundling/De-integration/Bundling• Convergence/Standardization/Self-X

MACHINERY/FACILITY PROCESSES

• Franchise/Leasing/Rental• Localization/Substitution/Reversal• Modularization/Standardization• Asymmetry/’Poka Yoke’/Nesting• Attributes Interdependency


INNOVATIVE PROCESSES FOR REDESIGNING BUSINESS MODELS & PURSUING THE IDEAL VALUE QUOTIENT

(Achieving apparently impossible business goals, strategies, and value propositions)





BLUE OCEAN NETWORK DIAGRAM (BOND)What and Why?

What is the Blue Ocean Network Diagram (BOND)?• A tool for redesigning business models, pursuing the Ideal Value Quotient (IVQ), and making better decisions • Universal tool and visual framework for quickly and systematically eliminating 3 critical obstacles to the Ideal Value Quotient (IVQ): poor business decisions; uninspiring business goals and targets; Red Ocean (“Me Too”) strategies & models• Global view of “What customers want” or “Voice of the Customer”

Why Blue Ocean Network Diagram (BOND)?• Facilitates decision-making for management and employees as well as board of directors• Facilitates organizational alignment and engagement especially for employees; everyone is on the same page and using the same metrics• Provides simple framework for visualizing Blue Ocean Strategy and IVQ• Provides simple visual framework for modeling as well as reviewing business strategies, objectives, models, assumptions, trade-offs, and decisions• Provides transparency in the selection and weighting of “value quotient factors” or decision-making criteria for evaluating possible business choices• Facilitates calculation of the value quotient for a business




4 Axioms of the Ideal Value Quotient (VQ)


1. Every object, which has sustainable growth, generally increases its Value Quotient (VQ) over time. Otherwise, the object declines and eventually dies.

2. A real-world object exhibits trade-offs or contradictions: advantages accompa-nied by disadvantages; benefits accompanied by costs; positives accompanied by negatives; delight accompanied by pain; good accompanied by evil.

3. An ideal object has an ideal Value Quotient (VQ), that is, lives in a “Blue Ocean” with no trade-off or contradiction: infinite advantages and no disadvantage; infinite benefits and no cost; infinite positive effects and no negative effect; infinite delight and no pain; good without any bad. The ideal object has zero mass and uses its internal and ‘free’ resources to perfectly do its job at no extra cost, at any time, and without any disadvantage.

4. Over time, a species or an ecosystem of real-world objects evolves towards the ideal object. Otherwise, the species declines and becomes extinct.




Related Concepts of the Ideal Value Quotient (VQ)


• Value Quotient (Value Engineering)

• Ideal Final Result (IFR); Ideality (TRIZ); SWOT Analysis (Business Planning)

• Benefit/Cost Ratio; Revenue to Cost Ratio (Financial Planning)

• Moore’s Law (Gordon Moore); Law of Accelerating Returns; Singularity (Ray Kurzweil)

• Disruptive Innovation (Clayton Christensen)

• Decision Theory: Rationality; Optimality; Satisficing Behavior (Economics)

• Invisible Hand; Market Forces (Economics); 80-20 Rule (Vilfredo Pareto)

• Theory of Evolution (Charles Darwin)




The Law of Increasing Value Quotient


The Value Quotient (VQ) of a technological device as well as living system tends to follow the shape of an envelope of S-Curves that progresses towards a point of infinite Value Quotient. Otherwise, the technological device or living system declines and dies.

Value Quotient (VQ)

Time

Envelope of S-Curves





Customer Result-Alignment Model (CRAM) For Ensuring That Customer’s Desired Result Aligns With Value Proposition & Tool of Business Model

CUSTOMER (Segment)

• Description/Profile• Problems/Needs• Needs/Jobs/Goals• Core Values/Ideals

OBJECT (Interface)

• Material (Features)• Product (Features)• Service (Features)• Personnel/Business

DRIVING FORCE

• Tangibles: Profit• Intangibles: Culture• Vision/Mission• Core Values/Ideals

TOOL

• Business (Chain)• Product• Service• Personnel

DISADVANTAGES (-)

• Cost• Harmful Effect• Threat• Risk/Penalty

ADVANTAGES (+)

• Benefit (Revenue)• Useful Effect• Opportunity• Reward

RESULT/OUTPUT

• Tangible Results• Intangible Results• Value Proposition

Competitors/ Environment

Valu

e Q

uotie

nt (V

Q) =

Adv

anta

ges/

Dis

adva

ntag

es

that provides(operates on)

THAT YIELDS

choose

s/hire

s

(pay

s for)

enables

WANTS (on demand)

obtainsprovides

provides

obta

ins





Customer Result-Alignment Model (CRAM)Case of Google Search

CUSTOMER

Web user/researcher

OBJECT (Interface)

Uncluttered list of relevant and ordered search results in response to query

DRIVING FORCE

• Tangibles: Profit• Intangibles: Culture• Vision/Mission• Core Values/Ideals

TOOL

Google Search

DISADVANTAGES (-)

• Results cannot be easily saved on hard disk• Limited interactivity with search results

ADVANTAGES (+)

• Fast service; time saving• Increase in productivity• Free service• Greater expertise

RESULT/OUTPUT

• High quality information • Fast answer to query• Deeper knowledge• (Real-time) News

Competitors/ Environment

Valu

e Q

uotie

nt (V

Q) =

Adv

anta

ges/

Dis

adva

ntag

es

that provides THAT YIELDS

choose

s/’hire

s’

enables

WANTS (on demand)

obtainsthat provides

that provides

obtains




INITIAL ELEMENT(“SEED”)

TIME

Past Present Future

Elements

System

Environment (Supersystem)

SPAC

E

PRESENT SYSTEM:

Space-Time Template for the Evolution of a SystemFor Facilitating the Making of Scenarios (for Value Quotient of Business/Product) in Space and Time





1. Battelle, J. (2005) The Search. New York: Portfolio. 2. Chesbrough, H. (2006) Open Business Models. Boston: Harvard Business School (HBS) Press. 3. Christensen, C.; Raynor, M.E. (2003) The Innovator’s Solution. Boston: Harvard Business School

(HBS) Press.4. Jarvis, J. (2009) What Would Google Do?. New York: HarperCollins.5. Kim, W.C.; Mauborgne, R. (2005) Blue Ocean Strategy. Boston: Harvard Business School (HBS)

Press.6. King, R. (2009) The Zoomable Page for Innovative Thinking in Space and Time: How Geniuses

and World-class Innovators Really Think … And How Anyone Can Do So in 1 Minute or Less.Fresno: Value Quotient Management.

7. Shuen, A. (2008) Web 2.0. California: O’Reilly.

Dr. Rod King

Speaker, Consultant, and Trainer on Business Model Analysis, Design, and Innovation

[email protected] & http://businessmodels.ning.comhttp://twitter.com/RodKuhnKing

REFERENCES


