Blue Ocean Basics - Key Factors of Competition
Choosing key factors is key to finding a breakthrough strategy.
Anybody who has touched blue ocean strategy is aware of the strategy canvas, the visual line-chart that serves as a roadmap to a new strategic offering. Key factors of competition, or just key factors for short, are the labels on the horizontal axis at the bottom of the chart, the short blurbs describing the product or service. Besides the Strategy Canvas, key factors are also vital when working with the Eliminate-Reduce-Raise-Create (ERRC) Grid.
Key factors, like the name implies, are key to creating a new blue ocean strategy. Choosing the right key factors is like choosing a business partner or even choosing a spouse; the right choice vastly improves the chances of success whereas the wrong choice will be an ongoing disaster.
Few choices are as important, in developing a new strategic offering than choosing the correct key factors. And yet, this part of the process is rarely covered on its own.
Let’s use one of the oldest examples from the book to explore key factors, the creation of Yellowtail Wine. As noted, I’ve created many blue ocean strategic offerings and written cases about others. Yet, Yellowtail remains a classic for purpose of this exercise. And, besides, who doesn’t like wine?
A quick overview of Yellowtail. There was a high-volume Australian winery, Cassella Vineyards, that wanted to break into the US market. Except that Americans didn’t drink much wine. They drink lots of soda and beer but wine sales were far smaller.
They worked with an American wine importer and some blue ocean strategists (before it was called that) to create a strategic offering that broke through. Their product, [yellow tail], combined the predictability of soda and beer with the taste of wine. It became a breakthrough hit, the bestselling wine in the US for decades.
So … wine. Let’s list what we think could be the factors for wine besides Price, which is always a key factor…
Country of Origin
Celebration / Reason for Drinking
Wine Expert Recommendation
Store Availability (Wine Store / Grocery Store)
Range Compared to Other Wines
Stock Availability (Rare / Common)
Risk of Bad Bottle
Time of Harvest
Type of Cork
Whew! That’s quite the list and it could’ve gone on far longer.
Unfortunately, we’re limited at this stage to no more than nine key factors and should have even fewer than that, though at least four. What we typically do then is to group, sort, prioritize.
As you can imagine, this requires a considerable amount of thought. Like many of the blue ocean strategy exercises, this thought process is as valuable as the end product. That is, even if you don’t create a blue ocean strategy after the completion of the exercise, you’ll have learned a lot more about what you’re aiming for and be in better shape for a second try.
Let’s check out what the book filtered and revised the above list down to:
Price (it’s always there)
Use of ecological terminology & distinctions in wine communication
That’s more manageable and, if you think about it, includes most of the factors in our original list.
Now, we’re going to figure out which of these to eliminate, reduce, raise, and create, the blue ocean strategy Four Actions Framework. We’ll cover that in more detail in another post.
Finally, we decide which factors to Create. Remember: we’ve saved costs by eliminating and reducing stuff that doesn’t add enough buyer value. The savings from eliminating and reducing allows us to raise and create factors. For Yellowtail, here’s what the strategists decided to create:
Ease of Selection
Fun and Adventure
In summary, Casella created a wine that is super-easy to pick and has a consistent taste. Year-after-year, every bottle of [yellow tail] tastes like every other bottle. It is impossible to get a bad bottle or, for that matter, an especially good one. The vineyard lists the year in small barely noticeable typeface; it’s not necessary any more than a vintage year is necessary on a bottle of beer.
As we can see above, choosing the correct key factors was vital and there was a wide variety to choose from. Had we taken more time, which strategists should take, our list of potential key factors could’ve easily gone on for pages.
Choosing the right group of key factors to start with for the as-is market — enough to describe the market but nothing so specific we box ourselves in — makes it possible to redefine market boundaries for differentiation and lower cost, a blue ocean strategy.
One item that’s important to remember is that when defining a key factor it is important to describe it generically in terms of cost. Creating a key factor called, say, “better documentation” locks us into the idea that “better” is likely related to cost.
Why does this matter? Because if we used the more generic “documentation” we could (and probably should) eliminate or reduce it by making the product or service so easy to use that documentation becomes less necessary or unnecessary. Strategic moves like that are the difference between a blue ocean move and a minor marketing pivot.