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Business Model Canvas & Blue Ocean Strategy

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As a third year International Business & Management student, I completed my six month specialisation in Innovation & Leadership in Leeuwarden, Netherlands. I had the opportunity to function as consultant for various startup and existing companies. I enjoyed working with the Business Model Canvas and applying Blue Ocean Strategies. This scientific article represent how I believe that these two approaches complement each other in the process of developing and innovating business models.

Business Model Canvas & Blue Ocean Strategy

  1. 1. Why the Business Model Canvas complements Blues Ocean Strategy Author: Business Model Canvas & Blue Ocean Strategy Page 1 of 7 Gillain Berry The author of this article has been studying the book of Business Model Generation by Alexander Osterwalder for over five months now. As a result, the author has looked to supporting books related to this theory, in order to deepen her knowledge in the aspect of Business Development. As a result, the author has learned about the Blue Ocean Strategy and experienced how well it works with the Business Model Canvas. Therefore, this article is meant to demonstrate how the Business Model Canvas complements Blue Ocean Strategy and vice versa, for the generation or innovation of a Business Model. Business Model Canvas Business Model Canvas is a tool that that stems from the book Business Model Generation. Basically a company can use this tool to assess their business as whole system. This is because the Business Model canvas creates a visual holistic view of how the changes from one building block, affects another building block within the Business Model. The Business Model Canvas consists of a total of nine building blocks. The right side of the Canvas is about value creation and the left side if the canvas is about reducing cost by increasing efficiency. There are various ways to innovate the Canvas. Such as focusing on Epicenters within the Business Model, asking “what if” questions, creating future scenarios and the use of an Empathy Map tool. For the Business Model Generation a brainstorm or the same methods as previously stated can also be used. The authors’ favourite innovation technique is the future scenarios and the empathy map together with the value proposition designer. This is because the empathy map and value proposition designer allows a company to focus on what the buyers frustrations and how the value proposition within the Business Model is solving their gains. Matching the needs of the buyers together with the offerings of the company Concept of Blue Ocean Strategy Blue Ocean Strategy is geared at analytically examining an industry in order to increase value while minimizing cost simultaneously. This method of value creation and the exploration of non-­‐customers create a blue ocean “new market”, the business model canvas then shows a complete image of all the dependable factor in order to ensure alignment. The non-­‐ customers for this new market can even be isolated in a Business Model Canvas together with the development of an empathy map in order to gain a deeper insight. First method and approach Blue Ocean Strategy first uses the Strategy Canvas to diagnose the industry and identify what the action framework is. The
  2. 2. Business Model Canvas & Blue Ocean Strategy 2 strategy canvas illustrates the current situation of the industry in question and shows in which aspect the industry in competing on. With the strategic canvas in view, the company can take a deeper look for alternatives and non-­‐customers with the help of the four actions framework and the eliminate-­‐educe-­‐ raise-­‐create grid. With the strategic canvas complete, the next step is to apply the four action framework in order to test the industries logic and business model. In order words, Blue Ocean Strategy creates Value Innovation with the four actions framework of the eliminate-­‐educe-­‐raise-­‐create grid. It is all about rising above industry standards, creating new offerings, eliminating what is no longer necessary, and reducing elements below industry standards within the strategy canvas. The objective is not to compete with the industry, but about surpassing what is traditionally expected and accepted to create new markets. A new strategic canvas with the changes in market approach, price and value is then matched further with the current situation. It is the author’s opinion that it is possible to create a business model canvas of this new market approach. This can be accomplished by gathering the information of the new strategy canvas and the eliminate-­‐reduce-­‐raise-­‐create grid and filling this information in a Business Model Canvas. This will allow the company to question each individual building block of the Business Model Canvas in correlation with the created blue ocean. As previously stated, it is the authors opinion that the Business Model Canvas gives the opportunity to isolate the non-­‐ customer segment identified in the specified industry, in order to assess the level of value innovation within the company’s overall Business Model. With the non-­‐customers segment from the blue ocean, in the business model canvas, the company can align the cost side together with the Channels, Relationship and the Value Proposition for the none-­‐customer segment. Second method and approach However, it is the opinion of the author that there are different ways in using the Business Model Canvas and Blue Ocean Strategy. The author of this article has worked for a group called the Dutch Classics Boats. This company wanted to create a viable business model as a facilitating bureau for boatyards. After two validations processes that enabled further innovation of the company’s different business ideas, the author used Blue ocean strategy to further innovate the first draft Business Model Canvas with the advice for that company. Therefore is it also the author’s experience that Blue Ocean Strategy can be used to further innovate a existing business model canvas. As a result, it can be stated that Blue Ocean Strategy can also be used for both Business Model Generation and Business Model Innovation. The disadvantage to using Blue Ocean Strategy alone is that it is easier to lose sight of the big picture. In order to see how the changes would affect all the nine building block. Secondly, by being able to see the bigger picture with the Business Model Canvas, this makes it easier to verify and create a proper alignment of the Blue Ocean Business Model. The method used with the case of the facilitating Bureau
  3. 3. Business Model Canvas & Blue Ocean Strategy Page 3 of 7 is that the Blue Ocean was used as an innovation technique, and the previously stated route is a method of Business Model Generation. What determines whether Blue Ocean Strategy is a innovation or Generation analytical tool highly depends on the sequence that is used. StartUp and existing companies Never the less, in order to guarantee the long-­‐term viability of a Business Model the author recommends that a startup company should first explore the possibility of creating a blue ocean. This is simply because this guarantee that the initial business idea is a completely new market from the beginning. Then the startup can further move on the working out the business idea in the business model canvas. On the other hand, if the company has already exist and has been competing in an Industry for years, then they can use blue ocean strategy to innovate a product or service and then isolate this product or service together with its customer segment in the Business Model Canvas for further alignment and the holistic view. Refinement of Business model In terms of developing a strong strategy for the company, the blue ocean strategy helped to refocus and challenge current market norms and condition. The eliminate-­‐reduce-­‐raise-­‐create was very effective in creating the mind set to facilitate this process. It is the opinion of the author for this article that, with a blue ocean idea to applying the blue ocean strategy and then incorporating these result into a business model is just the beginning. The book by Osterwalder on the topic of Business Model Generation, talks about the importance of pivoting the business idea. The author agrees with the important of this concept of validation and the process it creates called to pivoting. Throughout the execution of a Business Model, a company will be confronted with indications of whether the Business Model is failing or succeeding. This where the company will have to ask themselves if they want to continue further or pivot back to the Business Model and make some adjustment. The great thing about the Business Model Canvas and Blue Ocean Strategy is that is it always possible to go back to canvas and make adjustments after testing and validation. Business Environment It is the author’s opinion that the company will have to take a deep analysis of a DEPEST together with a SWOT in order to make sure that the decision to be made is relevant to future trends in the market industry and what the influencing factors might imply. Studying the business environment can help a company to anticipate changes in an industry ahead of time. This is turn can help a company to assess on whether a business model idea should be either short-­‐term or long-­‐term. With this information in mind a company can realize when its time to switch to their long-­‐term strategy. With the case of the facilitating Bureau, the business environment did not show much signs of better days to come. However, the Ecological research showed that because of global warming, the Netherlands will be warmer within the next century. A warmer weather implies that the demand for boats and yachts will
  4. 4. Business Model Canvas & Blue Ocean Strategy 4 increase because of shorter winters and longer summers, which would increase the number of yacht building activity across the Netherlands. Nonetheless, this only is not enough indication to say that this company can have a long-­‐term business under current and future business environment conditions. The author together with her group of practising consultants constructed a short-­‐term Business Model advice in the form of a business model for the company. As a result, the company will need to continually refine their business model while executing the Business Model. Recap Now it is time the recap what the authors has stated in this article. Blue Ocean Strategy and Business Model generation can both be used for the purpose of Business Model Generation and Business Model Innovation. Both concepts are a wonderful complement to the other because one is more analytical and is able to show how on which level the industry is competing, while the other offers to possibility to access each individual building block of the business as a whole and to ensure the alignment of the building blocks. Both the Business Model Canvas and Blue Ocean Strategy can be used for startup and existing companies alike, the only different is that a start-­‐up company is about generating a business model while and existing company is a innovation a business model, product or service. Therefore this is what distinguishes with of the two method and approaches mentioned in this article. As in the case of the facilitating bureau, the initial method and approach was much different. The consultants where not involved in the initial idea of creating a facilitating bureau for the boatyards. As a result, the business idea that was developed has proved to be more of a Red Ocean and not Blue Ocean. Nevertheless, the author together with her group of consultants made great efforts to transform their business idea into a blue ocean. The author of this article believes that a company can be very successful by using the Business Model Canvas and The Blue Ocean strategy. Although this concept might seem daunting for companies who do not have any knowledge in this field, it is absolutely worth the investment, whether time or money. For the images that support this Article, please turn to the Appendixes.
  5. 5. Business Model Canvas & Blue Ocean Strategy Page 5 of 7 Appendixes Figure 1 Value Innovation, Blue Ocean Strategy (Insead, 2014) Figure 2 Eliminate-­‐Reduce-­‐Raise-­‐Create Grid for The Facilitating Bureau (DC)
  6. 6. Business Model Canvas & Blue Ocean Strategy 6 Appendixes Figure 3 Strategy Canvas of Facilitating Bureau (DCB) Figure 4Business Model Canvas and the Relationship with Blue Ocean Strategy (AWAPAWA MINNTEAM3, 2013)
  7. 7. Business Model Canvas & Blue Ocean Strategy Page 7 of 7 Bibliography Kim, W. C., & Mauborgne, R. (2005). Blue Ocean Strategy. Bosten: Harvard Business School. Osterwalder, A., & Pigneur, Y. (2010). Business Model Generation. New Jersey: John Wiley & Sons, Inc. References AWAPAWA MINNTEAM3. (2013, November 22). AWAPAWA MINN3. Retrieved June 17, 2014 from http://www.awapawa.com/2013/10/blue-­‐ocean-­‐strategy-­‐time-­‐ to-­‐conquer-­‐new-­‐markets/ Insead. (2014, May 27). Blues Ocean Strategy Institue. Retrieved June 17, 2014 from http://www.insead.edu/blueoceanstrategyinstitute/home/inde x.cfm Figures Figure 1 Value Innovation, Blue Ocean Strategy _________________________________ 5 Figure 2 Eliminate-­‐Reduce-­‐Raise-­‐Create Grid for The Facilitating Bureau (DC) 5 Figure 3 Strategy Canvas of Facilitating Bureau (DCB) _________________________ 6 Figure 4Business Model Canvas and the Relationship with Blue Ocean Strategy 6

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