Blueoceanstrategy 100403005918-phpapp02

Group/Presentation Title
Agilent Restricted
Date ##, 200X
Blue Ocean Strategy
How to Create Uncontested Market Space
and Make the Competition Irrelevant
Facilitators : Yip Khai Biau (ymike27@hotmail.com)
& Lieu Yoke Sun

All Rights Reserved – KB Yip/YS Lieu Page : 2
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

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

Introduction to Blue Ocean StrategyIntroduction to Blue Ocean Strategy
 History & Background
 Defining Red & Blue
Ocean
 Six Principles of BOS
 Reach Beyond Existing
Demand
 Value Innovation

History & BackgroundHistory & 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.

WhatWhat’’ss RedRed, What, What’’ss BlueBlue??
• Create uncontested market space
• Make the competition irrelevant
• Create & capture new demand
• Break the value- cost trade off
• Simultaneous pursuit strategy of
differentiation and low cost
• Create uncontested market space
• Make the competition irrelevant
• Create & capture new demand
• Break the value- cost trade off
• Simultaneous pursuit strategy of
differentiation and low cost
Blue Ocean StrategyBlue Ocean Strategy
• Compete in existing market space
• Beat the competition
• Exploit existing demand
• Make the value-cost trade off
• Align strategy choice of
differentiation or low cost
• Compete in existing market space
• Beat the competition
• Exploit existing demand
• Make the value-cost trade off
• Align strategy choice of
differentiation or low cost
Red Ocean StrategyRed Ocean Strategy
Defining Red and Blue OceanDefining Red and Blue Ocean

Examples of Red and Blue Ocean

Six Principles of Blue Ocean StrategySix Principles of Blue Ocean Strategy
1. Reach beyond existing
demand
2. Reconstruct market
boundaries
3. Focus on the big picture,
not the numbers
4. Get the strategic
sequence right
5. Overcome key
organizational
hurdles
6. Build execution into
strategy
Formulation PrinciplesFormulation Principles Execution PrinciplesExecution Principles

Reach Beyond Existing DemandReach Beyond Existing Demand
 First Tier: “Soon-to-be” non-
customers who are on the edge of
your market, waiting to jump ship
 Second Tier: “Refusing non-
customers who consciously
choose against your market.
 Third Tier: “Unexplored” non
customers who are in markets
distant from yours.
First
Tier
Second
Tier
Third
Tier
Your
Market
Blue Ocean
Blue Ocean – Go for the Largest Catchment of Non-Customers

ExampleExample –– [yellow tail][yellow tail]
Traditional Wine :
• An elite, refined image in packaging with heavy
use of wine terminology.
• Aging quality.
• Prestige of a vineyard and its legacy.
• Complexity and sophistication of a wine’s taste,
such as tannins and oak.
• A diverse range of wines to cover all varieties
of grapes & consumer preferences
[yellow tail] :
• No jargon.Simple and nontraditional label.
• Aging is not important.
• Vibrant and fun.
• Sweeter and easier to drink.
• Only one Red (Shiraz) and one White
(Chardonnay).

First
Tier
Second
Tier
Third
Tier
Your
Market
ExampleExample –– [yellow tail][yellow tail]
Tier 1 – Wine drinker market
Tier 2 – “Easier to drink” market, eg.,
beer, cocktails, soft-drink
Tier 3 – Anyone that drinks water
[yellow tail] created a Blue
Ocean by making its wine
more appealing to the
bigger population
Your
Market
[yellow tail] did not focus
on the wine market only
First
Tier
Second
Tier
Third
Tier
Red
Wine
X

Circus
Theater
Performance
Entertainment
Circus
X
Reach Beyond Existing DemandReach Beyond Existing Demand
Circus
Theater
Performance
Entertainment
Circus
X

Other
Males
Girls
Everyone
Else
Young
Antisocial
Males
Electronic Game
Industry
Nintendo Wii
Nintendo created a Blue Ocean by
reducing the complexity, add the
ease of use and fun!
ExampleExample –– [Nintendo][Nintendo]
Other
Males
Girls
Everyone
Else
Young
Antisocial
Males

Value Innovation – The Cornerstone of BOS
Cost
Buyer Value
Cost Saving – Eliminate &
Reduce Competing Factors
Buyer Value Lifted – Raise
& Create New Elements
 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.
Value
Innovation
Back

 Strategy Canvas
 Eliminate-Reduce-Raise-Create
(ERRC) Grid
Blue Ocean Strategy ToolsBlue Ocean Strategy Tools

What is Strategy Canvas?What is Strategy Canvas?
Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor 6 Factor 7 Factor 8
Competing Factors
OfferingLevel
Your Company
Competitor 1
Competitor 2
High
Low
Mid
Degree of which each competitor
offers/invests in each factor
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
Value Curves

4 Actions Framework4 Actions Framework
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?
Create
created that the industry
has never offered?
A New
Value
Curve
A NewA New
ValueValue
CurveCurve
Raise
raised well above the
industry's
Strategically
Reduce Cost
Strategically
Invest in

CreateCreateReduceReduce
RaiseRaiseEliminateEliminate
EliminateEliminate--ReduceReduce--RaiseRaise--CreateCreate
(ERRC) Grid(ERRC) Grid
Back

 Activity 1 (45 min)
• Split into 3 Groups
• Review As-Is Strategy
Canvas (30 min)
• Presentation (5 min each,
15 min total)
• Agree to ONE As-Is
Strategy Canvas
• Use 6 Paths Framework,
reconstruct market
boundaries & identify
Divergent Factors (60 min)
30 min total)
• Agree to Top 3-5 Divergent
Factors
• Use ERRC to construct the
Desired Value Curve (60
mins)
30 mins total)
• Agree to ONE To-Be
Strategy Canvas
Formulating Blue Ocean StrategyFormulating Blue Ocean Strategy
Awakening :
As-Is Analysis
Exploration :
Reconstruct Market
Boundaries
Strategizing :
To-Be Strategy
Canvas
120 mins 120 mins75 mins

Activity 1 & 2 : AsActivity 1 & 2 : As--Is AnalysisIs Analysis
Review XYZ AsReview XYZ As--Is Strategy CanvasIs Strategy Canvas
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Fee
C
om
petitiveness
Institutional R
ecognition
Industry
Linkage
Program
&
C
areer P
ath
Facilitators
Facilities
Branding
Lifestyle/C
ulture
Competing Factors
OfferingLevel
XYZ
Competitors
High
Low
Mid
Back

Reconstruct Market BoundariesReconstruct Market Boundaries
Across Alternate Industry
Across Strategic Groups
Across Buyer Groups
Across Complementary Scope of
Products & Services
Across Functional Emotional
Orientation
Across Time
 There are 6 pathways to reconstruct the market boundaries
Red
Ocean
Blue
Ocean

Across Alternative IndustriesAcross Alternative Industries
Commercial
Airlines
Corporate
Jet
50 hrs/yr Smaller
Airplanes,
Airport,
Less Staff
1/16 Ownership
@ $375k
 Alternatives include products or services that have different functions and
forms but the same purpose.
Point-to-point, Faster,
Less Hassle, Increase Productivity
Commercial
Airline
Corporate
Jet
Good
Bad
• Pay per use
• No
Maintenance
• Less Travel
Time
• Less Hassle
• P2P
• Not P2P
• High Travel
Time
• Security
Concern
• High Cost
BOS Example –

Price Need for
customer's to
manage aircraft
Deadhead
costs
Speed of total
travel time
Ease of travel Flexibility and
reliability
In- flight serviceLow
High
Commercial Airlines
NetJets' Value
Curve
Private Jet
RaiseRaise
• Speed of travel time
• Ease of travel
• Flexibility and Reliability
• In flight service
EliminateEliminate
• Price
• Need for customers to
manage aircraft
• Deadhead costs
Strategy CanvasStrategy Canvas -- NetJetsNetJets

BOS Example –
Now Everyone Can Fly!Now Everyone Can Fly!
 Price of Coach &
Speed of Flight
 P2P Direct Flight
 No Frill – User Pay
 Budget Travel
Package
 Fast
 Expensive
 Better Services
 Flight Connections
 Slow
 Cheap
 Point to Point
Conventional Airline Coach
Across Alternative IndustriesAcross Alternative Industries
Across
Alternative
Industries

Strategy CanvasStrategy Canvas -- Air AsiaAir Asia
CreateCreate
• Web Registration
• Express Boarding
• Budget Hotel
ReduceReduce
RaiseRaise
• Quality of Safety
• Point to Point Direct
Flight
EliminateEliminate
 Price Competition
 Seat Selection
 Free Food & Beverages
 Air Ticket
 VIP Lounge
 Flight Connection
 Air Fare
 Capital
 Stopover time
 Staffing (ground and
air)
Price
Price
Com
p
Seat Selectn
Food
Supply
Air Ticket
VIP
Lounge
Flight Con
Capital
Stopover Tim
e
Staffing
Safety
P2P
D
irectF
W
eb
Reg
Xpress
Boardg
Budget H
otel
OfferingLevel
Low
High
Other Local Airline
Air Asia
Land Transportation

Across Buyer Groups
Products & Services
Orientation
Across Time
Red
Ocean
Blue
Ocean

Across Strategic GroupsAcross Strategic Groups
 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
Home Exercise
Womanly
Fun
Easy to Use
Machine
Peer
Support
Traditional
Health Club
Home
Exercise
Good
Bad
• Full range
exercise and
sporting
options
• Low Cost
• Privacy
• Expensive.
• Not easily
accessible.
• Complicated.
• Lack of
Privacy
• Low
motivation
Affordable
>10k
Outlets &
> 4M
members
(as of
Oct,
2006)
BOS Example –

CreateCreate
• Womanly fun
atmosphere
ReduceReduce
RaiseRaise
• Non threatening same
sex environment
EliminateEliminate
 Price
 Amenities
 Workout equipment
 Availability of Instructors
Price Amenities Workout
Equipment
Workout Time Availabilty of
instructors
Environment
encouraging
discipline and
motivation in
exercise
Nonthreatening
same- sex
environment
Convenience Womenly fun
atmosphere
Low
High
Home Exercise Program
Curves
Traditional Health Clubs
Strategy CanvasStrategy Canvas -- CurvesCurves

 Economical
 Less Hygienic
 Less Appealing Environment
 Expensive
 Hygienic
 Good Ambience &
Relaxing Environment
 Rightly Priced
 Hygienic
 Better Environment
 Emotional Appeal
BOS Example – OldTown

 No Frill
 Cheap - Pay For What You Use!
 Optional Add-ons:
 Limited service, basic
 Low on price, high on personality
 Walk in
 Luxury
 Expensive
 Service
 Facilities
Nice Sleep!Nice Sleep!
Hot Shower!Hot Shower!
4/5 Stars Hotels
BOS Example – Tune Hotel
Backpacker Hostels
 Cheap
 Sleep & Go

Across Buyer Groups
Products & Services
Orientation
Across Time
Red
Ocean
Blue
Ocean

Across Chain of BuyersAcross Chain of Buyers
Corporate
Jet
 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
Easy
To Use
No
Unpleasant
Feeling
Now
Request
Insulin
Industry
Better
Pricing
Better
Medicine
Traditionally
Prescribe
Example : Novo Nordick - from insulin producer to a diabetes care company
BOS Example –

Everyone is a gamer!Everyone is a gamer!
Reduced Graphics
Wii Fit
Everyone can play!
Increased motion control
Nintendo outsold Sony and
Microsoft 6:1. Can’t keep
product on shelves!
Across Chain of BuyersAcross Chain of Buyers
Family Fun
BOS Example – Nintendo Wii

Strategy Canvas : Nintendo WiiStrategy Canvas : Nintendo Wii
RaiseRaiseEliminateEliminate
 Price
 Graphics
 Physics
 Online Pay
Price
G
raphics
Physics
O
nline
Pay
C
om
plexity
M
ovie
G
am
e
Library
Ease
of U
se
Interaction/G
roup
Fun
M
agic
W
and
Low
High
Nintendo Wii
Game Industry
• Complexity
• Movie
• Interaction/Group Fun
• Magic Wand
• Game Library
• Ease of Use

Across Buyer Groups
Products & Services
Orientation
Across Time
Red
Ocean
Blue
Ocean

Across Complementary Products & ServicesAcross Complementary Products & Services
Corporate
Jet
 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.
PurchasePurchase DeliveryDelivery
SupplementaSupplementa
ryry
MaintenancMaintenanc
ee
UseUse DisposalDisposal
Example :
Traditional : Buses made from Steel
• Low Initial Price
• Less Space
• More Fuel • High •High
NABI : Buses made from Fibre Glass
• High Initial Price • More Space
• Less Fuel
• Low • Low
BOS Example – NABI

Strategy CanvasStrategy Canvas -- NABINABI
CreateCreate
• Aesthetic design
• Customer friendliness
ReduceReduce
RaiseRaise
• Environmental
friendliness
EliminateEliminate
 Corrosion
 Maintenance cost
 Fuel consumption
Initial purchase
price
Corrosion Maintenance
cost
Fuel
consumption
Environmental
friendliness
Aesthetic
design
Customer
friendliness
Low
High
NABI
Average U.S Transit Bus

Across Complementary Products and ServicesAcross Complementary Products and Services
Before During After
Purchasing
Process
 Book Selection
 Sit Down
 Browse Through
Selection
 Attend an event
 Go to Coffee Shop
 Read the Book
 Book Signing
 Buy DVD, Games, Gift
Carrying bag
DVD & GamesEvent : Story Telling for Kids Book Signing
Book Selection
 Customer Enquiry
 Paying
Immediate Enjoyment!
BOS Example: Operated 798 stores in all 50 U.S. states
and the District of Columbia, as well as
stores in Australia and Canada

Across Complementary Products and ServicesAcross 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/Sony-
Ericsson.
• Shenzhen facility at Longhua
• Covers about a square mile.
• Has its own fire brigade, hospital,
swimming pool, restaurants, banks,
supermarkets, internet cafe.

BOS ExampleBOS Example -- FoxconnFoxconn
Logistics &
Distribution
Design
Prototyping
VI Part
Sourcing &
Production
Mass
Production
Vertical Integration
(VI) Model
Repair &
Servicing
Sourcing
Inventory
Control
Logistics
Design
Prototyping
Mass
Production
Distribution
Repair &
Servicing
Conventional
EMS

Strategy CanvasStrategy Canvas -- FoxconnFoxconn
Cost
Com
petitiveness
Technology
Process
Delivery
Q
uality
Vertical Integration
Low
High
Foxconn
Other EMSes

Across Buyer Groups
Products & Services
Orientation
Across Time
Red
Ocean
Blue
Ocean

Across Functional or Emotional AppealAcross Functional or Emotional Appeal
 Some industries compete principally on price and function - their appeal is
rational.
 Other industries compete largely on feelings - their appeal is emotional.
• Pricey
• Extras
• Feelings
• Simple
• Low Cost
• Low Price
QB House
• Emotional Service -> None
• Hair Wash -> Air Wash
• $9
Traditional Hair
Saloon
• Hot Towels
• Message
• Tea/Coffee
• Special Hair /Skin
Treatments
• $27 - $45
1996 2003
Rev
Functional Emotional
BOS Example – QB House

 Low Fee
 Low Recognition of
Education Quality
 Conventional
Education System
 Many Environmental
Constraints
 Local Market
 High Fee
 WW Recognized
Certification
 Branches in UK, Africa
& China
 Collaboration w other
Universities
 Open Education
System
 Free & Creative
Environment
 Diverse Student Base
 Fun Learning
 Exposure
 Global Classroom
 6000 students from 90 countries
 Vibrant, multicultural and international
Academic Exchange
Encourage
Entrepreneurship
Across
Multiple
Pathways
 Strategic
Group
• Functional ->
Emotional
Institute / College
Across Functional or Emotional AppealAcross Functional or Emotional Appeal
BOS Example –

Fees
Foreign
C
ertS
uperiority
Environm
entalC
onstraints
Fee
C
om
petition
StudentC
onstraints
G
lobalization
C
om
petitionAsian
C
ulture
C
reative
Thinking
Flexibility
C
ulture
Exposure
Entrepreneurship
U
nconventionalTeaching
M
ethodEcosystem
Low
High
Lim Kok Weng
Private Colleges
CreateCreate
 Unconventional
Teaching Method
 Ecosystem
ReduceReduce
RaiseRaise
• Globalization
Competition
• Asian Culture
• Creative Thinking
• Flexibility Culture
• Exposure
• Entrepreneurship
EliminateEliminate
 Foreign Cert
Superiority
 Environmental
Constraints
 Student
Constraints
 Fee Competition
Strategy CanvasStrategy Canvas -- LimKokWengLimKokWeng

Across Buyer Groups
Products & Services
Orientation
Across Time
Red
Ocean
Blue
Ocean

Across TimeAcross Time
BOS Example – iTune
1999
Napster started
online music file
sharing service
2003
> 2 billion illegally
music flies were being
traded every month
Apple launched
iTunes online
music store
 iTunes had sold >
4 billion songs
 20 million songs
on Dec 25, 2007
2008
Apple teamed up with
major Music & Picture
Companies
 Sell Individual song /
entire album
 30 sec free listening
 Strategically price

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 user-
generated 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

Strategy CanvasStrategy Canvas -- YouTubeYouTube
N
eed
forH
TM
L
know
-how
H
assle
Fees
U
pload/dow
nload
tim
e
W
ebspace
allocatted
per user
Eas-of-use
technology
R
eady-m
ade
w
ebsite
FLV
technology
Social N
etw
orking
Videa
tags
&
search
Low
High
YouTube
Ordinary Webhosting
CreateCreate
• Ease of Use
technology
• FLV technology
• Ready-made website
• Social networking
• Video tags & Search
ReduceReduce
RaiseRaise
• Web space allotted
per user
EliminateEliminate
• Need for HTML
know-how
• Hassle of
undergoing
numerous steps
• Fees
 Uploading /
downloading time

Look across TimeLook across Time
Climate Change
Weird Science
Future of the
Individual
Innovation
Economy
Next Workforce
Longevity
Medicine
Fueling the
Future
Globalization
US- China Future
Securing the
Future
Ten Trends
of
the Extreme
Future
From the Book “Extreme Future”

From HeadFrom Head--toto--Head Competition to Blue Ocean CreationHead Competition to Blue Ocean Creation
Participates in shaping external
trends over time
Focuses on adapting to external trends
as they occur
TimeTime
Rethinks the functional-
emotional orientation of its
industry
Focuses on improving price
performance within the functional -
emotional orientation of its industry
FunctionalFunctional--EmotionalEmotional
OrientationOrientation
Looks across to complementary
and service offerings
Focuses on maximizing the value of
product and service offerings within
the bounds of its industry
Scope of Product orScope of Product or
Service OfferingService Offering
Redefines the industry buyer
group
Focuses on better serving the buyer
group
Buyer GroupBuyer Group
Looks across strategic groups
within industries
Focuses on competitive position within
strategic group
Strategic GroupStrategic Group
Looks across alternative
industries
Focuses on rivals within its industryIndustryIndustry
Blue Ocean CreationHead-To-Head Competition

Traditional Graveyard NV Multi Corporation
BOS Example – NV Multi Corporation
Total Peace of MindTotal Peace of Mind
 Economical
 Unpleasant Environment
 Pollution
 No Maintenance
 Expensive
 Pleasant Environment
 1 Stop Service
 After Sales Service
Across Multiple PathwaysAcross Multiple Pathways

AcrossAcross
AlternativeAlternative
IndustriesIndustries
Across BuyerAcross Buyer
GroupsGroups
ComplementaryComplementary
Products & ServicesProducts & Services
FunctionalFunctional
to Emotionalto Emotional
White Ladies
A Service Respect For Woman
Prayer Service
Professional Band
Service Team
•Notifying Friend &
Relatives
•Thank You Cards
•Memory Lane
•Video & Slideshow
• Bereavement
Product
• Insurance Protection
• Capital Gain
• Buyer -> User & User -> Buyer
• Pet Memorial Garden
• VIP Memorial Garden
BOS Example – NV Multi Corporation
Across Multiple PathwaysAcross Multiple Pathways

Strategy CanvasStrategy Canvas -- NV Multi CorporationNV Multi Corporation
Price
Price
Com
petition
Fear
Taboos
Sophisticated
Process
Pollution
W
ellLayoutCem
etery
StaffAppearancePre-arranged
O
ne
Stop
FuneralServicesW
hite
Angels
LuxuryCem
etery
Custom
izable
BurialPlots
Care
plan
Low
High
NV Multi
Private Cemetary
Public Cemetery
CreateCreate
• White Angels
• Luxury Cemetery
• Customizable
Burial Plots
• Care Plan
ReduceReduce
RaiseRaise
• Well Layout
Cemetery
• Staff Appearance
• Pre-arranged
• One Stop Funeral
Services
EliminateEliminate
• Price Competition
• Fear
• Taboos
 Sophisticated
Process
 Pollution

0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Fee
C
om
petitiveness
InstitutionalR
ecognition
Industry
Linkage
Program
&
C
areerP
athFacilitators
Facilities
Branding
Lifestyle/C
ulture
Factor9
Factor10
Factor11
Competing Factors
OfferingLevel
XYZ
Competitors
High
Low
Mid
Identify the
Divergent Factors
that Differentiate XYZ
from Competitors
Activity 3 & 4 : Reconstruct Market BoundariesActivity 3 & 4 : Reconstruct Market Boundaries
Identify Divergent Factors

Activity 3 & 4 : Reconstruct Market BoundariesActivity 3 & 4 : Reconstruct Market Boundaries
Identify Divergent Factors
DescriptionDivergent Factor
Sub-Group :
Note : Each sub-group must determine at least ONE Divergent Factor.
Back

Eliminate Create
Reduce Raise
Divergent Factors
X =
Y =
Z =
Activity 5 & 6 : ToActivity 5 & 6 : To--Be Strategy CanvasBe Strategy Canvas
Construct Desired Value Curve for XYZ

Mid
Fee
Competencies
Industrial
Linkage
Program
& Career Path
FacilitatorsInstitutional
Recognition
High
Low
Mid
High
Low
Facilities
Activity 5 & 6 : ToActivity 5 & 6 : To--Be Strategy CanvasBe Strategy Canvas
Construct Desired Value Curve for XYZ
Create
Divergent Factors
X =
Y =
Z =
Raise
Quality
Talent
Reduce
Technology
Process
Eliminate
Competencies
X Y Z
Existing Value
Curve
New Value
Curve
Lifestyle/
Culture

Three Characteristics of a Good StrategyThree Characteristics of a Good Strategy
1. Focus
2. Divergence
3. Compelling Tagline
Now Everyone Can Fly!Now Everyone Can Fly!

Barriers to ImitationBarriers to Imitation
Does not Make Sense
based on Conventional
Strategic Logic
NBC, CBS and ABC rediculed
the idea of 24x7 real time news
without star broadcasters
Brand Image Conflicts
Chanel, CD, etc could not imitate
Body Shop as it would signal an
invalidation of their current
business models
Economies of Scale
High volume generated by a
value innovation leads to rapid
cost advantages
Political, Operational and
Cultural Changes
Major revisions in routing planes,
retraining, changing
marketing/pricing/culture. Took
MAS 6 years to come up Firefly
1st to Market
When a company offers a leap in
value, it rapidly earns brand buzz
and a loyal following in the
marketplace
Natural Monopoly
Size of market does not make
sense to support another player
Back

Conclusion:Conclusion:
Focus on the Big Picture, not the NumbersFocus 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
See where your
strategy needs to
change
Go into the field to
explore the six
paths to creating
blue oceans
Observe the
distinctive
advantages of
alternative
products and
services
Draw your To Be
Strategy Canvas
based on insights
from field
observations
Get feedback on
alternative strategy
canvases from
customers,
competitors’
customers and non
customers
Distribute your
before- and-after
strategic profiles on
one page for easy
comparison
Support only those
projects and
operational moves
that allow your
company close the
gaps to actualize
the new strategy
Use feedback to
build the best 'to be'
future strategy
See which factors
you should
eliminate, create or
change
Back

Get the Strategic Sequence RightGet the Strategic Sequence Right
Buyer
Utility
Price Cost
Adoption
Hurdles
CommerciallyCommercially
ViableViable
Blue Ocean IdeaBlue Ocean Idea
Is there
exceptional buyer
utility in your
business idea?
Is your price
easily accessible
to the mass of
buyers?
Can you attain
your cost target to
profit at your
strategic price?
What are
adoption hurdles
in actualizing
your business
idea? Are you
addressing them
up front?
Cost Price Utility Adoption
Red Ocean
Sequence

Buyer Utility MapBuyer Utility Map
Customer
Productivity
Environmental
Friendliness
Fun and Image
Risk
Convenience
Simplicity
6
Disposal
5
Maintenance
4
Supplement
3
Use
2
Delivery
1
Purchase
TheSixUtilityLevels
The Six Stages of the Buyer Experience Cycle
How long to find
the product you
need?
Is place of
purchase
attractive &
accessible?
How secure is
the transaction
environment?
How rapidly can
you make a
purchase?
How long to get
the product
delivered?
How difficult to
install the new
product?
Do buyers have
to arrange
delivery
themselves?
Training or
expertise
assistance
required?
Easy to store
when not in
used?
How effective
are features
and functions?
Overcharged
with bell and
whistles?
Need other
products to
make it work?
How much time
do they take?
How much
pain do they
cause?
How easy are
they to obtain?
Require external
maintenance?
How easy to
maintain and
upgrade?
How costly?
Create waste
items?
Legal or
environmental
issue of the
product
disposal?
Create waste
items?
How easy to
dispose?

Buyer Utility MapBuyer Utility Map –– XYZXYZ’’ss ToTo--DoDo
Customer
Productivity
Environmental
Friendliness
Fun and Image
Risk
Convenience
Simplicity
6
Disposal
5
Maintenance
4
Supplement
3
Use
2
Delivery
1
Purchase
TheSixUtilityLevels
The Six Stages of the Buyer Experience Cycle
HR V.I.
Insourcing
Global Guru

Strategic PricingStrategic 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.

Price Corridor of the MassPrice 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:
Size of circle is proportion to number of buyers that product/service
attracts
Different Form and
Function, Same Objective
Different Form
Same FunctionSame Form
Upper-level pricing
Mid-level pricing
Low-level pricing
Price Corridor
of the Mass
High degree of legal and
resource protection
Difficult to Imitate
(E.g., Dyson)
Some degree of legal and
resource protection
Low degree of legal protection
Easy to Imitate
(E.g., Air Asia)

Mid to Lower Strategic PricingMid 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.

Profit Model of BOSProfit Model of BOS
The Target
Profit
The Strategic Price
The Target Cost
Pricing Innovation
Streamlining and
Cost Innovative
Partnering
• Metal/leather -> plastic
• 150 -> 51 parts
• Cheaper assembly
• 1500 partners over 50
countries

Overcome Key Organizational HurdlesOvercome Key Organizational Hurdles
CognitiveCognitive
HurdleHurdle
MotivationalMotivational
HurdleHurdle
ResourceResource
HurdleHurdle
PoliticalPolitical
HurdleHurdle

Political
 Leveraging angels
- Angels = those who have the most to gain
from the strategic shift
 Silencing devils
- Devils = those who have the most to lose
from it
 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
Motivational
 Focus on ‘kingpins’ – the key
influencers
 Fishbowl management of kingpins
- 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
Cognitive
 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
 Hot spots
- Low resources input but high potential
performance gains
 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
Toppling the 4 Hurdles to ActionsToppling the 4 Hurdles to Actions
Sewer – Underground
pipe carrying drainage
water or waste
Bring those in denial
to feel the pain and
meet the customers
Where are XYZ’s Hot
spots and Cold spots
?
Revenue vs Resource
?
Beside headcounts,
what other resources
can you trade ?
Meeting room ?
Who are your
kingpings ?
What review/metrics
do you use ?
How do we
breakdown the 3
differentiators into
sizeable chunks?
Who will align the
most with XYZ ? Who
will fight with XYZ ?
What can you lobby to
become your
Godfather ?

Build Execution into StrategyBuild Execution into Strategy
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
Strategy
Formulation
Process
Attitude
Behavior
Strategy
Execution

Barriers to ImitationBarriers to Imitation
Does not Make Sense
based on Conventional
Strategic Logic
NBC, CBS and ABC rediculed
the idea of 24x7 real time news
without star broadcasters
Brand Image Conflicts
Chanel, CD, etc could not imitate
Body Shop as it would signal an
invalidation of their current
business models
Economies of Scale
High volume generated by a
value innovation leads to rapid
cost advantages
Political, Operational and
Cultural Changes
Major revisions in routing planes,
retraining, changing
marketing/pricing/culture. Took
MAS 6 years to come up Firefly
1st to Market
When a company offers a leap in
value, it rapidly earns brand buzz
and a loyal following in the
marketplace
Natural Monopoly
Size of market does not make
sense to support another player
Back

AcknowledgementAcknowledgement
 Professor Kim and Mauborgne for enlightening us
with such a great book.
 You All, for being such a wonderful audience !

Back UpBack Up

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

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.
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!
Successful Application of BOSSuccessful Application of BOS
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

Successful Application of BOSSuccessful Application of BOS
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