In their excellent book Blue Ocean Strategy, W. Chan Kim and Renee Mauborgne share a fascinating technique for visualizing competitive differentiation and innovation opportunities. Called the Strategy Canvas, it is both a diagnostic tool to show you what your current competitive situation looks like as well as a planning tool for identifying untapped innovation opportunities.
The strategy canvas condenses a significant amount of information into a compact format. The horizontal axis contains a list of factors that the industry in question competes on and invests in, as well as potential areas were customer value could be created. The vertical axis indicates the degree to which each competitor invests in each factor.
To create the strategy canvas, you simply plot points for the current performance of your company and all competitors, and then connect the dots to create a series of lines that represents the value curve for each company.
Screenshot of strategy canvas examples from Visual Paradigm
The strategy canvas offers several advantages to innovators:
- It enables you to quickly see areas were your strategy and those of your competitors converge (where everyone is following the same orthodoxy or set of assumptions on how business is done)
- It shows areas of divergence—where your company’s strategy differs significantly from that of your competitors
- It also helps you to see white space opportunities for innovation and competitive differentiation
The strategy canvas also reveals if your company has taken a scattershot approach to creating customer value. If your company’s line on the strategy canvas looks like a zigzag, with high values in some areas and low values in other areas, it indicates that you and your strategic planning team needs to address that issue.
Have a look at this template builder to create your own strategy canvas.
In the chart on this page, you can see that the strategy canvas for Southwest Airlines has succeeded in differentiating its itself from other airlines and competing forms of transportation, by focusing on only three factors: friendly service, speed and frequent departures.
The authors of Blue Ocean Strategy point out that one of the problems with traditional strategic planning sessions is that the managers usually bring their own biases and perceptions of what is important to the table. This leads to a lack of consensus on the organization’s current situation, which competitive factors are most important to customers, and the organization’s future direction. The result is often a lengthy, ponderous, hard-to-read document that isn’t used to run the business.
The visually compelling strategy canvas, in contrast, enables executives to see their current situation and potential opportunities for business model innovation more clearly. It also provides a visual language that the team can use to build consensus.
This is a powerful planning tool that’s also very easy to use (building collaboration on what it should look like and the competitive factors it should contain are much harder, of course). Why not give it a try today in your business?
A version of this article was published in 2006 by Chuck Frey on InnovationManagement—this updated and expanded version is available only to InnovationManagement members.