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.
|Definition||The Four Actions Framework is a strategic management tool developed by W. Chan Kim and Renée Mauborgne, introduced in their book “Blue Ocean Strategy.” This framework is used to challenge and reconstruct the existing boundaries of competition within an industry by asking four key questions and identifying actions to create a new market space or “blue ocean.”|
|Components||The framework consists of four essential questions: 1. Eliminate: What factors or elements should be eliminated or reduced well below industry standards? 2. Reduce: Which factors should be reduced well below industry standards, but not entirely eliminated? 3. Raise: What factors should be raised well above industry standards? 4. Create: Which factors should be created that the industry has never offered before?|
|Process||1. Identify the Industry: Understand the industry’s current competitive factors and strategic variables. 2. Ask the Four Questions: Apply the four questions to challenge conventional industry practices. 3. Develop New Strategies: Based on the answers to the questions, develop strategies to create a new market space. 4. Execute: Implement the new strategies effectively.|
|Metrics||Metrics for the Four Actions Framework may include market share growth, customer satisfaction levels, sales volume, and profitability in the newly created market space. Metrics also evaluate how well the organization achieved the “eliminate, reduce, raise, create” actions.|
|Benefits||– Market Innovation: Helps organizations create entirely new markets. – Reduced Competition: Shifts focus away from direct competition. – Increased Profitability: Often leads to higher profit margins. – Differentiation: Allows organizations to stand out from competitors.|
|Drawbacks||– Risk: Venturing into uncharted territory involves risks. – Resource-Intensive: May require substantial resources and investments. – Market Acceptance: Success depends on market acceptance of the new offering. – Timing: Timing is crucial, and entering too early or too late can affect success.|
|Applications||– Product Development: Creating innovative products with unique features. – Service Enhancement: Offering services that stand out in the market. – Market Entry Strategy: Entering markets where competition is less intense. – Brand Building: Establishing a brand as a market leader through differentiation.|
|Use Cases||– Apple’s iPhone: Apple’s iPhone disrupted the mobile phone industry by eliminating traditional features (physical keyboards) and raising others (touchscreen and app ecosystem). – Cirque du Soleil: Created a new market space by combining elements of circus and theater, eliminating animal acts, and raising artistic and theatrical elements.|
|Examples||– Eliminate: The airline industry’s Southwest Airlines eliminated in-flight meals and seat assignments to reduce costs. – Reduce: Fast-food chains like McDonald’s reduce the complexity of their menus to improve efficiency. – Raise: Luxury car brands like Rolls-Royce raise the standards of craftsmanship and quality. – Create: Airbnb created a new market by allowing individuals to rent their homes to travelers.|
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:
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?
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?
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.
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:
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.
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.
These fees have become very much the status quo for consumers who bank with traditional financial institutions.
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?
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.
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.
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.
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.
- The Four Actions Framework is used to refine existing products in a market.
- Developed by Kim and Mauborgne, it’s a core concept of the Blue Ocean Strategy, aimed at creating uncontested markets with higher value at lower costs.
- Four Key Actions to Consider:
- Raise: Enhance product attributes to offer extra consumer value and set new industry trends or standards.
- Reduce: Eliminate or reduce elements that don’t justify their value or cost, potentially eroding profits.
- Eliminate: Remove factors that customers pay for but don’t add substantial value.
- Create: Introduce novel solutions that address consumer problems more effectively than competitors.
- ING Savings Maximiser Example:
- Raise: ING’s primary focus is maximizing interest rates for customers, which can be challenging in the current economic climate.
- Reduce: ING’s lack of physical branches, particularly for older consumers, could reduce its competitive advantage.
- Eliminate: ING refrained from charging withdrawal, monthly, or ATM fees, setting it apart from traditional banks.
- Create: ING introduced an automated savings feature to help consumers save more effectively.
- Nintendo Example:
- Raise: Nintendo’s Wii fostered social gaming and interactivity through innovative accessories and motion controllers.
- Reduce: Nintendo chose to develop its games instead of relying on third-party developers like Sony and Microsoft.
- Eliminate: Nintendo removed superfluous features unrelated to gaming, differentiating itself from competitors.
- Create: The Wii’s inclusive and interactive games appealed to a broader audience, including families and casual gamers.
- ING Savings Maximiser Example:
- The Four Actions Framework offers a systematic approach to refine existing products by considering raising, reducing, eliminating, and creating aspects.
- Examples like ING Savings Maximiser and Nintendo’s Wii showcase how businesses can apply these actions to enhance their products’ value proposition and competitiveness.
Connected Strategy Frameworks
Related Strategy Concepts: Go-To-Market Strategy, Marketing Strategy, Business Models, Tech Business Models, Jobs-To-Be Done, Design Thinking, Lean Startup Canvas, Value Chain, Value Proposition Canvas, Balanced Scorecard, Business Model Canvas, SWOT Analysis, Growth Hacking, Bundling, Unbundling, Bootstrapping, Venture Capital, Porter’s Five Forces, Porter’s Generic Strategies, Porter’s Five Forces, PESTEL Analysis, SWOT, Porter’s Diamond Model, Ansoff, Technology Adoption Curve, TOWS, SOAR, Balanced Scorecard, OKR, Agile Methodology, Value Proposition, VTDF
Main Free Guides: