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Blue Ocean Strategy
- 1. Blue Ocean Strategy W. CHAN KIM RENÉE MAUBORGNE
- 2. Reminds you of something? How attractive do you think, is the industry? What are the alternative forms of entertainment? And what do you think of the competition out there? Surviving in such a market space? Acquiring admiration of forty million people in ninety cities around the world ? Baffled yet?
- 3. “We Reinvent the Circus” Creating Blue Oceans Did not compete with Ringling Bros. and Barnum & Bailey Created uncontested new market space Appealed to adults and corporate clients Prepared to pay a price several times An unprecedented entertainment experience Cirque du Soleil “The only way to beat the competition is to stop trying to beat the competition.” ?!!!?!!!?
- 4. The Market Universe RedOceans (theknownmarketspace) Blue Oceans (the unknown market space) Untapped market space OnlyCommodities Opportunity for Growth and ProfitNo rules LowProfitProspects Created from within Red Oceans Competition Irrelevant The rules are waiting to be set No Bloody red Ocean Demand Creation Allrulesareset… How do we ‘Reinvent the Circus’? SwimandOutcompete Sustainability TheContinuousCreationofBlue Oceans
- 5. 2015 2014 2013 2012 .. . . . Look back a 100 years! How many of today’s industries were then unknown? automobiles music recording Aviation, petrochemicals health care management consulting . .. .... Turn the clock back only 30 years! A plethora of multi-billion dollar industries jumps out! Mutual funds, cell phones, gas-fired electricity plants, biotechnology, discount retail, express package delivery, minivans, snowboards, coffee bars, and home videos And the market place continues to evolve…….
- 6. The Raw Figures Business launches of 108 companiesLineextensions 93 Created Blue Oceans15 62 percent of total revenues 39 percent of total profits 38 percent of total revenues 61 percent of total profits
- 7. The Rising Imperative Accelerated technological advances Industrial productivity Globalization Disappearing niche markets and havens for monopoly Increasing price wars and shrinking profit margins Accelerated commoditization of products ( ) ( ) ( ) ( ) Choosing the right unit of analysis? Company/ industry vs. strategic move > 150 strategic moves 1880 to 2000 > 30 industries
- 8. Value Innovation Beat the competition Build a Defensible Position Make the competition irrelevant Open up new and uncontested market space. Create a leap in value for buyers and your company Value Creation technology-driven, market pioneering, or futuristic bleeding-edge technology “timing for market entry.” Utility price costpositions value-cost trade-off
- 9. Analytical Tools and Frameworks The U.S. wine industry Thirdlargestaggregateconsumptionof wineworldwide intense competition mounting price pressure increasing bargaining power on the part of distribution channels flat demand despite overwhelming choice. The Strategy Canvas The Four Actions Framework The Eliminate-Reduce-Raise-Create Grid
- 10. The range of factors the industry competes on and invests in. Theofferinglevelthatbuyersreceiveacrossallthese keycompetingfactors value curve TheStrategyCanvas classic differentiate on strategy
- 11. Benchmark Competitors Try to outcompete Conduct extensive customer research Reorienting strategic focus from competitors to alternatives, and from customers to noncustomers of the industry! How to make a fun and nontraditional wine that’s easy to drink for everyone ? Casella Wines
- 12. The Four Actions Framework
- 16. Reconstruct Market Boundaries The six paths framework Path 1: Look Across Alternative Industries Substitutes vs. Alternatives Focus on the key factors that lead buyers to trade across alternative industries The case of NetJets - fractional jet ownership Path 2: Look Across Strategic Groups Within Industries Understand which factors determine customers’ decisions to trade up or down from one group to another The Curves club experience Path 3: Look Across the Chain of Buyers The purchasers, the actual users, and influencers. Redesign value curves to focus on a previously overlooked set of buyers The Case of Novo Nordisk Path 4: Look Across Complementary Product and Service Offerings Rivals converge within the bounds of their industry’s product and service offerings Define the total solution buyers seek when they choose a product or service what happens before, during, and after your product is used Talking about Philips Electronics
- 17. Reconstruct Market Boundaries The six paths framework Path 5: Look Across Functional or Emotional Appeal to Buyers Simpler, lower-priced, lower-cost business model Infuse commodity products with new life by adding a dose of emotion The experience of QB (Quick Beauty) House Path 6: Look Across Time From the value a market delivers today to the value it might deliver tomorrow Finding insight in trends that are observable today Trends must be decisive to the business, they must be irreversible, and they must have a clear trajectory The Case of i-Tunes
- 18. Focus on The Big Picture Draw Your Strategy Canvas Visual Awakening Visual Exploration Visual Strategy Fair Visual Communication Use the Strategy Canvas Use the Pioneer-Migrator-Settler (PMS) Map Overcome the Limitations of Strategic Planning Reach Beyond Existing Demand strategic profile of an industry strategic profile of current and potential competitors company’s strategic profile Compare your business with your competitors Go into the field and explore the six paths to creating blue oceans draw a value curve Get feedback Eliminate-Reduce- Raise-Create Grid one-page picture Samsung Electronics of Korea Value Innovation Program (VIP) Center plot the company’s current and planned portfolios See where your strategy needs to change
- 19. Reach Beyond Existing Demand Think noncustomers before customers; commonalities before differences; and desegmentation before pursuing finer segmentation “Soon-to-be” noncustomers “Refusing” noncustomers “Unexplored” noncustomers Go for the Biggest Catchment Don’tfindyourselfinapuddle!
- 20. GetTheStrategic SequenceRight Testing for Exceptional Utility The buyer utility map The Six Stages of the Buyer Experience Cycle The Six Utility Levers From Exceptional Utility to Strategic Pricing Step 1: Identify the Price Corridor of the Mass Step 2: Specify a Level Within the Price Corridor From Strategic Pricing to Target Costing From Utility, Price, and Cost to Adoption Employees Business Partners The General Public Philips’ CD-i Merrill Lynch SAP Monsanto
- 23. Overcome Organizational Hurdles cognitive why rock the boat? limitedresources Motivation politics Tipping Point Leadership How? disproportionate influence on performance Break Through the Cognitive Hurdle make people see and experience harsh reality internally driven of people’s own accord Meet with Disgruntled Customers Jump the Resource Hurdle multiplying the value of the resources Horse trading Redistribute Resources to Your Hot Spots Redirect Resources from Your Cold Spots Jump the Motivational Hurdle Zoom in on Kingpins Place Kingpins in a Fishbowl Atomize to Get the Organization to Change Itself Knock Over the Political Hurdle Secure a Consigliere on Your Top Management Team
- 24. Build Execution into Strategy Poor Process Can Ruin Strategy Execution The Right Lubricant for Lubber The Power of Fair Process procedural justice The Three E Principles Engagement Explanation Expectationclarity A Tale of Two Cities Plants Commitment, trust, and voluntary cooperation
- 25. The Sustainability and Renewal of Blue Ocean Strategy How easy or difficult is blue ocean strategy to imitate? BarrierstoImitation 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 new player Patents or legal permits block imitation The high volume generated by a value innovation leads to rapid cost advantages Network externalities Even large advertising budgets by an aggressive imitator rarely have the strength to overtake the brand buzz earned by the value innovator. When to Value-Innovate Again? monitor value curves on the strategy canvas swim as far as possible in the blue ocean, making yourself a moving target, distancing yourself from your early imitators, and discouraging them in the process Reach out for another value innovation to create a new blue ocean