Business Strategy Monday–Creating a Value Curve

Today’s

Vocabulary

(1) Dependability: Doing what you said you would do

I prefer this car for its dependability. It might not be the coolest, but I know it will always work.

(2) Comfort: Something that relaxes you, the opposite of stress

This chair is so comfortable! I could sit here all day.

(3) Let’s pretend: We say this before talking about an unreal situation.

Let’s pretend we have an unlimited budget. What will we do?

Today’s

Questions

1. How might a restaurant find a blue ocean?

a. Going to the city center

b. Leaving the city center

c. Doing something different than the competition

2. Which things go on a value curve?

a. Things important to your industry

b. Things customers want or need

c. Things that your competitors aren’t doing, but you can do.

3. Why might an airline not value low ticket prices?

a. They might get revenue in other ways

b. They might create a flight people will pay more for

c. A and B

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BUSINESS STRATEGY MONDAY

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airline By Jeremy Schaar

The past two weeks I’ve been writing about blue ocean strategy and value curves. Today, I’ll review what blue ocean strategy and value curves are. Then I’ll write about how you can apply it to your industry.

Blue ocean strategy is when a company tries to move to an area without competition. They do this by changing their value curve. A value curve is a set of things that are important to your industry and how important they are for your company.

For example, a restaurant might have three things on its value curve: price, location, and taste. Which do you think should be important for a restaurant? Which shouldn’t be important? There’s no perfect answer, but imagine a city with many expensive restaurants in the city center. They all serve really great food. It’s a red ocean and everyone is trying to make their food a little bit better to compete. A company could find a blue ocean by charging less money and leaving the city center or sacrificing taste.

What about your industry? How might you find a blue ocean?

The first step is to think about what’s on your value curve. These are things important to your industry. Then you should decide how much you value each thing. Compare this with how much your competitors value each thing. Then redraw your value curve.

Let’s pretend you’re in the airline industry. Airlines have a real red ocean industry, so this is hard. (But no one ever said business was easy.)

Values

The first thing is obviously ticket price. Do you want to try to and offer cheaper tickets or will you try and get customers in another way? For customers, price will often be the most important thing, so you’ll probably want to value price a lot. But maybe price won’t be important to you. You might try and sell fewer tickets at a higher price. Or you might try to convince people your tickets are worth more money. Or you might try and get revenue in other ways.

After that, there’s comfort during the flight. How big are the seats? What other things can you offer to make the flight more comfortable? This will include everything from pillows to the TVs on the backs of seats and good food. If you value this high, maybe you can charge more. If it’s low, you can save on ticket price.

Dependability is another important value for airlines. Are the flights on time? How often do you have delays? Do you lose bags? Increasing speed and reducing errors will mean increasing costs, but it might be worth it. Many people will pay more for a dependable airline.

Customer Service is the final value I’ll mention today. What happens when there are delays? What mileage programs do you offer? Will you value this high and spend money on more customer service employees? Or will you not worry about it?

We might continue to add values, but this should give you an idea of how to create a value curve. Next time, we’ll look at how to change your value curve to beat the competition.

Want to study Business English? Check out the main site for our lessons.

Want to learn more about blue ocean strategy? Click here.

Got questions or comments? How about practicing some new vocabulary and posting your thoughts on the blog, Facebook, or Twitter?

CHECK YOUR ANSWERS!

Answers To Today’s Questions

C, A, C

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You Can Do It All Yourself But You Dont Have To

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