Transcript Blue Ocean Strategy

Blue Ocean Strategy
W. Chan Kim and Renee
Maubourgne
Edited by Chitchai P.
Agenda
1. Blue Ocean Strategy (BOS)


Creating Blue Ocean
Analytical Tools and Frameworks
2. Formulating Blue Ocean Strategy




Reconstruct Market Boundaries
Focus on Big Picture
Reach Beyond Existing Demand
Get Strategic Sequence Right
3. Executing Blue Ocean Strategy



Overcome Key Organization Hurdles
Build Execution into Strategy
Conclusion
GJI, [email protected]
2
Agenda
1. Blue Ocean Strategy (BOS)


Creating Blue Ocean
Analytical Tools and Frameworks
2. Formulating Blue Ocean Strategy




Reconstruct Market Boundaries
Focus on Big Picture
Reach Beyond Existing Demand
Get Strategic Sequence Right
3. Executing Blue Ocean Strategy



Overcome Key Organization Hurdles
Build Execution into Strategy
Conclusion
GJI, [email protected]
3
Creating Blue Ocean
New Market Space
The Continuing Creation of Blue Oceans
The Impact and Imperative of Crating Blue
Oceans
From Company and Industry to Strategic
Move
Value Innovation: The Cornerstone of BOS
The Six Principles of BOS
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Value Innovation:
The Cornerstone of BOS
Costs
Value
Innovation
Buyer Value
The Simultaneous Pursuit of Differentiation and Low Cost
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Red Ocean vs. Blue Ocean Strategy
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 untapped
demand
Make the value-cost trade-off
Break the value-cost trade-off
Align the whole system of a firm’s
activities with its strategic choices of
differentiation or low cost
Align the whole system of a firm’s
activities in pursuit of differentiation
and low cost
Focuses on adapting to external
trends as they occur
Participates in shaping external
trends over time
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The Six Principles of BOS
Formulating Principles
Risk Factor Each
Principle Attenuates
 Reconstruct market boundaries
 Focus on the big picture, not the numbers
 Reach beyond existing demand
 Get the strategic sequence right
↓ Search risk
↓ Planning risk
↓ Scale risk
↓ Business model risk
Execution Principles
Risk Factor Each
Principle Attenuates
 Overcome key organization hurdles
 Build execution into strategy
↓ Organization risk
↓ Management risk
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Analytical Tools and Frameworks
Strategy Canvas
Four Actions Framework
Eliminate-Reduce-Raise-Create Grid
Three Characteristics of a Good Strategy
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Strategy Canvas
US Wine Industry in the late 1990s
High
Premium Wines
Budget Wines
Low
Vineyard prestige
Price
Above-the-line
marketing
Use of enological
terminology and distinctions
in wine communication
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Aging
quality
Wine complexity
Wine
range
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Four Actions Framework
REDUCE
Which factors should be
reduced well below
the industry’s standards?
ELIMINATE
Which of the factors that
the industry take for granted
should be eliminated?
A New
Value
Curve
CREATE
Which factors should be
created that the industry
has never offered?
RAISE
Which factors should be
raised well above
the industry’s standard?
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Eliminate-Reduce-Raise-Create Grid
Case Study: Yellow Tail
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Eliminate
Raise
Enological Terminology
Aging qualities
Above-the-line Marketing
Price versus budget wines
Retail stores involvement
Reduce
Create
Wine complexity
Wine range
Vineyard prestige
Easy drinking
Ease of selection
Fun and adventure
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A New Value Curve –
Strategy Canvas of Yellow Tail
High
Premium Wines
[yellow tail]
Budget Wines
CREATE
RAISE
REDUCE
Low
Price
Above-the-line
marketing
Use of enological
Aging
quality
terminology and
distinctions in wine
communication
ELIMINATE
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Vineyard
prestige
Wine
complexity
Wine
range
Easy
drinking
Ease of
selection
Fun and
adventure
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Strategy Canvas: Southwest Airlines
High
Southwest Airlines
Average Airlines
Car Transport
Low
Price
Meals
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Lounges
Seating
Hub
class choice connectivity
Friendly
Service
Speed
Frequent
Pint-topoint
departure
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Strategy Canvas: Cirque du Soleil
High
Ringling Bros. & Barnum & Bailey
Cirque du Soliel
Smaller
Regional
Circuses
Low
Price
Multiple
show
Aisle
arena
concessions
Star
performers
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Theme
Thrill and
challenge
Animal
shows
Fun
and
humor
Unique
venue
Multiple
Production
Refined
watching
environment
Artistic
music and
dance
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Three Characteristics of a Good Strategy
Focus
Divergence
Compelling Tagline
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Agenda
1. Blue Ocean Strategy (BOS)


Creating Blue Ocean
Analytical Tools and Frameworks
2. Formulating Blue Ocean Strategy




Reconstruct Market Boundaries
Focus on Big Picture
Reach Beyond Existing Demand
Get Strategic Sequence Right
3. Executing Blue Ocean Strategy



Overcome Key Organization Hurdles
Build Execution into Strategy
Conclusion
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Reconstruct Market Boundaries
Path 1: Look Across Alternative Industries
Path 2: Look Across Strategic Groups within
Industries
Path 3: Look Across Chain of Buyers
Path 4: Look Across Complementary
Products and Service Offerings
Path 5: Look Across Functional or Emotional
Appeal to Buyers
Path 6: Look Across Time
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Strategy Canvas: NetJets
Path1: Alternative Industry
High
Private Jet
Corporate travel
NetJet’s Value Curve
Commercial Airlines
First and Business-Classes travel
Low
Price (fixed
Need for
purchase +
customer to
variable price manage aircraft
per flight)
(Aircraft M&A)
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Deadhead
costs
Speed of total
travel time
Ease of travel
(include.
Check-in,
customs, etc.
Flexibility and
reliability
In-flight
service
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Strategy Canvas: QuickFit
Path2: Strategic Group
High
Curves
Home Exercise
Program
Traditional
health clubs
Low
Price
Amenities
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Workout
equipment
(treadmill,
weights,
etc)
Availability of
Nonthreatening
Womanly
instructors
same-sex
fun atmosWorkout
Convenience
Environment
phere
Environtime
encouraging
ment
discipline and
motivation in
exercise
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Strategy Canvas: NABI
Path4: Scope of Product/Service Offerings
High
NABI
Hungarian Municipal
Bus Company
Average US
Transit Bus
Low
Initial
purchase
price
Corrosion
Maintenance
cost
Fuel
consumption
Environmental
friendliness
Aesthetic
design
Customer
friendliness
Life-Cycle Cost
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Strategy Canvas: QB House
Path5: Functional/Emotional Orientation
High
QB House
Average Japanese
Barbershop
Low
Price
Reservation
desk
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Extra
services
(other than
haircutting)
Range of
hair
treatments
Hygiene
Time
savings on
waiting
Time
High
savings on performance
haircut
”air wash”
system
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Summary:
Conceiving New Market Space
Head-to-Head Competition
Blue Ocean Creation
Industry
Focuses on rivals within its industry
Looks across alternative industries
Strategic Group
Focuses on competitive position
within strategic group
Looks across strategic groups
within industry
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 offering within
the bounds of its industry
Looks across to complementary
product and service offerings
Functional
Emotional
Orientation
Focuses on improving price
performance within the functionalemotional orientation of its industry
Rethinks the functional-emotional
orientation of to industry
Time
Focuses on adapting to external
trends as they occur
Participates in shaping external
trends over time
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Focus on Big Picture
Four Steps of Visualizing Strategy
The Pioneer-Migrator-Settler Map
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Four Steps of Visualizing Strategy
Visual
Awakening
• Compare your
business with your
competitor’s by
drawing your “as is”
strategy canvas.
• See where your
strategy needs to
change.
Visual
Exploration
• Go into the field to
explore the six paths
to creating blue
oceans.
• Observe the
distinctive
advantages of
alternative products
and services.
• See which factors
you should
Eliminate, Raise,
Create, or Change.
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Visual
Strategy Fair
Visual
Communication
• 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.
• Get feedback on
alternative strategy
canvases from
customers,
competitor's
customer, and noncustomers.
• Support only those
projects and
operational moves
that allow your
company to close
the gaps to actualize
the new strategy.
• Use feedback to
build the best “to be”
future strategy.
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The PMS Map
Pioneers
Migrators
Settlers
Today
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Tomorrow
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Reach Beyond Existing Demand
Second
First Tier
Tier
Your
Market
Third
Tier
 First Tier: “Soon-to-be” noncustomers who are on the
edge of your market, waiting
to jump ship
 Second Tier: “Refusing noncustomers who consciously
choose against your market.
 Third Tier: “Unexplored” non
customers who are in
markets distant from yours.
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Get the Strategic Sequence Right
Buyer
Utility
Price
Is there
exceptional buyer
utility in your
business idea?
Is your price
easily accessible
to the mass of
buyers?
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Cost
Can you attain
your cost target
to profit at your
strategic price?
Adoption
Commercially
Viable Blue
Ocean Idea
What are
adoption hurdles
in actualizing
your business
idea? Are you
addressing them
up front?
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Buyer Utility Map
The Six Stages of the Buyer Experience Cycle
1
Purchase
The Six Utility Levels
Customer
Productivity
Simplicity
Convenience
Risk
Fun and
Image
Environment
al
Friendliness
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2
Delivery
How long to find How long to get
the product you
the product
need?
delivered?
How rapidly can
you make a
purchase?
3
Use
Training or
expertise
assistance
required?
4
5
Supplement Maintenance
6
Disposal
Need other
Require external
products to make
ME
it work?
Create waist
items?
How difficult to
unpack and install Easy to store How much time do
when not in used?
they take?
Is the place of the new product?
How effective areHow easy are they
purchase
to obtain?
features and
attractive and Do buyers have to
If
so,
how costly
functions?
arrange delivery
accessible?
are they?
How secure is the themselves? If Overcharged with
yes, how costly
transaction
bell and whistles?
environment? and difficult is this
How much pain do
they cause?
How easy to
maintain and
upgrade?
How costly?
How easy to
dispose?
How costly?
Legal or
environmental
issue of the
product disposal?
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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:
Same
Form
Different Form
Same Function
Different Form
and Function,
Same Objective
High degree of legal and
resource protection
Difficult to Imitate
Price Corridor
of the Mass
Mid-level pricing
Some degree of legal and
resource protection
Low degree of legal protection
Easy to Imitate
Size of circle is proportion to number of
buyers that product/service attracts
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Profit Model of BOS
The Strategic Price
The Target
Profit
The Target Cost
Streamlining and
Cost Innovative
Partnering
Pricing Innovation
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Adoption
Employees
Partners
General Public
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Agenda
1. Blue Ocean Strategy (BOS)


Creating Blue Ocean
Analytical Tools and Frameworks
2. Formulating Blue Ocean Strategy




Reconstruct Market Boundaries
Focus on Big Picture
Reach Beyond Existing Demand
Get Strategic Sequence Right
3. Executing Blue Ocean Strategy



Overcome Key Organization Hurdles
Build Execution into Strategy
Conclusion
GJI, [email protected]
35
Overcome Key Organization Hurdles
1. Cognitive – Wedded to status quo
2. Political – Opposition from powerful vested
interest
3. Motivational – Unmotivated
4. Resource – Limited resource
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Build Execution into Strategy
Strategy
Formulation
Process
Attitude
Behavior
Strategy
Execution
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Fair Process
Engagement
Explanation
Expectation clarity
Trust &Commitment
“I feel my opinion counts.”
Volunteer
Cooperation
“I’ll go beyond
the call of duty.”
Exceeds Expectation
Self-Initiated
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Conclusion
Sustainability and Renewal of Blue Ocean Strategy
Imitation Barriers to BOS
 Value Innovation does not make sense to a company’s
conventional logic.
 Blue Ocean Strategy may conflict with companies’ brand image.
 Natural monopoly: The market often cannot support a second
player.
 Patents or legal permits block imitation.
 High volume leads to rapid cost advantage for the value innovator,
discouraging followers from entering the market.
 Network Externalities discourage imitation.
 Imitation often require significant political, operational, and cultural
changes.
 Companies that value-innovate earn brand buzz and a loyal
customer following that tends to shun imitators.
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