Chapter 5 – Blue Ocean Strategy
Dylan Taylor, Jenny Broussard, Scott Bednorz, Grant Moffett
REACH BEYOND EXISTING DEMAND
Focus mainly on existing customers
Drive for finer segmentation to
accommodate buyer differences
CONVENTIONAL STRATEGY PRACTICES TO CHALLENGE
Look to noncustomers instead of focusing on current customers
Focus on the commonalities that buyers value
MAXIMIZE THE SIZE OF THE BLUE OCEAN
Analyzed noncustomer commonalities
Hitting the golf ball was too difficult
Small club heads took time to master
Big Bertha
Larger club head
Bestseller
CALLAWAY GOLF
Think Noncustomers Before Customers
Think Commonalities Before Differences
Think De-segmentation Before Pursuing
Finer Segmentation
TO REACH BEYOND EXISTING DEMAND…
THREE TIERS OF NONCUSTOMERS
• “Soon-to-be noncustomers”
• Pret A Manager
• From: queue-order-pay-wait-receive-sitto: browse-pick up-pay-leave
• 90 second average store time
FIRST-TIER NONCUSTOMERS
RaceTrac and QuickTrip Customers
On-the-Run car washes (more red ocean)
Online quizzes, commercials and information (more blue ocean)
EXXONMOBIL
Refusing noncustomers”
JCDecaux
Most outdoor ads and billboards not effective
Street Furniture
SECOND-TIER NONCUSTOMERS
Increased time ads were seen
Signed contracts with municipalities for several years
Business plan: base cost of capital and upkeep + lots of revenue from advertisement = lost of profit
SECOND-TIER NONCUSTOMERS
Customers have issues with ExxonMobil business practices
Exxon’s website how the industry has bettered the US, not how Exxon has
EXXONMOBIL
Farthest away from an industry’s existing customers
Unexplored non customersTheir needs are assumed to belong to another market
Tooth Whitening ExampleUsually done by dentistsOral companies entered market
THIRD-TIER NONCUSTOMERS
Inability to control aircraft costs was a vulnerability to US military
Soaring costs, shrinking budgets, and an aging fleet
Navy, Marines, and Air Force all had different views of the perfect fighter plane
The Joint Strike Fighter (JSF) looked at all three of these branches as unexplored noncustomers for a market of high performing, low cost planes
U.S. DEFENSE AEROSPACE INDUSTRY
Two high cost components: avionics and enginesLooked at which features influenced the buying
decision for each branch of the military The Navy
Easy to maintain Durability
The Marines Short takeoff vertical landing (STOVL) Robust countermeasures
The Air Force Fastest aircraft Superior tactical agility
U.S. DEFENSE AEROSPACE INDUSTRY
U.S. DEFENSE AEROSPACE INDUSTRY
U.S. DEFENSE AEROSPACE INDUSTRY
GO FOR THE BIGGEST CATCHMENT
There is no hard-and-fast rule to suggest which tier of noncustomers you should focus on and when.
Focus on the tier that represents the biggest catchment.
You should also explore whether there are overlapping commonalities across all three tiers of noncustomers.
STRATEGIC ORIENTATION
The natural strategic orientation of many companies is toward retaining existing customers and seeking further segmentation opportunities.
Businesses need to challenge these existing, taken-for-granted strategic orientations.
To maximize the scale of their blue ocean they should first reach beyond existing demand as they formulate future strategies.
FALLBACK STRATEGIES
If no such opportunities can be found, businesses can then move on to further exploit differences among existing customers.
They should be aware that they might end up landing in a smaller space.
When competitors succeed in attracting the mass of noncustomers with a value innovation move, many of your customers may be attracted away from your business.
OUTCOME
It is not enough to maximize the size of the blue ocean you are creating.
You must profit from it to create a sustainable win-win outcome.