The Four Actions Framework for Business Growth

Companies are always looking for ways to stand out and grow. One effective approach is the Blue Ocean Strategy. This method helps businesses create unique market spaces where they have no competition, thereby shaping their business strategy.

A key part of this strategy is the Four Actions Framework (also called the ERRC grid). It helps companies reshape their markets and offer unique value to customers by raising and reducing factors well above and below the industry's standard.

In this article, we’ll explain the Blue Ocean Strategy, break down the Four Actions Framework, share real-life examples, and give practical tips for startup founders and business owners on how to use this strategy.

Introduction to the Blue Ocean Strategy

The Blue Ocean Strategy, developed by W. Chan Kim and Renée Mauborgne, encourages businesses to step away from the crowded “red ocean” of intense competition and enter the “blue ocean” of untapped market space.

By doing so, companies can unlock new demand, reduce costs, and create a new value curve that sets them apart from the industry's strategic logic. This involves challenging and reconstructing traditional business models and strategies, breaking the trade-off between differentiation and low cost,

and leveraging the four key questions of the four actions framework to systematically explore and reconstruct buyer value elements to offer a new experience while keeping the cost structure low. This strategic planning approach is vital for achieving profitable growth and staying ahead of industry trends.

Explanation of the Four Actions Framework

The Four Actions Framework is an integral part of the Blue Ocean Strategy. It consists of four key questions that challenge the industry’s strategic logic and address challenges customers may not have expressed yet, enabling companies to reconstruct buyer value elements in a way that creates a new market space. By leveraging the industry's strategic logic, companies can break the trade-off between differentiation and low cost. These four actions are:

1. Reduce: Identify which factors should be reduced well below the industry standard to lower costs and differentiate the product.
2. Eliminate: Determine which factors the industry has long competed on and eliminate them entirely.
3. Raise: Ascertain which factors should be raised well above the industry’s standard to enhance buyer value.
4. Create: Discover which factors should be created that the industry has never offered to generate new demand and drive innovation.

Let’s explore each component in detail:

Reduce

Reducing refers to lowering certain aspects of the product or service well below the industry's standard to achieve a low cost structure without compromising on core value. Consider how Yellow Tail, an Australian wine brand, simplified wine complexity by reducing aging quality and vineyard prestige, focusing instead on making wine approachable for a broader audience.

Eliminate

Elimination involves removing factors that the industry takes for granted but do not add significant value to the customer, thereby addressing the value-cost trade-off. For instance, Southwest Airlines eliminated seat assignments and meal services, thereby cutting costs and streamlining operations to offer lower prices and higher convenience.

Raise

Raising entails enhancing facets of the product well above the industry's standard that are highly valued by customers but poorly addressed by industry players. For example, Cirque du Soleil raised the level of theatrical elements in its performances, offering a unique blend of theater and circus that appealed to more sophisticated audiences.

Create

Creating is about introducing new features or services that the industry has never offered, thereby shaping the business strategy by developing unprecedented factors. This action often leads to groundbreaking innovation.

Take Apple’s iPhone, which created an entirely new market space with its combination of a phone, an iPod, and an internet communicator.

Real-World Case Studies

Yellow Tail

Yellow Tail’s success is a classic example of applying the Four Actions Framework in the wine industry. By reducing wine complexity, eliminating prestige factors, raising convenience, and creating fun and adventure in wine drinking, Yellow Tail attracted non-wine drinkers and captured a significant market share. Additionally, Yellow Tail helped customers solve challenges that other wine brands did not address.

Southwest Airlines

Southwest Airlines applied the Four Actions Framework to the airline industry by reducing luxury aspects, eliminating meal services, raising the frequency of flights, and creating a fun and friendly flight experience. This strategy allowed Southwest to offer low cost and a differentiated service.

Practical Application of the Framework for Startups and Business Owners

To apply the Four Actions Framework effectively, startup founders and business owners should follow these steps:

1. Conduct a Value Chain Analysis: Understand your current value propositions and industry standards.
2. Identify Customer Pain Points: Gather insights on what customers dislike about existing products or services.
3. Engage in Scenario Planning: Explore various scenarios and how changes in your offerings could impact the market.
4. Use the ERRC Grid: Map out the actions you need to take under reduce, eliminate, raise, and create. By pursuing the first two questions of eliminating and reducing, you can break the value-cost trade-off and gain insight into how to lower your cost structure while still offering buyer value.
5. Test and Iterate: Implement changes incrementally and gather feedback to refine your strategy.

Tips on Identifying and Creating Uncontested Market Space

1. Deep Understanding of Customer Segments: Know your target audience’s interests, preferences, and pain points.
2. Reconstruct Buyer Value Elements: Rethink the elements that create value for customers, focusing on their needs rather than industry norms.
3. Challenge Industry Assumptions: Use the Four Actions Framework to challenge the industry's strategic logic and business model. Ask key questions about why things are done a certain way and explore alternatives.
4. Leverage Digital Tools: Utilize AI and data analytics to gain a better understanding of market opportunities and customer behavior.
5. Focus on Value Innovation: Strive to offer superior value at a lower cost, creating a win-win scenario for both the company and customers.

Conclusion

In today's world, where competition is fierce and market dynamics are constantly evolving, adopting the Blue Ocean Strategy and the Four Actions Framework can be a game-changer for businesses.

By reducing, eliminating, raising, and creating key factors, companies can unlock new market spaces, drive innovation, and achieve sustainable growth. Startup founders and business owners who embrace this powerful tool will be better positioned to navigate industry trends, meet customer demands, and stay ahead of the competition.

About Martin Bell

Martin Bell (Founder & CEO of Bell Ventures) is the visionary and driving force behind the hyper-successful 100 Tasks Startup System which has driven the growth of 20,000+ startups including Zalando and Delivery Hero.

At Rocket Internet, he pioneered the 100-Day-Launch process and led 120+ private and public sector venture-building projects.

Now Martin aims to democratize entrepreneurship by sharing his invaluable practical knowledge and tools to empower aspiring entrepreneurs just like you. Does that sound like you? Then make sure to learn more below ...