Blue ocean strategy

Blue Ocean Strategy

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Academic JourneyE-Business MBA Program – ISC Paris

University College Cork

Course of Blue Ocean StrategyFebruary 21st , 2012Professor François Cazals

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AgendaISC Paris School of

ManagementThe ProfessorCompetition-based

strategyA little filmBlue Ocean Strategy

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ISC Paris group

Business School MBA

Executive

Education

1800 students « grande école »

250 students MBA’s

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François CazalsCEO DistriforceISC Paris

Affiliate ProfessorHead

ISC Executive Education E-Business MBA

Program

SpeakerHEC Paris Executive

EducationESSEC Paris

Executive Education

[email protected]: @distriforce

Blog: cazals.fr

Blue Ocean Strategy

Creating new market space

Competition-based strategy

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Subtle War Brutal War

“ War is an act of violence intended to compel our opponent

to fulfill our will”. Clausewitz (1780-

1831)

“To subdue the enemy without fighting is the

acme of skill”. Sun Tzu (544-496 BC

J.-C.)

Blue

Red

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A founding principle“Competition is at the core of the success or failure of firms”.1st sentence of Michael Porter’s most important book

Michael PORTER

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Two generic strategiesLow Cost Differentiation

Paris-DublinRyanair 55 €Air France 286 €

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A little film

http://distriforce.net/insead.wmv

The Book and the Authors

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Prof Chan Kim

Prof Renée Mauborgne

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Strategy Canvas

Comp Fact 1 Comp Fact 2 Comp Fact 3 Comp Fact 4 Comp Fact 5 Comp Fact 6 Comp Fact 7 Comp Fact 80

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2

3

4

5

6

7

8

9

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Firm Competitor

The value curve, the basic component of the strategy canvas, is a graphic depiction of a company’s relative performance across its industries factors of competition.

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Strategic corridor

Var 1 Var 2 Var 3 Var 4 Var 5 Var 6 Var 7 Var 80

1

2

3

4

5

6

7

8

9

10

Comp 1 Comp 2 Comp 3 Comp 4 Comp 5 Comp 6

DIFFERENCIATION

LOW COST

Corr

idor

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Industry CycleIn

nova

tio

n

Growth Maturity DeclineStart

BLU

E O

CEA

N

RED OCEAN

Con

ques

t

Segm

enta

tion

Diff

eren

tiat

ion

LoyaltyOne to OneLow Cost R

ED

OC

EA

N

?

Red Ocean Vs. Blue Ocean Compete in existing market

space Beat the competition Exploit existing demand Make the value-cost trade-

off Align the whole system of a

firm’s activities with its strategic choice of differentiation or low cost

Create uncontested market space

Make the competition irrelevant

Create and capture new demand

Break the value-cost trade-off

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

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4 actions framework

Create a new value curve

Reduce

Create

Raise

Eliminate

What factors should be

eliminated that the industry has taken

for granted?

Eliminate

What factors should be reduced

well below the industry standard?

Reduce

What factors should be created that the industry has never

offered?

Create

What factors should be raised well beyond the

industry standard?

Raise

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6 Paths Framework Head-to-head competition Blue Ocean Creation

Industry Focuses on rivals within its industry

Looks across alternative industries

Strategic GroupFocuses on competitive position within strategic

group

Looks across strategic groups within industry

Buyer Group Focuses on better serving the buyer group

Redefines the industry buyer group

Scope of product or service offering

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

of its industry

Looks across to complementary product

and service offerings

Functional-Emotional orientation

Focuses on improving price performance within the

functional-emotional orientation of its industry

Rethinks the functional-emotional orientation of its

industry

TimeFocuses on adapting to external trends as they

occur

Participates in shaping external trends over time

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Look across alternative industries

Rent a apartment

+

=

Go to the hotel

Corporate Apartements= apart-hotel concept

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Look across strategic groups within industry

+

=

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Redefine the industry buyer group

Look across to complementary product and service offerings

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Rethink the functional-emotional orientation of its industry

EmotionalFunctional

Fonctionnel

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Participate in shaping external trends over time

3D TV

Ultra Flat TV

Connected TV

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Blue ocean?

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3 Tiers of Non-customers

The Gamers• Men• Under 35• Sports,

Fights, Cars,…

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3 Tiers of Non-customers« Soon-to-be » non-

customersMen aged over 35

« Refusing » non-costumers

Old people, parents, women

« Unexplored » non-customers

Families

Business CaseHow Apple has created a new market space with the iPad

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3 examples

SAMSUNG NetbookN145Plus

Sony Vaio VPC-SB3L9EW 13,3" LED USB 3.0

iPad 2 64Go Wi-Fi

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Red OceanVariables Sony Samsung

Price 899 € 239 €

Weight 1,720 kg 1,240 kg

Screen 13,3 inches 10,1 inches

Hard Drive 500 Go 250 Go

Connectivity

10/10 7/10

Keyboard Yes Yes

Design 7/10 5/10

Market Laptops Netbooks

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Strategy canvas

Differentiation

Low Cost

Price Weight Screen Hard Drive Connectivity Keyboard Design

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Blue oceanVariables iPad

Price 489 €

Weight 0,613 kg

Screen 9,7 inches

Hard Drive 64 Go

Connectivity

3/10

Keyboard No

Design 9/10

Touch interface

New

iCloud New

AppStore New

Market Touch Pads

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Blue Ocean vs. Laptops

E R R C

Keyboa

rd

Connec

tivity

Hard d

rive

Wei

ght

Scree

nPric

e

Desig

n

iClo

ud

Appstor

e

Touch

inte

rface

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Blue Ocean vs. Laptops

E R R C

Keyboa

rd

Connec

tivity

Hard d

rive

Wei

ght

Scree

nPric

e

Desig

n

iClo

ud

Appstor

e

Touch

inte

rface

Three Tests of a Blue Ocean Strategy:

1) Focussed2) Divergent3) Compelling Tagline

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Blue ocean vs. Netbooks

E R R C

Keyboa

rd

Connec

tivity

Hard d

rive

Wei

ght

Scree

nPric

e

Desig

n

iClo

ud

Appstor

e

Touch

inte

rface

“If you dream it, you can do it”.

Walt Disney

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Annex

Exercise• 1. List Factors of

Competition

• 2. Top 2 or 3 in ERRC Grid Quadrants

• Clearly define the group of “non-customer” that you are going after.

Examples

Exercise3. Write on

Worksheet: E left, C right

4. Draw “As Is”

5. Draw “To Be”

Examples

ExerciseDemonstrate that iphone is a blue ocean strategy compared to blackberry (at the beginning)