Strategy canvas is a tool which compares the performance of competitors on the critical success factors in an industry or market. This helps identify areas of innovation with less competition. It can also be understood better as a visual representation of the value proposition of other players in a market. This tool of competitor analysis is most commonly used as the basis for developing a blue ocean strategy. In other words, the purpose of strategy canvas analysis is to innovate new areas in the market where there is little or no competition.
Strategy Canvas Model
Main elements of a Strategy Canvas
This tool relies on some key elements to achieve the desired objective of creating low competition markets, which are as follows:
- Critical Success Factors – these are the factors which are valued by customers in the current market or industry, thereby serving as sources of competitive advantage.
- Value Curves – this refers to the visual depiction of the level of performance of each competitor in the market across the different critical success factors for that industry
- Value Innovation – this is the main objective of strategy canvas, i.e., to excel at the critical success factors which competitors do not, or to create entirely new factors based on previously unidentified wants or needs of customers.
Strategy Canvas Example
This figure shows an example of a strategy canvas. Value curves depicted for three competing companies and what an innovative company can do to create value innovation. From the strategy canvas elements explained above, the horizontal axis lists the critical success factors. By assigning some values to the level of offering of each competitor for each critical success factor, a value curve can be visualized for each company.
An innovative company is one which shifts its focus from some of the factors with high levels of overlapping competition. Instead, it tries to introduce some new feature or service that competitors do not provide currently. This is the area of value innovation. Such an approach can be extremely useful in situation of high competition, such as when a company is facing multipoint competition with many rivals.
What is Value Curve Analysis?
Value curve analysis is used synonymously with strategy canvas analysis. It is used to compare the value proposition provided to customers by the current offerings available in the market. This requires a consideration of the critical success factors which are currently dominant in the industry and pursued by other competitors, such as products, services, and delivery.
Here are some pointers on how to interpret the value curves in a strategy canvas.
- A high score should be used to indicate that a company offers customers more value; this indirectly means that the company concentrates more investment and efforts into that factor.
- If the basic shape / trend line of the value curves of the different companies being compared are similar, it indicates a high level of competition on same factors.
Converging value curves for different competitors can mean that a blue ocean strategy will set you apart from the competition. At the same time, there could be a reason why the competitors in this industry have aligned similarly along the same critical success factors. This could mean that the blue ocean strategy needed would have to be something that completely re-defines the industry. This could be very difficult to accomplish successfully.
How to make a Strategy Canvas?
To make a strategy canvas, you should follow these steps:
- Explore the current market situation to see what competitors are doing
- Identify the critical success factors for the industry
- Assign values for how well each competitor performs on each of the identified critical success factors
- Study the generated value curves to identify the areas where value innovation can be pursued
By following these steps, you can easily make the strategy canvas in Excel. We have prepared a strategy canvas template which you can download from our Resources page.
However, in terms of practical application, the use of a framework is recommended to improve the usage of a strategy canvas.
Four Actions Framework
Strategy canvas analysis does not just involve the preparation of the visual representation of value curves of competitors. Instead, this should be used as a starting point for further analysis. One of the common approaches to further analysis using strategy canvas is to make use of the four-actions framework. This relies on some key steps as follows.
- Eliminate: Determine which factors that are often taken for granted as essential but may no longer have as significant of an importance or relevance. (This can be explored by looking at the latest market trends which show the change in preferences of customers towards these established critical success factors)
- Reduce: Identify which factors can be reduced much further below the established industry standard.
- Raise: This step involves a focus of additional investment and effort on the factors that can be raised well beyond the industry standard to overcome competition.
- Create: Try to explore some new factors that need to be created or introduced to the industry; this should be something which is not currently available through other competitors.
This can be understood with the same example, further explained as follows. The innovative company eliminated personalization and product variety from its strategy. The rationale for this could be that these factors were no longer valued as highly by the customers. This company also reduced emphasis on the core feature and price (in comparison to the competition). Instead, it raised the level of quality, user experience and customer support. Finally, this innovative company introduced new features and services that were not currently offered by other players in the market.
Additional Tips when developing a Strategy Canvas
In terms of conventional approach to strategy, companies typically compete to provider better solutions than their rivals. They often focus only on existing problems in an industry. Instead, as part of the value innovation and creation step of the strategy canvas, companies should try to gather insights on how to redeﬁne the problem which the industry is facing. This will help explore value elements which lie outside of the current industry boundaries, but still hold value to customers. Companies should also try to pursue internal synergies to enhance the results of their value innovations.
The best way to do this would be for a company to change its strategic focus. Instead of looking at just the competitors, they should be exploring alternatives to current solutions in the industry. Companies should also not confine themselves to only the current customers in an industry. They can also look beyond this to see how they can expand market and bring new customer segments into the industry.
When looking at the elimination step of the Four Actions Framework, companies should consider whether there have been some fundamental changes in what customers value in the market. Often, existing companies are focused on outperforming competitors on the same conventional factors and lose sight of new opportunities.
Another point to consider is whether the products or services being offered in the market have been over-engineered in the race to beat competition. It is often the case that companies over-serve customers more than their requirement or expectation. The result is an increase in their overall costs for little to no gain. Companies should instead aim to lift buyer value by creating new demand with relatively lower competition.