Blue Ocean Strategy Term - Pioneer-Migrator-Settler (PMS) Map

Pioneer-Migrator-Settler (PMS) Map - Blue Ocean Strategy Glossary

Pioneer-Migrator-Settler (PMS) Map is both a diagnostic and planning tool that helps managers assess and plan their future growth at the portfolio level. The PMS Map is a 3-by-2 matrix where each row represents a business category - pioneers, migrators and settlers. With respect to the two columns, the first represents the business situation today, while the second column represents the business situation in the future. Managers can use the PMS Map to plot either businesses in their portfolio, or the products/services they offer.

Pioneers are businesses or products/services that offer unprecedented value to buyers. Their value curve radically diverges from the competition, and they have a mass following of customers. These businesses are Blue Ocean Strategies; they are the most powerful sources of profitable growth.

Migrators are businesses or products/services that offer improved value over competition, but not innovative value: they give customers more for less, but do not radically change the key factors of competition of their industry.

Settlers are businesses or products/services that offer more or less the same value to buyers as the rest of the industry. These are me-too businesses. Although they are often today's cash cows, settlers will not generally contribute much to a company's future growth because they are stuck within the red ocean of competition.

To assess a company's profitable growth prospects, a company should plot each business or product/service as a circle on the map according to the criteria above.

The size of each dot should reflect the amount of revenue earned from each business or product/service. Hence a business with relatively large revenues would be plotted as a large circle on the map; a business with smaller relative revenues should be plotted as a small circle.

Source: Business Strategy Terms, Blue Ocean Strategy Glossary at Blueoceanstrategy.com

Blue Ocean Strategy Term - Noncustomers

Noncustomers - Blue Ocean Strategy Glossary

Noncustomers are customer groups who are either not served by the current industry's offering, or in the case of first-tier noncustomers, are existing customers who are about to turn away from the current industry's offering. Noncustomers can be grouped into three categories:
1. First-tier noncustomers are soon-to-be noncustomers: they use the current industry offering minimally, while searching for better options. They are waiting to jump ship and will leave this market as soon as the opportunity presents itself.

2. Second-tier noncustomers refuse the industry's offerings. These are buyers who have seen what the current industry has to offer as an option to fulfill their needs but have chosen against them.

3. Third-tier noncustomers have never thought of the current industry's offerings as an option. As such, they do not feel concerned by its offering. They are the farthest from the current market.

Often, companies focus on their existing customers and ignore noncustomers. They believe that their needs are too different from what they can offer or that they belong to other industries. To unlock untapped demand, managers must look outside of their typical customer base. By expanding their worldview beyond their current customers, they can reach beyond existing demand and unlock a new mass of customers that did not exist before.

Source: Business Strategy Terms, Blue Ocean Strategy Glossary at Blueoceanstrategy.com

Blue Ocean Strategy Term - Motivational Hurdles

Motivational Hurdles - Blue Ocean Strategy Glossary

Motivational Hurdles are the blocks to motivating employees in executing a new strategy like Blue Ocean Strategy. Once a company is awakened to the need for change, managers must ensure that their employees act in a direct, meaningful and sustained manner. Too often breakthrough strategies fail because front-line employees fail to execute them properly. This is often the result of business leaders issuing grand strategic visions through massive top-down mobilization initiatives that are often a cumbersome, expensive, and time-consuming process. Particularly given the wide variety of motivational needs in most large companies, these overarching strategic visions often inspire lip service instead of the intended action.

Instead of diffusing change efforts widely, tipping point leaders follow a reverse course and seek mass concentration over mass mobilization to overcome the motivational hurdle. They focus on three factors of disproportionate influence in motivating employees: kingpins, fishbowl management, and atomization. See Kingpins, Fishbowl Management, Atomization and Tipping Point Leadership.

Source: Business Strategy Terms, Blue Ocean Strategy Glossary at Blueoceanstrategy.com

Blue Ocean Strategy Term - Kingpins

Kingpins - Blue Ocean Strategy Glossary

Kingpins are key influencers in an organization. These are the individuals who are well respected and persuasive, and have an ability to unlock or block access to key resources. To execute Blue Ocean Strategy fast and at lower cost, leaders should concentrate on influencing the kingpins who have significant influence over the mass of employees instead of attempting to tackle everyone in the organization. See Motivational Hurdle.

Source: Business Strategy Terms, Blue Ocean Strategy Glossary at Blueoceanstrategy.com

Blue Ocean Strategy Term - Hot Spots

Hot Spots - Blue Ocean Strategy Glossary

Hot Spots are activities that have low resource input but high performance impact. Taking resources away from cold spots (activities that have high resource input but low performance impact) and assigning them to hot spots is a way to execute Blue Ocean Strategy with limited resources. See Cold Spots and Resource Hurdle.

Source: Business Strategy Glossary, Blue Ocean Strategy Terms at Blueoceanstrategy.com

Functional Appeal to Buyers

Functional Appeal to Buyers - Blue Ocean Strategy Glossary

Functional Appeal to Buyers refers to the functional utility buyers receive from a business or product/service based on basic calculations of utility and price. Competition in an industry tends to converge on one of two possible basis of appeal. Some industries focus principally on price and function based largely on calculations of utility; their appeal is functional. Other industries compete largely on feelings; their appeal is emotional. Yet what many companies fail to see is that the appeal of most products or services is rarely intrinsically one or the other. When companies are willing to challenge the functional/emotional orientation of their industry, they can often discover insights to create new market space. For example, if an industry is largely focused on a functional basis of appeal, ask: "What emotional elements can we raise or create to infuse our commodity products with new life by adding a dose of emotion?" See Six Paths Framework.

Source: BOS Terms, Functional Appeal to Buyers - Blue Ocean Strategy Glossary, Business Strategy at blueoceanstrategy.com

Four Actions Framework

Four Actions Framework - Blue Ocean Strategy Glossary

Four Actions Framework is a tool that helps managers reconstruct buyer value elements into a new value curve that breaks the differentiation/low cost trade-off. It forces the organization to ask the following four questions:

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 managers to consider eliminating factors that may have made sense in the past, but do not add much value to buyers today. The second question forces them to consider reducing factors that may have been over-designed in the race to beat the competition. Hence those two questions address the low cost side of the equation by helping companies reduce their cost structure. The third question forces managers to uncover and eliminate the compromises that the industry has forced buyers to make. The fourth question helps managers discover new sources of value for buyers. The last two questions address the differentiation side of the equation.

Source: BOS Terms, Four Actions Framework - Blue Ocean Strategy Glossary, Business Strategy at blueoceanstrategy.com

BOS Terms - Fishbowl Management

Fishbowl Management - Blue Ocean Strategy Glossary

Fishbowl Management is the process whereby the activities (action and inaction) of the key influencers of an organization, or kingpins, are made transparent to one another for all to see, as fish in a fishbowl. By placing kingpins in a fishbowl one can greatly raise the stakes of inaction. Light is shined on those who are lagging behind and those who are excelling. Punishment and reward, in turn, are given in a transparent and open way for all to see. For fishbowl management to work, it must be based on transparency, inclusion, and fair process. See Kingpins and Motivational Hurdle.

Source : BOS Terms, Fishbowl Management - Blue Ocean Strategy Glossary, Business Strategy at blueoceanstrategy.com

BOS Term - Fair Process

Fair Process - Blue Ocean Strategy Glossary

Fair Process is the managerial expression of procedural justice in the formulation and execution of strategic decisions. Fair process inspires employees to cooperate voluntarily and to go beyond the call of duty in executing a Blue Ocean Strategy. The implementation of any great strategic vision relies on the support and alignment of all members of an organization. But commitment cannot be commanded: carrots and sticks only bring compulsory cooperation. Fair process inspires employees to use their energy and initiative to execute a strategy to the best of their abilities. There are three mutually reinforcing elements that define fair process:

1. Engagement. Engagement means involving individuals in the strategic decisions that affect them, asking for their input, and allowing them to refute the merit of one another's ideas and assumptions. Engagement communicates management's respect for individuals and their ideas. It sharpens everyone's thinking and builds better collective wisdom. The result is better strategic decisions and greater commitment from the entire organization in executing Blue Ocean Strategy.

2. Explanation. Explanation means that everyone involved and affected should understand why final strategic decisions are made as they are. An explanation of the thinking behind decisions makes people confident that managers have considered their opinions and have made decisions impartially in the overall interests of the company. An explanation allows employees to trust management's intentions even if their own ideas have been rejected. It also serves as a powerful feedback loop that enhances learning.

3. Expectation clarity. Expectation clarity requires that after a strategy is set, managers state clearly the new rules of the game and what is expected of employees. Although the expectations of a Blue Ocean Strategy may be demanding, employees should know up front what standards they will be judged by and the penalties for failure. When people clearly understand what is expected of them, political jockeying and favoritism are minimized, and people can focus on executing the strategy rapidly.

Source : BOS Terms, Fair Process - Blue Ocean Strategy Glossary, Business Strategy at blueoceanstrategy.com

BOS Term - Explanation

Explanation - Blue Ocean Strategy Glossary

Explanation is an element of fair process. Explanation means that everyone involved and affected should understand why final strategic decisions are made as they are. An explanation of the thinking behind decisions makes people confident that managers have considered their opinions and have made decisions impartially in the overall interests of the company. An explanation allows employees to trust management's intentions even if their own ideas have been rejected. It also serves as a powerful feedback loop that enhances learning. See Fair Process.

Source: BOS Terms, Explanation, Blue Ocean Strategy Glossary, Business Strategy at blueoceanstrategy.com

BOS Term - Expectation Clarity

Expectation Clarity - Blue Ocean Strategy Glossary

Expectation Clarity is an element of fair process. Expectation clarity requires that after a strategy is set, managers state clearly the new rules of the game and what is expected of employees. Although the expectations of a Blue Ocean Strategy may be demanding, employees should know up front what standards they will be judged by and the penalties for failure. When people clearly understand what is expected of them, political jockeying and favoritism are minimized, and people can focus on executing the strategy rapidly. See Fair Process.

Source: BOS Terms, Expectation Clarity, Blue Ocean Strategy Glossary, Business Strategy at blueoceanstrategy.com

BOS Term - Engagement

Engagement - Blue Ocean Strategy Glossary

Engagement is an element of fair process. Engagement means involving individuals in the strategic decisions that affect them, asking for their input, and allowing them to refute the merit of one another's ideas and assumptions. Engagement communicates management's respect for individuals and their ideas. It sharpens everyone's thinking and builds better collective wisdom. The result is better strategic decisions and greater commitment from the entire organization in executing Blue Ocean Strategy. See Fair Process.

Source: Blue Ocean Strategy Glossary, BOS Terms, Business Strategy at blueoceanstrategy.com

Blue Ocean Strategy Glossary - Emotional Appeal to Buyers

Emotional Appeal to Buyers

Emotional Appeal to Buyers refers to the emotional utility a buyer receives in the consumption or use of a product or service. Competition tends to converge on one of two possible basis of appeal. Some industries focus principally on price and function largely based on calculations of utility; their appeal is functional. Other industries compete largely on feelings; their appeal is emotional. Yet what many companies fail to see is that the appeal of most products or services is rarely intrinsically one or the other. When companies are willing to challenge the functional/emotional orientation of their industry, they often find new noncustomer insights. For example, if one is in an industry that is largely focused on an emotional basis of appeal, ask: "What are the extras we offer that add to the cost of our product without enhancing functionality? What if we eliminated or reduced these factors, can we create a simpler, functional, lower-priced, lower-cost offering that would dramatically raise buyers' value?" See Six Paths Framework.

Source: Blue Ocean Strategy Glossary - Emotional Appeal to Buyers, Business Strategy Terms at www.blueoceanstrategy.com

Blue Ocean Strategy Glossary : Eliminate-Reduce-Raise-Create Grid (ERRC Grid)

Eliminate-Reduce-Raise-Create Grid (ERRC Grid)

Eliminate-Reduce-Raise-Create Grid (ERRC Grid) forces managers to systematically pursue differentiation and low cost by answering the following questions based on noncustomers insights gained using the Six Paths Framework:

Eliminate. Which of the factors that the industry takes for granted should be eliminated?

Reduce. Which factors should be reduced well below the industry's standard?

Raise. Which factors should be raised well above the industry's standard?

Create. Which factors should be created that the industry has never offered?

Filtering insights through the ERRC grid forces managers to simultaneously pursue differentiation and low costs. It drives one to robustly scrutinize every factor their industry competes on, helping them discover the range of implicit assumptions they make unconsciously in competing. It immediately flags if they are focused only on raising and creating and thereby lifting their cost structure by over-engineering their offering―a common plight in many companies. Finally, because it is easily understandable by managers at any level, the ERRC grid creates a high level of engagement throughout the organization.

Source: Blue Ocean Strategy Glossary : Eliminate-Reduce-Raise-Create Grid (ERRC Grid), Business Strategy Terms at www.blueoceanstrategy.com

Blue Ocean Strategy Glossary - Divergence

Divergence

Divergence refers to the difference between a company's strategic profile and that of its competitors'. Specifically, it refers to the divergence between the key competitive factors and level of investment in these factors of a company's offering relative to its rivals' as visualized on the strategy canvas. In red oceans, companies' strategies tend to converge; they tend to focus on the same key competitive factors with marginal differences in price and offering level across these competing factors. A company practicing blue ocean strategy, in contrast, reconstructs market boundaries to create a divergent offering from the competition. See Strategy Canvas and Six Paths Framework.

Source: Blue Ocean Strategy Glossary - Divergence, Business Strategry Terms at www.blueoceanstrategy.com

Blue Ocean Strategy Glossary - Devils

Devils

Devils are people who will likely fight the execution of a Blue Ocean Strategy. They are the ones who have the most to lose from the new strategy. Once identified, devils need to be isolated. Tipping point leaders build a coalition of supporters (angels) around them to dissuade the naysayers from attacking them; for attacking the new strategy would mean attacking the mass of supporters. See Political Hurdles.

Source: Blue Ocean Strategy Glossary, Business Strategy Terms at www.blueoceanstrategy.com

Consigliere

Blue Ocean Strategy Glossary : Consigliere

Consigliere is a politically adept and highly respected insider who can help identify landmines that may lie ahead in executing a Blue Ocean Strategy. A consigliere will, for example, help identify who will fight and who will support the changes a tipping point leader would like to make. While it is important to build a top management team with strong functional skills such as marketing, operations or finance, bringing a Consigliere on board allows a leader to zoom in on identifying the key players and how they will likely play the political game. See Political Hurdles.

Source: Blue Ocean Strategy Glossary at www.blueoceanstrategy.com

Complementary Products and Services

Blue Ocean Strategy Glossary : Complementary Products and Services

Complementary Products and Services are products and services that indirectly impact the utility a buyer receives from an offering. Few products and services are used in a vacuum. Yet managers tend to confine their worldview within the bounds of their industry, without asking what happens before, during, and after the use of their product or service.

The key is to define the total solution buyers seek when they choose a product or service. For example, babysitting assistance and parking facilities are two complementary services to movie theaters. By expanding one's attention to the total solution buyers seek when they choose a product or service, and by removing the "pain points" that buyers experience before, during or after the use of their product or service, a company can create a blue ocean of new market space. See Six Paths Framework.

Source: Blue Ocean Strategy Glossary at www.blueoceanstrategy.com

Commonalities

Blue Ocean Strategy Glossary : Commonalities

Commonalities are shared preferences among buyers. To ensure that a blue ocean is deep and wide enough to guarantee sustainable profitability, managers must aggregate the greatest demand for their offering by challenging two conventional strategic practices: focusing on existing customers and driving for finer segmentation to accommodate buyer differences. By looking to noncustomers and by building on powerful commonalities across them, it is possible to reach beyond existing demand and unlock a new mass of customers that did not exist before.

Source: Blue Ocean Strategy Glossary at www.blueoceanstrategy.com

Cold Spots

Blue Ocean Strategy Glossary : Cold Spots

Cold Spots are activities that have high resource input but low performance impact. Taking resources away from cold spots and assigning them to activities that have a high performance impact is a way to execute Blue Ocean Strategy with limited resources. See Resource Hurdle.

Source: Blue Ocean Strategy Glossary at www.blueoceanstrategy.com