226 In this section we blend our business model tools with the Blue Ocean Strategy concept coined by Kim and Mauborgne in their million-selling book of the same name. The Business Model Canvas is a perfect extension of the analytical tools presented by Kim and Mauborgne. Together they provide a powerful framework for questioning incumbent business models and creating new, more competitive models. Blue Ocean Strategy is a potent method for questioning Value Proposi- tions and business models and exploring new Customer Segments. The Business Model Canvas complements Blue Ocean by providing a visual “big picture” that helps us understand how changing one part of a business model impacts other components. In a nutshell, Blue Ocean Strategy is about creating completely new industries through fundamental differentiation as opposed to competing in existing industries by tweaking established models. Rather than outdoing competitors in terms of traditional performance metrics, Kim and Mauborgne advocate creating new, uncontested market space through what the authors call value innovation. This means increasing value for customers by creating new benefi ts and services, while simultaneously reducing costs by eliminat- ing less valuable features or services. Notice how this approach rejects the traditionally accepted trade-off between differentiation and lower cost. To achieve value innovation, Kim and Mauborgne propose an analytical tool they call the Four Actions Framework. These four key questions challenge an industry’s strategic logic and established business model: 1. Which of the factors that the industry takes for granted should be eliminated? 2. Which factors should be reduced well below the industry standard? 3. Which factors should be raised well above the industry standard? 4. Which factors should be created that the industry has never offered? In addition to value innovation, Kim and Mauborgne propose exploring non-customer groups to create Blue Oceans and tap untouched markets. Blending Kim and Mauborgne’s value innovation concept and Four Actions Framework with the Business Model Canvas creates a powerful new tool. In the Business Model Canvas the right-hand side represents value creation and the left-hand side represents costs. This fi ts well with Kim and Mauborgne’s value innovation logic of increasing value and reducing costs. business model perspective on blue ocean strategy bmgen_final.indd 226 6/15/10 5:44 PM