A commercially successful business plan is slow to find. Gradually. One fulfilled request at a time. One answered question after another. You don't want to get stuck on not being able to cut costs. That you're setting the price too high for your customers. Or that your product just won't be useful to your customers at all.
Just answer. Yes or no? Do we have anything we need? Have we set a price that makes it worthwhile? Is there nothing that would derail the marketing of our business plan? This will take you step by step through another Blue Ocean strategy tool - the Blue Ocean Creation Sequence. Let's take a closer look at how you should proceed and what questions you should ask yourself.
4 seemingly simple questions
Blue Ocean Strategy has come up with a simple yet effective sequence to find a commercially viable idea that will lead you to create a blue ocean. This sequence, which includes 4 clear questions, will help you create a profitable business model. And ensure it's a win win. For you and for your customers. If you don't answer yes to any of the questions about benefit, price, cost and implementation, revisit it and rethink your plans.
1. Does the business plan have an exceptional benefit for the buyer?
Is there even a compelling reason for a customer to open their wallet? Does your offer have any utility value to them?
Keep in mind that the main goal is to solve a problem or satisfy a need that has not been satisfied. Or has been, but not enough. This is where Blue Ocean's buyer benefit map helps you. I've written about it before. It helps you know your weak spot. Or rather, the weak spot of what you're offering and what you're doing business with. And you win. Don't let your customers look elsewhere for alternatives.
I think the Nintendo Wii worked great with this. It targeted the casual gamer, the need for this entertainment kind of came about unconsciously. But it did. Against competition from PlayStation and Xbox, they targeted customers who didn't care about high-tech consoles. They just wanted to play now and then. Nintendo simplified the whole experience for them and the market opened up.
2. Is the price acceptable to most buyers?
Is your offer attractive to the mass of customers? Can they afford the amount to pay? Or will they look to competitors?
The price must not only attract customers, but more importantly, retain them. Set a price corridor - it costs from-to. That's where you need to fit the price. To be successful even at this point, you need to understand the sensitivity of potential customers to price and make it acceptable to them.
Here I always like to mention the famous Cirque du Soleil - a typical example of the blue ocean strategy. It redefined the circus industry by combining the tent and the theatre. He didn't compete, he created a new kind of entertainment for a wider audience. Including adults who didn't normally go to the circus. He set the price higher than traditional circuses, but justified it by offering a more luxurious and unique experience to a whole new market segment.
3. Are you able to meet the planned costs to make the project profitable?
Can you count on predetermined costs and still achieve a profit margin? Don't costs determine the price?
Just don't get to the point where you reduce quality because of high costs. Costs must not block profit and at the same time must not determine price. If you are unable to meet the target cost, you must either abandon the idea because it will not be profitable, or you must innovate. There you have several options:
more efficient operation,
partnerships and leveraging others' expertise or economies of scale,
innovations in the production process.
Ensuring that the offering can be produced and delivered at a cost that allows profitable operation at a set price level is absolutely critical. A great tool that you already know from me is the ERRC matrix. It forces companies to reduce costs while differentiating themselves. The strategy is to achieve a cost structure that enables profitability and is difficult for competitors to replicate.
4. Are there any obstacles that prevent the implementation of the business plan?
Have you thought about them at all? Who can throw sticks at your feet, intentionally or unintentionally? Where does it all get stuck?
That's actually a common scenario - everything is on track, but the last step is more of a stumble. You only have a commercially successful business plan in your pocket if you manage to eliminate potential obstacles to implementation, ensuring successful deployment and sales of your idea. How to do it? Dispel the fears of employees, business partners or the general public. Communicate with an emphasis on the benefits. Proactively address any concerns. Educate, motivate to try, explain.
If you follow this sequence and really examine every single point in detail, there will definitely be more than just positive answers on the first good one. But this is also a necessary part of the process, don't be afraid of it. It's the only way to come up with a product that has the potential to succeed. It's the only way you'll create your own blue ocean, dominate the market and not look over your shoulder at the competition.
And if you're not sure about any of the points, let me know and we'll go through it together.