four-actions-framework

What Is The Four Actions Framework And Why It Matters In Business

The four action framework points out four key actions to take into account to refine existing products. Those are: raise, reduce, eliminate, and create. To plot the available consumer products in a marketplace against the company’s ability to provide value and thus be competitive over time.

Four Actions Framework In A Nutshell

The Four Actions Framework can be employed to alter the product in a given market. Kim and Mauborgne, authors of Blue Ocean Strategy advocate the Blue Ocean Strategy, the framework can also be used to refine existing products.

In pursuit of these goals, there are four points that all businesses must consider:

Raise

Can any existing product attributes (competitive factors) be enhanced in such a way that they provide extra consumer value? In other words, which attributes can set new industry standards or trends?

Reduce

Conversely, are there any such elements that can be reduced or eliminated if their relative value or cost does not justify the means? Perhaps some factors erode profits or reduce competitive advantage?

Eliminate

This means removing factors that customers pay for as part of a status quo that industry players take advantage of. In the wine industry, the aging qualities of wine and the complex terms used to describe wine are promoted to add value to the finished product. But what do these somewhat pretentious and superfluous terms mean to the average consumer? Better value-adding, competitive factors may include wine club discounts or guided tours of the winemaking process.

Create

Is there an opportunity to bring something novel to the market that solves a consumer problem in a more effective way than a competitor offering? Instead of creating complex wines with complicated descriptions, a winery could produce a wine that was fun, unpretentious, and easy to drink at an attractive price point.

Four actions framework examples

ING Savings Maximiser Four Actions Framework Example

ING is a global financial institution that started offering consumer bank accounts with interest rates that were superior to competitor rates. This was enabled by a low-cost, direct-to-consumer business model with no branches or ATM networks to maintain. There are also no account-keeping fees of any kind provided the user deposits a certain amount of money into the account each month.

The ING Savings Maximiser bank account is a market leader for those who desire streamlined, fee-free banking with a worthwhile interest rate. But can it be refined further? Let’s take a look:

  1. Raise – if we refer to the name of the product, it is obvious that the primary focus of ING is to maximize the interest rate it can offer customers. This has become more difficult in the current economic climate with rates at historic lows.
  2. Reduce – there are not many elements ING can reduce as it already has a focus on product simplicity. However, the lack of physical branches – particularly for older consumers – may reduce its competitive advantage.
  3. Eliminate – while ING has a low-cost business model, it could have decided to charge users withdrawal, monthly, or ATM fees to boost profits. These fees have become very much the status quo for consumers who bank with traditional financial institutions. 
  4. Create – to boost competitiveness and help consumers become disciplined savers, the company added an automated saving feature where a portion of one’s income is directed to a dedicated savings account.

Nintendo Four Actions Framework Example

Nintendo struggled for many years in the 1990s to compete with better performing and more technologically advanced gaming products from Microsoft and Sony. As a result, the company lost significant market share and ultimately realized that it needed to act to reverse its fortunes. 

In 2006, it launched the Wii which redefined the prevailing logic of the market and captured consumer segments that were previously neglected.

How did this play out?

  1. Raise – the Wii will be remembered as the product that fostered social gaming and increased interactivity. This was achieved by releasing sports and fitness games and developing innovative accessories such as the Wii Motion Plus Controller, Dance Dance Revolution Pad, and Mario Kart Wii Wheel. The motion controllers in particular were revolutionary as they allowed people to play games that had been almost impossible to replicate on a console.
  2. Reduce – Nintendo opted to avoid working with third-party game developers because it tended to be a difficult relationship where the costs did not justify the results. Instead, it focused on developing games itself while Sony and Microsoft continued to rely on third-party developer powerhouses.
  3. Eliminate – Nintendo eliminated superfluous features from their previous consoles that were not related to gaming, such as DVD and Blu-ray integration and a hard disk drive.
  4. Create – a natural consequence of Nintendo’s social and interactive games was inclusivity. As we touched on earlier, the Wii appealed to an extensive but neglected audience of consumers such as families, children, and more casual gamers who were not as hardcore as the gamers Microsoft and Sony were targeting. To date, the Wii console has over 1500 games that appeal to all ages, abilities, and interests and most do not require any experience at all.

Connected strategic frameworks

SWOT Analysis

swot-analysis
A SWOT Analysis is a framework used for evaluating the business‘s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.

PESTEL Analysis

pestel-analysis
The PESTEL analysis is a framework that can help marketers assess whether macro-economic factors are affecting an organization. This is a critical step that helps organizations identify potential threats and weaknesses that can be used in other frameworks such as SWOT or to gain a broader and better understanding of the overall marketing environment.

Porter’s Five Forces

porter-five-forces
Porter’s Five Forces is a model that helps organizations to gain a better understanding of their industries and competition. Published for the first time by Professor Michael Porter in his book “Competitive Strategy” in the 1980s. The model breaks down industries and markets by analyzing them through five forces

Blue Ocean Strategy

blue-ocean-strategy
A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is value innovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.

BCG Matrix

bcg-matrix
In the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful business product portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.

Balanced Scorecard

balanced-scorecard
First proposed by accounting academic Robert Kaplan, the balanced scorecard is a management system that allows an organization to focus on big-picture strategic goals. The four perspectives of the balanced scorecard include financial, customer, business process, and organizational capacity. From there, according to the balanced scorecard, it’s possible to have a holistic view of the business.

Scenario Planning

scenario-planning
Businesses use scenario planning to make assumptions on future events and how their respective business environments may change in response to those future events. Therefore, scenario planning identifies specific uncertainties – or different realities and how they might affect future business operations. Scenario planning attempts at better strategic decision making by avoiding two pitfalls: underprediction, and overprediction.

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