Align Value, Profit, and People Propositions Berkley Stell, Tiffany Jesko, Eric Baker, and Joshua Benjamin
Achieving Strategic Alignment
Strategic alignment Both blue ocean and red ocean strategies must incorporate all three of these propositions, but the way they pursue these propositions varies significantly Red Oceans pursue either differentiation or low cost within the given industry’s conditions. Blue Oceans pursue both differentiation and low cost strategies. Incorporation of all three propositions in strategy is crucial to a business’s success. Lack of doing so often results in short term success or failure.
Value Proposition :the reason people will use your company What are you offering them? Why do they want to buy from you? Comic Relief’s value proposition: Attracts customers/donors by compelling them to “fun”draise Gets everyone involved by having a national day of whacky community fun Ex. Red Nose Day or sponsoring silly antics of friends, family, or colleagues
Value Proposition of Home Depot What is Home Depot offering? Home improvement items Workshops- teach how to take on DIY tasks Customer service (guidance, delivery, installation) Why do they want to buy from Home Depot Have the largest in store selection, is known for being cheaper, aimed towards professionals (contractors, plumbers, interior designers, etc.) Suggested value proposition Providing premium products
Profit proposition Very simple premise: Maximize revenues while simultaneously keeping costs as low as possible. Comic relief did a very good job of this: Used volunteer workers to work their different fundraising events. With each donation, a red nose was handed to the donor, giving them something to take home. Subconsciously increased value, motivating people to donate, increasing revenues, meanwhile the red noses were extremely cheap to make, keeping costs down, maximizing profit.
Profit Proposition in Home Depot Regarding our suggestion for Home Depot: We suggest taking advantage of features that Home Depot already has, and applying them in an innovative way to premium products Storing premium products at their 100’s of distribution centers across the nation [Would not take up storage space in retail stores, so no expansion would be needed, as well as no sacrifices in already existing inventory.] Usage of Home Depot’s same day delivery features [Costs would be kept down as same day and next day delivery is already used by Home Depot, only costs would be expanding their operation.] Would be shipped to customer’s door after being ordered [Home Depot would only be paying to ship the products that have been ordered.]
People Proposition Motivating people requires overcoming organizational hurdles, winning peoples trust, and aligned/fair incentives. Have to inspire people with the value proposition Get everyone actively involved to be part of the strategy Ignoring the people proposition results in execution failure Ex: Comic relief Everyone enjoys their involvement and feels like they are making a change
People Proposition in Home Depot Discount program for online premium products Employee specific discount codes for in-store customers Employee upsell incentives Inspire and support charity programs/community involvement Provide corporate sponsorships Community Impact Grants Program Veteran Housing Grants Program
So… what is the next principal of Blue Ocean??? From what we currently know, Blue Oceans Strategy can be three principals: The ability to fundamentally reconstruct market boundaries and offer a leap in value to buyers. The ability to unlock business model innovation through strategic pricing, target costing allowing companies to seize new customers profitability. The ability to fundamentally release creativity, knowledge sharing, and voluntary cooperation of people through the proper approach to employees and partners. So… what is the next principal of Blue Ocean???
The Fourth Principal - Alignment Also known as “closing the loop between creating and capturing blue oceans allowing it to act as a high performance and sustainable strategy” Value Proposition: Attracts buyers Profit Proposition: Allows the company to make money People Proposition: Motivates people to work hard Blue Oceans encompasses both differentiation and low cost strategies. “If a strategy does not fully develop and align with the three strategy propositions, short-lived success or failure typically results” - Execution failure Example: Napster vs Apple Itunes in the digital music industry
Questions ?