Blue Ocean Strategy Salesforce.com

Blue Ocean Strategy

Blue Ocean StrategyA Case Study on Salesforce.comPresented by :Ashley MolinaNiranjan ZendeSiddharth KumarZain YusufWhat is a Blue Ocean ???Blue ocean is nothing but an analogy to describe the wider, deeper potential of a market space that is yet to be explored.

They may be termed as industries which are non-existent todayUntainted by CompetitionDemand is created and not fought overGrowth is profitable and rapidCompetition is made irrelevant

The theory is in direct opposition of Porters Five Forces modeltheory is in direct opposition of Harvard Professor MichaelPorter's Five Forcestheory, which helps businesses determine how they can best compete in the current marketplace. The Porter model looks at five specific factors that help determine whether or not a business can be profitable, based on other businesses that are already in their industry.In the "Wall Street Journal Guide Essential Guide to Management" (HarperBusiness 2010), author Alan Murray writes that the rapid pace of innovation and change in recent years has led to a search for a strategy that is more dynamic than Porter's five forces.

"While avoiding use of Mr. Porter's name, Mr. Kim and Ms. Mauborgne nevertheless attack him head on, arguing that the "five forces" analysis is a formula for remaining in 'red oceans,' where the sharks compete mercilessly for the action,"Murray wrote in his book. "The key to exceptional business success, they say, is to redefine the terms of competition and move into the 'blue ocean,' where you have the water to yourself.

Pain Points of Existing CRM SolutionsComplex requirements and systems infrastructure required to be integrated with the applications. Small businesses could not afford these costs or accommodate the lengthy deployment processCustomers needed proof of concept before they committed to the purchase. This resulted in sales cycles of more than 3 months and lengthy technology discussions among tech professionals. It often took 18 to 24 months for companies to get the application to work at full functionalityPain Points of Existing CRM Solutions (contd)Cost of purchasing packaged CRM software was high. A software license for 200 users was approximately $350,000Price of software was typically 25% to 30% of the overall cost. Additionally, customers needed to spend money on infrastructure, support and maintenance, and on hiring internal or external professionals to implement and upgrade the software/hardware and train users. Including these factors, the cost could easily exceed $1.8 million in the first year and $4 million in five yearsPain Points of Existing CRM Solutions (contd)Vendors normally pursued one of two strategies in the CRM market:They either differentiated their product by adding more featuresOr they lured customers with big discounts at the time of closing the license agreementOver 60% of CRM deployments failed to work

The Salesforce Blue Ocean strategy: Innovation on the Product, Service and Delivery Platforms:Based on cloud computing: The applications were delivered via the internet from central servers on salesforce.coms side, where systems were deployed and data were stored. This enabled the sharing of resources across a large pool of users, thus increasing economies of scale and cost efficiency of individual customersThe Salesforce Blue Ocean strategy (Contd): Customers were freed of the need to deploy and maintain the software with their own infrastructure thereby reducing costs and deployment timeUsers could access the applications anywhere from any device with internet accessThe price structure was dramatically simplified as customers simply paid a monthly subscription fee of $65/user. Total cost was reduced to $156,000/year bringing it within reach of small businesses

The Salesforce Blue Ocean strategy (Contd): The subscription model removed costs associated with low value activities in purchasing and deploying the service, allowing them to focus on strategic activities with a greater impact on their businessCustomers could test the application in a single work group or division first, then extend the use to other divisions once the test was successful. Customers could also quit at any time due to the subscription model.

The Salesforce Blue Ocean strategy (Contd): Salesforce stripped of excessive features and focused on essentials that catered to buyers core needs in sales, customer service and support, and marketing automation. Removing features made the application simple, more intuitive and user-friendly. Because of the web based nature, it was possible for Salesforce to collect information on website usage patterns and improve its user interface accordingly. They encouraged customers to build custom programs according to their business needs using Salesforces cloud based development tools. Done this way, custom programs were built four times faster at a lower cost and reintegrated into salesforce.coms original offering

Red v/s BlueRed Ocean StrategyBlue Ocean StrategyCompete in existing market spaceCreate uncontested market spaceBeat the competitionMake the competition irrelevantExploit existing demandCreate and capture new demandMake the valuecost tradeoffBreak the valuecost tradeoffAlign the whole system of acompanys activities with its strategic choice of differentiation or low costAlign the whole system of acompanys activities in pursuit ofdifferentiation and low cost

CostsValueCostsValueValue Innovation is simultaneous pursuit of High value & Low costTraditional CompaniesBlue Ocean CompaniesEliminateReduceRaiseCreateCost savings are made by eliminating and reducing the factors an industry competes on.

Buyer value is lifted by raising and creating elements the industry has never offered.

Differentiating Blue firms Blue Ocean Companies

They said the Wii departed from a red ocean that was dominated by Sony's Playstation and Microsoft's Xbox by creating a totally new video game concept."On one hand the Wii created new benefits, such as innovative, intuitive control with movement sensors," thecompany writes on its website. "On the other hand it generated massive cost reductions eliminating high end graphics and CPU power. Thus Nintendo was able to sell the Wii at a price that appealed to the mass public." What is Salesforce.comFounded in 1999, a global cloud computing company headquartered in San FranciscoSalesforce Inc. is listed on the NYSE and is a constituent of the S&P 500 IndexBest known for its Customer Relationship Management (CRM) product, has also expanded into commercial applications of social networkingHas clients in plethora of industries ranging from Financial Services, to Healthcare & Life sciences and Retail to Non-profitPioneer to offer CRM in a SaaS format

Creating a BOS in 4 stepsEliminate factors that the industry takes for granted but adds no perceived value to customers. Reduce factors well below the industrys standard to avoid the mistake of over delivering in order to beat the competitionRaise factors well above the industrys standard so your customer wont have to make compromises. Create new sources of value that the industry has never offered.

2.a.(part 1) needs to be elaborated in relation to the salesforce Traditional CRM CustomersLarge businessesComplex requirementsComplex system infrastructuresNeeded highly integrated software2.a. Part 2 & 3 1. Purchase2.Delivery3.Use4. Supplements5.Maintenance6. DisposalClient productivitySimplicityConvenienceRiskFun and imageEnvironmental friendlinessBuyer Utility Map for Traditional CRM Software1. Purchase2. Delivery3. Use4. Supplements5. Maintenance6. DisposalClient productivitySimplicityConvenienceRiskFun and imageEnvironmental friendliness2.c. part 1 Talk to Prof. T Innovation & Delivery Salesforce.comComprehensive and flexible platform.Small and medium-sized businesses.Cloud based application: simplicity and convenience.Reduced cost and time.Better customer experience.Centrally deployed applications.Quit any time. Focused on essentials

2.c. part 2

Value Curve of Traditional CRMs v/s Salesforce2.d. needs new values for graph Sustaining Salesforces Market LeadershipThey created another Blue Ocean by encouraging customers to build custom programs according to their business needs but in a completely different way:Force.com - Provided an application development environment for external developers to create add-on applications for almost any business need on a cloud basis and host them on salesforce.coms infrastructure. Applications could be created four times faster at a low costAppExchange - Used to package and distribute the software. Developers could upload the software to the platform. Corporate customers could search, read reviews, test for free, and ultimately purchase and download new applications to their salesforce.com environment.

Sustaining Salesforces Market Leadership (Contd)Another Blue Ocean strategy, Chatter provided a private social network service which allowed salespeople to collaborate in real time on their work items. In this way, they got timely updates about what their colleagues were doing as well as the status of important projects and deals, and therefore had a full picture of what mattered most to their businessTraditional CRM solutions with fragmented corporate implementation rarely got integrated later on. This compromised the productivity of traditional CRM solutions.