ERRC grid and strategy canvas: how to use them, with an example

Who should use it, and when not to

Use the canvas and the grid when your product competes on the same features and price as everyone else's, when the team keeps adding features to keep up, or before a relaunch or a new offer aimed at people who don't buy from your industry today. It works for a two-person service firm as well as for a product line in a large company, because it only needs a list of factors and an honest view of how buyers see them.

It is the wrong tool for judging whether an industry is profitable at all; for that, see Porter's five forces. It also isn't a positioning statement. The canvas decides what the offering is; the wording comes afterwards.

The core concepts

Competing factors. The things an industry competes on and spends money on, named as a buyer would name them: price, range, speed, service, location. Five to twelve is a workable number.

Offering level. How much of each factor buyers receive, scored on a simple scale such as 1 to 5. These scores are judgments, so write down whose judgment and what evidence sits behind each.

Value curve. One player's scores joined across the factors. In a crowded market the curves of rivals tend to run in parallel, which shows that everyone is competing on the same things. Kim and Mauborgne's site also uses the canvas to move attention from rivals to alternatives, and from customers to noncustomers: people who could buy but don't.

The four actions. Eliminate: which factors the industry takes for granted should be dropped? Reduce: which should fall well below the industry's standard? Raise: which should rise well above it? Create: what has the industry never offered? Raising and creating add value; eliminating and reducing lower cost. The authors' aim is to do both at once, instead of trading one for the other.

Three checks. A good new curve has focus (it puts effort on a few factors), divergence (its shape departs from the industry's), and a compelling tagline (a short, true line that says what it offers). If you can't write a true tagline, the curve isn't clear yet.

A worked mini example

An illustration with made-up facts. Ledgerline is a two-person bookkeeping firm in Portland thinking about an offer for independent restaurants. Local firms all compete on broad services, monthly office meetings, a long monthly report pack, and a close that lands about three weeks after month end; quotes for a small restaurant run around $400 a month. Ledgerline interviewed 12 restaurant owners: 9 never read the monthly pack, 10 want food cost and labour cost every week, 7 dislike dropping off receipts and meeting during service hours, and 4 keep their own books in a spreadsheet because firms cost too much.

The new curve passes focus (effort on speed and two numbers), passes divergence (it drops where the industry is high and rises where it is low), and has a tagline that is true if the till data works: "Your food and labour cost, every Monday." Price is left open until two tests answer it: whether the till data is complete enough, and what the four spreadsheet owners would pay.

How to run it

1. Fix the frame. Write one sentence naming the offering, the buyer, and the rivals or alternatives a buyer compares it with.
2. List the competing factors. Write five to twelve factors the industry competes on, in the buyer's words, and have someone who talks to customers correct the list.
3. Score the industry's value curve. Give each factor a level from 1 to 5 for the typical rival, noting the evidence or whose judgment each score is.
4. Look at buyers and noncustomers. Mark the factors buyers ignore or dislike, and write why people who could buy stay away and what they use instead.
5. Ask the four questions of every factor. Decide eliminate, reduce, keep, or raise for each, add what to create, and keep a reason for each move. Make sure Eliminate or Reduce is not empty.
6. Draw the proposed curve beside the industry's. Put both in one table, with created factors added at an industry level of zero.
7. Run the three checks. Mark focus, divergence, and a true tagline as pass or fail, with the reason.
8. Test before you relaunch. Name the two or three assumptions the curve depends on most and run a small, cheap test of each.

Common mistakes

• Only raising and creating. The ERRC page warns that this inflates cost and over-builds the offering.
• Naming factors from the inside. "Our CRM integration" is a feature; "how fast I hear back" is a factor a buyer scores.
• Comparing with the wrong group. A budget chain and a luxury brand on one canvas hide the pattern you are looking for.
• Ignoring noncustomers. The reasons people don't buy at all often show what to cut.
• A tagline that overpromises. It has to be true on the day the offer ships.
• Treating the canvas as the answer. It is a hypothesis about buyers until a test supports it.

To sort growth routes after you know how you'll differ, see the growth options matrix.

Where it comes from

W. Chan Kim and Renée Mauborgne developed the ideas in a series of Harvard Business Review articles, from "Value Innovation: The Strategic Logic of High Growth" (1997), where the value curve first appeared, to "Blue Ocean Strategy" (October 2004), and set out the strategy canvas, the four actions framework, and the ERRC grid in their book Blue Ocean Strategy (Harvard Business School Press, 2005), which has since appeared in expanded editions. The book illustrates the tools with company cases such as Cirque du Soleil; the example above is our own. This page is an independent summary, not affiliated with or endorsed by the authors or publisher. For more frameworks, see the strategy book guides.

Questions

What does ERRC stand for?

Eliminate, Reduce, Raise, Create. For each factor an industry competes on, you decide whether to drop it, cut it well below the industry's standard, push it well above, or add something the industry has never offered.

What is on the axes of a strategy canvas?

The horizontal axis lists the factors the industry competes on and invests in. The vertical axis shows the level buyers receive on each. A company's line across the factors is its value curve.

How do I know if a new value curve is good?

Kim and Mauborgne name three qualities: focus (effort on a few factors), divergence (a shape unlike the industry's), and a compelling tagline that is true of the offering.