If you know the Vann Group, you know we subscribe to the teachings of business experts Jim Collins (Built to Last and Good to Great) and W. Chan Kim and Renee Mauborgne (Blue Ocean Strategy). You’ve heard us talk about hedgehogs, BHAGs and red v. blue oceans. But you may be wondering how we blend these concepts—from different authorities—in creating strategies for our clients.
The purpose of this white paper is to explain how the tenets of these different schools of thought can be used together to create strategies that unlock value in a business.
Let’s begin with an explanation of some of the Key Principles from both schools that we believe are the most relevant for Strategy Development. Please note that the following is a synopsis and that we highly recommend reading Built to Last, Good to Great and Blue Ocean Strategy.
Jim Collins
The teachings of Jim Collins are based on several idea sets created by Collins through years of researching companies. He has found commonalities in great companies that he defines as follows:
“BHAG” –This is pronounced bee-hag, and it stands for “Big Hairy Audacious Goal”. According to Collins, this is a 10 to 30 year objective that serves as a unifying focal point of effort and should galvanize people and create team spirit. It is crisp, compelling and easy to understand.
Hedgehog Concept – This is the single organizing principle that unifies and guides everything about a business. It is developed by asking and answering three questions. 1) What are you passionate about? 2) What can you be best in the world at? 3) What drives your economic engine (the indicator that has the greatest economic impact on your business)? A Hedgehog is an important tool that simplifies the business, because anything that does not relate to the Hedgehog Concept is irrelevant.
Core Ideology – This is a combination of core values and core purpose. Core values are deeply held beliefs of what the organization should stand for. These beliefs are important to the organization internally, they do not need to be justified externally, and they are long lasting. Core purpose is the organization’s fundamental reason for being and must be validated by the importance people attach to the company’s work. According to Collins, core purpose taps the organization’s idealistic motivations and gets at the deeper reasons for its existence beyond just making money.
Vision –A combination of a company’s core ideology and what they envision their future state to be – or in other words, their BHAG.
W. Chan Kim and Renee Mauborgne
Also based on many years of research, the teachings of Kim and Mauborgne offer both a framework and a process for creating and succeeding in new market spaces. Key concepts include:
Red Oceans – Market spaces in which many competitors focus on fighting with each other. In red oceans, companies often invest in advancements that are only marginal advantages over the competition and therefore easily copied.
Blue Oceans -- Uncontested market spaces in which successful companies find ways to create demand in areas that are ripe for growth. These companies find ways to create value for customers that others are not providing.
Simultaneous pursuit of differentiation and low cost -- Executing a Blue Ocean strategy is not just about adding value that no one else is offering but also about finding activities to reduce or eliminate that are not valuable to customers in order to become a lower cost operation.
Frameworks and Tools – In Blue Ocean Strategy, Kim and Mauborgne offer a set of frameworks and tools for a company to use to find their Blue Ocean. Fully explained in their book (or as part of a Vann Group strategic planning session) these include the strategy canvas, value curve, four actions framework, six paths, buyer experience cycle, buyer utility map, and blue ocean idea index.
Next, let’s look at how we link these theories, concepts and tools in a cohesive approach to create winning strategy.
We begin by applying the Blue Ocean frameworks and tools to:
- Identify the marketplace in which the company competes, including competition, trends and anything else that affects their reality.
- Identify competitor classes that the company competes against and the factors on which they are competing.
- Identify target customers and what they value.
- Examine how competitors meet customers’ needs in order to find the gaps between what customers want and value and what they are getting from the existing marketplace.
- Create new value to fill those gaps.
As this point we can apply the Blue Ocean 4 Actions Framework to identify:
- The new activities that should be created in order to craft uncontested market space (filling the gaps).
- Which existing activities should be raised in order to increase value that will fuel the economic engine.
- Which activities should be reduced below the industry standard because they are not valued enough to adequately fuel the economic engine.
- Which activities should be eliminated entirely, because customers take them for granted.
Throughout this process, we carefully steer clear of the inherent dangers of conventional wisdom by putting biases and opinions on the table and examining what we think we know versus what we know we know. For example, it is critical to truly understand what customers value beyond a simplified assumption of “more for less”.
Next, we help the company to explore its core ideology, which includes its mission/vision and its Hedgehog Concept. Combining these notions with the outcome of the 4 Actions Framework enables the company (with our guidance) to articulate the Value Proposition.
Now, the company is able to create its BHAG and envision what the organization will look like when it has achieved it.
Through skilled and considered objective facilitation, we help companies eliminate the extraneous from their thinking and discussions so that their core values, core purpose, hedgehog and big hairy audacious goal become clear, exciting and energizing.
Finally, we arrive at a strategy that simultaneously makes the competition irrelevant and makes the business a lower cost operation.
If you have any questions about this white paper, contact Mike Vann at the Vann Group. The Vann Group is a business advisory firm that assists companies in transition to unlock their value. We provide practical business counsel to transitional companies through a customized approach that is founded upon our passion for business and our family′s 150+ year entrepreneurial track record. No other firm can provide the breadth and depth of services like the Vann Group, including strategic planning and business development, merger and acquisition advisory services, leadership succession planning, organizational development consulting, and crisis and turnaround management.
