local government authority demand innovation workshop - blue ocean strategy

APSE Solutions Demand Innovation Workshops

Post Efficiency Demand Management

The problem

• The age of austerity• Coupled with rising demand

• Graph of doom

• Or …….

The response so far

Cuts•Very low lying fruit•Service reduction•Service failure

Contestability•Value chain •Lean management•More for less

Competition•Value chain•Lean management•Procurement•Contract management

•More for less

Income generation•Mostly confined to existing markets and services

Emerging questions about demand•Troubled families•Reablement

Seeing the public services as a system: bigger picture •Sharing management

•Collaboration across sectors

Porter’s Value Chain

Porter’s Five Forces

Back to basics: why we what we do

• Social policy– Some things are important to everybody– Public health– Social well being– Economic well-being

• Cost/benefit of public services– Public provision can be more efficient than the

market

So is failure an option?

• What happens when the salami runs out?

Beyond supply side efficiency

• Prevention rather than cure• Nudge theory and behaviour change• Income generation

On a bigger scale: tackling causes saves money

Reactive treatment for stroke, heart disease,

diabetes

Prophylactic medication

Increasing physical activity

Healthy school meals

Resource swallowing potential

Lower

Higher Lower

Higher

Behaviour changingpotential

Activities to tackle lifestyle diseases

Leisure facilities

Park pitches

Sports development

Healthy school food

DrugTreatmen

t

Hospital treatmen

t

Prophylactic drugs

Physical educatio

n

Street lighting

Parental educatio

n

Footpath maintenan

ce

Sports development

Playgrounds

Parks maintenan

ce

Dance classes

GP care

Ambulance

service

Food labelling

Cycle lanes

Walk to school

initiative

High impact on underlying problem

Low impact on underlying problem

High costLow cost

Hospital treatmen

t

GP care

Ambulance

service

Prophylactic drugs

DrugTreatmen

t

Leisure facilities

Park pitches

Sports development

Food labelling

Dance classes

Footpath maintenan

ce

Healthy school food

parks maintenan

ce

Physical educatio

n

Playgrounds

Parental educatio

n

Re

so

ur

ce

Tr

an

sf

er

Impact/Cost Matrix

Walk to school

initiative

Cycle lanes

Street lighting

Calderdale Home To School Transport

13

The Evidence – create moments

It helped me gain more experience

and confidence..

Its more grown up...I will keep fit

I never thought he would be able to

travel independently ....it

will open up so many doors for him

As parents we were worried....but the travel team

were professional and reassuring...when we saw him walking home on his

first unaccompanied journey his face was beaming....we

knew we had made the right decision

I like travelling with my friends on

the buses

Developing a systematic approach

• Understanding demand• Changing the nature of demand

– Reducing it?– Growing it?– Redirecting it?

• Looking to the future

Blue Ocean Strategy: Demand Innovation

In a public service context

• Trade off between cost and service quality

• Ever increasing pressure on demand

• Ever increasing burden on staff

• Repeated service failure

• Ultimate organisational failure

• Pursuit of excellence and low cost

• Management of demand

• Empowerment of staff• Innovation in service

delivery• Organisational change

Key principles: W Chan Kim and Renee MauborgneBlue Ocean Strategy Unit: INSEAD

• Value innovation• Thinking beyond competition strategy• Creating new demand• Finding uncontested market space• Avoiding commoditisation of product

Key relevance to public sector

• Blue ocean is consciously concerned with demand side– Creating new demand– Managing demand through re-focussing

• Transcends marginal savings available on supply side– Competition and contestability theory focus on

cost control and efficiency – not enough– Entrenches current approach to delivery

4 Action Framework

New Value Curve

Reduce well below

industry standard

Create

Raise well above

industry standard

Eliminate taken for granted factors

Strategy canvas

• Analyse an industry• Analyse chain of buyers• Analyse and develop new strategy

Value factors

Focus

High

Strategy canvas: McDonalds

Qualities of blue ocean strategy

• Focus• Divergence• Compelling tag-line

6 Path Framework

Head to head competition Blue Ocean Creation

Industry Focus on industry rivals Looks across industry boundaries

Strategic group Focus on competitive position within strategic group

Looks across strategic groups within industry

Buyer group Focusses on better serving the buyer group

Redefines the industry buyer group

Scope of product or service offer

Focusses on maximising the value of product within the bounds of its industry

Looks across to complimentary products and service offerings

Functional – emotional orientation

Focusses on improving price performance within existing orientation

Rethinks the functional – emotional orientation of its industry

Time Focusses on adapting to external trends as they occur

Participates in shaping external trends over time

To reconstruct market boundaries• Look across alternative industries• Look across strategic groups within industries• Look across the chain of buyers• Look across complimentary product and

service offerings• Look across functional or emotional appeal to

buyers• Look across time

The service: What is it?

• Suppliers• Inputs• Processes• Outputs• Customers

Break

Exploring demand for services: exercises

• Who are customers?• Who are the stakeholders• Stakeholder analysis• Kano analysis• CTQ

Stakeholder analysis

Keep satisfied

Manage closely

Keep informed

Monitor(Minimum Effort)

Side player• Consult on

potential interest areas

• Increase engagement/interest

Observer• Keep up to

date• Increase their

interest• Try to turn

into supporter

Key Player• Consult

regularly• Engage in

decision process

• Privilege face to face communication

Supporter• Keep informed

regularly• Consult on

interest areasLow High

High

Kano analysis

Lunch

Analysing demand: Exercises

• Demand chain• Strategy canvas

– Excel spreadsheet or brown paper• 4 action framework

Strategy canvas

Compe

titive

Fac

tor

Compe

titive

Fac

tor

Compe

titive

Fac

tor

Compe

titive

Fac

tor

Compe

titive

Fac

tor

Compe

titive

Fac

tor

Compe

titive

Fac

tor

Compe

titive

Fac

tor

Compe

titive

Fac

tor

Compe

titive

Fac

tor

Compe

titive

Fac

tor

Compe

titive

Fac

tor

0

2

4

6

8

10

Industry Strategy Canvas

Your Company / Product

Comp 1

Comp 2

Comp 3Key service factors

Sco

rin

g

Four action framework

Raise Reduce

Eliminate Create

Reconstructing market boundaries

Look across alternative industries

Look across strategic groups within industries

Look across the chain of buyers

Look across complimentary product and service offerings

Look across functional or emotional appeal to buyers

Look across time

Sequence of Blue Ocean Strategy

Buyer Utility• Is there exceptional

buyer utility?

Price• Is the price

accessible to mass of buyers?

Cost• Can you make a

profit at target cost?

Adoption• What are the

hurdles to adoption?

• Are you addressing them?

Buyer Utility Mapping

Making change happen

• Factors of disproportionate influence– People, acts, activities

• Fair process– Keeping the workforce on board– Stakeholder analysis (power/influence)

• Focus divergence– Functional to emotional– Demand chain

• Compelling tag line– Marketing

Hurdles to overcome

Cognitive• Attachment to

status quo

Political• Vested interest

Motivational• Demoralisation

Resource• Can’t afford to

change

• Ride electric sewer• Face disgruntled

customers

• Secure a consiglier• Leverage Angels• Silence Devils

• Zoom in on King Pins• Put them in a fishbowl• Atomise

• Hot spots• Cold spots• Horse trading

Focus on what matters

Mass of employees

Extremes Extremes

Focus on extremes – peoples, acts, activities of disproportionate influence

Company

Company

Focus on changing the mass – time and resources hungry

Conventional organisational change theory

Tipping point leadership

Influencing attitudes and behaviour through Fair Process

Strategy formulation

processFair process

Attitudes Trust and commitment

Behaviour Voluntary cooperation

Strategy execution

Exceeds Expectations

Economic theory

Exogenous (usually technology) growth theory

• Supply and demand • Structure – conduct –

peformance (Joe S Bain)• Stucturalist • Environmental determinism• Conventional competition

strategy – capture and redistribute wealth

• Supply side focus – zero sum economics

Endogenous growth theory• Creative entrepreneur

(Joseph Schumpeter)

• New growth theory

• Reconstructionist• Blue Ocean strategy -

create new demand and therefore wealth

• Demand side focus

Understanding Demand

‘Giving the people what they want is fundamentally and disastrously wrong. The people don’t know what they want…(Give) them something better’

Samuel ‘Roxy’ Rothapfel

www.apse.org.uk

Contact detailsAndy Mudd, Principal Consultant, APSE

Email: AMudd@apse.org.uk

Association for Public Service Excellence2nd floor Washbrook House, Lancastrian Office Centre,

Talbot Road, Old Trafford, Manchester M32 0FP.telephone: 0161 772 1810

fax: 0161 772 1811web:www.apse.org.uk