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Sean Haight - Strategy Canvas Weston Waldo – Four Action Framework Matt McKanna – Eliminate, Reduce, Create, Raise Grid Jack Johns – Characteristics of a Good Strategy

Discussion Questions? Can a company in a red ocean still create blue oceans?

Analytical Tools and Frameworks Effective Blue Ocean Strategy should be about risk minimization and not risk taking. “All our dreams can come true, if we have the courage to pursue them.” Walt Disney

Snow White and the Seven Dwards

Snow White and the Seven Dwarfs was the first full-length cel animated feature film. Walt Disney started in 1934 on production of Snow White and even his brother and wife tried to convince him to not make it. His initial budget was ten times greater than anything he had produced so far and he had to mortgage his house to produce the film. It was the highest grossing film of 1938 and when adjusted for inflation is still one of the top ten highest grossing films of all time in the US. The success led to Disney building a new facility in Burbank and began production on the films Pinocchio, Fantasia, Dumbo, Bambi, Alice in Wonderland, and Peter Pan.

The Strategy Canvas 2 Purposes 1) Captures the Current State of play in the known market space. 2) Allows one to understand where competition is investing, factors the current industry competes on(products, service, and delivery) and what customers receive from the existing competition

Example: U.S. Wine Industry Price per bottle Elite and refined image on the bottle Above-the line marketing to try and give prominence to a particular wine house Aging Quality Vineyard Prestige and Legacy Wine Complexity Wine Range

Horizontal and Vertical Axis The Horizontal Axis shows the range of factors that the industry competes and invests on. The Vertical Axis captures the offering level the buyer receives across all these competing factors. The Value Curve is a graphic depiction of a company’s relative performance across its industry's factors of competition and is the basic component of the strategy canvas. A high score means that a company offers buyers more and also invests more in that factor.

What not to do Do not try to benchmark competitors and outcompete them by offering a little more for a little less Do not conduct extensive customer research (customers can scarcely imagine how to create uncontested market space)

Fundamentally shift the Strategy Canvas Reorient your strategic focus from competitors to alternatives and from customers to noncustomers of the industry, and look for alternatives. Gain insight into how to redefine the problem and reconstruct buyer value elements

Application to Other Classes A strategy canvas is similar to a SWOT Analysis that we learned in marketing in that one analyses what your strengths and weaknesses are and what your competitors are doing. In accounting one tracks how much a company invests it’s money and in what projects it’s investing its money in.

Casella Wines How to make a fun and nontraditional wine, easy to drink for everybody? Saw that American’s 3 to 1 preferred alcohol over wine because they thought it was a turnoff and pretentious. It saw this as an opportunity and to achieve this turned to the second basic analytical tool, The Four Actions Framework.

The Four Action Framework 1.Eliminate Which factors that the industry takes for granted should be eliminated? 4. Create Which factors should be created that the industry has not seen before? 3. Raise Which factors should be raised well above the industry standard? 2. Reduce Which factors should be reduced well below the industry standard? Figure 2-2 A New Value Curve

The Four Actions Framework 1.Eliminate: Eliminate factors your company competes on 2.Reduce: Product and Service overdesigned 3.Raise: Eliminate industry forced customer compromises 4.Create: Creating new sources of value and demand

Toy Story Trailer

Creating the Blue Market for computer animation films In 1988 Disney approached Pixar to make a full length animated feature using computer-animation. Disney reached a deal with Pixar in 1991 where Disney would own the picture, have creative control, with an option to do 2 more films with Pixar and Pixar would earn 12.5% of the revenues. In 1993 Tom Hanks and Tim Allen signed on to do the voices of Buzz and Woody. It took over 300 computer processors to make the film In total, the film required 800,000 machine hours and 114,240 frames of animation Film made over $350 million dollars in 1995 and started the computer animated movie trend. Started a partnership with Disney and Pixar, till Disney bought Pixar for 7.4 billion dollars in 2006.

Class Application Relevant to any entrepreneurship class Entrepreneurs must master the framework Apply to any business model to result in success Four Action Strategy used to promote innovation

The Eliminate-Reduce-Raise-Create Grid The grid is designed to assist companies on certain factors that should be eliminated and reduced, as well as factors that can be raised or even created. Eliminate -What factors can be eliminated that companies within the industry have long competed on? Raise -What compromises that your industry forces you to make can be raised? Reduce -What components of the industry can be reduced to create a blue ocean? Create -What factors can be created to discover entirely new sources of value for buyers?

The Eliminate-Reduce-Raise-Create Grid The grid creates a connection from the four questions in the four actions framework to the actual implementation of eliminating, reducing, raising, and creating different factors. – Pursue differentiation and low costs (Simplicity) – Forces companies to eliminate and reduce factors that were previously ignored – Easily understood by managers at any level – Helps drive decision making on factors the industry competes on, rather than specific competitors. Yellow Tail example – Eliminate  Aging qualities and above-the-line marketing – Reduce  Wine complexity and wine range – Raise  price versus budget wines – Create  Ease of selection and easy drinking

Walt Disney There are certain characteristics of the grid that Walt Disney has followed to become the successful company that they are. Raise- Target audience Create- Multiple business segments (Theme parks, studio entertainment, and consumer products) Walt Disney has created value in their company by making people happy. This value has expanded by increasing the target audience and creating new business segments that were once untouched.

Lion King Broadway

In 1994 Disney first brought Beauty and The Beast to Broadway and in it’s run worldwide run it made 1.4 billion dollars and soon followed the biggest Broadway musical of all time The Lion King having made $853.8 million and counting.

Characteristics of a Good Strategy When expressed through a value curve, then, an effective blue ocean strategy has three complementary qualities: – Focus – Divergence – Compelling tagline

Characteristics of a Good Strategy Yellow Tail example: – Focus – company does not diffuse its efforts across all key factors of competition – Diverging – the shape of their value curve diverges from the other players by looking for alternatives – Compelling Tagline – a fun and simple wine to be enjoyed everyday Southwest Airlines example: – Focus – friendly service, speed, and frequent point-to-point departures – Divergence – single value curve because their competitors value curves are virtually identical to theirs – Compelling Tagline – “the speed of a plane at the price of a car- whenever you need it”

Disney Key Strategies Focus on family entertainment and media: – Networks – Parks and Resorts – Studio Entertainment – Consumer Products – Interactive Media Diverge Compelling Tagline: “where dreams come true”

Reading the Value Curves A Blue Ocean Strategy A Company Caught in the Red Ocean Over delivery Without Payback An Incoherent Strategy Strategic Contradictions An Internally Driven Company

Creating A Blue Market

Creating a Blue Ocean In 1994 Disney released it’s first direct to video animated sequel feature Return of Jafar to much success and it continued this trend with Aladdin and the King of Thieves making over $186 million dollars and The Lion King 2 selling over 15 million copies.

Discussion Recap Does Disney still create blue oceans while being in a red ocean?

Answer Yes, based on our research Disney’s past projects have shown a continuous expansion for the entertainment market, and other outlets.