Team 1 Align Value Profit and People Propositions

Team 1: Align Value, Profit, and People Propositions By Alex Jouganatos, Matthew Pastrano, Shawnee Moreland, and Mami Yamamoto

Alignment When asked to define what a blue ocean strategy is and what drives its success, most answers fall along the lines of: 1. It is how to reconstruct market boundaries and a leap in value to buyers. 2. How to unlock business model innovation through strategic pricing, targeting costing, and the like so a company can seize new customers profitably. 3. How to release creativity, knowledge sharing, and voluntary cooperation of people through the proper approach to employees and partners. Although, these are all correct, they are only partially correct. They all forget to mention Alignment, where we close the loop between creating and capturing blue oceans so that it becomes a high performance and sustainable strategy.

The Three Strategy Propositions For Nike to reach the highest level of success strategy, they must align the three essential propositions: Value, profit, and people. For the blue ocean strategy approach, the three values must align with the pursuit of both differentiation and low cost.

Achieving Blue Ocean Strategic Alignment As we go through the three strategy propositions, we will see when all three strategy propositions align with differentiation and low cost, key factors from one proposition often support and reinforce the other two propositions.

The Value Proposition An innovation, feature, or service intended to make a company or product attractive to its customers. Nike offers four primary value propositions: 1. 2. 3. 4. Accessibility Innovation Customization Brand/Status. Accessibility - Nike has acquired numerous footwear and apparel firms since its founding, including Converse and Hurley International. These actions have enabled it to expand its product lines.

Nike’s Value Proposition Continued Innovation - Nike maintains the Nike Explore Team Sport Research Lab at its headquarters, a research facility focused on designing cutting-edge products. It also operates the Nike Advanced Product Creation Center, focused on technology incorporation. Customization - Nike. ID allows customers to personalize various aspects of their shoes, including sport style, traction, and colors. Socks can also be tailored. Brand/Status - Nike has partnered with several of the world’s leading athletes to promote its products, including Michael Jordan, Cristiano Ronaldo, and Tiger Woods.

Nike’s Profit Proposition ● Goal is to achieve low cost structure while generating funds in a differentiated way ● Leverage existing retail stores and methods to achieve higher profits ● Plan to Achieve this is through the Triple Double Strategy by Nike ● “Double its speed to market and double its direct connection with consumers” ● At a time when large international companies would be doubling down on what makes them successful, Nike differentiates itself ● By going on the offensive to “disrupt yourself” to propel the company further and faster

Nike’s People Proposition ● Positive motivations and incentives put in place for the people needed to support and implement strategy ● Focus is to inspire corporate sponsors and celebrities who buy in to make the value of a company and profit sustainable ● The people and stakeholders involved in the company take pride in being apart of a global brand ● With 30, 000 retailers in Nike’s network globally and roughly 110, 000 points of distribution

When a Strategy Is Not Properly Aligned ● Shifting toward lower-margin footwear (profit proposition not aligned)

When a Strategy Is Not Properly Aligned Continued ● The partnerships with lower-end retailers like Kohl's and DSW but also emphasized a "premiumization" strategy with high-end products like its flagship Curry shoes and Dwayne "The Rock" Johnson's Project Rock Delta shoes. UA spent a lot of money to market these shoes but they were not received well by customers, causing UA to lose a lot of money. (Value proposition not aligned) ● Under Armour also spent tens of millions of dollars on its high-profile contract with Steph Curry over the past several years, but the popularity of his Curry shoes has significantly waned causing even more profit loss. (Profit proposition not aligned)

When a Strategy Is Not Properly Aligned Continued ● Kevin Plank, CEO of Under Armour, has repeatedly emphasized the idea that UA is a tech company instead of a traditional footwear and apparel manufacturer. UA has purchased various mobile apps, developed its own fitness and shopping app, and produced connected footwear, wearables, and other devices to support this. ● However, that "Connected Fitness" business turned into a money pit, incurring an operating loss of $44. 6 million last quarter while generating just $23. 4 million in revenues.

Putting It All Together ● Three strategy propositions: Value, Profit, and People. ● When focused on a blue ocean strategy, the three propositions support one another. ● Nike’s four value propositions are Accessibility, Innovation, Customization, and Brand/Status. ● Nike’s profit proposition is to achieve low cost structure while generating funds in a differentiated way. ● Nike’s people proposition is to inspire corporate sponsors and celebrities who buy in to make the value and profit sustainable.