Frame the situation in the marketplace from a perspective of context and competitive environment.
Applying an external lens to the situation helps in understanding the context within which the strategic decision making is or was taking place, which then crafts strategic options that are relevant to the consumers in that marketplace. Answering the following questions will uncover both the context the decisions were made and the competitive environment:
- Identify the traditional players in the market
- Competitive environment (use Porter 5) and feature offerings (use Porter 5)
- Difference in features/attributes (for the strategy canvas)
- Identify core, marginal, and disillusioned customers, suppliers
- Market penetration, market growth, market acceptance
- Pockets of unserviced, unmet, or unidentifiable needs
When assessing what made these companies disruptors when they launched, the best approach is to understand the environment — both in terms of PESTLE and Porter 5. Companies with Blue Ocean Strategies disrupted the traditional industry in meaningful ways.
For instance, P&G became one of the first companies that commercialized on a large scale consumer discretionary products (soap, laundry, food, OTC pharmaceutical, cosmetics, packaged and prepared foods) across a broad range of consumer goods, standardizing production, product development, distribution, marketing, promotions, and offering large scale discounts downstream (wholesale, retail, etc). P&G was a pioneer, its products replaced many thereto artisanal, small-scale consumer oriented products manufactured in small shops, factories, and plants; initially, their focused approach to improve consumer discretionary products transformed the landscape in the U.S. before changing the global competitive environment. And, as the market matured, so did P&G’s approach: from producing for the masses, it offered differentiated products at various price points capturing the low, middle, and upper segments of certain consumer discretionary products. What they avoided was the high-end, luxury, products because up until the 1990s, the luxury market was niche and the concept of affordable luxury consumer discretionary products (high brand name cosmetics and cheap branded goods) did not exist.
In all case studies, the first step is desktop research. There is ample reference material from desk research to conduct a summary of these companies’ initial launch strategies. Looking to the past to recreate what occurred in the industry and internally with these disruptor companies provides the insight needed. These are the considerations to focus on:
- When analyzing strategic opportunities, the correct lens is the traditional industry and competitive situation at the time before the change happened. This is an important piece of research and analysis that will better equip us in assessing what forces determined the situation and the development of new strategies to address opportunities and threats in an environment in which you do not have the answers and are being asked to formulate solutions. Throughout history disruption has always happened: guns replaced arrows and papyrus replaced (to some extent) clay tables.
- A critical lynchpin in this framework is a clear understanding of customer insights, particularly of your non-customers (“why aren’t they buying”). We cannot assess pain points (“problems”) and unmet needs (“someone should be doing this”) without considering the customer and non-customer alike, nor can we determine the ERRC without viewing the features through the lens of the customer. Different customers look for different features and have different unmet needs (“differentiation”) and companies tend to look at homogeneous groups of customers (“clustering”) to service.
When assessing the industry and competitive situation before disruptors completely changed the paradigm, focusing on the features/attributes of the traditional players reveals where the opportunities emerged.
For instance, Pandora operated in an environment that was widely different from what it created and then suddenly as all first mover it had to play defense. Once cars started replacing horses and buggies, there was a lot of disruption. Industries that supported the horse and buggy industry (farriers, saddle makers, coach makers, etc.) had to adapt. Quickly.
On the strategy canvas, it is important to be clear on what is on the Y-axis. There are different views on what to scale the axis to. But, the most comprehensive view is assessing from the perspective of a value/features dimension with the determinant factors defined by the company’s investment level in developing and sustaining that feature. That information often comes from a thorough Porter 5 analysis.
- Features can be price, service, functionality, etc. Differently put, the analysis should answer the question from the customer’s perception of the value provided by the feature or the relative ranking of the companies on that feature.
- In the traditional Blue Ocean Strategy, the Y-axis reflects company investment in/emphasis upon those features. That is why the Eliminate, Reduce, Raise, Create (ERRC) work is the next step in the process.
Questions to ask:
- What costly (and perhaps not valued) features can be eliminated or reduced?
- What features are valued, but under-invested by the companies? These should be raised.
- How can be done to attract non-customers who might value a product or service that is currently available but not relevant to them by creating new features?
Disruptors often become conventional companies as they become established, focusing on sustainable innovation, rather than constantly trying to disrupt and breakthrough. This is a natural part of a maturing industry. But, there are options. When devising a strategic plan for any organization after having diagnosed the challenges and opportunities that organization currently faces (see above), you need to
- Understand the situation and environment in which the organization finds itself.
- Identify the most appropriate strategic concepts and models, including an explanation why those are appropriate (SWOT, PESTLE, 5 forces, BOS, MSP). Work on Porter 5 primarily, supported by PESTLE (if needed). SWOT should only be used if it is critical because it is more tactical than strategic.
- Understand what makes customers customers, non-customers non-customers, and what can be done to move the non-customers into customers, and prevent customers from becoming non-customers. This is where the real synthesis, analysis, and out of the box thinking come into play.
- Employing analytics to better understand the strategic environment, in selecting a strategy, and/or when evaluating the strategy performance.
- Describe the recommended strategy and its path to implementation,
- Consider the assumptions and uncertainties.
Porter 5 forces and Blue Ocean Strategies
Since dimensions in the Porter’s 5 forces approach lead directly into the Blue Ocean framework, the differentiation in the competitive landscape across features and cost leadership are typically those elements that collectively define the relative success of companies and products. It is essential to distinguish the two: a company has an overarching strategy for all its products, has a specific strategy for each of its products, and a tactical approach that ensures that products compete with competitors’ products. PESTLE and Porter 5 are big picture ideas that can flow downstream, but SWOT is a simpler, tactical approach that is not scalable for strategic decision making.