Strategy Canvas

What is Strategy Canvas?

The Strategy Canvas is a strategic diagnostic tool developed by W. Chan Kim and Renée Mauborgne, authors of the Blue Ocean Strategy. It visually represents the current state of play in the known market space and provides a framework for understanding and creating new market space. The canvas maps the various factors that an industry competes on and the offering levels buyers receive across these factors. By analyzing this landscape, businesses can identify opportunities to differentiate and create uncontested market space.

This tool moves beyond traditional competitive analysis by focusing not just on what competitors offer, but on how they compete. It plots the relative competitive strengths and weaknesses of key industry players against a set of competing factors. The goal is to reveal the strategic profile of an industry and the predictable paths that companies tend to take. This visualization is crucial for identifying opportunities to break away from the competition and offer something uniquely valuable to customers.

Understanding the Strategy Canvas is fundamental for businesses aiming to pursue a blue ocean strategy. It enables managers to see the strategic logic of their industry and to reconstruct the market’s boundaries. By challenging industry assumptions and redefining market offerings, companies can aim to make the competition irrelevant and unlock new demand. The canvas serves as both a diagnostic tool and a planning framework for achieving this strategic shift.

Key Takeaways

• The Strategy Canvas visually maps an industry’s competitive factors and the offerings of key players.
• It helps identify areas of differentiation and opportunities for creating uncontested market space (Blue Oceans).
• The tool facilitates a shift from competing in existing markets to creating new demand.
• It provides a structured approach to analyzing industry strategy and reconstructing market boundaries.

Understanding Strategy Canvas

The Strategy Canvas typically features a horizontal axis listing the key factors on which an industry competes. These factors can range from product features and service levels to pricing and distribution channels. The vertical axis represents the offering level of buyers across these factors, ranging from low to high. Each competitor in the industry is then plotted as a line on this graph, showing their relative investment and performance on each factor.

The resulting visual representation highlights the common strategic logic of an industry. Companies that compete similarly often exhibit similar lines, forming a pattern. Where these lines diverge significantly, opportunities for differentiation may exist. The goal is to move away from the crowded red ocean of existing competition and explore a blue ocean of untapped market demand. This involves making strategic choices about which factors to invest in, which to reduce, and which to eliminate, while also introducing factors that the industry has never offered before.

Formula (If Applicable)

The Strategy Canvas does not rely on a specific mathematical formula for its construction. Its power lies in its visual and qualitative representation of strategic positioning. The ‘formula’ is derived from the strategic choices made about the competing factors: what to eliminate, reduce, raise, and create.

• Eliminate: Factors the industry takes for granted but are no longer valuable to buyers.
• Reduce: Factors that are over-served by the industry and can be reduced without compromising buyer value.
• Raise: Factors that are under-served by the industry and should be raised to meet buyer needs.
• Create: Factors the industry has never offered but can be introduced to create new sources of value and demand.

Real-World Example

Cirque du Soleil is a classic example of a company that utilized the Strategy Canvas to create a blue ocean. In the traditional circus industry, competitors (like Ringling Bros. and Barnum & Bailey) competed on factors such as star performers, animal acts, and multiple rings. The Strategy Canvas would have shown these factors being heavily invested in, with high offering levels for buyers who valued these elements.

Cirque du Soleil, however, reimagined the circus. Using the Strategy Canvas, they analyzed the industry and made strategic choices. They eliminated animal acts and star performers, reduced the emphasis on traditional concession stands, raised the artistic and theatrical elements (music, dance, sophisticated venue), and created a unique blend of circus artistry and theatre appealing to an adult audience willing to pay premium prices. This allowed them to offer a new form of entertainment, attracting customers who previously did not attend traditional circuses, effectively creating a new market space.

Importance in Business or Economics

The Strategy Canvas is paramount in business strategy for its ability to facilitate radical innovation and strategic differentiation. It provides a clear, visual language for understanding complex market dynamics and identifying pathways to create new demand rather than fighting for existing market share. By shifting focus from competitive parity to market creation, businesses can achieve sustainable growth and profitability.

Economically, the Strategy Canvas aids in understanding how industries can evolve and new markets can be formed. It offers insights into how companies can break away from commodity traps and price wars, leading to greater economic value creation. It encourages a more dynamic view of market competition, where disruption and innovation are not just reactive measures but proactive strategic pursuits.

Types or Variations

While the core Strategy Canvas framework remains consistent, its application can have variations based on the specific industry and strategic objectives. The primary variation lies in the selection and definition of the competing factors on the horizontal axis. These factors must be relevant to the industry being analyzed and capture the key dimensions of buyer value.

Another variation is the focus of the analysis. While typically used for creating blue oceans, it can also be adapted for analyzing existing market positions or identifying potential threats from emerging competitors. The key is to ensure that the chosen factors and the resulting visual analysis lead to actionable strategic insights.

Related Terms

• Blue Ocean Strategy
• Red Ocean Strategy
• Competitive Analysis
• Value Innovation
• Strategic Planning

Sources and Further Reading

• Kim, W. Chan, and Renée Mauborgne. Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant. Harvard Business Review Press, 2005.
• MindTools. “Strategy Canvas: Visualizing Your Strategy.” www.mindtools.com/pages/article/strategy-canvas.htm
• Bain & Company. “Blue Ocean Strategy in Action.” www.bain.com/insights/blue-ocean-strategy-in-action/
• Strategyzer. “Strategy Canvas.” www.strategyzer.com/canvas/strategy-canvas

Quick Reference

Strategy Canvas: A visual tool mapping industry competition on key factors to identify blue ocean opportunities.

Frequently Asked Questions (FAQs)