Blue Ocean Strategy 07

Blue Ocean StrategyBlue Ocean Strategy

Business Creativity & Business Creativity & InnovationInnovation

Creating uncontested market Creating uncontested market spacespace

and make the competition and make the competition irrelevantirrelevant

W. Chan Kim

Renée Mauborgne

Group Members

• Abhijna E Rao• Apurva Gupta• Pallavi Shukla• Pallavi Sinha• Sai Shyam Somala

Two worlds …Two worlds …

Red OceanCompete in crowded markets

Blue OceanCreate and capture new

market space

Blue Oceans• How many of today’s industries were

unknown 100 years ago?

4 Actions Framework : Key to Value CurveReduce

What factors should be reduced well below the industry standard?

Raise

What factors should be raised well above the industry standard?

The key to discovering a new value curve lies in answering four basic questions

Creating new markets:A new value curve

Creating new markets:A new value curve

Eliminate

What factors that the industry has taken for granted should be eliminated?

Create/Add

What factors that the industry has never offered should be created or added?

Yellow tail wine

Wine production in U.S – • The top 8 companies produce more than 75

percent.• 1600 other wineries produce the remaining 25

percent

Four Actions Framework

Value Innovation

Costs

Buyer Value

EliminateEnological terminology and distinctions

Aging qualities

Above-the-line marketing

RaisePrice versus budget wines

Retail store involvement

ReduceWine complexity

Wine range

Vineyard prestige

CreateEasy drinking

Ease of selection

Fun and adventure

RED RED vs vs BLUEBLUE

Red Ocean Strategy Blue Ocean Strategy

Compete in existing market space.

Create uncontested market space.

Beat the competition. Make the competition irrelevant.

Exploit existing demand. Create and capture new demand.

Make the value-cost trade-off. Break the value-cost trade-off.

Align the whole system of a strategic firm's activities with its choice of differentiation or low cost.

Align the whole system of a firm's activities in pursuit of differentiation and low cost.

VALUE INNOVATION

Six path framework

Path 1:Look Across Alternative Industries

• Net jet airways: offering business class comfort at economic class fare.

Path 2:Look across strategic groups within industries

• Toyota’s Lexus: higher end luxury at lower end prices.

Path 3:Look across chain of buyers.Path 4 : Look across complementary products and

service offerings.• Theatres with baby sitting servicesPath 5 : Look across functional or emotional appeal to

buyersPath 6 : Look across time• Mountain Asian Crisis

Four Steps of Visualizing1. Visual Awakening

2. Visual Exploration

3. Visual Strategy Fair

4. Visual Communication

•Compare your business with your competitors’ by drawing your “as is” canvas

•See where your strategy needs to change

•Go into the field to explore the six paths to creating blue oceans

•Observe the distinctive advantages of alternative products and services

•See which factors you should eliminate, create or change

•Draw your “to be” canvas based on insights from field observations

•Get feedback on alternative strategy canvases from customers, competitors’ customers, and non-customers

•Use feedback to build the best “to be” future strategy

•Distribute your before-and-after strategic profiles on one page for easy comparison

•Support only those projects and operational moves that allow your company to close gaps and actualize the new strategy

BOS Logic: Reconstruct market boundaries

IndustryFocuses on rivals within its industry

Strategic GroupFocuses on competitive position within strategic group

Buyer GroupFocuses on better serving the buyer group

Scope of Product and Service

Offerings

Focuses on maximizing the value of product and service offerings within the bounds of its industry

Functional-emotional Orientation of an

Industry

Focuses on improving price-performance with the functional-emotional orientation of this industry

Time/TrendsFocuses on adapting to external

trends as they occur

Looks across alternative industries

Looks across strategic groups within its industry

Redefines the buyer group of the industry

Looks across to complementary product and service offerings that go beyond the bounds of its industry

Rethinks the functional-emotional orientation of its industry

Participation in shaping external trends over time

Boundaries of Competition

Head-to-HeadCompetition

Creating New Market Space

Reach Beyond Existing DemandTwo Conventional Strategy Practices:•Focus on existing Customers•Drive for finer segmentation to accommodate buyer differences

Three Tiers of Non Customers

1st

2nd

3rd

There is a universe of There is a universe of noncustomers which can be turned noncustomers which can be turned into customers to offer a big blue into customers to offer a big blue ocean market.ocean market.

1st tier: “Soon-to-be” 1st tier: “Soon-to-be” noncustomers who are on the noncustomers who are on the edge of your marketedge of your market

2nd tier: “Refusing” 2nd tier: “Refusing” noncustomers who consciously noncustomers who consciously choose against your marketchoose against your market

3rd tier: “Unexplored” 3rd tier: “Unexplored” noncustomers who are in noncustomers who are in markets distant from yoursmarkets distant from yours

Sequence of Blue Ocean Strategy

Testing Exceptional Utility

Is Your offering priced to attract target buyers so that they are compelling to Pay??

• Strategic Pricing

Target Costing• Streamline operations and introduce cost

innovations• Partnering• Change pricing model of the industry. Eg: Blockbuster

Profit Model of Blue Ocean Strategy

Adoption

• Employees• Business Partners• General Public

Overcome Key Organizational Hurdle

To deal with these four hurdles. Two approaches can be taken into consideration: Conventional wisdom Tipping point leadership

These hurdles can be tackled by tipping point leadership in following ways

Cognitive hurdle: Ride the “ electric sewer” meet with the disgruntled customers.

Resource hurdle: hot spots, cold spots, and horse trading.

Motivational hurdle: kingpins, fishbowl management, and atomization.

Political :leveraging angels, silencing devils, and getting a consigliore on their top management team.

Example of Bill Bratton and NYPD (New York police Department)

BUILDING EXECUTION INTO STRATEGY

• 6th Principle of Blue Ocean Strategy.• “To build people’s trust and commitment”• Minimizes risk of:1.Distrust2.Non-cooperation3.Sabotage• Example: Lubber

FAIR PROCESS

• What is fair process?• 3E principles of fair process1.Engagement2.Explanation3.Clarity of Expectation• Ex: Elco

• “Intellectual and emotional recognition”

SUSTAINABILTY OF BLUE OCEAN STRATEGY

• Barriers to imitation:1. Ridicule2. Brand image conflict3. Natural monopoly4. Patents or legal permits5. High volume generation6. Network externalities7. Political aspects8. Brand buzz and loyalty

CONCLUSION• Renewal of Blue Ocean Strategy• When to value-innovate again?• Imitation is unavoidable• Monitor value curves on strategy

canvas• Need for continuous value

innovation: 1. Ex1: The Body Shop2. Ex2: Yellow tail

Thank you….