In strategic management, the Value Curve is a diagnostic tool for understanding market dynamics and competitive positioning. It provides a visual framework for charting a company’s current performance profile relative to its competitors. By mapping the perceived value delivered to buyers, strategists can identify areas of over-investment, under-delivery, and competitive gaps. The tool helps organizations move beyond incremental improvement to contemplate different ways of competing.
Defining the Value Curve
The Value Curve is formally known as the Strategy Canvas, an analytical tool for visualizing the current competitive landscape. It graphically captures the relative performance of market players across the factors on which an industry currently competes. This plot helps management understand where value is being created and delivered to customers.
The Strategy Canvas plots the factors of competition along the horizontal axis (X-axis), such as price, quality, and service speed. The vertical axis (Y-axis) represents the offering level, indicating how much of each factor a company offers to buyers, typically ranging from low to high. The resulting line reveals the strategic profile of a company compared to its rivals. Significant differences in these curves indicate market differentiation, while similar curves suggest a lack of distinct strategy.
Key Components of the Value Curve
The structure of the Value Curve is defined by its two primary axes, which organize and quantify the competitive space of an industry.
Horizontal Axis (X-Axis)
This axis lists the factors that companies currently invest in and compete on to attract customers. These factors include tangible elements such as product features, service reliability, distribution network density, and the overall price point.
Vertical Axis (Y-Axis)
This axis represents the relative offering level that buyers receive for each competitive factor. This level is a measurement of the perceived magnitude of the offering, typically scored from low to high. Plotting a company’s performance generates the unique strategic profile, allowing for a visual assessment of relative investments and trade-offs across the market.
The Process of Creating a Value Curve
Constructing a meaningful Value Curve requires a systematic approach to accurately capture the current state of market competition.
- Define the market and identify primary competitors and alternative offerings. Alternatives may include substitute products or services that fulfill the same underlying customer need, such as a cinema competing with a home streaming service.
- Establish a consensus list of the factors on which the industry currently competes. These factors become the labels for the horizontal axis and represent the primary areas where companies invest resources and where customers base purchasing decisions.
- Score the company and each competitor on the vertical axis for every factor. This scoring is based on the relative level of offering delivered to the average buyer, often relying on customer surveys and market research. Connecting these plotted points creates the distinct Value Curve for analysis.
Analyzing Strategic Positioning
Interpretation of the completed Value Curve reveals the quality and viability of a company’s strategic positioning. A strong strategy is characterized by three specific visual traits:
- Focus: The company’s curve concentrates investment on a select few competitive factors rather than attempting to score highly on every factor.
- Divergence: The company’s profile stands apart from its rivals, signaling a distinct value proposition to the market.
- Compelling Tagline: The shape of the curve communicates a clear, distinct, and easy-to-understand message about the company’s offering to buyers.
When multiple Value Curves overlap significantly, it indicates a “stuck in the middle” strategy. This convergence suggests companies are mimicking each other, competing primarily on marginal improvements or price, and failing to achieve meaningful differentiation. A flat or zigzagging curve without clear peaks or troughs signals a lack of focus and strategic compromise.
The Link to Blue Ocean Strategy
The Value Curve is the foundational analytical instrument for the Blue Ocean Strategy (BOS) framework, which aims to create uncontested market space. Its role is to diagnose whether a company is competing in a “Red Ocean,” characterized by intense competition and diminishing profit margins where rivals’ curves closely resemble one another. The goal of BOS is to use the canvas to chart a path to a “Blue Ocean” by altering the shape of the curve.
To achieve divergence, strategists employ the Four Actions Framework (ERRC) directly on the Value Curve:
- Eliminate: Which factors should be removed that the industry has long taken for granted?
- Reduce: Which factors should be lowered well below the industry standard?
- Raise: Which factors should be lifted well above the industry standard?
- Create: Which factors should be introduced that the industry has never offered?
Applying ERRC actions lowers the score on certain factors (Eliminate and Reduce) to lower costs, while raising or creating new factors (Raise and Create) lifts buyer value. This process results in a new, highly divergent Value Curve that breaks the trade-off between differentiation and low cost, opening a new market space.
Strategic Benefits of Using a Value Curve
The utility of the Value Curve extends beyond analysis, providing several benefits for strategic management. It offers visual clarity, allowing management to see the current competitive reality and their strategic profile on a single chart. This visual format aids internal communication, helping to align functional departments around a coherent strategy.
Plotting the curve forces management to challenge assumptions about which competitive factors are truly valuable to customers versus which are legacy industry costs. By highlighting areas where no company is currently competing, the canvas points toward opportunities for creating uncontested market spaces and driving innovation.
Conclusion
The Value Curve is a powerful tool for shaping and communicating strategy. It transforms complex competitive data into an accessible visual language, enabling organizations to move past incremental improvements. By compelling strategists to visualize their current and potential market position, the canvas shifts the focus from simply beating rivals to innovating the value proposition. This shift drives the creation of new demand and profitable growth.