ARTICLE
ERRC in Practice: citizenM
STRATEGY & INNOVATION - MARCH 2026
The hotel industry is, in the words of citizenM co-founder Michael Levie, "redder than red." Four-star hotels compete on almost exactly the same factors as five-star hotels, with marginally less of each. Three-star hotels offer roughly three-quarters of what four-star hotels provide. Everyone competes on the same dimensions. citizenM looked at this canvas, applied the ERRC grid from Blue Ocean Strategy, and built a hotel that achieved 90 percent average occupancy against a sector average of around 55 percent while charging prices accessible to budget travellers and delivering experiences rated alongside five-star competitors.
What It Is
The ERRC grid is the primary operational tool of Blue Ocean Strategy, developed by W. Chan Kim and Renee Mauborgne at INSEAD. ERRC stands for Eliminate, Reduce, Raise, Create. The grid asks four questions about any industry's current competitive canvas: which factors that the industry competes on can be eliminated entirely without losing the core client, which can be reduced below the industry standard, which should be raised significantly above it, and which factors that do not currently exist in the industry should be created?
The grid is designed to break the assumption that improvement within an existing competitive framework is the only strategic option. It forces the explicit acknowledgment that some things competitors invest heavily in are not valued by the client at the level of investment they receive, and that some things no competitor currently offers are precisely what the underserved client needs.
Why It Matters Now
Creative businesses default to incremental improvement within the existing competitive framework: better work, faster turnaround, more responsive service, lower pricing. Each of these moves within the canvas rather than questioning it. The result is a competitive position that is defensible only until a competitor matches the improvement, at which point the cycle repeats.
Case Evidence
CitizenM's founders Rattan Chadha and Michael Levie began by studying why frequent travellers chose between three-star and five-star hotels. They identified that only three factors consistently drove the choice of five-star: the feeling of luxury, the quality of the sleeping environment, and the location. Price drove the choice of three-star, alongside the perception that five-star hotels felt too formal and pretentious.
Their ERRC grid produced: Eliminated: front desk, concierge, bellhops, doormen, room service, and the traditional check-in process. Reduced: room size. Raised: sleeping environment quality (king beds, premium linens, high-quality showers, excellent sound insulation) and location. Created: self-check-in kiosks, multi-skilled ambassadors who could handle any request, and communal living rooms replacing empty formal lobbies.
The result: citizenM's staff costs run 50 percent below the industry average. Its profitability per square metre is twice that of comparable upscale hotels. Its guest satisfaction ratings place it in the "fabulous" and "superb" categories alongside five-star properties, despite charging three-star prices. Average occupancy sits at 90 percent.
How It Works
STEP 01
Map the existing competitive canvas: identify the factors that define competition in the sector and plot where the business and primary competitors sit on each.
STEP 02
Apply the ERRC grid: for each competitive factor, ask honestly whether clients would miss it if it disappeared and whether it is invested in at a level its client value justifies.
STEP 03
Identify the non-clients: people adjacent to the current market who are not engaging with any current offer, and ask what they would need that no current player provides.
STEP 04
Draft a new value curve that plots the result of the grid: where to eliminate and reduce investment, and where to raise and create.
STEP 05
Test the new curve with a defined client group before committing to the operational and financial changes it requires.
Industry Application
For creative consultancies, the ERRC grid most often produces counterintuitive results in the eliminate and reduce quadrants. Many things creative businesses invest in to signal quality, extensive pitching, large team presentations, elaborate proposals, are not valued by clients at the level of investment they receive.
The create quadrant typically reveals the most differentiated opportunities: the things no current competitor offers that a specific client segment would genuinely value. For a creative consultancy, the create quadrant might produce embedded practice development, performance tracking, or long-term capability building as new service categories distinct from the delivery-and-exit model most competitors operate.
Financial Dimension
CitizenM's financial performance is documented precisely: 90 percent occupancy versus 55 percent sector average, staff costs 50 percent below industry standard, profitability per square metre twice that of comparable upscale hotels. The mechanism is structural: by eliminating factors that consumed cost without generating proportional client value, and raising factors that generated disproportionate client value at moderate additional cost, citizenM built a fundamentally different cost-to-value ratio than any competitor.
Where the Market Fails
Most applications of the ERRC grid fail at the eliminate quadrant. Organisations list what they could theoretically eliminate but defend each item on the grounds that it is important to some clients. The discipline the grid requires is the willingness to eliminate factors that matter to some clients if they are not important to the clients whose value the new strategy is designed to capture.
Diagnostic Questions
QUESTION 01:
Which factors in the current service offering are invested in primarily because competitors do them, rather than because clients have indicated they value them?
QUESTION 02:
Are there potential clients adjacent to the current market who are not engaging because a factor that costs the business significantly is actively off-putting to them?
QUESTION 03:
If the business were designing its service from scratch for its highest-value clients only, which two or three current service elements would it not include?
Practitioner Reference
"If there ever were a red ocean, the hotel industry would be it. It's redder than red. In this industry, people think they've innovated if they change the paint colour on the walls or switch the type of chocolate on the pillow." Michael Levie, citizenM co-founder, Blue Ocean Strategy case study
Key Takeaways
01
The ERRC grid is the operational tool for stepping outside an existing competitive canvas; without it, strategy is improvement within the existing framework.
02
The eliminate quadrant requires genuine discipline: eliminating factors that some clients value because the new strategy is designed for clients who value something else more.
03
CitizenM's results demonstrate the return on a genuinely different value curve rather than an incrementally improved one.
04
The create quadrant is where the most differentiated opportunities typically live.
05
Non-clients are the most important research audience for a new value curve; they reveal what the current market fails to provide.
What This Means for DON'T WASTE I Partnerships
Under Strategy and Innovation, the ERRC grid is one of DWI's primary strategic tools when a creative business's growth has plateaued within an existing competitive framework. The analysis identifies where investment is driven by convention rather than client value, and where the uncontested territory lies.
Closing
The client does not pay for what the business invests in. The client pays for what they value. The distance between those two things is the strategy.
Sources
W. Chan Kim and Renee Mauborgne, Blue Ocean Strategy in the Hotel Industry: blueoceanstrategy.com/blog/blue-ocean-strategy-in-the-hotel-industry W. Chan Kim and Renee Mauborgne, Blue Ocean Strategy (2005) and Blue Ocean Shift (2017) citizenM Hotels: citizenm.com ERRC Grid Tool: blueoceanstrategy.com/tools/errc-grid