Posts Tagged ‘Renée Mauborgne’

Minimize your “big idea” risks by asking 4 questions

Have you ever loved a new idea so much you’re willing to forgive the nagging uncertainty of its financial viability? I’ve been there. You’ve already created the catchy name, bought the URL and outlined the program details. To ease your conscience, you tell yourself you’ll just work harder at selling it.

The authors of Blue Ocean Strategy would say a great idea isn’t enough. They’d put you through what they call a strategic sequence of questions.

Blue Ocean Strategy (BOS) emphasizes a focus on blue oceans of uncontested market space. In contrast, red oceans or existing market space get crowded as more compete for a greater share of existing demand. Cutthroat competition turns the ocean red. Blue oceans consist of untapped market space where there is opportunity for highly profitable growth and where competition is rendered irrelevant. As nonprofits more frequently turn to alternative funding sources, they don’t have the luxury of crashing and burning on a bad idea. That’s why the BOS methodology is essential for nonprofits during any form of planning/forecasting.

An integral part of BOS approach is creating a business model that is viable and makes a healthy profit in the blue ocean. If you follow the correct strategic sequence and test your blue ocean ideas against criteria in that sequence, you can minimize your risk. The sequence stems from the authors asking the following questions.

If you answer “no” to any question, your blue ocean potential stops.

Buyer utility—Is there exceptional buyer utility in your business idea?
Price—Is your price easily accessible to the mass of buyers?
Cost—Can you attain your cost target to profit at your strategic price?
Adoption—What are the adoption hurdles in actualizing your business idea? Are you addressing them up front?

We asked our interview guest, Heather Gowdy, and coauthor of The Nonprofit Business Plan: A Leader’s Guide to Creating a Successful Business Model (2012), to discuss the merits of the strategic sequence in light of her unique perspective on business planning.

CausePlanet: The strategic sequence (on page six of the Page to Practice™ summary) reinforces a closer look at the financial aspects of a potential blue ocean. We know from The Nonprofit Business Plan, you would endorse thoroughly understanding the financial aspects of any potential strategy. Will you comment on the importance of questions like these in the strategic sequence?

Gowdy: It is absolutely critical to understand the financial implications of a potential strategy—just as it is important to understand the implications for mission advancement. Many nonprofits excel at doing both, but just as many struggle with aspects of business model analysis. Which is understandable: doing so can be even more complex in the nonprofit sector than in the business sector. A nonprofit organization’s “buyers” or customers are not just the individuals and groups availing themselves of a particular product or service. Given that those customers typically do not pay market rate for what they receive, the nonprofit must make up the difference with funding from other sources. Those third-party payers are also customers (buyers) although they may not receive anything directly in return. Nonprofits must continually consider, attract and satisfy both types of customer. The price versus cost question can be equally challenging. Nonprofits can, do and often must provide services that do not in and of themselves generate a financial profit. The question becomes, does the mission value of doing so warrant moving forward, and if so, what other aspect of the business model will support that? Jumping to implementation without having clear answers to these questions is risky at best.

When you’ve considered launching a new idea, have you asked yourself questions similar to these contained in the authors’ strategic sequence? If you answered “no” to any of the questions, did you still carry on with the plan or make adjustments?

See also:

Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant

The Nonprofit Business Plan: The Leader’s Guide to Creating a Successful Business Model

Which comes first: the partnership or the plan?” by Heather Gowdy

Image credit: newmediaandmarketing.com

Leave a reply

Strategic plan has you seeing red? Try blue.

When most of us think about how to get an edge, we look around at our competition. We strategize about how to outperform our peers and raise more funds from the same donor pool.

Blue Ocean Strategy authors, Chan Kim and Renée Mauborgne would argue that approach is exactly why you’ll fail.

Instead, they ask you to imagine a market universe composed of two sorts of oceans: red oceans and blue oceans. Red represents all the industries in existence today or our current market space. Blue oceans denote all the industries not in existence.

The red ocean or existing market space gets crowded as more compete for a greater share of existing demand. Cutthroat competition turns the ocean red. Blue oceans, in contrast, consist of untapped market space where there is opportunity for sustainable growth and where competition becomes irrelevant.

Ringling versus Cirque:

The premise of Blue Ocean Strategy is aptly described by the authors through the exploration of Cirque du Soleil, one of Canada’s largest cultural exports. In less than 20 years, Cirque has achieved revenues that took Ringling Bros. and Barnum & Bailey—the global champions of the circus industry—more than 100 years to attain. What makes its success remarkable is its achievement in a declining industry. Cirque has succeeded by creating a new, uncontested market space that has made the competition and declining circus market irrelevant. They have appealed to a whole new group of customers: adults and corporate clients rather than children.

While you may feel like you run a three-ring circus that happens to have a 501c3 status, you’re not alone. Kim and Mauborgne encourage you to quit competing with so many peers, and instead, create your own uncontested market space.

A nonprofit planning perspective of Blue Ocean Strategy®

We asked Heather Gowdy, coauthor of The Nonprofit Business Plan: A Leader’s Guide to Creating a Successful Business Model (2012), to discuss the merits of Blue Ocean Strategy with us in light of her unique perspective on business planning.

CausePlanet: Heather, thank you for serving as our guest author for this interview. As a member of the La Piana Consulting team and coauthor of The Nonprofit Business Plan, you bring a unique and welcome nonprofit perspective that’s especially relevant to this business book and to building a successful business model. What do you appreciate most about Kim and Mauborgne’s Blue Ocean Strategy®?

Heather Gowdy: First and foremost, I love the emphasis on stepping back and taking the time to truly think strategically about your market, your customers and your noncustomers. So often organizations get trapped in the same grueling competitive cycles, searching for ways to incrementally adjust what they do to better meet the needs of clients, customers, individual donors or institutional funders. There is real value in thinking “out of the box” and looking for blue ocean strategies that might better enable you to advance your mission–strategies that may not be at all obvious now, but will lead to greater impact and sustainability in the long term.

In what color ocean does your current plan have you swimming? What appeals to you most about the Blue Ocean Strategy®? In my next post, watch for more interview excerpts with Heather and why you should be seeing blue instead of red.

See also:

Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant

The Nonprofit Business Plan: The Leader’s Guide to Creating a Successful Business Model

Which comes first: the partnership or the plan?

Image credit: Cirque du Soleil

Leave a reply

Welcome! Please provide your log-in information below.
Forget your password?
Enter your email or user name and your log-in information will be sent to the email on file.