TOOLSET

Industrial Strategy Analysis

Looking at industries from a critically discerning perspective is a great way to capture unmet needs of all the audiences targeted by them. While explaining the Blue Ocean Strategy, Chan Kim and Renee Mauborgne suggest a useful tool to do this. This tool clearly shows three of the main elements of the dominant strategic configuration in an industry. The first is the factors the industry competes with, namely its primary value propositions. The second is what customers experience or can obtain on the basis of these factors. The third is the strategic profiles of all solutions in the industry.

The outcome of the analysis is a two-axis graph. On the horizontal axis of the graph, there are the main factors the industry competes with by continually investing. The vertical axis indicates the level of customer experience that each one of the existing solutions can offer along each competition factor. A solution that scores high for a specific competition factor on the vertical axis means it provides a better experience for customers. The lines formed by determining the levels of existing solutions in terms of all factors show the strategic profiles of those solutions.

The outcome of this tool is used in the Customer Value Analysis tool.
Industrial Strategy Canvas

How It Works?

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Step 1

Determine Competitive Factors

Identify key factors the industry competes with, no fewer than five and no more than twelve. When identifying these factors, consider the following:
  • Look from the perspective of industry players because the goal is to extract the industry's viewpoint. The customer's perspective will come into play in later stages. To understand what the industry values, you can examine where it invests and what it communicates most to its customers. Often, there's a discrepancy between what companies think is valuable to their customers and what most customer groups truly value. The path to innovative solutions lies in identifying this discrepancy.
  • When conducting this study for B2B industries, there's a frequent mistake of assuming that the products sold are standardized and that the most distinguishing factor in competition is price. Don't forget other important factors in these industries, such as solution evaluation, technical support services, delivery times, and stock availability.
  • Organizational factors that customers can't experience (e.g., competent human resources, strong IT infrastructure) should not be considered. If there is an organizational factor that is competitive and experienced by the customer, it should be expressed in terms of the value offered to the customer. For example, if competent human resources allow companies to provide customized solutions quickly and flexibly and this is a significant competitive element, instead of writing "competent human resources," write "customized solution speed and flexibility."
  • Brand strength is often listed as an essential competitive factor. However, it's crucial to remember that a brand is often a product of the strategic profiles of the solutions a company offers. The power of a brand is determined by its level of awareness and the allure of the values it evokes. A brand that consistently lets customers experience an attractive set of values will become more well-known. For example, the Apple brand is strong because Apple products consistently offer customers an attractive set of values (simplicity, ease of use, elegance, quality, luxury). With this perspective, instead of adding "brand strength" to the list of competitive factors, it would be more accurate to write the factors that create that strength.
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Step 2

Select Solutions to Evaluate

Decide which solutions to place on the canvas. To prevent the industrial strategy canvas from losing its direction, I recommend including no more than five solutions.

Start with the market leader. The market leader is often the one that others try to imitate. Therefore, you'll notice that the strategic profiles of most players in the market converge towards that of the market leader. Although there may be minor differences that distinguish the imitators, these often hold little value in the eyes of customers and are perceived as interchangeable solutions. Including players who merely mimic the market leader on your canvas wouldn't add much value; it might even lead to overemphasized minor differences that customers deem insignificant. For instance, to most customers choosing a C segment sedan, the difference between a trunk volume of 300 liters and 350 liters is negligible. If the market leader has a 300-liter trunk capacity, you shouldn't bother evaluating a competitor boasting "Ours is 350 liters!"

Then move on to the best-in-class players. Their strategic profile is the gold standard defining the industry. They are pioneers in many respects and are not always the market leaders. If there are several very similar best-in-class players, focus on the most significant one.

If you're mapping a industrial strategy canvas for a market served by alternative industries, don't forget to evaluate the top players in these industries. For example, if you're looking into the online money transfer industry, consider traditional service providers like banks, traditional companies like Western Union, and even cryptocurrency services as competitors.

Finally, it's smart to include small but rapidly growing players that are challenging the dominant status quo in the industry.
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Step 3

Assess the Selected Solutions Based on the Competitive Factors You've Identified

Now it's time to evaluate the players you've identified based on the competitive factors you've set. Before assessing, you need to establish your scale. You can use a five-point Likert scale where one is low, three is average, and five is very high. Then, you should define what one, three, and five mean for each factor. Keep in mind while assessing:

When evaluating price, use the absolute price (the sticker price) as a reference. On the vertical axis, a high price should be high, and a low price should be low. You can set the scale and price match such that the level three on your price scale corresponds to the average price in the industry.

You might not have enough data to predict how customers experience certain competitive factors for every solution. Evaluators might also disagree among themselves. Remember, the industrial strategy canvas is a self-assessment tool aimed at giving a macro-level picture of the industry. So, if you accidentally rate a solution as a three instead of a four on a certain dimension, it's not a significant issue.

Not every customer experiences each factor the same way. Don't get hung up on minor differences; however, if you identify groups with significantly different expectations, consider creating separate canvases for each.

Different competitive factors may have different weights in the eyes of customers, and these weights might vary among different customer groups. However, this aspect is not considered in the industrial strategy canvas.

With these considerations in mind, once you have created your canvas, you can then proceed to evaluate the picture it presents and draw strategic insights. You might start with questions like: How intense is the competition in this industry? How similar are the strategic profiles of the industry players? What are the common assumptions in the industry?

If all the strategic profiles in an industry are converging, it suggests the industry has become a "red ocean" marked by cutthroat competition where solutions easily substitute for one another. Solutions with significantly different strategic profiles are effectively shielding themselves from competition, creating their own "blue oceans."