The Strategy Canvas: Illustrating Organizational Strategy on a Single Page
Is it possible to illustrate an organization’s strategy on a one page document? Absolutely! Authors W. Chan Kim and Renee Mauborgne created a tool called The Strategy Canvas that does just that. When properly constructed, the result will be a document that will increase the likelihood that a proposed strategy can be easily understood by all members of the organization and that will most likely be implemented. For my article in this month’s issue of Fargo, INC!, I will provide you with an overview of The Strategy Canvas and several reasons why using this tool will be of value and benefit to your organization.
What is a Strategy Canvas?
A Strategy Canvas is a tool that helps managers to “evaluate differences among competitors” within an industry. The structure of a Strategy Canvas is comprised of three components. The first component is called Factors of Competition, which is a list of several factors (depicted on the horizontal X axis) that are important to customers when purchasing a product or service. The second component is called Offerings. Within each Factor of Competition in an industry, companies invest resources and/or offer amenities and benefits. Using a range of low to high, the level or ranking of offerings by a company in each factor is depicted on the vertical Y axis. By combining both components, one can plot points on a graph chart. The third component is a Value Curve, which is simply connecting the dots plotted across the chart for a single company. Since each company has its own value curve, multiple company value curves can be included on a Strategy Canvas and can be distinguished by color coding each value curve. Kim and Mauborgne highlight several features of a Strategy Canvas: “First, it shows the strategic profile of an industry by depicting very clearly the factors that affect competition among industry players, as well as those that might in the future. Second, it shows the strategic profile of current and potential competitors, identifying which factors they invest in strategically. Finally, our approach draws the company’s strategic profile—or value curve—showing how it invests in the factors of competition and how it might invest in them in the future.”
For more detailed instructions on how to create a Strategy Canvas, to see a visual of what the finished product looks like, and to read how a company implemented this tool to make a dramatic and effective shift in organizational strategy, I highly recommend reading Kim and Mauborgne’s 2002 Harvard Business Review article titled “Charting Your Company’s Future.”
Dr. Aikens can be reached at: saikens@shontarius-d-aikens
What are the benefits of creating a Strategy Canvas?
So why should your organization consider creating a Strategy Canvas? There are several reasons. The first reason is that the process for creating a Strategy Canvas requires organization members to get objective data on the real reasons why customers use their products or services. Identifying the true Factors of Competition requires managers to get out of the building and to engage and interact with customers. Kim and Mauborgne suggest talking to not only customers, but also to lost customers, competitor’s customers and, if possible, watching users of your products and services in action. Too often, especially when working too closely with a product or service over time, managers can develop an inaccurate or out of date understanding of what customers are really looking for in their products or services. Identifying the Factors of Competition within an industry keeps the organization aware of potential changing needs or preferences of customers.
The second reason is that a Strategy Canvas provides an organization with an honest assessment of how they compare with competitors. As previously mentioned, one of the first steps in creating a Strategy Canvas is to accurately identify the Factors of Competition in the industry. Once those have been identified, the next step is to determine where an organization and its competitors are ranked in terms of the value offered for each of those factors (whether high or low in offerings). For example, let’s say that the three Factors of Competition identified for your organization’s industry are 1) price, 2) customer service and 3) product quality. And in your analysis, it was determined that your organization was the leader in terms of price, while customer service was viewed as average and product quality was viewed as below average in comparison to your competitors. This is essentially identifying an organization’s strengths and weaknesses as perceived by customers. Knowing this information enables the organization to determine which activities should be continued in order to maintain or build on their strengths while determining what future investments are needed to improve in other areas of importance to customers. From the scenario provided, the overall result is that this insight gives managers some direction on what needs to be done to increase the organization’s ability to compete in the industry on multiple factors rather than just one.
The third reason why a Strategy Canvas would be beneficial to your organization is the increased likelihood that action would be taken to implement the strategy. Formulating a strategy is one thing; executing strategy is another thing. And according to strategy scholars and practitioners, most strategies fail due to poor or lack of execution. One reason for this, as suggested by Kim and Mauborgne, is that typical strategic planning documents are too long to read. The simplicity of a Strategy Canvas is that it is a short document (1 page) that can be easily read and understood by all employees. Why is this important? More individuals who have a clear understanding of the organization’s strategy will lead to more actively engaged individuals taking actions to move the organization in the desired direction.