1.
BLUE OCEAN
STRATEGY
The ´How to´ book
No. 2,3 & 7 in Amazon.de (Foreign language books)
No. 1,1 & 8 in Amazon.com
(relevant categories)
Peter Berends
W.Chan Kim Renée Mauborgne

2.
Introduction
• What is Blue Ocean Strategy?
• Background?
• What are the steps prescribed?
• How does it relate to practice?
• Difficulties and appraisal

3.
Background
• 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 claims to offer systematic and reproducible methodologies and processes in
pursuit of value innovation by both new and existing firms.

4.
What is Blue Ocean Strategy?
• Blue Ocean Strategy is a preconceived way to maximise the chances to open new
competition-free markets that boost firm income (and thus survival).
• Red oceans are competition intensive markets where firms ´struggle´ to survive
(the oceans are red from the blood of fish biting each other)

5.
Red Ocean Strategy Blue Ocean Strategy
Compete in existing market space Create uncontested market space
Beat the competition Make the competition irrelevant
Exploit existing demand Create and capture new demand
Make the value-cost trade off Break the value-cost trade off
Focus on ´normal´ strategic choices Focus on ´both-and´ choices

6.
Value innovation as cornerstone
• 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.

7.
The 6 Principles of a Blue Ocean Strategy
Formulation principles:
• Reconstruct market boundaries
• Focus on the big picture
• Reach beyond existing demand
• Get the strategic sequence right
Execution principles:
• Overcome the four key organizational hurdles
• Build execution into strategy

8.
Analytical tools and frameworks
• The strategy canvas
• The four actions framework and grid (Eliminate, Reduce, Raise, Create)
• The three characterisics of a good strategy

9.
The strategy canvas: Benefits
Industry profile by
showing the factors
that affect
competition among
the players.
Shows the strategic profile for
incumbents, identifying which
factors they invest in.
Shows the
company´s strategic
profile and how it
invests in the
competitive factors,
and possible future
factors to create a
BOS.

10.
The Strategy Canvas: Components
Component Graphical depiction Description
Key competive factors Horizontal axis 1. Factors the industry
invests in (red), and
2. Factors that are added
(to create a blue ocean
strategy)
Level of
investment/Value
Vertical axis Captures the offering
levels buyers receive
across all the competitive
facors
Strategic profile Value curve Visualises the strategic
position vis à vis the
competition

11.
The power of visualization: perceptual
bandwith:
• taste: 1.000 b/s
• smell: 100 kb/s
• hearing: 100 kb/s
• touch: 1Mb/s
• sight: 10 Mb/s
(That´s why a picture tells more than a thousand words.)

12.
Value
innovation
Reduce
Raise
Create
Eliminate
The ERRC framework
A consistent way to
analyse factors that could
increase value for the
customer
In a later stage to help
setting the price right.

13.
1. Reconstructing Market Boundaries:
The 6 Paths
• Path 1. Look across alternative
industries
• Path 2. Look across strategic groups
within industries
• Path 3. Look across the chain of
buyers
• Path 4. Look across complementary
product and service offerings
• Path 5. Look across functional or
emotional appeal to buyers
• Path 6. Look across time

14.
Path Head to head
Competition
BlueOcean
Creation
1 Industry Focuses on rivals within the industry Looks across alternative industries
2 Strategic Group Focuses on competitive position within
strategic groups
Across strategic groups
3 Buyer Group Focuses on better serving the buyer
group
Redefines the buyer group
4 Product-Service
Scope
Maximizing the value of product and
service offerings within the bounds of
the industry
Complementary product and service
offerings
5 Functional-
emotional
orientation
Improving price-performance within the
functional-emotional orientation of its
industry
Rethinks
6 Time Adapting to trends Co-creates trends over time

15.
2. Focus on the big picture, not the numbers
(aligning the strategy process)
• Visualize
• Awakening
• Exploration
• Strategy fair
• Communication

16.
3. Reach beyond existing demand
Three groups (tiers) of non-customers
1. Soon to be customers
2. Refusing customers
3. unexplored customers
Expansion instead of
segmentation.

17.
4. Get the strategic sequence right
Decision tree:
1. Buyer utility? (Buyer utility map)
then
2. Price? (Price corridor)
then
3. Cost? (target costing)
then
4. Adoption hurdles? (educating the fearful)
Viable Blue
Ocean Strategy

18.
Characteristics of a BOS
• Focus
• Divergence
• CatchingTagline

19.
EXECUTING BLUE
OCEAN STRATEGY

20.
5. Overcoming key organization hurdles
• Tipping point leadership
• Hurdles:
• cognitive
• resource
• motivational
• political

21.
6. Build execution into strategy
• Take the process in consideration
• Procedural fairness:
• Engagement
• Explanation
• Expectation clarity
• Take the people you´re working with seriously

22.
Examples
1. Philips Senseo
2. Nestlé Nespresso

23.
THT Constant
taste
Brand
loyalty
Price Ease of use Disposal Variety `espresso
feel´
Senseo Coffee
Senseo Coffee Nespresso

24.
Central ideas
• Value for customers
• The customer doesn`t know
what he wants
• Visualise
• Dialogue
• looking for leverage points
• Challenge conventional
wisdom
Challenge
business/firm
paradigms
The main challenge is thus
more entrepreneurial in
nature.

25.
Appraisal
• Puts forward the focus of value innovation: what can we do to increase customer
value in a divergent way (not only cost or diversification).
• Blue Ocean Strategy is a well written account of what creative entrepreneurs and
value innovation can accomplish.
• It offers templates and procedures of which the strategy canvas and the ERRC grid
are an addition to the literature.

26.
Difficulties
• They describe cases and promise success (success bias). From descriptive theory
to prescriptive (pretty common in economic sciences).
• Little is known of firms that consciously addapted BOS –AND were successful.
• Finding and appraising the strategic values is the hard work that asks for out of the
box thinking. Mostly market entrants shake up the industry rules, not the
incumbents.
• For the execution of strategy and accompanying change, better books are
available.

27.
Conclusion
• The strategy canvas and ERRC Grid are valuable tools for analysis, visualisation
and communication.
• It´s difficult to see what we cannot see (paradigms and mental models)
• The customer doesn´t know on forehand what he wants –what is it that we
envision?
• The customer is the central focus: how to increase value.
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