Blue ocean strategy Part 2

Blue ocean strategy Part 2
Blue Ocean Strategy – Part 2 Formulation & Implementation The science of making competition irrelevant © 2012 Regalix Inc. Confidential, All Rights Reserved
In Our Previous Webinar © 2012 Regalix Inc. Confidential, All Rights Reserved
Red Ocean Vs. Blue Ocean Red Ocean Strategy Blue Ocean Strategy Compete in existing market space Create uncontested / New market space Beat the competition Make the competition irrelevant Create a value – cost trade off Break the value-cost trade off Competitive Advantage Value Innovation Segment existing customers Attract noncustomers Exploit existing demand Create and capture new demand © 2012 Regalix Inc. Confidential, All Rights Reserved
Value Innovation Traditional Companies Blue Ocean Companies Price Eliminate Price Reduce Value Innovation – Simultaneous pursuit of high value & Low cost Create Value/ Raise Value/ product product features features Characteristics of a good Value innovation Strategy Compelling Tag line : The value FOCUS: Not to diffuse efforts DIVERGENCE: The shape of the curve can be translated into a across all key factors of value curve diverges from those clear, strong, truthful and competition. of other players. compelling TAGLINE. © 2012 Regalix Inc. Confidential, All Rights Reserved
The Four Actions Framework REDUCE Factors that should be well below the industry Standard ELIMINATE CREATE Create A Factors that the industry New Value Factors that the industry takes for granted and need has never created to be eliminated Curve RAISE Factors that should be raised above the industry standard © 2012 Regalix Inc. Confidential, All Rights Reserved
The Strategy Canvas Concept NETJETS High Medium Business / 1st Class Travel Relevance Scale Low Commercial Airline Industry Dead head Hassle free Time Savings/ Flexibility & Price Faster Travel Jet Ownership In Flight Service Costs Travel Reliability Attributes of Industry & Competitors NETJETS Commercial Airline Business / 1st Industry Class Travel • The strategy canvas is the central diagnostic and action framework for building a compelling blue ocean strategy. • The Strategy canvas serves two purposes: – It captures the current state of play in the known market space. This allows you to know where you are viz competition – It propels you to action by reorienting your focus: • From competitors to alternatives • From customers to non customers of the industry. © 2012 Regalix Inc. Confidential, All Rights Reserved
Strategic Questions before NetJets – How to enter into the Aviation Space when the market was dominated by the big Airline groups? - 1983 The Red Ocean •Over 20 domestic And international Airlines competing in the space •All of them attracted Business Travelers, Holiday travelers and Casual Travelers •Corporates spent millions on executive travel every year •All travelers had to go through the long check ins, security checks, hectic flight transfers, congested airports, Baggage claims …. •Business Travelers only have the option of Business Class/ First class or corporate Jet The Blue Ocean • Identified that Business Travelers are the most frequent and regular flyers • NETJETS offered Business Travelers “ The convenience of a private Jet at the price of a Airline Ticket” • NETJETS also provided fractional 1/16 ownership of the aircraft – With no hassles Aircraft Maintenance • Private Aircraft made available to corporate at 4 hours notice ( much less than flight booking) • No Hassles or responsibilities of Aircraft Maintenance • Customized in flight services – Only for the traveler Created a B2B industry when the entire industry was still B2C © 2012 Regalix Inc. Confidential, All Rights Reserved
The Story Of Indochino.com • World’s first Self Service Virtual Suit company • Customers can choose the fabric, design style and accessories - Online • Buttons, Lapels, linings, pockets, cuff signature – everything is customizable • Customers measure themselves and provide fitting details online with video tutorial • Delivery within 3 weeks ( • If order is less than perfect, Indochino pays for local tailoring or remake sthe suit for free • Most suits priced under $500 ( Whereas cheap suits cost around $200 and the designer ones around $1500) Traditional Apparel / Suit Companies Indochino.com 1) Indochino.com does not compete in any of the • Industry divided into five segments segment Haute Couture, Luxury, Affordable Luxury, Mainstream & Discount 2) Indochino.com does not get affected by the industry factors • The Traditional companies competed among each other on the factor like : No of stores, Location of stores – 3) Indochino.com built its brand reputation by delivering Premium stores , Premium brand, Range or no of Lines Value offered, Hi Fashion Vs customization Vs price Tradeoff 4) Indochino.com outsources all suits to quality and • Marketing & Brand reputation reputed local and tailor network of Shanghai ( Top brands associated with Designer Labels) Created and Captured a new Market •High Customization costs Demand by focusing on Buyer Utility © 2012 Regalix Inc. Confidential, All Rights Reserved
The Story Of Zynga •Founded Zynga in April 2007 with a mission “Connect the world through games” •Has over 3000 Employees and 270 million customers, 60 mn daily active users •Largest Social games developer of Facebook •Now provides games in multiple platforms like: •Facebook, Myspace, Android, ipad, iphone, yahoo & Farmville.com Traditional Gaming Companies Zynga 1) Industry divided into four segments • Console based games, Online Games, Mobile Games & Flash Games 2) Console based games dominated the marketplace with 75% Zynga’s Farm Ville of the revenues. 1) Zynga did not compete in any of the segment or market 3) The big three of the gaming dominated 95% of the console player dominance marketplace (sony, Nintendo, Xbox ..) 2) Zynga’s (Farm Ville) did not get affected by the industry 4) The Traditional gaming companies competed among each factors other on the following factors: Consoles – Type speed, capabilities, No of titles in each genre, Speed 3) Zynga built its brand reputation by sharing and word of of Title Release – weekly, monthly, Hi end real time graphics, Hi end mouth connect accessories 4) Zynga caterered to all – children, parents, professionals … 5) Catered only to gamers – Teenage boys to professional 5) Zynga created a new genre of education / simulation games gamers Created and captured a new market demand by 6) Addictive and had lot of side effects – Too much violence, focusing on Non Customers addiction, Lack of exercise, not mind stimulating 7) Parents usually did not recommend Inc.buy © 2012 Regalix / Confidential, All Rights Reserved
Story Of Khan Academy •A non-profit educational organization created in 2006 by Salman Khan- A MIT & Harvard Business School Alumni •Free online collection of more than 3,300 micro lectures •Most viewed online courses and lectures in the world – Over 172 million total views. • Over 177 million lessons delivered till date • Close to quarter billion dollars in donation • Team size of just 20 people • Amongst the 100 most influential people of the world Traditional Education Companies Khan Academy 1) Khanacademy filled the gaps existing in traditional brick 1) Industry divided into 2 segments & mortar school learning • Brick & mortar Learning – Schools/ Colleges • Videos & Exercises to be used as a teaching aid and not • Online learning replacement for teacher 2) Learning was centered around students • Use analytics and technology to figure out the Strengths & weakness of students 3) The factors the industry was competing on: • Student teacher ratio 2) Learning is centered around students, teachers and parents • Class room Interaction • Cost of learning / Education 3) Everybody gets equal opportunity / attention/ Learning • Interactive Learning 4) Unique Pedagogy - 4) Smart kids get more attention than other kids • Stop, rewind, understand and then play 5) Focused pedagogy – Teacher talks – Students listen – 5) Analytics drive the understanding of each students strengths Therefore Students learn & Weakness 6) Teachers Judge student’s strength / weakness Created and captured a new market demand by focusing on functionality & emotional appeal © 2012 Regalix Inc. Confidential, All Rights Reserved
Moving Forward Discovering the Principles of Blue Ocean Strategy © 2012 Regalix Inc. Confidential, All Rights Reserved
Principles Of Blue Ocean Strategy Core/Formulation Principles Formulation Risks Reconstruct market boundaries Search Risk Focus on the big picture, not the numbers Planning Risk Reach beyond existing demand Scale Risk Get the strategic sequence right Business Model Risk Execution Principles Execution Risks Overcome key organizational hurdles Organizational Risk Build execution into strategy Management Risk The formulation principles and execution Principles, work in tandem to minimize risks and maximizing opportunities. © 2012 Regalix Inc. Confidential, All Rights Reserved
Reconstructing Market Boundaries Focus on Big Picture – Not Numbers Reach Beyond Existing Demand Getting The Strategic Sequence Right Overcoming Organizational Challenges Building Execution Into Strategy © 2012 Regalix Inc. Confidential, All Rights Reserved
6 Paths Framework Conventional boundaries in a competitive marketplace Look across Alternative Competitors in Industry Industries From competing Competitive Position among Strategic Groups Looks across strategic groups within Better serving existing Buyer Redefines Buyer Groups Groups Creating value across Maximizing value with Looks at Complementary existing Product product / service offerings More functions more price / Blue Rethinks Functional ocean Orientation of Industry premium Strategy Shapes External trends over Adapting to trends & Time time value • Blue oceans can be created by exploring outside of industry boundaries • Break out of the traditional boundaries of the industry to unlock value • “out of the boundaries” thinking framework for unlocking value © 2012 Regalix Inc. Confidential, All Rights Reserved
6 PATHS: Exploration Outside of Traditional Boundaries Path 1 - Looking across Alternate Industry What are the alternative industries to your industry? Path 2 – looking across Strategic Groups Why do buyers trade across to them? What are the strategic groups in your industry? Why do buyers trade up for the higher group, and why do NTT DoCoMo, Federal Express, Southwest Airlines, NetJets they trade down for the lower one? Polo Ralph Lauren, Curves, Sony Walkman, Toyota Lexus Path 3 - Looking across chain of buyers What is the chain of buyers in your industry? Which buyer group does your industry typically focus on? If you shifted the buyer group of your industry, how can you unlock new value? Novo Nordisk, Bloomberg Terminals, Canon Copiers, Philips Alto Path 4 – looking across complementary product / service offering What is the context in which your product or service is used? What happens before, during, and after? Can you identify the pain points? How can you eliminate these pain points through a complementary product or service offering? Barnes & Noble, Dyson Vacuum Cleaners, Kinépolis Kiné-kids, Zenick Salick’s Cancer Centers Path 6 – Looking across Time value of business Path 5 – Looking across Functional-emotional appeal to buyers What trends have a high probability of impacting your industry, are Does your industry focus on functionality or emotional appeal? If you irreversible, and evolving in a clear trajectory? How will these trends compete on emotional appeal, what elements can you strip out to make it impact your industry? Given this, how can you open up unprecedented functional? If you compete on functionality, what elements can be added customer utility? to make it more emotional? Apple Music, Cisco Systems, CNN, Starbucks, QB House, Direct Line Group, Pfizer’s Viagra HBO’s “Sex and the City” © 2012 Regalix Inc. Confidential, All Rights Reserved
•A Typical Strategic plan in an organization today is so very red ocean • Because Managers formulate the strategy based on current industry, current customers and current challenges. • Managers spend majority of their time thinking about profitability, projections, market shares, segments and revenues based on current industry facts / assumptions. • Managers are pulled in all directions by their superiors based on limited information & perceptions •By building a company’s strategic planning process around a strategy canvas, the company can focus their main attention on the big picture rather than getting immersed in numbers and jargons. Ok Here Here Managers CEOs © 2012 Regalix Inc. Confidential, All Rights Reserved Staff
Four Steps of Visualizing Strategy The four steps that pushes a company’s strategy canvas to blue oceans Visual Visual Visual Strategy Visual Awakening Exploration Fair Communication • Compare your business • Go into the field to • Draw your ‘to be” • Distribute your before- with your competitor’s by explore the six paths to strategy canvas based on and-after strategic profiles drawing your “as is” creating blue oceans. insights from field on one page for easy strategy canvas. observations. comparison. EXPLANATION • Observe the distinctive • See where your strategy advantages of alternative • Get feedback on • Support only those needs to change. products and services. alternative strategy projects and operational canvases from customers, moves that allow your • See which factors you competitor's customer, company to close the gaps should Eliminate, Raise, and non-customers. to actualize the new Create, or Change. strategy. • Use feedback to build EXPECTATION : CLARITY •DO NOT USE MARKET the best “to be” future RESEARCH strategy. • This approach mitigates planning risks by investing time & effort to develop a compelling strategy canvas that is Focused, Divergent & that has a compelling tagline. • Compares the current business attributes with your competitors’ by drawing your “as is” strategy canvas, and then evaluating where the strategy needs to change. © 2012 Regalix Inc. Confidential, All Rights Reserved
The PMS Map Pioneers • Pioneers: Businesses that provide unprecedented value • Settlers: Their business conforms to the basic value Migrator curve of the industry or me too industry • Migrators: Improved value but not innovative idea Settlers Today Tomorrow • Visualizing strategy helps managers to predict and plan company’s future • This framework can be used to help a company align its internal product portfolios • Clearly, what companies should be doing is shifting the balance of their future portfolio toward pioneer • If current portfolio and the planned offerings consist mainly of settlers then the company has low growth trajectory © 2012 Regalix Inc. Confidential, All Rights Reserved
Reach Beyond Existing Demand Conventional Companies Creates enhanced • Retain and guard existing customers competiveness among Focus on Existing • Compete for competitor business players – leading to higher Customers cost of customer acquisition • Create a niche by looking at finer customer preferences Creates small Drive for finer • Dominate with competitive marketplaces that might Segmentation advantage in segments not be scalable and profitable in long run Conventional Strategy of companies needs to be challenged © 2012 Regalix Inc. Confidential, All Rights Reserved
The Three Tiers of Non Customers Tier 3 Non Customers Tier 3 non customers: “unexplored” non customers who are in markets distant from yours. Tier 2 Non Customers Tier 2 non customers: refusing noncustomers who consciously choose against your market Tier 1 – Non Customers Tier 1 non customers : “soon-to-be” noncustomers who are on the edge of your market, waiting to jump ship Non Customers Managing the three tiers of Non customers Tier 1 Non Customers : Investigate Dissatisfaction Key commonalities across needs & desires e.g. PRET A MANGER- British fast food chain Tier 2 Non Customers: Eliminate access barriers Economic, Functional, Education, Geographical Go for the Bigger Catchment e.g. JCDecaux – street Furniture Tier 3 Non Customers: Remove long held assumption on customer needs & behavior e.g. US Airforce Joint Strike Fighter and Zynga © 2012 Regalix Inc. Confidential, All Rights Reserved
How did Zynga effectively utilized this principle? Tier 1 Non-Customers Tier 2 Non-Customers Tier 3 Non –Customers Non Regular players – young Casual Players - working Non Player Parents- women/ Audience boys & girls bored out of men/ women not enough housewives traditional games time to play Change 1 Changed genres completely – Cost of acquisition – free Removed violence from shooting, arcade, racing, to simulation Change 2 Made social networking fun Eliminated hassles of consoles, Play with friends and family – and more exciting game titles, accessories, not necessarily together / real hardware & setups time Results Fun lasts longer, with reduced Non serious casual play to relax No winner – no loser time and effort / unwind • Zynga looked across non customers and attracted new buyer groups to create an industry that did not exist earlier © 2012 Regalix Inc. Confidential, All Rights Reserved
Buyer Utility Is there a compelling Is there exceptional buyer utility in reason for the mass to your Business idea? buy? Yes No Price Revenue Is your strategic price Is your price easily accessible to the attractive enough to mass of buyers? attract customers? Yes No Sequence of Cost Can your costs be Blue Ocean significantly lower than the current Can you attain your cost target to profit at your Strategic price? Costs Strategy Industry price? Yes No Adoption Are there any adoption hurdles? What are the adoption hurdles in Hurdles actualizing your business idea? Are What are the you addressing them upfront? resistance points? Yes No Commercially Viable Blue We will explore the Sequence and the formulation in our Ocean Strategy Next webinar using the tools we have explored today © 2012 Regalix Inc. Confidential, All Rights Reserved
Buyer Utility Map A buyer’s experience can usually be broken into a cycle of six stages, running from purchase to disposal. Each stage encompasses a wide variety of specific experiences. At each stage, managers need to ask a set of questions to gauge the quality of buyer’s experience. Purchase Delivery Use Supplements Maintenance Disposal •How long does it •How long does it •Does the •Do you need •Does the •Does use of the take to find the take to get the product require other products product require product create product you need? product training or and services to external waste items? delivered? assistance? make this product maintenance? •Is the place of •How easy is it to work? purchase •How difficult is it •Is the product •How easy is it to dispose of the attractive and to unpack and easy to store •If so, how costly maintain and product? accessible? install the new when not in use? are they? upgrade the •Are there legal product? product? •How secure is the •How effective •How much time or environmental transaction •Do buyers have are the product’s do they take? •How costly is issues in environment? to arrange features and maintenance? disposing of the •How easy are delivery functions? product safely? •How rapidly can they to obtain? themselves? you make a •Does the •How costly is purchase? product or disposal? service deliver far more power or options than required by the average user? Is in overcharged with bells and whistles? © 2012 Regalix Inc. Confidential, All Rights Reserved
Uncovering Blocks to Buyer Utility Uncovering blocks to buyer utility can identify the biggest blocks to buyer experience that stand in the way of converting noncustomers into customers. Customer Productivity: In which stage are the biggest blocks to customer productivity? Simplicity: In which stages are the biggest blocks to simplicity? Convenience: In which stage are the biggest blocks to convenience? Risk: In which stage are the biggest blocks to reducing risks? Fun and Image: In which stage are the biggest blocks to fun and image? Environmental In which stage are the biggest blocks to environmental friendliness? Friendliness: © 2012 Regalix Inc. Confidential, All Rights Reserved
Testing the Buyer Utility – with Indochino.com Purchase Delivery Use Supplements Maintenance Disposal Is it Productive for the buyer? Utility Leavers Does the buyer find it simple? Does the buyer find it Convenient? Does it reduce buyers' Risk Does it have a fun image association? Does it have environment friendly Buying Experience Indochino.com • Buyer Utility Score Blocks– Lower than what is prevalent in the current industry • Therefore Indochino.com raised the Buyer Utility and Experience © 2012 Regalix Inc. Confidential, All Rights Reserved Traditional Suit industry
Exceptional Utility to Strategic Pricing Three Alternate product / service Types Different Form & Same Different Form – Function – Same Form Same Function objective Viagra Higher degree of Legal & resource SAP Lycra protection Difficult to imitate Mid Level pricing Some degree of legal & resource Price Corridor protection I phone of Masses Low degree of legal & resource Ford Model T Protection Air Asi • Step 1: Identify the Price Corridor of • Step 2: Specify the price level within the Mass. the price corridor • Blue oceans approach to price is not Cost + profit • Infact it is Strategic Price – Target Cost © 2012 Regalix Inc. Confidential, All Rights Reserved
Strategic Pricing to Target Costing Strategic Price • Unlike traditional companies the price must be determined first not Target the costs. Profit • The costs is determined based on the target profit intended Target Cost • Cost is approached as a target for reduction • Target Costs Can be achieved Streamlining & Partnering through: Cost Innovations – Streamlining Operations • Outsourcing, digitizing, cloud, • E.g. Apple – Partnering Price Innovations • Leverage low cost capabilities and reach of other companies • E.g. SAP who partnered with Oracle, Cape Gemeni , Accenture etc Price ≠ Cost + profit © 2012 Regalix Inc. Confidential, All Rights Reserved
Overcoming Adoption Hurdles • Perfect business model doesn’t always guarantee success of a blue ocean idea •Failure to address the concerns of employees • A new idea threatens the position of can be very expensive •Make an effort to explain the new idea, Work the company, which can provoke fear out the problems so everyone wins among the three main stakeholders: employees, business partners, and the public • Before moving on with a new idea, the Employees company should communicate the plan effectively to all stake holders • Use Blue Ocean Idea Index to test the system General Business Public Partners •Stakeholders need to be confident and know that there will be no surprises •Possibly more important than •Do not let others take charge of your own employees debate •Resolve by openly discussing the problem © 2012 Regalix Inc. Confidential, All Rights Reserved
Overcoming Key Organizational Hurdles • Every change in organization is Cognitive Hurdle encounters 4 hurdles viz. Cognitive, An Organization Wedded with Status Quo Resource, Motivational & Political • Conventional wisdom asserts that the greater the change, the greater the resources and time you will need to bring about results. Resource Hurdles Political Hurdles Limited resources Opposition from Powerful Vested Interests Leveraging tipping point leadership to align all with the new strategy. • Transforming the extremes will transform the masses. Motivational • Focus on acts of disproportionate Hurdles influence. Unmotivated Staff – People, Acts and Activities © 2012 Regalix Inc. Confidential, All Rights Reserved
Overcoming Hurdles with Tipping point leadership Cognitive Hurdles Motivational Hurdles Zoom in on Kingpins (key influencers) Identify the Natural Leaders, Skilled and Ride the “Electric Sewer” persuasive (Experience the key challenges yourselves / top Place kingpins on a fishbowl management, before framing the problem) (Highlight actions and responsibilities of kingpins Meet with Disgruntled Customers in a transparent & fair process) (Ensure you understand the experience of others) Atomize to get the organization to change itself (Breaking up of objectives, by function and role so that nobody can say it’s a difficult task) Resource Hurdles Political Hurdles Redistribute resources to your hot spots (Identify the impactful areas where more resources are required but not adequate) Who are my devils? Who will fight me? Who will Redirect resources from your cold spots lose the most (Identify the non Impactful areas where resources Who are my angels? Who will naturally align with can be freed) me? Who will gain the most by the strategic shift? Engage in horse trading (Trade resources from others for symbiotic © 2012 Regalix Inc. Confidential, All Rights Reserved
Building execution into Strategy • During a Strategy execution that requires offering customers a leap in value : – People are required to step out of their comfort zones and change the way they have performed previously – People can resent having a strategy thrust upon them – Poor process can ruin Strategy, leading to distrust, non-cooperation and even sabotage. The Three Principles of Fair process • Involving Individuals in strategic decisions that affect them. Engagement • Asking for their inputs and allowing to refute the merits and demerits of ideas • Nullifying the assumptions that anyone may have •Involves explaining as to why the strategic decisions are made as they are Explanation • What is the core thinking that underlies the strategy •What are the new rules of the game and therefore the new responsibilities Expectation Clarity • What are the expectations and standards that each will be judged upon © 2012 Regalix Inc. Confidential, All Rights Reserved
How fair Process affects People’s Attitudes & behaviors Strategy Fair Process Engagement Intellectual & Formulation Process Explanation Emotional Recognition Expectation Clarity Attitudes Trust & Commitment Trust & Commitment “ I feel My Opinion Counts” Behavior Voluntary Cooperation Voluntary cooperation “ I will go beyond the call of Duty” in execution Strategy Strategy Exceeds Expectations Execution Self Initiated • Fair process of Strategy ensures a managerial road map that builds productivity while executing a strategy © 2012 Regalix Inc. Confidential, All Rights Reserved
BOS Principles Summary Strategy Formulation Strategy Execution Business Model Organizational Management Search Risks Planning Risks Scale Risks Risks Risks Risks Strategic Business Management 6 Paths Approach Market Sizing Mobilization Planning Model Risks Getting the Reconstruct Focus on Big Reach Beyond Overcoming Building strategic Market Picture – Not Existing Organization Execution Sequence Boundaries Numbers Demand al hurdles into Strategy Right Plan beyond incremental •Sequence the •Alternative improvements using business Model to Industries a visualization •Challenge capture newly Tipping Point •Strategic groups approach Conventional created value leadership to Execution •Buyer Groups •Visual Awakening practices •Buyer Utility Tackle through: •Complementary • Visual Exploitation •Consolidate Mapping • Cognitive hurdles Engagement Product offerings • Strategy Fair demand by •Pricing & corridors •Resource Hurdles •Explanation •Functional • Visual focusing on Non of Masses •Motivational •Clarity of Emotional Communication Customers • Cost Targets •Use PMS map to Hurdles expectations Orientation • Three tiers of based on margins identify current & • Political Hurdles •Time Non Customers desired future orientation of • Potential business Adoption obstacles © 2012 Regalix Inc. Confidential, All Rights Reserved
Get in Touch  Forefront of Innovation  visit: www.regalix.com  Digital Marketing Services  Technology Enabled Services  If you have any questions about this webinar please  Regalix Labs feel free to get in touch with the speaker Pavan Kumar, pavan@regalix-inc.com  Multi-disciplinary Leadership Team & Strong Advisory Board, 175+ Team  Fortune 500 and Venture Backed Customers (B2B and B2C)  Global Operations: HQ in Silicon Valley, 4 Offices  Industry Recognition 39 © 2012 Regalix Inc. Confidential, All Rights Reserved
Thank you © 2012 Regalix Inc. Confidential, All Rights Reserved

Blue ocean strategy Part 2

Check these out next

Blue ocean strategy Part 2

Recomendados

Más contenido relacionado

Presentaciones para ti(20)

Similar a Blue ocean strategy Part 2(20)

Más de Regalix(20)

Último(20)

Blue ocean strategy Part 2