StrategyIntermediate6 min read

Value Innovation Canvas

The Value Innovation Canvas — also called the Strategy Canvas and operationalized via the Four Actions (ERRC) Grid — is the core analytical tool of W. Chan Kim and Renée Mauborgne's Blue Ocean Strategy. It plots how an industry currently competes across the factors customers care about, then forces you to make four explicit moves: ELIMINATE which factors that the industry takes for granted? REDUCE which factors well below industry standard? RAISE which factors well above industry standard? CREATE which factors the industry has never offered? The output is a new value curve that's visibly different from competitors and that simultaneously cuts cost (via eliminate/reduce) AND raises buyer value (via raise/create). The whole point is to escape the cost-quality tradeoff that traps most strategy work.

Also known asERRC GridEliminate-Reduce-Raise-Create GridStrategy Canvas (Blue Ocean)Four Actions Framework

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The Trap

The trap is using the canvas as a brainstorming exercise rather than a discipline. Real ERRC work is brutal — eliminating things customers say they want, reducing factors competitors are obsessing over, raising things that look uneconomic. Most teams stop at 'reduce some things, raise some things' — producing a value curve that's slightly better than competitors on the same dimensions, which is exactly the red-ocean competition the framework is designed to escape. If your post-canvas strategy doesn't make at least one competitor's executive say 'that's stupid, customers will never accept it,' you haven't actually used the canvas.

What to Do

Run the canvas in three steps: (1) Plot the current industry's strategy curve — list 6-12 factors the industry competes on (price, features, service levels, channels, etc.) and rate each on 1-10 for how heavily competitors invest in it. (2) Apply the four actions ruthlessly: for each factor, must we eliminate, reduce, raise, or create? Refuse to answer 'leave alone' for more than half the factors. (3) Draw the new value curve. It must look visibly different from competitors AND it must be financially viable — eliminations and reductions fund the raises and creations. If the new curve looks similar to the old, redo it. If it's not financially self-funding, redo it.

In Practice

The canonical Blue Ocean case is Cirque du Soleil's reinvention of circus in the 1980s-90s. The traditional circus competed on: animal shows, multiple-ring spectacle, star performers, low-cost popular entertainment, food/concession revenue. Cirque ELIMINATED animal shows and star performers (huge cost cuts), REDUCED fun/humor and danger (less than traditional circus), RAISED venue elegance (theatrical settings, not tents in fields), and CREATED themed productions, sophisticated music, artistic choreography, multiple productions per year. The new value curve looked nothing like Ringling Brothers and nothing like Broadway theater — Cirque created a category sitting between circus and theater, charging theater-level prices for circus-cost economics. The result: a multi-decade run of profitability in an industry (circus) that was otherwise in structural decline. Source: Kim & Mauborgne, 'Blue Ocean Strategy' (Harvard Business Review Press, 2005), Chapter 1-2.

Pro Tips

01
The 'eliminate' move is the hardest and the most valuable. Industries calcify around factors that customers don't actually care about but that competitors all invest in (the 'rules' of the industry). Eliminating those factors funds everything else AND signals that you're not playing the same game.
02
When applying the four actions, consult non-customers more than customers. Existing customers will defend the current value curve because that's why they buy. The opportunity is in the people who don't buy — the canvas tells you what's keeping them out.
03
Pair the canvas with a 'value innovation' pricing decision. Cirque didn't undercut the circus on price; they charged 5-10x more. The canvas isn't about being cheaper — it's about being different in ways that justify a different price point.

Myth vs Reality

Myth

“Value Innovation Canvas is just a SWOT or 2x2 in disguise.”

Reality

SWOT lists strengths and weaknesses; the value canvas plots the entire industry's competitive shape and forces you to deviate from it. The discipline is the four actions — eliminate, reduce, raise, create — and the requirement that the new curve be visibly different. SWOT can produce a strategy that's slightly better on the same dimensions; the canvas is specifically designed to prevent that.

Myth

“Blue Ocean strategies always require new technology or invention.”

Reality

Most blue oceans are recombinations of existing factors, not new technology. Cirque used existing circus and theater elements rearranged. NetJets used existing aviation elements rearranged. Yellow Tail wines used existing winemaking rearranged for non-wine-drinkers. The innovation is in the shape of the value curve, not in the underlying technology.

Try it

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Pressure-test the concept against your own knowledge — answer the challenge or try the live scenario.

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Knowledge Check

Your team has run a Value Innovation Canvas for your B2B SaaS product. The proposed new value curve looks like this: same price as competitors, slightly better service, slightly more features, slightly faster onboarding. What is the diagnostic problem with this output?