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Writings about the business of design and strategy.

What You Can Learn from Virgin America's Strategy Canvas

The common wisdom for starts-up looking to take on entrenched competitors is to look at what the competitors are doing and offer a different - but relevant - value proposition to customers. The best-selling book Blue Ocean Strategy which came out a few years ago gives a clear way of thinking about and visualizing your unique value, the "strategy canvas". Unfortunately it's not always as simple as just "thinking differently". The struggling upstart airline Virgin America is a case in point.

Virgin America offers a superior product at a lower price, has an enthusiastic fan base, and cutting-edge marketing - all usual ingredients for market disruption. So why can't it take a sizable bit out of entrenched competitors? Fast Company reports on how Virgin has faced barrier after barrier to expanding its service into new markets, a critical step for an airline to gain enough geographic footprint to attract a sustainable quantity of passengers.

The article quotes Hubert Horan, an aviation consultant:

“King Solomon couldn’t start a U.S. domestic airline these days. No matter how well they’re run, it’s tough for any airline that’s small to survive.

Here are these well-run efficient airlines [Virgin, JetBlue, Southwest] — people like them, they have low costs — but they can’t get the badly run inefficient airlines to go away. In a competitive market, the people with the better-run companies ought to drive the high-cost companies out of business, and that just doesn’t work in the airline industry.”

Here is a strategy canvas of the airline industry, comparing Virgin, Southwest, and an averaged "Legacy" airline. The strategy canvas evaluates several dimensions of competition (e.g. prices, convenience) on simple low-to-high scales. You draw a "value curve" crossing the points where entrenched competitors sit for each of the competitive dimensions, and then look for white-space opportunities to differentiate. (My tongue-in-cheek but not entirely incorrect one-line summary of BOS is: look at what the competition is doing, and do the opposite.)

Admittedly this diagram is a quick and dirty analysis but you can immediately see how Virgin and Southwest have very different value curves than legacy outlines. (And yes I recognize that there is variation within the legacy airlines, they aren't all exactly the same, but like I say I've averaged them for the purpose here. This is is often what is advocated in BOS, which uses Southwest as a case study of creating a new value curve - see the graphic on p38.)

Strategy canvases are a nice way to quickly take the pulse of a category. But they are also easy to do poorly by leaving off important dimensions that may not be about the more obvious factors of product innovation.  This strategy canvas, for example, leaves out the political and geographic lockout that the legacy airlines have created, which - as Virgin is showing - are vital to market traction. Don't make the mistake that some companies (and industry analysts do) of cherry-picking your competitive dimensions to make yourself look good, and leave out ones that may have a critical impact on your ultimate success.

AVP of Marketing Strategy Adam Richardson is the author of Innovation X: Why a Company’s Toughest Problems are its Greatest Advantage. His book is the manual for leaders looking for clarity about the emerging challenges facing their businesses. You can follow Adam on Twitter @richardsona.