Creating an Uncontested Market with the Strategy Canvas

 

By Omodiaogbe Samuel

Last Updated: December 1, 2023 

Introduction

Strategy Canvas is a strategic management framework that enables you to graphically visualize how your value proposition compares to competition. It is used to plot how the competing firms compete in a market space, what factors they compete on and how they score on each of the key factors. The Canvas is a basic line chart with the competing factors along the x-axis and the offering level along the y-axis. The strategy canvas captures the current state of players in the known market space. That allows you to understand where the competition is currently investing, the factors the industry currently competes on―in terms of products, service, and delivery, and what customers receive from the existing competitive offerings on the market. It is conventionally believed that companies can either create greater value to customers at a higher cost or create reasonable value at a lower cost. Here strategy is seen as making a choice between differentiation and low cost. However, by innovating with the canvas, a company can change its focus and shift attention from the competing factors to attracting the non-traditional customers. As a result, it can place equal emphasis on value and innovation. Value without innovation tends to focus on value creation on an incremental scale. Something that improves value but is not sufficient to make you stand out in the marketplace. On the other hand, value innovation is achieved when the whole system of the company’s utility, price, and cost activities are properly aligned. And the ultimate goal of innovating with the canvas is to create a blue ocean strategy.  An approach that seeks to pursue both differentiation and low cost simultaneously.

Steps to Designing the Strategy Canvas

  • Decide the relevant market and offering scope to draw
  • Focus on the buyer/customer
  • Put Price as the first factor of competition and rate it on an absolute value basis
  • Identify and discuss the factors with your team to agree on definitions
  • Streamline and simplify for visual clarity by:
    • grouping related factors
    • grouping similar competitors
    • reordering the factors
  • Draw multiple prototypes, test, and iterate based on the feedback from the customers

Drawing Your Strategy Canvas – The Four Steps of Visualize Strategy 

Step 1:  Visual Awakening: Get a clear sense of where you are in terms of what you actually offer and how that compares to your competition.

  • Compare your business with your competitors by drawing your strategy canvas.
  • See where your strategy needs to change

Step 2: Visual Exploration: This step calls for sending your team into the field, putting managers face-to-face with the customers.  You need to know how people use or don’t your products or services. A company should never outsource its eyes.  There is simply no substitute for seeing for yourself. 

Step 3:  Visual Strategy Fair: Once feedback has been suggested, it’s time to go back and draw up a new strategy canvass. Indeed, it’s an iterative process

Step 4:  Visual Communication: After the future strategy is set, the last step is to communicate it in a way that can be easily understood by the stakeholders

Application of the Strategy Canvas with a Case Study

                      

                             Footprint Institute

            Addressing Graduates Unemployment Crisis in Nigeria

There is a great crisis of graduate unemployment in Nigeria. Every year, out of over 200,000 that graduate from the tertiary institutions, only about 10% end up securing employment, and the rest join the unending unemployment crew. The unemployment rate in Nigeria at 33% is the third worst in the world. While youth unemployment is above 50%, but graduate unemployment is the worst. Graduate unemployment is attributed to poor skill level, lack of jobs creation, lack of productivity, corruption and other related challenges. In fact, graduate unemployment in Nigeria is a national crisis and the government seems not to have a right answer to it. The problem has led many into crimes such as robbery, kidnapping, terrorism, cybercrime, and other related criminal activities. As a matter of fact, if urgent steps are not taken to address the crisis, there is every possibility that it could result to uncontrollable dimension

Solution Statement

This is where Footprint Institute comes in. We’re Social Venture that was setup to turn graduates in Nigeria from “job seekers to job creators”. What we have discovered after interacting with many of them is that most have passion for entrepreneurship, but the challenge is the know-how. To address that, we believe setting up an Entrepreneurial Training Institution would go a long way in alleviating the problem. Some of the complaints we got while interviewing them were lack of skills, lack of capital, lack of support, and lack of knowledge of the intended industry. To that effect, we believe the right solution can only be found in quality training, where professionals and industry players would equip the graduate students on the best approach. We also discovered that most professionals and industry player would be willing to help if the right platform was created. Therefore, we have decided to create a platform for the volunteer’s trainers to reach the inspiring entrepreneurs, and equip them with right skillset for building and running successful businesses

The Strategic Approach

After setting our vision and mission, we conduct market research in order to understand the competitive landscape. Our research revealed that there are other organizations in the marketplace offering one form of entrepreneurial training or another in the country. After comparing the value proposition of the major players in the market, we discovered that the competitors can be represented with key four organizations: Grow Foundation, Enterprise Hub, Ewu Entrepreneurial School, and LEAP Academy. Our research also revealed that there are key attributes the market competes on, and they include:

  • Tuition
  • Physical Classroom
  • Online Learning
  • Vocational Training
  • International Partnership
  • Program Duration
  • Focus on Graduates
  • Depth of Curriculum

Key Competitive Attributes and Rating

For us to use the spreadsheet to depict how each of the competitors fared, we decided to rate the attributes on the scale of 1-3 (1= low, 2 = medium, and 3 = high)

Competing Factors

Grow Foundation

Enterprise Hub

Ewu Entrepreneurial School

LEAP Academy

Footprint Institute

Tuition

2

3

1

3

2

Physical Classroom

3

3

3

2

2

Online Learning

1

1

1

1

2

Vocational Training

2

1

1

1

2

International Partnership

1

0

0

1

3

Program Duration

3

2

1

3

2

Focused on Graduates

2

1

1

1

3

Dept of Curriculum

3

2

1

2

2

The Chart

Value innovation is the cornerstone of blue ocean strategy. We call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space. Value Innovation means simultaneous pursuit of differentiation and low cost. It places equal emphasis on value and innovation. Innovation without value tends to be technology-driven, market pioneering, or futuristic, often shooting beyond what buyers are ready to accept and pay for. But value innovation is a new way of thinking about and executing strategy that results in the creation of a blue ocean. Blue ocean strategy integrates the range of a firm’s functional and operational activities. Thinking along the blue ocean line means fundamentally shifting the strategy canvas of an industry by reorienting your strategic focus from competitors to alternatives, and from customers to noncustomers of the industry. And 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.

From Customers to Non-Customer

Essentially, there are three categories of non-customers: The first point of call should be the customers. But you should not stop there. You should also go after noncustomers. And when the customer is not the same as the user, you need to extend your observations to the users. You should not only talk to these people but also watch them in action.

The Three Types of Non-Customers

First-Tier Noncustomers: These soon-to-be noncustomers. They’re those who minimally use the current market offerings to get by, because they search for something better. Upon finding any better alternative, they will eagerly jump ship.

Second-Tier Noncustomers: These are refusing noncustomers. People who either do not use or cannot afford to use the current market offerings because they find the offerings unacceptable or beyond their means

Third-Tier Noncustomers: The third tier of noncustomers is the farthest away from an industry’s existing customers. Typically, these unexplored noncustomers have not been targeted or thought of as potential customers by any player in the industry. That’s because their needs and the business opportunities associated with them have somehow always been assumed to belong to other markets

Footprint Institute Value Innovation

At Footprint Institute, our primary focus has been unemployed graduates that have passion for entrepreneurship. Now we have discovered that if that is our only focus, then our targeted market is narrow, and the potential to scaleup is limited. So, what do we do to reach none targeted customers, and who are they?

Based on the three tiers of non-customers, we have decided to tap into the following segment

  • Unemployed graduates without interest in entrepreneurship: We need to find out why they are not interested. Perhaps they lack adequate information, or cannot afford it. We need to create the interest by giving them irresistible value proposition
  • Catching them young: We need to shift our focus to undergraduates in the spirit of catching the young. We can achieve that by creating self-paced online program that they could combine with the regular curriculum
  • To reach the above two non-customers, we need to involve their parents. We need to market our program to the parents by letting them know the value of entrepreneurship, and the massive potential financial reward that is possible, as well as social benefits involved

To innovate on our strategy canvas, we need to use the Four Action Framework

 

The Four Actions Framework

When creating the Strategy Canvas, you should look to eliminate or reduce things customers place little to no value on, raise factors that customers value highly, add new factors that customers would want but are currently not offered by the market

The Four Actions Framework: To break the trade-off between differentiation and low cost and to create a new value curve, there are four key questions to challenge an industry’s strategic logic and business model: 

  1. Which of the factors that the industry takes for granted should be eliminated?
  2. Which factors should be reduced well below the industry’s standard?
  3. Which factors should be raised well above the industry’s standard?
  4. Which factors should be created that the industry has never offered?
  • The first question forces you to consider eliminating factors that companies in your industry have long competed on
  • The second question forces you to determine whether products or services have been overdesigned in the race to match and beat the competition. Here, companies overserve customers, resulting to increase in the cost structure
  • The third question pushes you to uncover and eliminate the compromises your industry forces customers to make.
  • The fourth question helps you to discover entirely new sources of value for buyers and to create new demand and shift the strategic pricing of the industry

Now let’s re-design the strategy canvas of Footprint Institute by innovating with the ERRC Framework

Competing Factors

Grow Foundation

Enterprise Hub

Ewu Entrepreneurial School

LEAP Academy

Footprint Institute

Tuition

2

3

1

3

1

 

Physical Classroom

3

3

3

2

1

 

Online Learning

1

1

1

1

3

 

Vocational Training

2

1

1

1

0

 

International Partnership

1

0

0

1

3

 

Program Duration

3

2

1

3

2

 

Focused on Graduates

2

1

1

1

3

 

Dept of Curriculum

3

2

1

2

3

 

Funding Opportunity

    

2

 

Undergraduates

    

2

 

By innovation with the canvas using the ERRC Framework we did the following:

Eliminate-Reduce-Raise-Create

  • Reduced tuition
  • Reduced physical classroom
  • Raised online learning
  • Eliminated vocational training
  • Raised dept of curriculum
  • Created funding opportunity
  • Created undergraduate program

                                                       The New Canvas

 

From the above analysis, you discover that value innovation is more than innovation. It is about a strategy that embraces the entire system of a company’s activities. Value innovation requires companies to orient the whole system toward achieving a leap in value for both buyers and themselves. Footprint Institute was able to achieved that by understanding the competitive environment. Therefore, it used the ERRC framework to create an uncontested market, which is the blue ocean strategy

An effective Blue Ocean Strategy has three complementary qualities: focus, divergence, and a compelling tagline. Without these qualities, a company’s strategy will likely be muddled, undifferentiated, and hard to communicate with a high cost structure.

  • Focus: Every great strategy has focus, and a company’s strategic profile, or value curve, should clearly show it
  • Divergence: the value curves of blue ocean strategists always stand apart. By applying the four actions of eliminating, reducing, raising, and creating, they differentiate their profiles from the industry’s average profile
  • Compelling Tagline: A good tagline must not only deliver a clear message but also advertise an offering truthfully

As a result, the primary focus of Footprint Institute is the unemployed graduate. At the sametime, it extended the strategic approach by applying the ERRC framework to bring on board the non-traditional customers. And the tagline is “turning job seekers to job creators”

                                  The Red Ocean vs Blue Ocean

Our strategy has been to shift from the red ocean to the blue ocean. The companies caught in the red ocean followed a conventional approach, racing to beat the competition by building a defensible position within the existing industry order. Competition based on red ocean strategy assumes that an industry’s structural conditions are given and that firms are forced to compete within them. But blue oceans don’t use the competition as their benchmark. Instead, they followed a different strategic logic that we call value innovation. Value innovation is the cornerstone of blue ocean strategy. We call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space. When a company’s value curve converges with its competitors, it signals that a company is likely caught within the red ocean of bloody competition. In that situation, the company’s explicit or implicit strategy tends to be trying to outdo its competition on the basis of cost or quality. This signals slow growth, unless the company benefits from being in an industry that is growing on its own accord.

To break out of red oceans, companies must break out of the accepted boundaries that define how they compete. Instead of looking within these boundaries, managers need to look systematically across them to create blue oceans. They need to look across alternative industries, across strategic groups, across buyer groups, across complementary product and service offerings, across the functional-emotional orientation of an industry, and even across time. The process of discovering and creating blue oceans is not about predicting or preempting industry trends. Nor is it a trial-and-error process of implementing wild new business ideas that happen to come across managers’ minds or intuition. Rather, managers are engaged in a structured process of reordering market realities in a fundamentally new way. Through reconstructing existing market elements across industry and market boundaries, they will be able to free themselves from head-to-head competition in the red ocean.

Once a company creates a blue ocean and its powerful performance consequences are known, sooner or later imitators appear on the horizon.

  • Eventually almost every blue ocean strategy will be imitated. The basic shape of your value curve will begin to converge with that of the competition.
  • To avoid the trap of competing, you need to monitor value curves on the strategy canvas. Monitoring value curves signals when to value -innovate and when not to. It alerts you to reach out for another blue ocean when your value curve begins to converge with those of the competition.

                                      Summary  

 The Strategy Canvas is a framework the help you to conceptualize and develop deeper insights on the key attributes your industry competes on.  The canvas is both a diagnostic as well as an action framework to build a compelling strategy that moves you from the red to a blue ocean. Creating blue oceans is not a static achievement but a dynamic process. Companies already understand how to compete in red oceans, but what they need to learn is how to make competition irrelevant. Blue Ocean shifts strategy from value creation, to value innovation. It moves from value creation, doing similar things in an improved way, to value innovation, which means stop doing old things and either start doing new ones or do similar ones in a fundamentally new way, while pursuing differentiation and low cost simultaneously. The core elements of the formulation are the strategy canvas and the four-actions framework (structured of the eliminate-reduce-raise-create factor grid)

To achieve our strategic objective, we need to overcome the following challenges:

  • What do we need do in order to be unique and stand out in the market?
  • How do we create the highest value to the customer?
  • How do minimize cost, and maximize value simultaneously?
  • How do we strike the delicate balance between cost leadership and differentiation strategies?
  • How do we redefine the industry without following the conventional attributes the market competes on?
  • How do we innovate and create a blue ocean strategy by making competition irrelevant?
  • How do we create a sustainable competitive advantage?

 

Omodiaogbe Samuel, MSc. CMC, ChMC, FIMC

Omodiaogbe is a Strategic Management Consultant, and he the Principal Consultant/CEO at Vast Thinking Consults Ltd where he help organizations and business leaders to create superior value. Omodiaogbe holds BSc. and MSc. in Economics. Also, he is a Certified Management Consultant (CMC), a Chartered Management Consultant (ChMC), and a Fellow, Institute of Management Consultants, Nigeria. He is an Instructor on Coursera, where he teaches 25 courses in Strategic Management. Omodiaogbe is one of the world’s leading MOOCs learners on Coursera and Edx with over 500 Certificates from top-ranked Universities, Business Schools, and Organizations 

Contact him:
Email; somodiaogbe@vastthinking.com.ng
Visit: www.vastthinking.com.ng

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