Create Uncontested Market Space with Blue Ocean Strategy

Blue Ocean Strategy
How to Create Uncontested Market Space
and Make the Competition Irrelevant

Facilitators : Yip Khai Biau (ymike27@hotmail.com)
& Lieu Yoke Sun
Group/Presentation Title
Agilent Restricted
Date ##, 200X

Blue Ocean Strategy (BOS)


Introduction to BOS



BOS Tools : Strategy Canvas & E.R.R.C.



Awakening : As-Is Strategy Canvas



Exploration : Reconstruct Market
Boundaries



Strategizing : To-Be Strategy Canvas



Actualization : Identify actions to actualize
the strategies



Conclusion
Facilitators : Yip Khai Biau (ymike27@hotmail.com)
& Lieu Yoke Sun
All Rights Reserved – KB Yip/YS Lieu

Page : 2

Objectives


Develop understanding of Blue Ocean Tool Sets and how
to apply them effectively



Strategy Canvas
ERRC



Perform As-Is Analysis to Compare Current Strategy of XYZ
vs Competitors



Explore Pathways to Breakaway from Market Boundaries to
look for Bigger Playing Field



Brainstorm and Agree on the To-Be Strategy for XYZ


Page : 3

Introduction to Blue Ocean Strategy


History & Background



Defining Red & Blue
Ocean



Six Principles of BOS



Reach Beyond Existing
Demand



Value Innovation


Page : 4

History & Background
• Authored by W. Chan Kim and Renee Mauborgne in
2005.
• Based on a study of 150 strategic moves spanning
more than 100 years and 30 industries.
• BOS is the simultaneous pursuit of differentiation and
low cost.
• The aim of BOS is not to out-perform the competition
in the existing industry, but to create new market
space or a blue ocean, thereby making the
competition irrelevant.
• BOS offers systematic and reproducible
methodologies and processes in pursuit of innovation
by both new and existing firms.
• BOS frameworks and tools are designed to be visual
in order to not only effectively build the collective
wisdom of the company but also to effectively execute
through easy communication.

Page : 5

Defining Red and Blue Ocean
What’s Red, What’s Blue?
Red Ocean Strategy

Blue Ocean Strategy

•• Compete in existing market space
Compete in existing market space

•• Create uncontested market space
Create uncontested market space

•• Beat the competition
Beat the competition

•• Make the competition irrelevant
Make the competition irrelevant

•• Exploit existing demand
Exploit existing demand

•• Create & capture new demand
Create & capture new demand

•• Make the value-cost trade off
Make the value-cost trade off

•• Break the value- cost trade off
Break the value- cost trade off

•• Align strategy choice of
Align strategy choice of
differentiation or low cost
differentiation or low cost

•• Simultaneous pursuit strategy of
Simultaneous pursuit strategy of
differentiation and low cost
differentiation and low cost


Page : 6

Examples of Red and Blue Ocean


Page : 7

Six Principles of Blue Ocean Strategy
Formulation Principles
1. Reach beyond existing

Execution Principles
5. Overcome key
organizational

demand
2. Reconstruct market

hurdles
6. Build execution into

boundaries
3. Focus on the big picture,

strategy

not the numbers
4. Get the strategic
sequence right


Page : 8

Reach Beyond Existing Demand


Yourlu
B
Market



Second Tier: “Refusing noncustomers who consciously
choose against your market.



Second
First Tier
Tier

First Tier: “Soon-to-be” noncustomers who are on the edge of
your market, waiting to jump ship

Third Tier: “Unexplored” non
customers who are in markets
distant from yours.

Third
Tier

cean
eO

Blue Ocean – Go for the Largest Catchment of Non-Customers

Page : 9

Example – [yellow tail]

[yellow tail] :

Traditional Wine :
• An elite, refined image in packaging with heavy
use of wine terminology.

• No jargon.Simple and nontraditional label.

• Aging quality.

• Vibrant and fun.

• Prestige of a vineyard and its legacy.

• Sweeter and easier to drink.

• Complexity and sophistication of a wine’s taste,
such as tannins and oak.

• Only one Red (Shiraz) and one White
(Chardonnay).

• Aging is not important.

• A diverse range of wines to cover all varieties
of grapes & consumer preferences


Page : 10

Example – [yellow tail]
Tier 3 – Anyone that drinks water

[yellow tail] did not focus
on the wine market only

Tier 1 – Wine drinker market

Second
First Tier
Tier

Third
Tier

Second
First Tier
Tier

Third
Tier

Your
Your
Market
Market

Red
Wine
X

Tier 2 – “Easier to drink” market, eg.,
beer, cocktails, soft-drink

[yellow tail] created a Blue
Ocean by making its wine
more appealing to the
bigger population


Page : 11

Reach Beyond Existing Demand

Entertainment
Theater
Performance

Entertainment
Theater
Performance

Circus

Circus

Circus
X

Circus
X


Page : 12

Example – [Nintendo]
Electronic Game
Industry

Girls
Other
Males
Young
Antisocial
Males

Nintendo Wii
Nintendo created a Blue Ocean by
reducing the complexity, add the
ease of use and fun!

Everyone
Else

Girls
Other
Males

Everyone
Else

Young
Antisocial
Males


Page : 13

Value Innovation – The Cornerstone of BOS


Value innovation places equal emphasis on value and innovation.



Value innovation is a new way of thinking about and executing strategy that
results in the creation of a blue ocean.



The creation of blue oceans is about driving costs down while simultaneously
driving value up for buyers.
Cost Saving – Eliminate &
Reduce Competing Factors

Cost

Value
Innovation

Buyer Value

Buyer Value Lifted – Raise
& Create New Elements


Back
Page : 14

Blue Ocean Strategy Tools



Strategy Canvas



Eliminate-Reduce-Raise-Create
(ERRC) Grid


Page : 15

What is Strategy Canvas?
Degree of which each competitor
offers/invests in each factor

Value Curves

High

Offering Level

Competitor 1

Competitor 2

Mid

Your Company
Low

Factor 1

Factor 2

Factor 3

Factor 4

Factor 5

Factor 6

Factor 7

Competing Factors

Factor 8

Factors that
the industry
competes &
invests, also
potential
areas where
customer
value could be
created.

Graphical Representation of Strategy
+
Big Picture View
+
Landscape Scanning
+
Relative Positioning vs. Competitors

Page : 16

4 Actions Framework
Strategically
Reduce Cost

Reduce
Which factors should be
reduced well below the
industry's standard?

Eliminate
Which of the factors that
the industry takes for
granted should be
eliminated?

Raise

A New
A New
Value
Value
Curve
Curve

raised well above the
industry's

Create

Strategically
Invest in

created that the industry
has never offered?


Page : 17

Eliminate-Reduce-Raise-Create
(ERRC) Grid
Eliminate

Raise

Reduce

Create

Back

Page : 18

Formulating Blue Ocean Strategy
75 mins

120 mins

Exploration :
Reconstruct Market
Boundaries

Awakening :
As-Is Analysis



Activity 1 (45 min)

120 mins



Activity 3 (90 min)

Strategizing :
To-Be Strategy
Canvas


Activity 5 (90 min)

• Split into 3 Groups



• Review As-Is Strategy
Canvas (30 min)

• Use 6 Paths Framework,
reconstruct market
boundaries & identify
Divergent Factors (60 min)

• Use ERRC to construct the
Desired Value Curve (60
mins)

• Presentation (5 min each,
15 min total)


30 min total)

Activity 2 (30 min)
• Agree to ONE As-Is
Strategy Canvas



Activity 4 (30 min)
• Agree to Top 3-5 Divergent
Factors


30 mins total)

 Activity 6 (30 min)
• Agree to ONE To-Be
Strategy Canvas

Page : 19

Activity 1 & 2 : As-Is Analysis
Review XYZ As-Is Strategy Canvas

Offering Level

High

4.5
4
3.5
3

Mid

2.5
2
1.5

Competitors
XYZ

1

Low

0.5
0

h
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Br

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Back

Page : 20

Reconstruct Market Boundaries


There are 6 pathways to reconstruct the market boundaries
Across Alternate Industry
Across Strategic Groups
Across Buyer Groups

Red
Ocean

Across Complementary Scope of
Products & Services

Blue
Ocean

Across Functional Emotional
Orientation
Across Time


Page : 21

Across Alternative Industries
BOS Example –


Alternatives include products or services that have different functions and
forms but the same purpose.

Commercial
Airline

• Pay per use
Good

• No
Maintenance

Corporate
Jet

Corporate
Jet

Commercial
Airlines

• Less Travel
Time
• Less Hassle
• P2P

1/16 Ownership
@ $375k

• Not P2P
Bad

• High Travel
Time
• Security
Concern

• High Cost

50 hrs/yr

Smaller
Airplanes,
Airport,
Less Staff

Point-to-point, Faster,
Less Hassle, Increase Productivity


Page : 22

Strategy Canvas - NetJets
Raise

Eliminate
•

Speed of travel time

•

Ease of travel

•

Flexibility and Reliability

•

In flight service

Create

Reduce
•

Price

•

Need for customers to
manage aircraft

•

Deadhead costs

High

Private Jet
NetJets' Value
Curve

Com m ercial Airlines

Low Price

Need for
customer's to
manage aircraft

Deadhead
costs

Speed of total
travel time

Ease of travel

Flexibility and
reliability


In- flight service

Page : 23

Across Alternative Industries
BOS Example –
Conventional Airline

Coach

Across
Alternative
Industries










Fast
Expensive
Better Services
Flight Connections

Slow
Cheap
Point to Point

Now Everyone Can Fly!






Price of Coach &
Speed of Flight
P2P Direct Flight
No Frill – User Pay
Budget Travel
Package

Page : 24

Strategy Canvas - Air Asia
Raise

Eliminate
 Price Competition

•

Quality of Safety

 Seat Selection

•

Point to Point Direct
Flight

 Free Food & Beverages
 Air Ticket
 VIP Lounge
 Flight Connection

Create

Reduce
 Air Fare

•

Web Registration

 Capital

•

Express Boarding

 Stopover time

•

Budget Hotel

 Staffing (ground and
air)
High

Offering Level

Air Asia

Other Local Airline

Land Transportation

Low

l
l
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y
F
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et
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Re oa r
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P
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W
ic
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Fl
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Pr
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P2
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S
F
o
B
Xp
St


Page : 25



Across Buyer Groups

Red
Ocean

Products & Services

Blue
Ocean

Orientation
Across Time


Page : 26

BOS Example –


Strategic Groups –Groups of companies within an industry that pursue a similar
strategy.



E.g., Automobiles – Luxury (Mercedes, BMW), Economical (Toyota, Proton).
Traditional
Health Club

Good

• Full range
exercise and
sporting
options

Home
Exercise

Traditional
Health Club

Womanly
Fun

• Low Cost
• Privacy

Easy to Use
Machine

• Expensive.
Bad

• Not easily
accessible.
• Complicated.

Peer
Support

• Low
motivation

• Lack of
Privacy

>10k
Outlets &
> 4M
members
(as of
Oct,
2006)

Affordable
Home Exercise


Page : 27

Strategy Canvas - Curves
Raise

Eliminate
•

Non threatening same
sex environment

Create

Reduce
 Price

•

 Amenities

Womanly fun
atmosphere

 Workout equipment
 Availability of Instructors

High

Curve s

Hom e Exercise Program

Traditional Health Clubs

Low

Price

Amenit ies

Workout
Equipment

Workout Time

A vailabilt y of
instructors

Environment
encouraging
discipline and
motivation in
exercise

Nonthreatening
same- sex
environment

Convenience


Womenly fun
at mosphere

Page : 28

BOS Example – OldTown









Expensive
Hygienic
Good Ambience &
Relaxing Environment

Economical
Less Hygienic
Less Appealing Environment






Rightly Priced
Hygienic
Better Environment
Emotional Appeal


Page : 29

BOS Example – Tune Hotel
4/5 Stars Hotels

Nice Sleep!
Hot Shower!





Luxury
Expensive
Service
Facilities
Backpacker Hostels







Cheap
Sleep & Go

No Frill
Cheap - Pay For What You Use!
Optional Add-ons:
 Limited service, basic
 Low on price, high on personality
 Walk in


Page : 30



Across Buyer Groups

Red
Ocean

Products & Services

Blue
Ocean

Orientation
Across Time


Page : 31

Across Chain of Buyers
BOS Example –


There is a chain of ‘buyers’ who are directly or indirectly involved in the buying
decision.
Purchasers – pay for the product or service
Users – use the product or service
Influencers – influence the decision in the purchase

Corporate
Jet
Example : Novo Nordick - from insulin producer to a diabetes care company

Traditionally

Now

Prescribe

Better
Medicine

Request

Better
Pricing

Easy
To Use

Insulin
Industry

No
Unpleasant
Feeling

Page : 32

Across Chain of Buyers
BOS Example – Nintendo Wii
Everyone is a gamer!

Everyone can play!
Reduced Graphics

Nintendo outsold Sony and
Microsoft 6:1. Can’t keep
product on shelves!

Family Fun
Wii Fit

Increased motion control


Page : 33

Strategy Canvas : Nintendo Wii
Raise

Eliminate
•

Complexity

•

Game Library

•

Movie

•

Ease of Use

Create

Reduce
 Price

•

Interaction/Group Fun

 Graphics

•

Magic Wand

 Physics
 Online Pay

High
Nintendo Wii

Gam e Industry

Low

ic
Pr

e
G

s
ic
ph
ra

s
ic
ys
Ph

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In

up
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Fu
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ag
M

W

d
an

Page : 34



Across Buyer Groups

Red
Ocean

Products & Services

Blue
Ocean

Orientation
Across Time


Page : 35

Across Complementary Products & Services
BOS Example – NABI


Define the total solution buyers seek when they choose a product or service.



Think about what happens before, during, and after your product is used.
Corporate
Jet

Example :
Traditional : Buses made from Steel
• Less Space
• More Fuel

• Low Initial Price

Purchase

• High Initial Price

Delivery

Use

• High

Supplementa Maintenanc
ry
e

• More Space
• Less Fuel

• Low

•High

Disposal

• Low

NABI : Buses made from Fibre Glass

Page : 36

Strategy Canvas - NABI
Raise

Eliminate
•

Environmental
friendliness

Create

Reduce
 Corrosion

•

Aesthetic design

 Maintenance cost

•

Customer friendliness

 Fuel consumption

High

NABI

Average U.S Transit Bus

Low
Initial purchase
price

Corrosion

Maintenance
cost

Fuel
consumption

Environmental
friendliness

Aesthetic
design


Customer
friendliness

Page : 37

Across Complementary Products and Services
BOS Example:

Operated 798 stores in all 50 U.S. states
and the District of Columbia, as well as
stores in Australia and Canada

Purchasing
Process

Before





Book Selection
Sit Down
Browse Through
Selection
Attend an event

During



Customer Enquiry
Paying






Go to Coffee Shop
Read the Book
Book Signing
Buy DVD, Games, Gift

Immediate Enjoyment!

Book Selection

Event : Story Telling for Kids

After

Book Signing

Carrying bag

DVD & Games
Page : 38

Across Complementary Products and Services
BOS Example • Largest EMS (Electronics Manufacturing
Services) in the World.
• Ranked 132 at Fortune Global with $51B
revenue, higher than Intel (188), Motorola
(200), Flextronics (292).
• Employs 550,000 employees worldwide
with design centers/factories at >10
countries.
• Make Apple Mac/iPod/iPhone, Intel
motherboards, Dell, HP, Sony PlayStation,
Nintendo Wii, Microsoft Xbox, cell phones
for Nokia/Samsung/Motorola/LG/SonyEricsson.
• Shenzhen facility at Longhua
• Covers about a square mile.
• Has its own fire brigade, hospital,
swimming pool, restaurants, banks,
supermarkets, internet cafe.


Page : 39

BOS Example - Foxconn
Repair &
Servicing
Repair &
Servicing
Logistics &
Distribution
Distribution

Conventional
EMS
Mass
Production

Mass
Production

Prototyping

Logistics
VI Part
Sourcing &
Production
Inventory
Control
Prototyping

Design

Sourcing
Design


Vertical Integration
(VI) Model
Page : 40

Strategy Canvas - Foxconn
High

Foxconn

Othe r EM Se s

Low

Co

st

Co

m

pe

ti t

iv

e
en

ss
hn
ec
T

g
olo

y
Pr

e
oc

ss
D

y
er
l iv
e

Q

ua

li ty

r
Ve


a
ti c

n
lI

te

g

t
ra

io

n

Page : 41



Across Buyer Groups

Red
Ocean

Products & Services

Blue
Ocean

Orientation
Across Time


Page : 42

Across Functional or Emotional Appeal
BOS Example – QB House
Some industries compete principally on price and function - their appeal is
rational.
 Other industries compete largely on feelings - their appeal is emotional.


• Pricey

• Simple
• Low Cost
• Low Price

• Extras
• Feelings

Emotional

Functional

Traditional Hair
Saloon
QB House

•
•
•
•

Rev

• Emotional Service -> None
• Hair Wash -> Air Wash
• $9
1996

2003

Hot Towels
Message
Tea/Coffee
Special Hair /Skin
Treatments
• $27 - $45


Page : 43

Across Functional or Emotional Appeal
BOS Example –
Institute / College

Across
Multiple
Pathways


Low Fee



Low Recognition of
Education Quality







Conventional
Education System

 Strategic
Group
• Functional ->
Emotional

 High Fee
 WW Recognized

Certification



Branches in UK, Africa
& China
Collaboration w other
Universities

 Open Education

System

 6000 students from 90 countries
 Vibrant, multicultural and international

 Free & Creative

Environment

Many Environmental
Constraints

 Diverse Student Base

Local Market

 Fun Learning
 Exposure
 Global Classroom


Academic Exchange

Encourage
Entrepreneurship

Page : 44

Strategy Canvas - LimKokWeng
Raise

Eliminate

•

Asian Culture

•

Creative Thinking
Flexibility Culture
Exposure

•

Reduce

Globalization
Competition

•

 Environmental
Constraints

•

•

 Foreign Cert
Superiority

Entrepreneurship

Create

 Student
Constraints

 Unconventional
Teaching Method

 Fee Competition

 Ecosystem

High

Lim Kok Weng
Private Colleges

Fo
re
ig
n

Fe
C
es
er
En
tS
vi
ro
up
nm
er
io
en
rit
ta
y
lC
on
st
ra
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in
ts
e
C
om
St
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ud
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G
lo
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ba
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at
in
io
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n
C
om
pe
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As
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ia
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C
ul
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at
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Th
in
Fl
kin
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ib
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C
ul
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Ex
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En
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on
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eu
lT
rs
ea
hi
p
ch
in
g
M
et
ho
d
Ec
os
ys
te
m

Low


Page : 45



Across Buyer Groups

Red
Ocean

Products & Services

Blue
Ocean

Orientation
Across Time


Page : 46

Across Time
BOS Example – iTune

Apple launched
iTunes online
music store

Apple teamed up with
major Music & Picture
Companies
 Sell Individual song /
entire album
 30 sec free listening
 Strategically price

Napster started
online music file
sharing service

1999

> 2 billion illegally
music flies were being
traded every month

2003

 iTunes had sold >
4 billion songs
 20 million songs
on Dec 25, 2007


2008

Page : 47

Across Time
BOS Example :


A video sharing website
for upload, view and share
video clips



User can post video
'responses' and subscribe
to content feeds



Created in mid-February
2005 by three former
PayPal employees



Uses Adobe Flash
technology to display a
wide variety of usergenerated video content



Acquired by Google in Nov
2006 for $1.6B

As of Apr 2008, hosting 83.4 million videos and 3.75 million user channels
> 100 million videos were being watched every day


Page : 48

Strategy Canvas - YouTube
Raise

Eliminate
•

Need for HTML
know-how

•

Hassle of
undergoing
numerous steps

•

Fees

•

Web space allotted
per user

Create

Reduce


Uploading /
downloading time

•

Ease of Use
technology

•

FLV technology

•

Ready-made website

•

Social networking

•

Video tags & Search

High
YouTube

Ordinary Webhosting
Low

d
ee
N

fo

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H
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-h
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e
sl
as

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Fe

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w
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pa
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e
W

e
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d
te
at
oc
l
al

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us

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Ea

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f- u
-o

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lo
no
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dy
ea
R

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ad
-m

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w
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te

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lo
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al
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So

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et


ng
ki
or
a
de
Vi

gs
ta

&

ch
ar
se

Page : 49

Look across Time

Weird Science
Future of the
Individual

Climate Change

Longevity
Medicine

Innovation
Economy

Ten Trends
of
the Extreme
Future

Fueling the
Future

Next Workforce

Securing the
Future

Globalization
US- China Future

From the Book “Extreme Future”


Page : 50

From Head-to-Head Competition to Blue Ocean Creation
Head-To-Head Competition

Blue Ocean Creation
Looks across alternative
industries

Industry

Focuses on rivals within its industry

Strategic Group

Focuses on competitive position within Looks across strategic groups
strategic group
within industries

Buyer Group

Focuses on better serving the buyer
group

Redefines the industry buyer
group

Scope of Product or
Service Offering

Focuses on maximizing the value of
product and service offerings within
the bounds of its industry

Looks across to complementary
and service offerings

Functional-Emotional
FunctionalOrientation

Focuses on improving price
performance within the functional emotional orientation of its industry

Rethinks the functionalemotional orientation of its
industry

Time

Focuses on adapting to external trends Participates in shaping external
as they occur
trends over time


Page : 51

Across Multiple Pathways
BOS Example – NV Multi Corporation
Traditional Graveyard

NV Multi Corporation
Total Peace of Mind






Economical
Unpleasant Environment
Pollution
No Maintenance






Expensive
Pleasant Environment
1 Stop Service
After Sales Service


Page : 52

Across Multiple Pathways
BOS Example – NV Multi Corporation

Complementary
Products & Services

Service Team

Prayer Service

White Ladies
A Service Respect For Woman

Professional Band

Across Buyer
Groups

Functional
to Emotional

• Notifying Friend &
Relatives
• Thank You Cards
• Memory Lane
• Video & Slideshow

Across
Alternative
Industries
• Buyer -> User & User -> Buyer
• Pet Memorial Garden
• VIP Memorial Garden

• Bereavement
Product
• Insurance Protection
• Capital Gain


Page : 53

Strategy Canvas - NV Multi Corporation
Raise

Eliminate
•

Price Competition

•

Fear

•

Taboos

•

Well Layout
Cemetery

•

Staff Appearance

•

Pre-arranged

•

One Stop Funeral
Services
Create

Reduce
 Sophisticated
Process

•
•

Luxury Cemetery

•

Customizable
Burial Plots

•

 Pollution

White Angels

Care Plan

High
NV Multi

Private Cem etary
Public Cemetery

an

s
ot

pl
re
Ca

Bu
r

ial

Pl

er
y
et
e
iz a
bl

om

Cu

st

Lu

xu
ry

Ce
m

An

ge

ls

ic e
s
W
hi
te

ed
er
al
Fu
n
p

St
o
O

ne

Se
rv

ra
ng

ce
Pr

e-

ar

ea
ra
n

et
er
y
St
af

fA
pp

t io
n
ay
ou
t

Ce
m

ss

Po
l lu
el
lL
W

is t
ic a

te
d

Pr

oc
e

bo
os

ar
Fe

titi
m
pe

Ta
So
ph

Pr
ic

e

Co

Pr
ic

e

on

Low


Page : 54

Activity 3 & 4 : Reconstruct Market Boundaries
Identify Divergent Factors

High

4.5

Competitors

3.5
3

Mid

2.5
2
1.5
1

Low

XYZ

0.5

e

C
om
In
pe
st
itu
tit
i ve
ti o
ne
na
ss
lR
ec
og
In
ni
du
ti o
st
Pr
n
ry
og
Li
ra
nk
m
ag
&
e
C
ar
ee
rP
at
h
Fa
ci
li t
at
or
s
Fa
ci l
i ti
es
Br
an
Li
di
fe
ng
st
yl
e/
C
ul
tu
re
Fa
ct
or
9
Fa
ct
or
10
Fa
ct
or
11

0

Fe

Offering Level

4

Competing Factors


Identify the
Divergent Factors
that Differentiate XYZ
from Competitors
Page : 55

Activity 3 & 4 : Reconstruct Market Boundaries
Identify Divergent Factors
Sub-Group :

Divergent Factor

Description

Note : Each sub-group must determine at least ONE Divergent Factor.
Back

Page : 56

Activity 5 & 6 : To-Be Strategy Canvas
Construct Desired Value Curve for XYZ
Eliminate

Create
Divergent Factors
X=
Y=
Z=

Reduce

Raise


Page : 57

Activity 5 & 6 : To-Be Strategy Canvas
Construct Desired Value Curve for XYZ
Eliminate
Competencies

Create
Divergent Factors
X=
Y=
Z=

Reduce

Raise

Technology
Process

Quality
Talent

High

New Value
Curve

Existing Value
Curve

Mid
Low
Fee
Competencies

Institutional
Recognition

Industrial
Linkage

Program
& Career Path


Facilitators

Facilities Lifestyle/
Culture

X

Y

Z

Page : 58

Three Characteristics of a Good Strategy

1. Focus

2. Divergence

Now Everyone Can Fly!
3. Compelling Tagline

Page : 59

Barriers to Imitation

Does not Make Sense
based on Conventional
Strategic Logic

Brand Image Conflicts
Chanel, CD, etc could not imitate
Body Shop as it would signal an
invalidation of their current
business models

NBC, CBS and ABC rediculed
the idea of 24x7 real time news
without star broadcasters

Political, Operational and
Cultural Changes
Major revisions in routing planes,
retraining, changing
marketing/pricing/culture. Took
MAS 6 years to come up Firefly

Economies of Scale
High volume generated by a
value innovation leads to rapid
cost advantages

1st to Market

Natural Monopoly

When a company offers a leap in
value, it rapidly earns brand buzz
and a loyal following in the
marketplace

Size of market does not make
sense to support another player


Back
Page : 60

Conclusion:
Focus on the Big Picture, not the Numbers
Awakening

Exploration

Strategy Fair

Communication

Compare your
business with your
competitors' by
drawing your As Is
Strategy Canvas

Go into the field to
explore the six
paths to creating
blue oceans

Draw your To Be
Strategy Canvas
based on insights
from field
observations

Distribute your
before- and-after
strategic profiles on
one page for easy
comparison

See where your
strategy needs to
change

Observe the
distinctive
advantages of
alternative
products and
services

Get feedback on
alternative strategy
canvases from
customers,
competitors’
customers and non
customers

Support only those
projects and
operational moves
that allow your
company close the
gaps to actualize
the new strategy

See which factors
you should
eliminate, create or
change

Use feedback to
build the best 'to be'
future strategy


Back
Page : 61

Get the Strategic Sequence Right
Red Ocean
Sequence

Buyer
Utility

Is there
exceptional buyer
utility in your
business idea?

Cost

Price

Price

Is your price
easily accessible
to the mass of
buyers?

Cost

Can you attain
your cost target to
profit at your
strategic price?

Utility

Adoption

Adoption
Hurdles

Commercially
Viable
Blue Ocean Idea

What are
adoption hurdles
in actualizing
your business
idea? Are you
addressing them
up front?


Page : 62

Buyer Utility Map
The Six Stages of the Buyer Experience Cycle
1

2

3

Purchase

Delivery

Use

4

5

Supplement Maintenance

Productivity

the product you
need?

the product
delivered?

Training or
expertise
assistance
required?

Simplicity

How rapidly can
you make a
purchase?

How difficult to
install the new
product?

Easy to store
when not in
used?

How much time
do they take?

How easy to
maintain and
upgrade?

Do buyers have
to arrange
delivery
themselves?

How effective
are features
and functions?

How easy are
they to obtain?

Disposal

How costly?

Customer How long to find How long to get

The Six Utility Levels

6

Convenience

Risk

Fun and Image

Is place of
purchase
attractive &
accessible?

Need other
products to
make it work?

How secure is
the transaction
environment?

Require external
maintenance?

Create waste
items?

How easy to
dispose?

Create waste
items?

Overcharged
with bell and
whistles?

How much
pain do they
cause?
Legal or
environmental
issue of the
product
disposal?

Environmental
Friendliness


Page : 63

Buyer Utility Map – XYZ’s To-Do
The Six Stages of the Buyer Experience Cycle
1

2

3

4

5

6

Purchase

HR V.I.

Delivery

Use

Supplement

Maintenance

Disposal

Customer

Insourcing

Global Guru

The Six Utility Levels

Productivity

Simplicity

Convenience

Risk

Fun and Image

Environmental
Friendliness


Page : 64

Strategic Pricing
• Conventional – Test water with price insensitive customers. Drop price over time to
attract mainstream buyers.
• BOS Strategic Pricing – Start with Pricing to capture Mass Market.
• Why ?
• Volume gives Economy of Scale. E.g., Microsoft Windows XP.
• All or Nothing. E.g., eBay.
• Lack of Excludability would give rise to Free-Riding. E.g., Air Asia, OldTown.
• An offering’s reputation must be earned from Day One => Buyers can’t refuse.


Page : 65

Price Corridor of the Mass
1. Identify the Price Corridor
of the mass

2. Specify a Price Level within
the Price Corridor

Three alternative product/service types:

Different Form
Same Form

Same Function

Different Form and
Function, Same Objective

High degree of legal and
resource protection
Difficult to Imitate
(E.g., Dyson)

cing
l pri
ve
er-le
Upp

Price Corridor
of the Mass

Some degree of legal and
resource protection

Mid-level pricing
Low
-lev
el p

ricin
g

Low degree of legal protection
Easy to Imitate
(E.g., Air Asia)

Size of circle is proportion to number of buyers that product/service
attracts


Page : 66

Mid to Lower Strategic Pricing
Suitable for companies with no patent and asset protection (e.g., expensive production
factory).
• Their Blue Ocean offering has high fixed costs and marginal variable costs.
• Their attractiveness depends heavily on network externalities (all-or-nothing proposition such
as eBay).
• Their cost structure benefits from steep economies of scale and scope. Volume brings with
it significant cost advantages.


Page : 67

Profit Model of BOS
The Strategic Price

The Target
Profit

The Target Cost

Streamlining and
Cost Innovative

Partnering
• 1500 partners over 50
countries

• Metal/leather -> plastic
• 150 -> 51 parts
• Cheaper assembly

Pricing Innovation


Page : 68

Overcome Key Organizational Hurdles

Cognitive
Hurdle

Resource
Hurdle

Motivational
Hurdle

Political
Hurdle


Page : 69

Toppling the 4 Hurdles to Actions
Cognitive
Sewer – Underground
pipe carrying drainage
water or waste

Bring those in denial
to feel the pain and
meet the customers

 Ride the electric sewer
- Experience first hand the ‘real situation on
the ground’

 Meet with Disgruntled Customers
- ‘You can’t outsource your eyes’
- Get feedback from biggest critics

Resource
Where are XYZ’s Hot
spots and Cold spots
?
Revenue vs Resource
?
Beside headcounts,
what other resources
can you trade ?
Meeting room ?

 Hot spots

Motivational
 Focus on ‘kingpins’ – the key
influencers

Who are your
kingpings ?

 Fishbowl management of kingpins

What review/metrics
do you use ?

- Kingpins’ actions and inactions are made
as transparent to others as are fish in a
bowl of water

 Atomization
- Break down overall strategic objective into
bite sized chunks; different levels
understand their goal

Political
 Leveraging angels

- Low resources input but high potential
performance gains

- Angels = those who have the most to gain
from the strategic shift

 Silencing devils

 Cold spots
- Activities that have high resource input but
low performance impact
- Redistribute resources to hot spots from
cold spots

 Horse trading
- Swap resources around to where it is
needed

How do we
breakdown the 3
differentiators into
sizeable chunks?

- Devils = those who have the most to lose
from it

Who will align the
most with XYZ ? Who
will fight with XYZ ?
What can you lobby to
become your
Godfather ?

 Getting a consigliere on their top
management team
- Consigliere = politically adept but highly
respected insider who knows in advance all
the land mines, including who will fight you
and who will support you


Page : 70

Build Execution into Strategy
Strategy
Formulation
Process

Fair Process
Engagement
Explanation
Expectation clarity

Trust &Commitment

Attitude

“I feel my opinion counts.”

Volunteer
Cooperation

Behavior

“I’ll go beyond
the call of duty.”

Strategy
Execution

Exceeds Expectation


Self-Initiated

Page : 71

Barriers to Imitation

Does not Make Sense
based on Conventional
Strategic Logic

Brand Image Conflicts
Chanel, CD, etc could not imitate
Body Shop as it would signal an
invalidation of their current
business models

NBC, CBS and ABC rediculed
the idea of 24x7 real time news
without star broadcasters

Political, Operational and
Cultural Changes
Major revisions in routing planes,
retraining, changing
marketing/pricing/culture. Took
MAS 6 years to come up Firefly

Economies of Scale
High volume generated by a
value innovation leads to rapid
cost advantages

1st to Market

Natural Monopoly

When a company offers a leap in
value, it rapidly earns brand buzz
and a loyal following in the
marketplace

Size of market does not make
sense to support another player


Back
Page : 72

Acknowledgement


Professor Kim and Mauborgne for enlightening us
with such a great book.



You All, for being such a wonderful audience !


Page : 73

Back Up


Page : 74


Page : 75

So, are Red Ocean Strategies Worthless?
NO!
1.

A company must master its traditional markets using conventional strategic
planning tools.
- ‘It will always be important to swim successfully in the red ocean by out
competing rivals. Red oceans will always matter and will always be a fact of
business life’.
- But ‘to focus on the red ocean is therefore to accept the key constraining factors
of war- limited terrain and the need to beat an enemy to succeed – and to deny
the distinctive strength of the business world: the capacity to create new market
space that is uncontested.’

2.

But to sustain high performance, companies must create their own blue oceans,
and make the competition irrelevant!
- But blue oceans are largely uncharted
a) no analytic fireworks to guide its creation and implementation,
b) no principles to effectively manage risk,
c) therefore too risky for managers to pursue.
The book provides practical examples and guides to create blue oceans.

Page : 76

Successful Application of BOS
World Congress on Information Technology (WCIT) 2008
• A premier global ICT forum that brings together global
leaders in business, government and academia.
• Held at the Kuala Lumpur Convention Centre on May 18
– 22, 2008, 5 days-event.
• Themed “The Global Impact of Information and
Communications Technology: Enable Businesses,
Empower Societies, Enrich Economies”,
• Very successful event, drew more than 2,500 delegates
from over 80 countries!

Mapping the blue ocean strategies
From a strategic point of view, the 16th edition of Witsa's World Congress on Information Technology (Witsa's WCIT 2008) is conceived
using the "blue ocean" strategy methodology. WCIT 2008 is constructed from the ground up to be similar to previous editions, primarily from
the point of view of its focus on the global impact of ICT. Yet it is significantly different because of the collection of multiple events that are
held concurrently. The former gives it continuity while the latter brings additional depth to an outstanding series that started with the first
World Congress in 1978.
Creating "blue oceans" is a dynamic process of strategising and execution. It is also about doing the right thing at the right time. At first, the
organising committee needs to establish the ultimate goals, which must be achieved within a realistic time frame. Overall, there are three
phases of development, which span two years. The phases include fundraising, programme formulation and production. At each phase,
there are specific strategies being worked out and execution plans being carried out based on the "eliminate-reduce-raise-create" grid.
This "E-R-R-C" grid mapped out the ultimate "blue ocean" framework for organising the WCIT 2008. With this framework, the organising
committee managed to work out a unique WCIT 2008 strategy canvas for achievements. The strategy set out action plans to eliminate
whatever that is redundant, outdated and trivial to the overall organisation of the event. It also eliminated many challenges to minimise
operating cost and, at the same time, raise overall quality and create unique value propositions.
Source : The Edge Daily
Title : 19 May 2008 CEO's Laptop: All set for a most prestigious event by David Wong
David Wong - Pikom chairman and group CEO of SnT Global Sdn Bhd


Page : 77

Successful Application of BOS
Nintendo Wii


Page : 78

Create Uncontested Market Space with Blue Ocean Strategy

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