This document provides an overview and summary of the book "Blue Ocean Strategy" by W. Chan Kim and Renee Mauborgne. It discusses key concepts from the book, including how blue ocean strategy focuses on creating new market space rather than competing in existing "red oceans." The document outlines six paths or frameworks for reconstructing market boundaries and creating blue oceans, including looking across alternative industries, strategic groups, chains of buyers, complementary products/services, functional/emotional appeal, and time. Examples are provided for how companies like Cirque du Soleil, Casella Wines, and others successfully applied blue ocean strategy principles to create new demand and make competition irrelevant.

1. Book Summary
W. Chan Kim Renee Mauborgne
1

2. 2
Contents
1. Creating Blue Oceans
Part One: Blue Ocean Strategy
2. Analytical tools and Frameworks
Part Two: Formulating Blue Ocean Strategy
3. Reconstruct Market Boundaries
4. Focus on Big Picture, Not the numbers
5. Reach beyond Existing demand

3. Contents
Part Three: Executing Blue Ocean Strategy
7. Overcome key organizational hurdles
8. Build Execution into strategies
3

4. Chapter 1:
Creating Blue Oceans
This chapter talks about the new market
spaces which replaces red ocean
strategy with blue oceans. It also talks
about the imperative of making a new
ocean besides analysing its impact on
any industry.
4

5. RED OCEANS VS. BLUE OCEANS
Imagine a market universe composed of two
sorts of oceans: red oceans and blue oceans.
Red oceans represent all the industries in
existence today. Blue oceans denote all the
industries not in existence today.
In RED oceans, industry boundaries are
defined and accepted, and the competitive
rules of the game are known
BLUE oceans, in contrast, are defined by
untapped market space, demand creation, and
the opportunity for highly profitable growth
5

6. 6
Red Ocean Blue Ocean

7. Red Oceans vs. Blue Oceans
Undefined market space,
demand creation, opportunity
for highly profitable growth
Most are created from within
red oceans by expanding
existing industry boundaries
Rules of game waiting to be
set
Blue ocean strategy is a
market-creating strategy
Industry boundaries defined
and accepted
Companies try to outperform
rivals; cutthroat competition
As market space gets
crowded, prospects for profit
and growth reduced
Red ocean strategy is a
market-competing strategy
Blue Ocean Red Ocean
7

8. Supply is exceeding demand in most industries
global competition is intensifyingProblems:
Accelerated communization of products and
services
Increasing price wars
Shrinking profit margins
Red oceans becoming bloodier, need to be
concerned with creating blue oceans
8
The Rising Imperative of Creating
Blue Oceans

9. The Impact of Creating Blue
Oceans
9

10. VALUE INNOVATION
Value innovation is the cornerstone of blue ocean
strategy. We call it value innovation because
instead of focusing on beating the competition,
you focus on making the competition irrelevant
by creating a leap in value for buyers and your
company, thereby opening up new and
uncontested market space
Innovation without value tends to be technology-
driven, market pioneering, or futuristic, often
shooting beyond what buyers are ready to accept
and pay for
10

11. Value Innovation
11

12. VALUE INNOVATION
Value innovation occurs only when
companies align innovation with
utility, price, and cost positions
Those that seek to create blue
oceans pursue differentiation and
low cost simultaneously.
12

13. VALUE INNOVATION: THE CORNERSTONE
OF BLUE OCEAN STRATEGY
Competition-based red ocean strategy
assumes that an industry’s structural
conditions are given and that firms are
forced to compete within them
Value innovation is based on the view
that market boundaries and industry
structure are not given and can be
reconstructed by the actions and beliefs
of industry players
13

14. Few examples of Blue Oceans
The American Wine Industry :Casella
Wines
The Case of Cirque du Soleil
14

15. 3rd largest in world: worth $20 billion
Californian makes 66% - the rest is from Italy,
France, Spain, Chile, Argentina, Australia
Exploding number of new wines – new vineyards
in Oregon, Washington, New York
15
The American Wine Industry

16. No 1 imported wine (outsells France and
Italy)
Fastest growing imported wine in the
history of the USA industry
New consumers of wine
Jug drinkers trade up
16
Casella Wines

17. Premium wine drinkers trade down
Industry criticizes them mercilessly at first
17
Casella Wines

18. Supplier power of the star performer were high
Alternative form of entertainment was available :
Ranging from urban live entertainment to home
entertainment
Industry was suffering from steadily decreasing
audiences and in turn, declining revenue and
profit
18
The Circus Industry

19. Cirque du Soleil achieved rapid growth in a
declining industry with low profit potential
Cirque du Soleil created uncontested new
market space that made the competition
irrelevant
Because of this, Cirque du Soleil appealed to
both circus customers and noncustomers
19
Cirque du Soleil

20. Example: ‘Cirque du Soleil’
A circus company stuck in a stagnant market
space with limited potential for growth as per the
traditional strategic analysis of the market.
Bargaining power of both the
suppliers(performers) and the buyers(the
customers) was high along with a negative
sentiment against the use of animals.
Cirque du Soleil competed against the traditional
players in the industry by creating a different form
of entertainment all together.
20

21. Six Principles of Blue Ocean
Strategy
Reconstruct market boundaries
Focus on the big picture, not the numbers
Reach beyond existing demand
Get the strategic sequence right
Overcome key organizational hurtles
Build execution into strategy
21

22. Chapter 2:
Analytical Tools and
Frameworks
22

23. Effective blue ocean strategy should be about
risk minimization and not risk taking. This
chapter applies strategy canvas framework on
US wine industry Strategy canvas captures the
offering level that buyers receive across all
key competing factors. A high score means
that a company offers buyers more, and hence
invests more. To fundamentally shift the
strategy canvas of an industry, you must begin
by reorienting your strategic focus from
competitors to alternatives, and from
customers to non-customers of the industry
23

24. The strategy canvas is both a diagnostic and an
action framework for building a compelling blue
ocean strategy. It captures the current state of play
in the known market space. This allows you to
understand where the competition is currently
investing, the factors the industry currently competes
on in products, service, and delivery, and what
customers receive from the existing competitive
offerings on the market. The horizontal axis captures
the range of factors the industry competes on an
invests in. The vertical axis captures the offering
level that buyers receive across all these key
competing factors. The value curve then provides a
graphic depiction of a company’s relative
performance across its industry’s factors of
competition
24
Strategy Canvas

25. Strategy Canvas
25

26. THE STRATEGY CANVAS
26

27. THE STRATEGY CANVAS (YELLOW TAIL)
Instead of offering wine as wine, Casella created
a social drink accessible to everyone: beer
drinkers, cocktail drinkers, and other drinkers of
non-wine beverages
[yellow tail] leapfrogged tall competitors with no
promotional campaign, mass media, or
consumer advertising. It didn’t simply steal sales
from competitors; it grew the market. [yellow tail]
brought non-wine drinkers—beer and ready-to-
drink cocktail consumers—into the wine market
27

28. The Strategy Canvas (Yellow Tail)
28

29. Strategy Canvas : Cirque du
Soleil
29

30. Four Actions to create a Blue
Ocean
30

31. FOUR ACTIONS FRAMEWORK
There are four key questions to
challenge an industry’s strategic logic
and business model:
1) Which of the factors that the industry
takes for granted should be eliminated?
31

32. FOUR ACTIONS FRAMEWORK
2) Which factors should be reduced well
below the industry’s standard?
3) Which factors should be raised well
above the industry’s standard?
4) Which factors should be created that
the industry has never offered?
32

33. FOUR ACTIONS FRAMEWORK
33

34. Casella Wines created three new
factors in the U.S. wine industry —
easy drinking,
easy selection,
fun and adventure —
and eliminated or reduced everything
else
34
Casella Wines -- Yellow Tail

35. 4 Actions : Wine Industry
35

36. Eliminate
Star Performers
Animal shows
Aisle concession sales
Multiple show arenas
Raise
Unique venues
Reduce
Fun and humor
Thrill and danger
Create
Theme
Refined environment
Multiple productions
Artistic music and dance
4 Actions : Cirque du Soleil
36

37. 3 characteristics of a Good strategy
Focus
Divergence
Compelling
taglines
Only on the main
factors of
service/product
Tendency to be
unique & different
from the
competitors
Clear cut and
meaningful tagline
37

38. READING THE VALUE CURVE
Blue Ocean Strategy:
When a company’s value curve, or its
competitors’, meets the three criteria that
define a good blue ocean strategy—focus,
divergence, and a compelling tagline that
speaks to the market—the company is on the
right track
38

39. READING THE VALUE CURVE
A Company Caught in the Red Ocean
When a company’s value curve
converges with its competitors, it signals
that a company is likely caught within
the red ocean of bloody competition
39

40. READING THE VALUE CURVE
Over delivery Without Payback
When a company’s value curve on the strategy
canvas is shown to deliver high levels across
all factors and the its position is not strong, the
strategy canvas signals that the company may
be oversupplying its customers, offering too
much of those elements that add incremental
value to buyers
40

41. READING THE VALUE CURVE
An Incoherent Strategy
When a company’s value curve looks
like a bowl of spaghetti—a zigzag with
no rhyme or reason, where the offering
can be described as “low-high-low-low-
high-low-high”—it signals that the
company doesn’t have a coherent
strategy
41

42. READING THE VALUE CURVE
Strategic Contradictions
Are there strategic contradictions?
These are areas where a company is
offering a high level on one competing
factor while ignoring others that support
that factor
42

43. READING THE VALUE CURVE
An Internally Driven Company
In drawing the strategy canvas, how does a
company label the industry’s competing
factors? Are the competing factors stated in
terms buyers can understand and value, or
are they in operational jargon? The kind of
language used in the strategy canvas gives
insight as to whether a company’s strategic
vision is built on an “outside-in” perspective,
driven by the demand side, or an “inside-out”
perspective that is operationally driven
43

44. Part 2: Formulating
Blue Ocean
Strategy
44

45. Chapter 3:
Reconstruct Market
Boundaries
Challenge: Successfully identify,
out of the possibilities that exist,
commercially compelling blue
ocean opportunities
45

46. SIX FUNDAMENTAL ASSUMPTIONS:
KEEP COMPANIES TRAPPED IN RED
OCEANS
1) Define their industry similarly and
focus on being the best within it
2) Look at their industries through the
lens of generally accepted strategic
groups, and strive to stand out in the
strategic group they are in
3) Focus on the same buyer group,
whether it’s the purchaser, user, or
influencer
46

47. SIX FUNDAMENTAL ASSUMPTIONS:
KEEP COMPANIES TRAPPED IN RED OCEANS
4) Define the scope of the products and
services offered by their industry
similarly
5) Accept their industry’s functional and
emotional orientation
6) Focus on the same point in time-and
often on current competitive threats-in
formulating strategy
47

48. PATH 1:LOOK ACROSS ALTERNATIVE
INDUSTRIES
Companies compete not only with the
other companies in their own industry
but also with companies in those other
industries that produce alternative
products or services
48

49. Path 1: Look across alternative Industries
Cinemas vs. Restaurants – Completely different
but solves the same purpose for the person i.e. a
good night out
Buyers implicitly makes decisions between
alternatives and substitutes, often
unconsciously
49

50. PATH 1: (HOME DEPOT)
Offer the expertise of professional home
contractors at markedly lower prices than
hardware stores
By delivering the decisive advantages of both
alternative industries, and eliminating or
reducing everything else, they have transformed
the ordinary homeowners into do-it-yourselfers
50

51. PATH 1: (SOUTHWEST AIRLINES)
Concentrated on driving as the
alternative to flying, provided the speed
of air travel at the price of car travel
51

52. Path 2: Look Across Strategic
Groups Within Industries
Strategic Group: Group of companies within an
industry that pursue a similar strategy
Need to understand what factors drive the
customers to trade up or down between strategic
groups
52

53. Path 2: Look Across Strategic
Groups Within Industries
Strategic Groups can generally be ranked in a
rough hierarchical order built on 2 dimensions:
PRICE & PERFORMANCE
53

54. Examples of Companies creating
Blue Oceans by following this path
Sony Walkman
– By looking
across the low
price and
mobility of
transistor
radios & high
fidelity of boom
boxes
Toyota Lexus –
Offered the
quality of
Mercedes Benz,
BMW etc. at the
price of Cadillac
or Lincoln
Polo Ralph
Lauren –
Providing the
satisfaction of
haute couture
and affordable
price
Path 2: SONY, TOYOTA, POLO
54

55. Path 3: Look across Chain of Buyers
Chain of “buyers” - directly or indirectly
involved in the buying decision.
Purchasers who pay for the product or service
may differ from the actual users
There are important influencers as well.
55

56. Path 3: Look across Chain of Buyers
Challenging an industry’s conventional wisdom
about which buyer group to target can lead to
the discovery of new blue ocean. By shifting its
focus upstream from purchasers to users,
Bloomberg created a value curve that was
radically different from anything the industry
had seen before
56

57. PATH 3: LOOK ACROSS THE CHAIN OF
BUYERS
Purchasers, users, and influencers
Companies usually focus on a single
buyer group
Create blue ocean by shifting buyer
group
57

58. PATH 3: NOVO NORDISK AND
STARBUCKSNovo Nordisk
From insulin producers to diabetic care
company
Starbucks
Selling coffee beans to grocery stores
58

59. Path 4: Look Across Complementary
Product and Service Offerings
Few products and services are used in a
vacuum. In most cases, other products and
services affect their value
The key is to define the total solution buyers
seek when they choose a product or service. A
simple way to do so is to think about what
happens before, during, and after your product
is used. Babysitting and parking the car are
needed before people can go to the movies.
59

60. PATH 4: LOOK ACROSS
COMPLEMENTARY PRODUCT &
SERVICE OFFERINGS
Most products and services are affected
by other products or services & many
companies fail to notice this
The key is to define a solution buyers
seek when they choose a product or
service. A simple way to do this is to
think about what happens Before,
During, After
60

61. Path 4: PHILIPS
By thinking in terms of solving the major pain
points in customers’ total solution, Philips saw
the water problem as its opportunity. The result:
Philips created a kettle having a mouth filter
that effectively captured the lime scale as the
water was poured
61

62. PATH 4: NABI
NABI: Hungarian bus company that
applied Path 4 to U.S. transit bus industry
Competition competed on offering the
lowest purchase price for buses. But
Designs outdated
Delivery times were late
Quality was low
62

63. PATH 4: LOOK ACROSS COMPLEMENTARY
PRODUCT & SERVICE OFFERINGS
Solution: Adopted fiberglass when making it’s
buses
Cut costs by being corrosion free
Light weight cut fuel consumption and emissions
After accidents they didn’t have to replace a
whole panel rather they could cut the damaged
area and replace it
Lighter weight also meant lower powered engines
and fewer axles which cut costs
And gave more space inside the bus
63

64. PATH 5: LOOK ACROSS FUNCTIONAL
OR EMOTIONAL APPEAL TO BUYERS
Emotionally Oriented
Add price without enhancing functionality .
Functionally Oriented
Blend commodity products with life by adding
emotion.
Examples:
Swatch, The Body Shop, Quick Beauty House
64

65. PATH 5: (QUICK BEAUTY HOUSE,
JAPAN)
Created a Blue Ocean in the Japanese
barbershop industry.
Shift from emotional to highly functional
Eliminated the time and cost of getting a haircut
Re-defined the Japanese barbershop industry
65

66. 6. LOOK ACROSS TIME
Three principles to assess trend
66
Decisive Irreversible
Clear
trajectory
Example- Apple identified the trend for digital
music and realized the fast growing demand
for MP3 players and launched Apple’s hit Ipod

67. Path 6: Look Across Time
Three principles are critical to assessing trends
across time. To form the basis of a blue ocean
strategy, these trends must be decisive to your
business, they must be irreversible, and they
must have a clear trajectory.
Having identified a trend of this nature, you can
then look across time and ask yourself what the
market would look like if the trend were taken to
its logical conclusion
67

68. PATH 6: LOOK ACROSS TIME
What companies tend to do:
Focus on same point in time
Passive actions
Projecting trend itself
External Threats
68

69. PATH 6: LOOK ACROSS TIME
What companies need to do:
Look into time
Don’t predict future
How the trend will bring Value
69

70. FROM HEAD TO HEAD COMPETITION TO
BLUE OCEAN CREATION
Head to head competition Blue Ocean Creation
Industry Focus on rivals within its
industry
Look across alternative
industries
Strategic Group Focus on competitive
position within strategic
group
Look across strategic
group within industries
Buyer Group Focus on better serving the
buyer group
Redefines the industry
buyer group
Scope of product or
service offering
Focus on maximizing the
value of product or service
offerings within industry
bounds
Look across
complementary product
or service offerings
Functional Emotional
Orientation
Focus on improving price
performance within the
functional emotional
orientation of its industry
Rethink the functional
emotional orientation of
its industry
Time Focus on adapting external
trends as they occur
Shape external trends
over time
70

71. 71
Chapter 4:
Focus on the Big Picture,
Not numbers

72. FOCUS ON THE BIG PICTURE, NOT
NUMBERS
Strategy Canvas
Drawing a strategy canvas:
visualizes a company’s current strategic position
in its marketplace
helps the company chart its future strategy
draws a company’s and its managers’ focus on
the big picture rather than becoming immersed in
numbers
72

73. FOCUSING ON THE BIG
PICTURE: DRAWING YOUR STRATEGY
CANVAS
Drawing a Strategy Canvas does three
things
It shows the strategic profile of an industry
by depicting very clearly the factors that
affect the competition among industry
players
It shows the strategic profile of current
and potential competitors, identifying
which factors they invest in strategically
It shows the company’s strategic profile-or
value curve- depicting how it invests in
them in the future
73

74. THE FOUR STEPS OF VISUALIZING
STRATEGY
Visual
Awakening
Visual
Exploration
Visual
Strateg
y Fair
Visual
Commu
nication
74

75. 75
Chapter 4:
Focus on the Big Picture, Not numbers

76. STEP1: VISUAL AWAKENING
76
Compare your business
with your Competitors by
drawing your “as is”
strategy canvas
See where
your strategy
needs to
change

77. STEP2: VISUAL EXPLORATION
Go into the
field to
explore the
six paths
to create
Blue
Oceans.
Observe
the
distinctive
advantage
s of
alternative
products
and
services
See which
factors you
should
eliminate,
create or
change
77

78. STEP3: VISUAL STRATEGY FAIR
78
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
Use feedback to build the best “to be”
future strategy

79. STEP3: VISUAL STRATEGY FAIR
ELIMINATE
Relationshi
p
Manageme
nt
RAISE
Ease of Use
Security
Accuracy
Speed
Market
Commentary
REDUCE
Account
Executives
Corporate
Dealers
CREATE
Confirmati
on
Tracking
79
Eliminate-Reduce-Raise-Create Grid:
The Case of EFS

80. STEP 4: VISUAL COMMUNICATION
Distribute your
before-and-after
strategic profiles
on one page for
easy comparison
Support only
those projects and
operational moves
that allow your
company to close
the gaps to
actualize the new
strategy
80

81. EXAMPLE – EFS
Had been struggling for a long time with
an ill-defined and poorly communicated
strategy
81

82. EXAMPLE – EFS
Began the strategy process by bringing
together upper management from Europe, N.
American, Asia, and Australia
2 Teams: Value curve production and emerging
online foreign exchange business
The experience: Europe vs. America
EFS strategy vs. competitors (Clearskies)
82

83. EXAMPLE – EFS
EFS sent managers out for four weeks to gather
information.
They had to interview ten people involved in
corporate foreign exchange.
Also reached outside the industry’s traditional
boundaries to other companies that did not yet
use corporate foreign exchange.
83

84. EXAMPLE – EFS
EFS Findings:
What they thought was important turned out not
to be what the customer thought was important.
Because of these findings, EFS was able to
reformulate new strategies.
Redid the value curves and formulated new
compelling taglines that fit their business model.
84

85. EXAMPLE – EFS
Both teams presented their strategy canvases
at a visual strategy fair (6 by the online group/6
by the offline group)
After all 12 strategies were presented, each
judge was given 5 sticky notes and told to put
them next to his/her favorite, then explain why
they did not choose certain curves.
85

86. EXAMPLE – EFS
They realized that 1/3 of what they had
thought were key competitive factors were,
in fact, marginal to customers. Another 1/3
either were not well articulated or had been
overlooked in the visual awakening phase.
It then became clear that the executives
needed to reassess things such as EFS’s
separation of its online & traditional
business.
86

87. STEP 3: VISUAL STRATEGY FAIR
Following the visual strategy fair, the
teams were able to draw a value curve
that was a truer likeness of the existing
strategic profile than anything they had
produced earlier.
87

88. STEP 3: VISUAL STRATEGY FAIR
88

89. EXAMPLE – EFS
The new value curve exhibited the criteria
of a successful strategy, and it displayed
more focus than the previous strategy
By collapsing its online & traditional
businesses into 1 offering, EFS
substantially cut the operational
complexity of its business model, making
systematic execution far easier
89

90. Eliminate-Reduce-Raise-Create Grid: The Case of
EFS
EXAMPLE – EFS
Eliminate
Relationship
Management
Raise
Ease of use
Security
Accuracy
Speed
Market commentary
Reduce
Account Executives
Corporate Dealers
Create
Confirmation
Tracking
90

91. USING THE PIONEER-MIGRATOR-
SETTLER (PMS) MAP
PMS Map- helps visualize, plan, and predict a
companies future growth and profit.
Pioneers- business that offer unprecedented
value and are powerful sources of profitable
growth. Their value curves are different form
the competitions on a strategy canvas. All
pioneers are blue oceans.
91

92. USING THE PIONEER-MIGRATOR-
SETTLER (PMS) MAP
Migrators- are in between pioneers and
settlers. They offer improved value, but
not innovative value.
Settlers- do not contribute to much
future growth and are stuck in a red
ocean. Their value curves match the
basic shape of the industry.
92

93. EXAMPLE PMS MAP
93

94. VISUAL STRATEGY AT THE CORPORATE
LEVEL
USING THE STRATEGY
CANVAS
Samsung Electronics
Of Korea
Exam
ple
• In 1998, Samsung
Electronics used Strategic
Canvas in its key business
creation decisions
• In 2003, the center
completed more than eighty
strategic projects and
opened more than 10 VIP
(Value Innovation Program)
branches to meet rising
demands
USING THE PIONEER-
MIGRATOR-SETTLER (PMS)
MAP
A company’s Pioneers are
the businesses that offer
unprecedented value.
Settlers are those whose
value curves conform to the
basic shape of the industry’s.
These are me-too businesses.
The potential Migrators lies
somewhere in between. These
businesses offer improved value,
but not innovative value.
94

95. OVERCOMING THE LIMITATIONS OF
STRATEGIC PLANNING
It should be more
conversational than
solely documentation-
driven
It should be more
about building the big
picture than about
number-crunching
exercises
It should have a
creative component
instead of being
strictly analysis-driven
It should be more
motivational, invoking
willing commitment,
than bargaining driven,
producing negotiated
commitment
95

96. CHAPTER 5:
REACH BEYOND EXISTING DEMAND
96

97. REACH BEYOND EXISTING DEMAND
First-Tier Noncustomers
These soon-to-be noncustomers are those
who minimally use the current market
offerings to get by as they search for
something better. Upon finding any better
alternative, they will eagerly jump ship. In
this sense, they sit on the edge of the
market
97

98. REACH BEYOND EXISTING DEMAND
First-Tier Noncustomers
What are the key reasons first-tier
noncustomers want to jump ship and leave
your industry? Look for the commonalities
across their responses. Focus on these, and
not on the differences between them. You
will glean insight into how to de-segment
buyers and unleash an ocean of latent
untapped demand
98

99. REACH BEYOND EXISTING DEMAND
Second Tier Noncustomer
These are refusing noncustomers, people
who either do not use or cannot afford to use
the current market offerings because they
find the offerings unacceptable or beyond
their means. Their needs are either dealt with
by other means or ignored
99

100. REACH BEYOND EXISTING DEMAND
Second Tier Noncustomer
What are the key reasons second-tier
noncustomers refuse to use the products or
services of your industry? Look for the
commonalities across their responses. Focus
on these, and not on their differences. You
will glean insight into how to unleash an
ocean of latent untapped demand
100

101. REACH BEYOND EXISTING DEMAND
Third Tier Noncustomer
The third tier of noncustomers is the farthest
away from an industry’s existing customers.
Typically, these unexplored noncustomers
have not been targeted or thought of as
potential customers by any player in the
industry. That’s because their needs and the
business opportunities associated with them
have somehow always been assumed to
belong to other markets
101

102. REACH BEYOND EXISTING DEMAND
Go for the Biggest Catchment
Focus on the tier that represents the biggest
catchment at the time
Explore whether there are overlapping
commonalities across all three tiers of
noncustomers. It expands the scope of latent
demand you can unleash
You should first reach beyond existing demand
to noncustomers and desegmentation
opportunities as you formulate future
strategies
102

103. REACH BEYOND EXISTING DEMAND
Go for the Biggest Catchment
You should be aware when your competitors
succeed in attracting the mass of
noncustomers with a value innovation move,
many of your existing customers may be
attracted away because they too may be
willing to put their differences aside to gain the
offered leap in value
You must profit from it to create a sustainable
win-win outcome
103

104. 104
Example: (PRET MANAGER)
Having Identified need of healthy,
inexpensive, fast, fresh lunch with sit-down
facilities by observing commonalities across
first tier of non-customers & came up with
Pret Manager

105. 105
Example: (JCDecaux)
JCDecaux- Observed the commonalities in
the second tier non-customers and realized
that the low rate of repeat visits, low value
addition, less exposure time, lack of
stationary downtown locations in outdoor
advertising using billboards were the
reasons for many companies to not opt for
outdoor advertising. So it came up with the
idea that municipalities could offer stationary
downtown locations, such as bus stops,
where people tended to wait a few minutes
and hence had time to read and be influenced
by advertisements.

106. 106
Example: (DENTAL WHITENING)
Dental whitening – It was an assumption that
tooth whitening was a service provided
exclusively by dentists and not by oral care
consumer-product companies.
Consequently, oral care companies never
looked at the needs of these noncustomers.
When they did, they found an ocean of latent
demand waiting to be tapped & the capability
to deliver safe, high-quality, low-cost tooth
whitening solutions, and the market
exploded

107. Chapter 6.
Get the Strategic Sequence Right
• Companies need to build their
strategy following what is called the
Sequence of Blue Ocean Strategy.
• The sequence goes:
• Buyer Utility, Price, Cost, Adoption
107

108. Buyer Utility
Does your
offering unlock
exceptional
utility?
There is no blue
ocean potential
without this point
Options include:
• Park the idea
• Rethink it
• Reach an
affirmative
Price
Companies don’t
want to rely
solely on price to
create demand
Is your offering
priced to attract
the mass of
target buyers for
a compelling
ability to pay for
your offering?
These first two
steps address the
revenue side of a
company’s
business model
Cost
Can you produce
your offering at
the target cost
and still earn a
healthy profit
margin?
Don’t let cost
drive prices
When target costs
cannot be met,
forgo the idea
because the blue
ocean will not be
profitable
Adoption
Sequence
108

109. Chapter 6:
Get the strategic sequence right
Sequence of Blue Ocean Strategy
109
What are the adoption
hurdles in actualizing the
business idea? Are you
addressing them upfront?
Can you attain your
cost target to profit at
your strategic price?
Is your price easily
accessible to the
mass of buyers?
Is there exceptional
buyer utility in your
business idea?
YES
YES
YES
Buyer Utility
Cost
Adoption
Price
NO_RETHINK
NO_RETHINK
NO_RETHINK
YES
NO_RETHINK
A
COMMERCIALLY
VIABLE BLUE
OCEAN

110. 110
Example: PHILIPS CD-I
Philips’ CD-I (All in one: video machine
+music system + game player + teaching tool)
But couldn’t provide consumers with the
understanding of the product and hence NO
COMPELLING REASON TO BUY IT  Sales
never took off

111. The Buyer Utility Map
111

112. 112
Chapter 6:
Get the strategic sequence right
The Six Stages of Buyer Experience Cycle

113. 113
Chapter 6:
Get the strategic sequence right
The Six Utility Levers
The way in which companies can unlock
exceptional utility for the buyers
Customer Productivity (the most
commonly used lever)
Simplicity
Convenience
Risk
Fun & Image

114. 114
Uncovering Blocks to Buyer Utility
This shows how a company can identify the most
compelling hot spots to unlock exceptional utility:

115. QUESTIONS TO ASK?
When testing for exceptional utility ask:
Where are the greatest blocks to utility across
the buyer experience cycle for your customers
and non customers?
Does your offering effectively eliminate these
blocks?
When a company’s offering passes this test, it
is ready to move to the next step
115

116. QUESTIONS TO ASK?
From Exceptional Utility to Strategic Pricing
To secure a strong revenue stream for your
offering, you have to set the right strategic
price.
Many companies may take the reverse course
and test the product in different situations
before deciding to low their pricing.
It is crucial to know how the company will set
its pricing strategy from the start.
116

117. 117
Get the strategic sequence right
From Exceptional Utility to Strategic Pricing
Two reasons for change:
Companies are discovering that volume generates
higher returns than it used to
For eg. In software industry, Producing the first
copy of the Windows XP operating system cost
Microsoft billions of dollars, whereas subsequent
copies involved no more than the nearly trivial
cost of a CD. This makes volume key.

118. 118
Get the strategic sequence right
From Exceptional Utility to Strategic Pricing
To a buyer, the value of a product or service may
be closely tied to the total number of people
using it.
For eg. online auction service managed by eBay.
People will not buy a product or service when it
is used by few others. Either you sell millions at
once, or you sell nothing at all.

119. 119
Get the strategic sequence right
From Exceptional Utility to Strategic Pricing
Excludability is a function both of the nature of
the good and of the legal system.
A good is excludable if the company can prevent
others from using it
Intel, for example, can exclude other
microprocessor chipmakers from using its
manufacturing facilities through property
ownership laws
Lack of excludability reinforces the risk of free
riding

120. PRICING
Companies have to start at day one
finding the right pricing strategy to
bring in the customers and retain them
over time
Word of mouth is a huge brand building
tool
120

121. PRICING
Price Corridor of the Mass
This a tool that has been created to help
managers find the right price for an irresistible
offer
This irresistible offer by the way does not always
have to be the lowest labeled price for that
particular line of product
The tool involves two distinct but interrelated
steps
121

122. 122
Get the strategic sequence right
Price Corridor of the Mass
To help managers find the right price for an
irresistible offer

123. STEP 1: IDENTIFY PRICE CORRIDOR
How do companies determine a
strategic price?
Answer: Understand the price
sensitivities of the people who will be
comparing your product to many other
products in other industries
123

124. STEP 1: IDENTIFY PRICE CORRIDOR
Companies must categorize products
that fall into two categories
Different form, same function
Different form and function, same
objective
124

125. STEP 1: IDENTIFY PRICE CORRIDOR
Different form, same function
Example: Ford’s Model T vs. the horse-
drawn carriage
Different form and function, same
objective
Example: Cirque du Soleil vs.
restaurant/bar
125

126. STEP 1: IDENTIFY PRICE CORRIDOR
Listing all these alternatives shows
managers which buyers can be
poached
Identify the price bandwidth that
captures the largest groups of target
buyers: the Price Corridor of the Mass
126

127. How high of a price can managers set
within the corridor? They must assess
Degree to which the product is protected
legally through patents or copyrights
Degree to which the company owns
some exclusive asset or core capability
127
Step 2: Specify a Price Level

128. Level of patent and asset protection
determines which price bound to
choose
Upper
Middle
Lower
128
Step 2: Specify a Price Level

129. Companies should pursue mid- to lower-
boundary pricing if:
Their blue ocean has high fixed costs and
marginal variable costs
Their attractiveness depends heavily on
network externalities
Their cost structure benefits from steep
economies of scale and scope
129
Step 2: Specify a Price Level

130. FROM STRATEGIC PRICING TO TARGET
COSTING
Target Costing addresses the profit side of the
business Model
To maximize profit potential a company
should start with Strategic Price, then deduct
desired profit margin from the price to arrive
at Target Cost
Price-minus costing, and not cost-plus
pricing, is essential if you are to arrive at a
cost structure that is both profitable and hard
for potential followers to match
130

131. FROM STRATEGIC PRICING TO TARGET
COSTING
important strategic plans companies use to
meet their Target Cost
Streamlining Operations and Introducing Cost
Innovations
Partnering
Changing Price Model of the Industry
131

132. PROFIT MODEL OF BLUE OCEAN
STRATEGY
132
The Strategic
Price
The Target
Profit
The Target Cost
Streamlining and
Cost Innovations
Partnering
Pricing
Innovation

133. BLUE OCEAN IDEA (BOI) INDEX
Philips
CD-I
Motorola
Iridium
DoCoMo
i-mode
Japan
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?
_ -/+ +
133

134. Chapter 7
Overcome Key
Organization Hurdles
134
Executing Blue Ocean Strategy

135. The Four Organizational Hurdles
to Strategy Execution
135
Cognitive Hurdle
An organization
wedded to the
status quo
Resource Hurdle
Limited resources
Motivational Hurdle
Unmotivated staff
Political Hurdle
Opposition from
powerful vested
interests

136. Builds on the rarely exploited corporate reality
that in every organization, there are people,
acts, and activities that exercise a
disproportionate influence on performance
136
Tipping Point Leadership

137. ORGANIZATIONAL HURDLES
137
Tipping Point
Leadership
Allows you to
quickly and
cost effectively
overcome the 4
hurdles to
executing blue
oceans

138. Mounting the
challenge is about
conserving
resources and
cutting time by
focusing on
identifying and then
leveraging the
factors of
disproportional
influence in an
organization.
138
Tipping Point Leadership

139. The hardest battle is simply to make people
aware of the need for a strategic shift and to
agree on its causes.
Tipping point leadership does not rely on
numbers.
It zooms in on the act of disproportionate
influence: making people see and experience
harsh reality first hand. “Seeing is believing.”
139
1. Break Through the Cognitive
Hurdle

140. Two ways:
140
1. Break Through the Cognitive
Hurdle
1. Make Employees Come Face-to-Face with the
Worst Operational Problems
2. Meet with Disgruntled Customers

141. 141
2. Jump the Resource Hurdle
Redistribute Resources to Your Hot Spots
(Activities that have low resource input but high
potential performance gains)
Redirect Resources from Your Cold Spots
(Activities that have high costs but low
performance impact)

142. 142
2. Jump the Resource Hurdle
Engage in Horse Trading (Trading excess
resources for another unit’s excess to fill
remaining resource gaps.

143. 143
2. Jump the Resource Hurdle

144. Zoom in on Kingpins
- Key Influencers in the organization
- Can create a ripple effect by touching and
motivating employees to embrace the new
strategy
144
3. Jump the Motivational Hurdle

145. Fishbowl management, where kingpins’ actions
and inaction are made transparent to others
-Creates an intense performance culture.
-Raises the stakes of inaction.
145
3. Jump the Motivational Hurdle

146. Atomize to Get the Organization to Change Itself
-Relates to the framing of the strategic challenge
-Employees need to know that it is attainable, or
the change will not likely succeed.
146
3. Jump the Motivational Hurdle

147. Secure a Consigliores on Your Top Management
Team
A politically adept but highly respected insider who
knows in advance all the land mines to be encountered by
a strategic change
Leverage Your Angels and Silence Your Devils
Angels- those who have the most to gain from the
strategic shift.
Devils- those who have the most to lose from a strategic
shift.
147
4. Knock Over the Political Hurdle

148. Chapter 8:
Build Execution into
Strategy
148

149. CHAPTER 8:
A company must equal everyone from
the top to the front lines. Everyone in
an organization must support and be
aligned with strategy. To build trust
and commitment and to inspire
voluntary cooperation build execution
into strategy from the start & reach to
fair process in making and executing
of strategy
149

150. THE POWER OF FAIR PROCESS
150
Fair process is the managerial expression of
the procedural justice theory
procedural
justice
psychology
of justice
study of
process
Why Does Fair Process Matter?

151. THE POWER OF FAIR PROCESS
Intellectual and Emotional Recognition
Theory:
When individuals feel recognized for their
intellectual worth, they are willing to share
their knowledge
By using fair process employees will be to
engage in voluntary cooperation
151

152. THE POWER OF FAIR PROCESS
If individuals are not treated as though
there knowledge is valued they may not
share their ideas and best thinking
Employees may also begin to reject
other’s intellect as well
152

153. ATTITUDES AND BEHAVIORS TOWARD
FAIR PROCESS
153
Fair Process
Engagement
Explanation
Expectation clarity
Trust and Commitment
“I feel my opinions count.”
Voluntary Cooperation
“I’ll go beyond the call of
duty.”
Exceed Expectations
Self-initiated
Strategy Formulation
Process
Attitudes
Behavior
Strategy Execution

154. 3 E PRINCIPLES OF FAIR PROCESS
Engagement
Involving individuals in
the strategic decisions
that affect them
• Ask for input
• Allow employees to
question the ideas or
assumptions of others
• Communicates
management’s respect
for individuals and their
ideas
• Creates better strategic
decisions from
management and greater
commitment from
everyone involved
Explanation
Everyone involved should
understand why the final
strategic decisions are
made
• People are confident that
managers have
considered all opinions
and made decisions
based on the overall
interest of the company
• Employees can trust
managers intentions
• Managers can receive
feedback from
employees allowing for
enhanced learning of the
decision
Expectation
Clarity
Once the strategy has
been set into action,
managers must clearly
communicate the new
rules and procedures
Employees should know
what standards they will
be judged on and what
penalties they will receive
for failure
Are the new goals, targets,
and responsibilities for our
employees clearly
understood?
154

155. THE TALE OF TWO PLANTS
Chester
Failed to Engage Employees
Consulting firm ordered not to disturb
employees
155

156. THE TALE OF TWO PLANTS
Chester
Failed to Explain
Employees were not explained why new system
was being implemented
Failed to clarify Expectations
Did not elaborate on how new system worked,
and what employees jobs were
156

157. THE TALE OF TWO PLANTS
High Park
Engaged Employees
Introduced consultants to employees, held
company meetings.
Explained why new process was being
implemented
Clearly stated employee Expectations in new
system
157

158. THE TALE OF TWO PLANTS
RESULTS:
Management at Chester violated the three E’s,
unlike High Park
Chester plant employees lose trust in
management and is met with resistance to the
new strategy
High Park strategy is implemented, Employees
gain trust in management and shift from being
the worst employees to the best
158

159. FAIR PROCESS AND BLUE OCEAN
STRATEGY
Intangible capital
Companies who have created blue oceans are
quick to praise their employees who show
commitment, trust and voluntary cooperation
Companies who have this intangible capital
stand apart in speed, quality and consistency of
their execution and to implement strategic
shifts at low cost
159

160. FAIR PROCESS AND BLUE OCEAN
STRATEGY
Obtaining Intangible Capital
What not to do?
What to do?
160

161. FAIR PROCESS AND BLUE OCEAN
STRATEGY
What not to do?
Money and Power?
This will simply fall short of inspiring human
behavior beyond self interest.
Don’t separate strategy formulation from
execution
This is a hallmark of questionable implementation
and mechanical flow through at best!
161

162. FAIR PROCESS AND BLUE OCEAN
STRATEGY
What to do?
Implement Fair process
Build execution into strategy making from the
start
People tend to be committed to support the
resulting strategy even when it is viewed as not
favorable or at odd with their unit
People realize that small self sacrifices are
essential in building a strong company
162

163. Chapter 9
Conclusion: The Sustainability
and Renewal of Blue Ocean
Strategy
163

164. “Creating blue oceans is not a static
achievement but a dynamic process.
Once a company creates a blue ocean
and its powerful performance
consequences are known, sooner or
later imitators appear on the horizon.
The question is, how easy or difficult is
your blue ocean strategy to imitate?”
Chapter 9
164

165. BARRIERS TO IMITATION
A value innovation does not make sense
based on conventional strategic logic
Brand image conflict can prevent
companies from attempting to imitate a
blue ocean strategy
Natural monopoly can block imitation if the
size of the market cannot support another
player
165

166. BARRIERS TO IMITATION
Copyrights, patents or other legal block
imitation
The high volume generated by a large
value innovation leads to rapid cost
advantages, placing potential imitators at
a sever disadvantage
166

167. BARRIERS TO IMITATION
Network externalities. The more customers
you have the more attractive you become
Because imitation often requires
companies to make substantial changes to
their existing business practices
A huge leap in value often earns brand
buzz and a loyal following in the
marketplace
167

168. WHEN TO VALUE-INNOVATE AGAIN
Monitor value curves on strategy canvas
and dominate the blue ocean as long as
possible
Hold on when there is still a huge profit
stream to be collected from your current
offerings
168

169. WHEN TO VALUE-INNOVATE AGAIN
Focus on lengthening, widening and
deepening your rent stream to operational
improvements and geographic expansion to
achieve maximum economies of scale and
market coverage
Reach out for another blue ocean when your
value curve begins to converge with those of
the competition
169

170. WHEN TO VALUE-INNOVATE AGAIN
A blue ocean strategy brings with it considerable
barriers to imitation. Some of these are
operational, and others are cognitive
When imitators persist, monitor value curves
and focus on lengthening, widening, and
deepening your share through operational and
geographical expansion until value-innovation
is your last resort
170

171. 17
1
Prepared By: Prof. Sameer Mathur, Ph.D.
Sameer Mathur
Indian Institute of Management,
Lucknow
Marketing Professor 2013 –
Marketing Professor 2009 – 2013
Ph.D. and M.S. (Marketing) 2003 – 2009