The PMS map

A useful exercise for a corporate management team pursuing profitable growth is

to plot the company’s current and planned portfolios on the Pioneer-Migrator-
Settler Map created by W. Chan Kim and Renée Mauborgne.

Settlers are defined as me-too businesses, migrators are business offerings better
than most in the marketplace, and a company’s pioneers are the businesses that
offer unprecedented value. These are a company’s blue ocean strategic moves, and
are the most powerful sources of profitable growth. They are the only ones with a
mass following of customers.

If both the current portfolio and the planned offering consist mainly of settlers, the
company has a low growth trajectory, is largely confined to red oceans, and needs
to push for value innovation. Although the company might be profitable today as
its settlers are still making money, it may well have fallen into the trap of
competitive benchmarking, imitation, and intense price competition.

If current and planned offerings consist of a lot of migrators, reasonable growth

can be expected. But the company is not exploiting its potential for growth and
risks being marginalized by a company that value-innovates. In our experience the
more an industry is populated by settlers, the greater the opportunity to value-
innovate and create a blue ocean of new market space.

This exercise is especially valuable for managers who want to see beyond today’s
performance. Revenue, profitability, market share, and customer satisfaction are all
measures of a company’s current position. Contrary to what conventional strategic
thinking suggests, those measures cannot point the way to the future; changes in
the environment are too rapid. Today’s market share is a reflection of how well a
business has performed historically. Clearly, what companies should be doing is
shifting the balance of their future portfolio toward pioneers. That is the path to
profitable growth.

7. The ERRC grid, the way it is used and the decisions that can come from it

The ERRC grid is a helpful tool for any startup or company is trying to identify
new opportunities, new products or services to offer, or a business model to
differentiate it from the competition. It facilitates identifying the following
elements a company should work on to make the competition irrelevant:

Eliminate: Factors that the industry has long competed on but people take for
granted and should be eliminated because they no longer add value.
Reduce: Factors that should be reduced well below the industry standard because
they come with a high cost but provide little competitive advantage or profit.
Raise: Factors that should be raised well above the industry standard and can add
value to existing customers. Create: Factors that should be created that the
industry has never offered and can attract new customers.

When you look at the competitive factors, there are really only four actions you
can take with them. You can eliminate them completely, you can reduce your
investment in them, you can raise your investment in them or you can create totally
new factors. These four actions are the basis for creating a new strategy canvas.
The Malaysian company Air Asia is used as an example of how an airline could
avoid the red ocean and open up new markets making the competition irrelevant.
Step 1. Eliminate the competitive factors. Which competing factors should be
eliminated from the industry’s standard? For example, eliminate free
food/beverage on the plane. They are taken for granted by the customers and
removing them might lower the ticket price and attract new customers who
couldn’t afford plane tickets before.

Step 2. Reduce the investment in them. Which competing factors should be

reduced well below the industry’s standard? For example, reduce Luxury facilities
provided by airport lounge. Also, make the attendance service on the plane
optional.

Step 3. Raise the investment in them. Which competing factors should be raised
well above the industry’s standard? For example, focus on several key destination
cities and increase the frequency of flight. This can attract more customers who
travel a lot and need a more convenient flight schedule. While step 4 is creating
totally new factors. Which competing factors should be created that the industry
has never offered? For example add online booking option and create point to point
travel system to add value to existing customers.

11. The Four Steps of Visualizing Strategy

What follows is brief discussion of the Visualizing Strategy:

1. Visual Awakening: it means comparing your business with your competitors by

drawing your "as is" strategy canvas. Also seeing where your strategy needs to
change.

2. Visual Exploration: it has the meaning of going into the field to explore the six
paths to creating blue oceans, observing the distinctive advantages of alternative
products and services and seeing which factors you should eliminate, create, or
change.

3. Visual Strategy Fair : Draw your "to be" strategy canvas based on insights
from field observations. Get feedback on alternative strategy canvases from
customers, competitors' customers, and noncustomers. Use feedback to build the
best "to be" future strategy.

4. Visual Communication : Distribute your before-and-after strategic profiles on

one page for easy comparison. Support only those projects and operational moves
that allow your company to close the gaps to actualize the new strategy.

12. The Kernel of strategy contents

The kernel of a strategy contains three elements:

(1) The diagnosis that defines or explains the nature of the challenge. Strategy is
about focus. It’s about leveraging limited resources to achieve maximum results.
To do that, you must first understand the challenge you face and that begins by
discovering what’s important and what’s not. A proper diagnosis comes from
focusing attention on the points that matter and then defining the challenge with
piercing clarity and insight. It is the clear and insightful answer to the question,
“What’s going on here?”

(2) The guiding-policy for dealing with the challenge. The purpose of a guiding
policy is to channel actions in a particular direction. It is the context and intent
through which decisions are made and helps focus attention to head in a particular
direction.

(3) The set of coherent-actions that are designed to carry out the guiding-policy.
Strategy without action is nothing but a document. But action without strategy is
aimless. Just as a diagnosis informs the guiding policy, the guiding policy frames
the coordinated steps to accomplish the goal.

9. capturing and creating Blue Ocean Strategy

According to the marketing theory and the title of a book published in 2004 that
was written by W. Chan Kim and Renée Mauborgne, the companies and the
organizations can create and capture Blue Ocean Strategy. These companies and
organizations create this strategy by creating and capturing a leap in value for the
company, its buyers, and its employees while unlocking new demand and making
the competition irrelevant.

W. Chan Kim and Renée Mauborgne shaped the analogy that companies should
stop struggling to win in red oceans of bloody competition, where rival businesses
fight for dominance of an established yet saturated market space. Instead,
companies can create “blue oceans” of uncontested market space, where the
potential for profit is far greater, and the competition nonexistent or irrelevant.

An organization can create and capture the blue oceans by looking across the six
conventional boundaries of competition, reduce their planning risk by following
the four steps of visualizing strategy, create new demand by unlocking the three
tiers of noncustomers and launch a commercially viable blue ocean idea by
aligning unprecedented utility of an offering with strategic pricing and target
costing and by overcoming adoption hurdles. Therefore, the competitive
companies and organizations can create and capture this strategy.