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The Blue Ocean Strategy
 Presented by: Stephene Roy Cardines Condino
Outline of the Report
Blue Ocean and the Red ocean

Value Innovation

Three Compelling Taglines for a Blue Ocean Strategy

The Four Grids

Visualizing Strategies in 4 Steps

Sequence of Blue Ocean Strategies

Buyer Experience

Profit Model of Blue Ocean Strategy

Blue Ocean Idea Index

Avoiding imitations of Blue Ocean Strategy
Blue Ocean and the Red Ocean
      Red Ocean Strategy                               Blue Ocean Strategy

Competition exist in the Market Place             Making an uncontested market space.


Players tries to beat and compete with            Make the competition irrelevant.
each other

Exploit existing demand.                          Create and capture new demand.


Make the value-cost trade-off.                    Break the value-cost trade-off.


Align the whole system of a firm’s activities     Align the whole system of a firm’s activities
with its strategic choice of differentiation or   in pursuit of differentiation and low cost.
low cost.
Value Innovation
For an organization to discover the Blue Ocean and leave
the Bloody red Ocean, An Organization should have the so
called “Value Innovation”
Value Innovation is the cornerstone of the Blue Ocean
Strategy by making competition irrelevant and opening an
uncontested market space.
Value is referred as the “Value for both the Buyer and
Consumer”
Innovation (Product, service or delivery) that creates value
for the market
Value Innovation is not the same as technology Innovation
and Market Pioneering
Non Existent of Value and Innovation
“Value without innovation tends to focus on Value
Creation Alone”

“Innovation without Value tends to be technology
driven, market pioneering and even futuristic”
Three Compelling Tagline for a Blue
         Ocean Strategy

 Focused

 Divergent

 Compelling Tagline
Eliminate/Reduce/Raise/Create the
                  Grid                Reduce
                            Which factors should be
                            reduced well below industry
                            standards?



        Eliminate                                                    Create
Which of the factors that
                                         A                Which factors should be
the industry takes for
                                       New                created that the industry
granted should be                      Value
eliminated?                                               has never offered?
                                       Curve


                                        Raise
                              Which factors should be
                              raised well above the
                              industry’s standard?



    The four actions framework offers an technique that breaks the trade-off between
    differentiation and low cost and to create a new value curve. It answers the four key
    questions of what industry takes for granted and needs to be eliminated; what factors need
    to be reduced below industry standards; what factors need to be raised above industry
    standards; and what should be created that the industry has never offered.
Eliminate/Reduce/Raise/Create the
                  Grid
                          Eliminate                                                Raise
            Enological terminology and distinctions                      Price versus budget wines

                        Aging qualities                                   Retail Store involvement

                  Above-the-line marketing

                          Reduce                                                 Create
                       Wine complexity                                         Easy drinking

                         Wine range                                          Ease of selection

                      Vineyard prestige                                     Fun and adventure



The eliminate-reduce-raise-create grid pushes companies not only to ask all four questions in the four
actions framework but also to act on all four to create a new value curve. By driving companies to fill in the
grid with the actions of eliminating, reducing, raising, and creating, the grid provides four immediate
benefits: it pushes them to simultaneously pursue differentiation and low costs; identifies companies who
are only raising and creating thereby raising costs; makes it easier for managers to understand and comply;
and it drives companies to scrutinize every factor the industry competes on.
Visualizing Strategy in Four Steps
 The four steps include visual awakening, visual exploration, visual strategy fair, and visual
 communication.

 1.      Visual          2.      Visual             3.      Visual Strategy         4.      Visual
         Awakening               Exploration                Fair                            Communicatio
                                                                                            n


 •Compare your           •Go into the field to      •Draw your “to be” strategy     •Distribute your before-
 business with your      explore the six paths to   canvas based on insights        and-after strategic profiles
 competitors’ by         creating blue oceans.      from field observations.        on one page for easy
 drawing your “as is”                                                               comparison.
 strategy canvas.        •Observe the distinctive   •Get feedback on
                         advantages of              alternative strategy            •Support only those
 •See where your         alternative products and   canvases from customers,        projects and operational
 strategy needs to       services.                  competitors’ customers,         moves that allow your
 change                                             and noncustomers.               company to close the
                         •See which factors you                                     gaps to actualize the new
                         should eliminate,          •Use feedback to build the      strategy.
                         create, or change.         best “to be” future strategy.
Sequence of Blue Ocean Strategy
                                                               Buyer utility
                                                   Is there exceptional buyer utility in your
                                                   business idea?                               No-- Rethink

An important part of blue ocean strategy is to      Yes

“get the strategic sequence right.” This                            Price
sequence fleshes out and validates blue ocean
                                                   Is your price easily accessible to the
ideas to ensure their commercial viability. This   mass of buyers?
can then reduce business model risk. In this                                                    No-- Rethink
model, potential blue ocean ideas must pass
                                                   Yes
through a sequence of buyer
utility, price, cost, and adoption. At each step                     Cost
there are only two options: a “yes” answer, in     Can you attain your cost target to profit
which case the idea may pass to the next           at your strategic price?
                                                                                                No-- Rethink
step, or “no”. If an idea receives a no at any
point, the company can either park the idea or      Yes
rethink it until you get a yes.
                                                                 Adoption
                                                   What are the adoption hurdles in
                                                   actualizing your business idea? Are
                                                   you addressing them up front?                No-- Rethink

                                                    Yes

                                                               A Commercially
                                                              Viable Blue Ocean
                                                                     Idea
Buyer Experience
                     Six Stages of Buyer’s experience. The six stages of Buyer experience is
                     running more or less sequentially from purchase to disposal. Each stage
                     encompasses a wide variety of specific experiences. At each
                     stage, managers can 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      Does the product         Do you need other       Does the product    Does use of the
take to find the    it take to get     require training or      products and services   require external    product create
product you         the product        expert assistance?       to make this product    maintenance?        waste items?
need?               delivered?                                  work?
                                       Is the product easy to                           How easy is it to   How easy is it to
Is the place of     How difficult is   store when not in use?   If so, how costly are   maintain and upgradedispose of the
purchase            it to unpack and                            they?                   the product?        product?
                                       How effective are the
attractive and      install the new
                                       product’s features and   How much time do        How costly is       Are there legal
accessible?         product?
                                       functions?               they take?              maintenance?        or environmental
How secure is the   Do buyers have                                                                          issues in
                                       Does the product or      How easy are they to
transaction         to arrange                                                                              disposing of the
                                       service deliver far      obtain?
environment?        delivery                                                                                product safely?
                                       more power or options
                    themselves? If
How rapidly can                        than required by the                                                 How costly is
                    yes, how costly
you make a                             average user? Is in                                                  disposal?
                    and difficult is
purchase?                              overcharged with bells
                    this?
                                       and whistles?
Blue Ocean Idea Index


 Utility   Is there exceptional utility? Are there
           compelling reasons to buy your offering?


 Price     Is your price easily accessible to the
           mass of buyers?


 Cost      Does your cost structure meet the target
           cost?


Adoption   Have you addressed adoption hurdles up
           front?
Profit Model of Blue Ocean Strategy
    The profit model of blue ocean strategy shows how value
    innovation typically maximizes profit by using the three levers of
    strategic price, target cost, and pricing innovation.

                               The Strategic Price




                                 The Target Profit




                                 The Target Cost




       Streamlining and Cost
                                                      Partnering
            Innovations




                                 Pricing Innovation
Avoiding Imitations

A Value Innovation move does not make sense based on
conventional strategic logic
Brand Image conflict prevents companies from imitating a blue
ocean strategy
Natural monopoly blocks imitation when the size of a market
cannot support another player
Patents or legal permits block imitation
The high volume generated by a value innovation leads to rapid
cost advantages, placing potential imitators at an ongoing cost
disadvantage
Network externalities discourage imitation
Imitation often requires significant political, operational and
cultural changes
References


Retrieved November 8, 2011
www.slideshare.net/jessestarmer/blue-ocean-
strategy-summary-61974

Retrieved November 8, 2011 from
www.ribbonfarm.com/2007/08/06/book-review-blue-
ocean-strategy/

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Blue Ocean Strategy

  • 1. The Blue Ocean Strategy Presented by: Stephene Roy Cardines Condino
  • 2. Outline of the Report Blue Ocean and the Red ocean Value Innovation Three Compelling Taglines for a Blue Ocean Strategy The Four Grids Visualizing Strategies in 4 Steps Sequence of Blue Ocean Strategies Buyer Experience Profit Model of Blue Ocean Strategy Blue Ocean Idea Index Avoiding imitations of Blue Ocean Strategy
  • 3. Blue Ocean and the Red Ocean Red Ocean Strategy Blue Ocean Strategy Competition exist in the Market Place Making an uncontested market space. Players tries to beat and compete with Make the competition irrelevant. each other Exploit existing demand. Create and capture new demand. Make the value-cost trade-off. Break the value-cost trade-off. Align the whole system of a firm’s activities Align the whole system of a firm’s activities with its strategic choice of differentiation or in pursuit of differentiation and low cost. low cost.
  • 4. Value Innovation For an organization to discover the Blue Ocean and leave the Bloody red Ocean, An Organization should have the so called “Value Innovation” Value Innovation is the cornerstone of the Blue Ocean Strategy by making competition irrelevant and opening an uncontested market space. Value is referred as the “Value for both the Buyer and Consumer” Innovation (Product, service or delivery) that creates value for the market Value Innovation is not the same as technology Innovation and Market Pioneering
  • 5. Non Existent of Value and Innovation “Value without innovation tends to focus on Value Creation Alone” “Innovation without Value tends to be technology driven, market pioneering and even futuristic”
  • 6. Three Compelling Tagline for a Blue Ocean Strategy Focused Divergent Compelling Tagline
  • 7. Eliminate/Reduce/Raise/Create the Grid Reduce Which factors should be reduced well below industry standards? Eliminate Create Which of the factors that A Which factors should be the industry takes for New created that the industry granted should be Value eliminated? has never offered? Curve Raise Which factors should be raised well above the industry’s standard? The four actions framework offers an technique that breaks the trade-off between differentiation and low cost and to create a new value curve. It answers the four key questions of what industry takes for granted and needs to be eliminated; what factors need to be reduced below industry standards; what factors need to be raised above industry standards; and what should be created that the industry has never offered.
  • 8. Eliminate/Reduce/Raise/Create the Grid Eliminate Raise Enological terminology and distinctions Price versus budget wines Aging qualities Retail Store involvement Above-the-line marketing Reduce Create Wine complexity Easy drinking Wine range Ease of selection Vineyard prestige Fun and adventure The eliminate-reduce-raise-create grid pushes companies not only to ask all four questions in the four actions framework but also to act on all four to create a new value curve. By driving companies to fill in the grid with the actions of eliminating, reducing, raising, and creating, the grid provides four immediate benefits: it pushes them to simultaneously pursue differentiation and low costs; identifies companies who are only raising and creating thereby raising costs; makes it easier for managers to understand and comply; and it drives companies to scrutinize every factor the industry competes on.
  • 9. Visualizing Strategy in Four Steps The four steps include visual awakening, visual exploration, visual strategy fair, and visual communication. 1. Visual 2. Visual 3. Visual Strategy 4. Visual Awakening Exploration Fair Communicatio n •Compare your •Go into the field to •Draw your “to be” strategy •Distribute your before- business with your explore the six paths to canvas based on insights and-after strategic profiles competitors’ by creating blue oceans. from field observations. on one page for easy drawing your “as is” comparison. strategy canvas. •Observe the distinctive •Get feedback on advantages of alternative strategy •Support only those •See where your alternative products and canvases from customers, projects and operational strategy needs to services. competitors’ customers, moves that allow your change and noncustomers. company to close the •See which factors you gaps to actualize the new should eliminate, •Use feedback to build the strategy. create, or change. best “to be” future strategy.
  • 10. Sequence of Blue Ocean Strategy Buyer utility Is there exceptional buyer utility in your business idea? No-- Rethink An important part of blue ocean strategy is to Yes “get the strategic sequence right.” This Price sequence fleshes out and validates blue ocean Is your price easily accessible to the ideas to ensure their commercial viability. This mass of buyers? can then reduce business model risk. In this No-- Rethink model, potential blue ocean ideas must pass Yes through a sequence of buyer utility, price, cost, and adoption. At each step Cost there are only two options: a “yes” answer, in Can you attain your cost target to profit which case the idea may pass to the next at your strategic price? No-- Rethink step, or “no”. If an idea receives a no at any point, the company can either park the idea or Yes rethink it until you get a yes. Adoption What are the adoption hurdles in actualizing your business idea? Are you addressing them up front? No-- Rethink Yes A Commercially Viable Blue Ocean Idea
  • 11. Buyer Experience Six Stages of Buyer’s experience. The six stages of Buyer experience is running more or less sequentially from purchase to disposal. Each stage encompasses a wide variety of specific experiences. At each stage, managers can 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 Does the product Do you need other Does the product Does use of the take to find the it take to get require training or products and services require external product create product you the product expert assistance? to make this product maintenance? waste items? need? delivered? work? Is the product easy to How easy is it to How easy is it to Is the place of How difficult is store when not in use? If so, how costly are maintain and upgradedispose of the purchase it to unpack and they? the product? product? How effective are the attractive and install the new product’s features and How much time do How costly is Are there legal accessible? product? functions? they take? maintenance? or environmental How secure is the Do buyers have issues in Does the product or How easy are they to transaction to arrange disposing of the service deliver far obtain? environment? delivery product safely? more power or options themselves? If How rapidly can than required by the How costly is yes, how costly you make a average user? Is in disposal? and difficult is purchase? overcharged with bells this? and whistles?
  • 12. Blue Ocean Idea Index Utility Is there exceptional utility? Are there compelling reasons to buy your offering? Price Is your price easily accessible to the mass of buyers? Cost Does your cost structure meet the target cost? Adoption Have you addressed adoption hurdles up front?
  • 13. Profit Model of Blue Ocean Strategy The profit model of blue ocean strategy shows how value innovation typically maximizes profit by using the three levers of strategic price, target cost, and pricing innovation. The Strategic Price The Target Profit The Target Cost Streamlining and Cost Partnering Innovations Pricing Innovation
  • 14. Avoiding Imitations A Value Innovation move does not make sense based on conventional strategic logic Brand Image conflict prevents companies from imitating a blue ocean strategy Natural monopoly blocks imitation when the size of a market cannot support another player Patents or legal permits block imitation The high volume generated by a value innovation leads to rapid cost advantages, placing potential imitators at an ongoing cost disadvantage Network externalities discourage imitation Imitation often requires significant political, operational and cultural changes
  • 15. References Retrieved November 8, 2011 www.slideshare.net/jessestarmer/blue-ocean- strategy-summary-61974 Retrieved November 8, 2011 from www.ribbonfarm.com/2007/08/06/book-review-blue- ocean-strategy/