1.
Case Studies
Cirque du Soleil
Casella Wines [Yellow Tail]
South-West Airlines
Part 3
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2.
The 6 Path Framework for creating Uncontested
Market Space
1. Looking across alternative industries
2. Looking across strategic groups within industries
3. Looking across the chain of buyers
New
Value
4. Looking across complementary Product Offerings
Curve
5. Looking across “Value” appeal to Non-buyers
6. Looking across Time
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3.
1. Looking across alternatives
 Alternatives are products or services that have different functions or forms
but serve essentially the same general purpose, eg, cinemas and restaurants.
 Cinemas certainly are not substitutes for restaurants, but they
are alternative entertainment value
 Which other Industries can satisfy the same need of my customers?
 eg, for S/W Airlines, the alternative Industry was the Car Travel which met the point-to-
point need
 Cirque du soleil looked at Theatre as an entertainment alternative Industry instead of
staying limited with competitive circuses alone!
 What more can I do to get them in?
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4.
2. Looking Across Strategic Groups within Industry
 Strategic groups within a common market, that appear not to be
competing, have common value dimensions that can be developed
{Kim and Mauborgne say that the goal is to encourage buyers to move from one group to another by
adding one or more desired values.}
 Within the hotel Industry: - a new entrant who picks up features of both 5-star & 1-star
both
 In the Mobile Phone Industry: - Merge features of lower end phones & the extreme high
end phones.
 Merc, BMW & Jaguar focus on outcompeting each other in the luxury car segment,
while economy car makers focus on excelling over one another in their strategic group.
Lexus combines the two.
The key to creating a Blue Ocean is to break out of this narrow tunnel vision &
determine what factors determine customers’ decisions to trade up or down from
one group to another
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5.
3. Looking Acr oss Chain of buyer s
Kim and Mauborgne describe three basic classes of buyers
 (1) Purchasers (those who pay for the service),
 (2) Users (those who actually use the service),
 (3) Influencers (those who influence service use through referral, advice, or other means)
Opportunity lies along this path opportunity to shift marketing efforts to other
classes
of buyers
The pharma Industry focuses predominantly on doctors as influencers
 Novo Nordisk – the Danish Insulin Producer created a Blue Ocean in the insulin Industry
by focusing on the user more than on the doctors
 They came out with Insulin that was not in difficult to administer vials but in in the form of a
pen that they called the novo-pen
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6.
4. Looking across complementary product offerings
 Untapped Value is hidden in complementary products & services
 Buyers seek a total solution when they choose a product or service!
 A simple way to do so is to think about what happens before, during &
after your product is sold!
 The ease & cost of getting a baby-sitter as well as parking the car affects
the perceived value of “going to the movies”
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7.
5. Looking acr oss “Value” appeal to buyer s
Functional Emotional
 Some industries compete principally on price & function largely based on calculations
of utility (they appeal to the rational)
 Functionally oriented industries can often infuse commodity products with new life
by adding a dose of emotion & in doing so, can stimulate new demand!
 Other Industries compete largely on feelings (they appeal to the emotional)
 Emotionally oriented industries offer many extra that add price without enhancing
functionality!
 When companies are willing to challenge the functional-emotional orientation of their
Industry, they often find new market space!
 SWATCH transformed the functionally driven budget watch industry into an
emotionally driven fashion statement
 Body Shop transformed the emotionally driven industry of cosmetics into a
functional, no-nonsense cosmetics house!
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8.
6. Looking across time
 Key insights into BO strategy rarely come from projecting external trends like
technologies / major regulatory changes; instead they arise from business insights into
how the trend will change value to customers & impact the companies business model
 By looking across time- from the value a market delivers today to the value it might
deliver tomorrow, managers can actively shape their future & lay claim to a new BO
 Cisco systems created a new market space by thinking across time trends. It started with
a decisive & irreversible trend, that had a clear trajectory – the growing demand for high-
speed data exchange! Cisco’s routers, switches & other networking devices created
breakthrough value for customers, offering fast data exchanges in a seamless
networking environment
 CNN created the first 24*7 global news network based on the rising tide of globalization
 Ask yourself:
 What trends have a high probability of impacting the Industry; are irreversible; & are
evolving in a clear trajectory?
 How will these trends impact your Industry?
 Given this, how will you open up unprecedented customer Value?
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9.
Reaching Beyond Existing Demand
Focus on your non-customers!
 Instead of focusing on customer differences, look at powerful commonalities amongst
non-customers & what they value!
Where is the focus of attention- Capturing a greater share of exiting customers OR on converting
non-customers of the Industry into new demand?
 Do you seek out key commonalities in what buyer’s value, OR, do you strive to embrace
customer differences through finer customization & segmentation?
To reach beyond existing demand, think non-customers before customers; commonalities before
differences; and desegmentation before pursuing finer segmentation!
Non-Customers tend to offer greater insights into how to unlock &
grow a Blue Ocean than (relatively) content existing customers!
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10.
Reaching Beyond Existing Demand
The Three Tiers of Non-customers
 First Tier – “Soon-to-be”
 On the edge of your market
Third Tier  If there is an alternative, they will switch
 If nothing else emerges, they will become
Second customers!
Tier
First Tier  Second Tier – “Refusing”
 Consciously decides against your market
 R&D to understand refusal!
Your Market
 Third Tier – “Unexplored”
 In market distant from yours
 IFBI worked upon this & created a Blue Ocean!
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11.
Focus on the Big Pictur e, Not the number s
4 steps of Visualizing Blue Ocean Strategy
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12.
Key Activities in Visualizing Strategy Process
The four steps in Visualizing Strategy
Visual
Visual Visual Visual
Strategy
Awakening Exploration Communication
Fair
 Draw “as-is” • Go to the field to • Draw “to-be” • Validate “to-be”
strategy canvas explore the six strategy canvas value curves
 Identify where paths to creating based on insights • Select value
strategy needs to blue oceans from field curves to roll-out
change • Observe distinct observations • Develop plan to
advantages of • Get feedback communicate Blue
alternative from customers, Ocean Strategy
products & competitor’s
services customers and
• Talk to non- non-customers
customers • Use feedback to
• Assess which build the “best”
factors to future strategy
eliminate, create
or change
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13.
T he Str ate gic Sequence
Steps to a commercially-viable Blue Ocean idea
Is there exceptional buyer utility in your business idea?
Buyer Utility
Revenue
Side
Is your price easily accessible to the mass of buyers?
Price
Can you attain your cost target to profit at your strategic
Cost price?
Profit Side
What are the adoption hurdles in implementing your
Adoption idea? Are you addressing them upfront? Eg. Resistance
by retailers / Business Partners, employees, general
public!
Buyer Utility & Price create a leap in Net Buyer Value
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NBV = Value received – price paid

14.
Buyer Utility
Does the product create a compelling reason for buyers to buy it?
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15.
Buyer Utility Map
 The 36 cell Buyer Utility map helps managers develops products / services that become
less a function of their technical possibilities and more a function of their utility to
buyers!
 2 axis – Utility Levers plotted against Buyer Experience factors
 Utility levers are the ways in which companies unlock exceptional utility for buyers
 By locating proposed offering on the 36 cell matrix, it can be figured out how the idea not
only creates a different utility proposition from existing offerings but also removes the
biggest blocks to utility that stand in the way of converting non-customers ->
Customers!
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16.
Six Stages of the Buyer Experience Cycle
Purchase Delivery Use Supplements Maintenance Disposal
• Does the product •
 How long does • How long require training or Do you need • Does the • Does the use
it take to find does it take expert other product of the
the product to get the assistance? products and require product
you need? product • Is the product services to external create waste
 Is the place of delivered? easy to store make this maintenance? items?
purchase • How difficult when not in use? product • How easy is it • How easy is
attractive and is it to • How effective are work? to maintain and it to dispose
accessible? unpack and the product’s • If so, how upgrade the of the waste
install the features and costly are product? product?
 How secure is functions?
the new they? • How costly is • Are there
transaction product? • Does the product
or service • How much the legal or
environment? • Do buyers deleiver far more time do they maintenance? environment
 How rapidly
have to power or options take? al issues in
arrange than require by • disposing
can you make the average How much
delivery pain do they safely?
a purchase? themselves? users? Is it
overcharged with cause? • How costly is
If yes, how bells and whistles? • How easy the disposal?
costly and
difficult is are they to
this? obtain?
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17.
Buyer Utility Map
The six stages of the Buyer Experience Cycle
Purchase Delivery Use Supplements Maintenance Disposal
Customer
Productivity
[ helping doing
things faster or
better]
The six Utility Levers
Simplicity
Convenience
Risk [financial,
credibility etc]
Fun & Image
Eco-Friendliness
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18.
Uncovering the Blocks to Buyer Utility
Purchase Delivery Use Supplements Maintenance Dispose
Customer Productivity: In which stage are the biggest blocks to customer productivity?
Customer Productivity: In which stage are the biggest blocks of simplicity?
Convenience: In which stage are the biggest blocks of convenience?
Risk: In which stage are the biggest blocks of reducing risks?
Fun and Image: In which stage are the biggest blocks to fun and image?
Environmental Friendliness: In which stage are the biggest blocks to environmental Friendliness?
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19.
From Exceptional Utility to Strategic Pricing
 Determine the price that will capture the mass of target buyers
 The pricing needs to be thought to since
 There is a need to generate huge volumes for higher returns
 To a buyer, the value of the product / service is closely tied to the number of people
using it
 “Price Corridor of the mass” to help managers find the right price
 2 step process
 Identify the price corridor of the mass
 Identify the level with the “Price Corridor of the mass”
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20.
The Price Corridor of the Mass
Step 1: Identify the price corridor Step 2: Specify a price level
of the mass. within the price corridor.
Three alternative product/service types:
Different form,
different
Same Different form, function, same
form same function objective
High degree of legal and resources
g protection
icin
el pr
-lev Difficult to imitate
Up per
Price Corridor Mid-level pricing
Some degree of legal and
resources protection
of the Mass L o we
r-leve Low degree of legal and resources
l pric
in g protection
Easy to imitate
Size of circle is proportional to number of
buyers that product/service attracts
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21.
Fr om Str ate gic pricing to Tar get Costing
 Strategic Pricing minus desired target profit = target cost
 Price minus cost approach & NOT cost + pricing
 Done by building a strategic profile that not only has divergence but also focus
so that costs can be out-stripped
 Eg. Cirque du Soleil
 Target Cost hit using 3 levers
 Streamlining operations & introducing Cost Innovations from manufacturing to
Distribution
 Can raw materials be replaced with less expensive ones?
 Can high-cost, low value activities in value chain be eliminated, reduced or outsourced?
 Can activities be digitized?
 Partnering
 Helps companies secure needed capabilities fast & effectively while dropping their cost
structure
 Allows leveraging the other companies expertise & economies of scale
 Eg. By partnering with Oracle, SAP saved millions of Dollars on development costs & by
getting a world class central database which sits at the heart of SAP’s core products – R2 &
R3
 Changing the Pricing Model
 Helps to meet the strategic Pricing …. Profitably!
 For eg, ‘Blockbuster’ changing their pricing model from selling video-tapes to renting them
21 [ from 80$ to a few $]

22.
T he Pr ofit Model of Blue Ocean Str ate g y
The Strategic Price
The Target Profit
The Target Cost
Streamlining and
Partnering
Cost Innovation
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Pricing Innovation

23.
 END of Part 3
 Go To Part 4
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