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Blue Ocean Strategy unpacked “ In Blue Oceans, demand is created rather than fought over. There is ample opportunity for both growth and profit.” W. Chan Kim

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Think Change What seems like only a ripple today... Can become the wave of the future

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What is a Red Ocean? <ul><li>Red Oceans are all the industries in existence today—the known market space. In the red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known. </li></ul><ul><li>Here companies try to outperform their rivals to grab a greater share of product or service demand. As the market space gets crowded, prospects for profits and growth are reduced. </li></ul><ul><li>Products become commodities or niche, and cutthroat competition turns the red ocean bloody. Hence, the term red ocean is used. </li></ul>

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What is a Blue Ocean? <ul><li>Blue Oceans in contrast, denote all the industries not in existence today — the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. </li></ul><ul><li>Blue ocean is an analogy to describe the wider, deeper potential of market space that is not yet explored.. </li></ul>

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Blue Ocean Strategy in a nutshell <ul><li>create uncontested markets </li></ul><ul><li>make competition irrelevant </li></ul><ul><li>create & capture new demand </li></ul><ul><li>break value/cost trade-off </li></ul><ul><li>align with differentiation AND low cost </li></ul><ul><li>compete in existing markets </li></ul><ul><li>beat the competition </li></ul><ul><li>explore existing demand </li></ul><ul><li>make the value/cost trade-off </li></ul><ul><li>align with differentiation OR low cost </li></ul>BLUE OCEAN RED OCEAN

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Value Innovation – Creates the Blue Ocean Eliminate Reduce Create Raise VI Value Innovation

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Reconstruct Market Boundaries From Competing Within Buyer Group (Purchaser, User, or Influencer) Strategic Group (Focused on Competition) Scope (Maximise Products and Services) Orientation (Improve Price Performance Functional-Emotional orientation) Industry (Being the Best - Rivalry) Time (adapting to external trends as they occur) To Creating Across Blue Ocean Creation Path 1 : Looks across alternative industries Six Paths Framework Path 2 : Looks across strategic groups within industry Path 3 : Redefines the industry buyer group Path 4 : Looks across complementary product and service offerings Path 5 : Rethinks the functional –emotional orientation of its industry Path 6 : Participates in shaping external trends over time

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Four Actions Framework – Creating Value Innovation Eliminate Which of the factors that the industry takes for granted should be eliminated? Reduce Which factors should be reduced well below the industry standard? Raise Which factors should be raised well above the industry standard? Create Which factors should be created that the industry has never offered? A new Value Curve

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Focus on the Big Picture, Not the Numbers <ul><li>Visual Awakening </li></ul><ul><ul><li>As-is strategy canvass </li></ul></ul><ul><ul><li>Identify Changes </li></ul></ul><ul><li>Visual Exploration </li></ul><ul><ul><li>Six Paths </li></ul></ul><ul><ul><li>Observe: advantages or alternatives </li></ul></ul><ul><ul><li>Factors: Eliminate, Create or change </li></ul></ul><ul><li>Visual Strategy Fair </li></ul><ul><ul><li>To-Be strategy Canvas </li></ul></ul><ul><ul><li>Feedback: alternatives from customers </li></ul></ul><ul><ul><li>To-Be: Future Strategy </li></ul></ul><ul><li>Visual Communication </li></ul><ul><ul><li>Distribute: before-and-after strategic profiles </li></ul></ul><ul><ul><li>Support only initiatives that will close the gaps </li></ul></ul>Visual Stimulation Visual Stimulation Visual Stimulation

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Visualisation: Strategy Canvas – Value Curve High Low Industry Value Curve Blue Ocean Strategy Move Competing Factors Offering Level

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Visualisation Tool – Pioneer-Migrator-Settler (PMS) Map Pioneers are Businesses that offer unprecedented value. Blue Ocean Strategist Migrators are Businesses that offer improved value, but not innovative value. Blue Ocean Strategist Settlers are Businesses that conform to their industries. Stuck in Red Ocean Pioneers Migrators Settlers As-Is To-be

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Reach Beyond Existing Demand 1 st Tier: “Soon-to-be” noncustomers who are on the edge of your market waiting to jump ship 2 nd Tier: “Refusing” noncustomers who consciously choose against your market 3 rd Tier: “Unexplored” noncustomers who are in markets distant from yours 3 rd Tier 2 nd Tier 1 st Tier Your Market

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Sequence of Blue Ocean Strategy BUYER UTILITY : Is there exceptional buyer utility in your business idea? PRICE : Is your Price easily accessible to mass buyers? COST : Can you attain your cost target to profit at your strategic Price? ADOPTION : What are the adoption hurdles in actualising your business idea? Are you addressing them up front? A Commercially Viable Blue Ocean Idea NO – Re-Think YES NO – Re-Think NO – Re-Think NO – Re-Think YES YES YES

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Exceptional Utility The Buyer Utility Map

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From Exceptional Utility to Strategic Pricing The Price Corridor of the Mass Size of the circle is proportional to number of buyers that product/service attracts Upper –level pricing Mid–level pricing Lower–level pricing Price Corridor of the Mass Step 1: Identify the price corridor of the mass Step 2: Specify a price level within the price corridor Three alternative products/service Types: Same Form Different form, same function Different form and function, same objective High degree of legal and resource protection. Difficult to imitate Some degree of legal and resource protection Low degree of legal and resource protection. Easy to imitate

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From Strategic Pricing to Target Costing The Profit Model of Blue Ocean Strategy The Strategic Price The Target Cost Streamlining and Cost Innovations Partnering Pricing Innovation The Target Profit

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Blue Ocean Idea Index Organisation Product or Service Utility Is there exceptional utility? Are there compelling reasons to buy your offering? + Price Is your price easily accessible to the mass buyers? - Cost Does your cost structure meet the target cost? +/- Adoption Have you addressed adoption hurdles up front? +

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Executing Blue Ocean Strategy The Four Organisational Hurdles to Strategy Execution Meet with the Customers. Get involved Redirect Resources from your Hot Spots and Cold Spots. Engage in Horse Trading Zoom in on King Pins. Place King Pins in a Fish Bowl. Atomize to get the organisation to change itself Secure a consigliere on your top management team. Leverage your Angels and Silence your Devils COGNITIVE HURDLE An organisation wedded to the status quo MOTIVATIONAL HURDLE An organisation wedded to the status quo RESOURCE HURDLE An organisation wedded to the status quo POLITICAL HURDLE An organisation wedded to the status quo

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Build Execution into Strategy The Power of Fair Process Strategy Formulation Process Attitudes Behaviour Strategy Execution How Fair Process Affects People’s Attitudes and Behaviour <ul><li>Fair Process </li></ul><ul><ul><li>Engagement </li></ul></ul><ul><ul><li>Explanation </li></ul></ul><ul><ul><li>Expectation Clarity </li></ul></ul><ul><li>Trust and Commitment </li></ul><ul><ul><li>“ I feel my opinions count” </li></ul></ul><ul><li>Voluntary Cooperation </li></ul><ul><ul><li>“ I’ll go beyond the call of duty” </li></ul></ul><ul><li>Exceeds Expectations </li></ul><ul><ul><li>Self Initiated </li></ul></ul>

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The Sustainability and Renewal of Blue Ocean Strategy <ul><li>Imitation Barriers to Blue Ocean Strategy </li></ul><ul><ul><li>Value Innovation does not sense to a company’s conventional logic </li></ul></ul><ul><ul><li>Blue Ocean Strategy may conflict with other companies' brand image. </li></ul></ul><ul><ul><li>Natural Monopoly: The market often cannot often support a second player </li></ul></ul><ul><ul><li>Patents or legal permits block imitation </li></ul></ul><ul><ul><li>High volume leads to rapid cost advantage for the value innovator, discouraging followers from entering the market. </li></ul></ul><ul><ul><li>Network externalities discourage imitation. </li></ul></ul><ul><ul><li>Imitation often requires significant political, operational, and cultural changes. </li></ul></ul><ul><ul><li>Companies that value-innovative earn brand buzz and a loyal customer following that tends to shun imitators </li></ul></ul>

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Sources of Reference <ul><li>W. Chan Kim, Renée Mauborgne, Blue Ocean Strategy , 2005, Havard Business School Press. ISBN: 1-59139-619-0 </li></ul><ul><li>http://www.blueoceanstrategy.com </li></ul>