Risk-Reward and Blue Ocean Strategy

#blueocean #valueinnovation #risk #reward #strategy

In previous posts, we’ve examined some of the blind spots that may arise when implementing a Blue Ocean Strategy. These challenges can largely be addressed by conducting a thorough risk-reward analysis. Fortunately, the Blue Ocean Strategy framework includes tools designed to support this process. The Blue Ocean Strategy (2005) emphasizes the importance of risk analysis. Specifically, the Four Actions Framework, along with its Eliminate-Reduce-Raise-Create (ERRC) grid, provides a structured approach to evaluating risks and rewards. For more details, refer to: https://www.blueoceanstrategy.com/blog/errc-grid-template-examples/.

However, as Australian consultant Phil Olsen has noted, the effectiveness of this tool depends not just on its structure, but on how it is applied. The "Eliminate" component of the ERRC grid often poses the greatest challenge for managers, as it requires a candid assessment of what is truly acceptable from a corporate perspective.

You need to be ruthless in the elimination of the superfluous ‘noise’ that is holding the company back otherwise 80% of your distraction will come from the 20% of the events that are a distraction. Conversely, 80% of your success will come from 20% of your activities so CHOOSE WISELY. Ask these questions: Are you being ruthless enough? What really is not serving you? What are you hanging on to that you need to let go of? – CLEAN OUT NOW. Note - some areas may not be elimination, they may just be reduction. Ref: https://www.linkedin.com/pulse/risk-reward-blue-ocean-being-strategic-philip-olsen

The elimination of the superfluous noise is crucial. This noise represents your potential growth, and potential savings. To focus on the essential, your business needs to remove the elements that are superfluous.