Conclusion: The Sustainability and Renewal of Blue Ocean Strategy Team 1: Adrienne Collins, Jessica Drummond, Mark Beal, Mario Santos, Michael Sanchez,

Conclusion: The Sustainability and Renewal of Blue Ocean Strategy

Team 1: Adrienne Collins, Jessica Drummond, Mark Beal, Mario Santos, Michael Sanchez, Spencer Thomas,

Alec Wegmann, Chad Hensley

Maintaining a healthy position

• Creating a blue ocean isn’t an achievement, but a process.

Success brings imitators

• Once a company proves a blue ocean successful, it is only a matter of time before others attempt to hop on the bandwagon.

• It is only a matter of time.

imitation

Current ocean turning red?

• As the company and its early imitators succeed and expand the blue ocean, more companies will eventually jump in.

This raises the question:

When should a company reach out to create another blue ocean?

Barriers to Imitation

• Some can be operational, others cognitive.

• BOS will last 15-20 years without any real challenges.– Southwest Airlines, Cirque du Soleil,

Federal Express

Some Imitation Barriers

• Value innovation just doesn’t make sense to competition when using conventional logic.– CNN 24 hrs vs. NBC/CBS/ABC being

nightly– Called Chicken Noodle News by the

industry

• Brand image conflict can create a sense of invalidation– The Body Shop stayed away from

beautiful models and the idea of eternal youth.

Imitation Barriers of Cracker Barrel

• Old fashioned, ‘down home’, 1930’s styled theme cannot be copied by others.

• Country store idea doesn’t make sense to others in the restaurant industry.– Consumer can recreate the atmosphere

at home with pancake batter and syrup sold at the country store.

Sustainability of Imitation Barriers cont.

• Natural monopoly blocks imitation when the size of a market cannot support another player.

• Patents or legal permits block imitation.

• The high volume generated by a value innovation leads to rapid cost advantages, placing potential imitators at an ongoing cost disadvantage.

Barriers to Imitation

• Network Externalities– Think of Metcalfe's Law (mgt 3370) – Robert Metcalfe said the usefulness of a

network improves by the square of the number of nodes on the network.

– Translation: The Internet, like telephones, grows more valuable as more join in. This is how Ebay grew so profitable so fast.

Barriers to Imitation

• Politics– politics get in the way when imitating a

BOS requires companies to make substantial changes to their business practices

– ex: SW Airlines created a service that offered the speed of air travel with the cost & flexibility of driving.• imitating this strategy would call for major

revisions in routing planes, pricing, marketing, staff training, and culture.

Offering A Leap In Value

• Earns brand buzz• Loyal following in the marketplace• Rarely overtaken by competitors’

large advertising• Cracker Barrel– Look to attract brand loyal travelers– Also offer retail store (Convenient)

Microsoft Money vs. Quicken

• Microsoft wanted to dislodge Intuit’s value innovation

• For 10 years has not been able to despite large investment

• Reasons:• Quicken is easier to navigate through than Money Plus• Multi-level categorization

• Microsoft Money Discontinued

Value Curve

• A graphic depiction of a company’s relative performance across it’s industry’s competition

• Alerts you to find new Blue Oceans• Stops you from leaving a still

profitable ocean– Focus– Divergence

• “Swim as far as possible in the blue ocean”

When to Value-Innovate Again

• Distance yourself as far as possible in the Blue Ocean

• As competitors’ value curves converge toward yours, you should begin innovation to create a new Blue Ocean

The Body Shop

– Once dominated its created blue ocean for a decade

– Now in the middle of a red ocean

– Focused too much on competitors and not enough on reaching out to another value innovation

Yellow Tail

– Swimming in a clear blue ocean of new market space

– Has made the competition irrelevant

– Test of long run profitable growth will be its ability to value-innovate again when competitors compete aggressively and converge value curves

Six Principles of BOS

• Pointers for every company thinking about its future strategy if it wants to thrive

• Competition will not suddenly come to a halt but will remain as a present critical factor of the market reality

• To obtain high performance in this overcrowded market, companies should go beyond competing for market share to creating blue oceans

Six Principles of BOS Cont’d

• Reality demands that companies succeed in both blue and red oceans, and master the strategies for both

• Companies need to learn how to make the competition irrelevant

• Aims to help balance the scales so formulating blue ocean strategies comes as systematic as operating in red oceans