The blue ocean strategy

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The basic premise of the authors Kim and Mauborgne is that many companies that win in the marketplace do so in ways that make their competition irrelevant.

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The blue ocean strategy

  1. 1. The Blue OceanStrategy<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  2. 2. Premise<br />The basic premise of the authors Kim and Mauborane is that many companies that win in the marketplace do so in ways that make their competition irrelevant.<br />if managers focus only to competition are likely to don’t see blue oceans…<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  3. 3. Red Ocean<br />The Red Oceans represent the fiercely competitive arena where most companies compete. <br />Red Oceans are all the industries in existence today—the known market space In the red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known. Here companies try to outperform their rivals to grab a greater share of product or service demand. As the market space gets crowded, prospects for profits and growth are reduced.<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  4. 4. Blue Ocean<br />The Blue Oceans are open and not filled with competitors, uncontested market space!<br />Blue oceans, in contrast, denote all the industries not in existence today—the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. Blue ocean is an analogy to describe the wide of market space that is not yet explored.<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  5. 5. Red OceanVsBlue Ocean <br />Difference between two oceans:<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  6. 6. Value innovation<br />The corner-stone of Blue Ocean Strategy is “Value Innovation":<br />A blue ocean is created when a company achieves value innovation that creates value simultaneously for both the buyer and the company. <br />The innovation (in product, service, or delivery) must raise and create value for the market, while simultaneously reducing or eliminating features or services that are less valued by the current or future market. <br />Instead, they propose finding value that crosses conventional market segmentation and offering value and lower cost.<br />Cirque du Soleil - an example of creating a new market space, by blending opera and ballet with the circus format while eliminating star performer and animals<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  7. 7. Value innovation <br />Blue Ocean born from to a combination of differentiation and low cost might be necessary for firms to achieve a sustainable competitive advantage.<br />What factors can be eliminated that the industry has taken for granted?<br />What factors can be reduced well below the industry’s standard?<br />What factors can be raised well above the industry’s standard?<br />What factors can be created that the industry has never offered?<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  8. 8. Apple’s value innovations<br />So, what has Apple done in the last decade?<br />iPod: Apple changed the market standard with MP3s <br />(iTunes).<br />iPhone: With it they changed a mobile market. Apple was the first to develop applications for the iPhone.<br />iPad: The market was demanding a tablet device, but the competitor’s products weren’t marketable.<br />
  9. 9. Build a Blue Ocean<br />Value Curve<br />The horizontal axis captures the range of factors that the industry competes on and invests in, and the vertical axis captures the offering level that buyers receive across all these key competing factors.<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  10. 10. Build a Blue Ocean<br />StrategyCanvas<br />The strategy canvas serves two purposes:<br /><ul><li>Firstly, it captures the current state of play in the known market space. This allows you to understand where the competition is currently investing and the factors that the industry competes on.
  11. 11. Secondly, it propels you to action by reorienting your focus from</li></ul> competitors to alternatives and from customers to noncustomers<br /> of the industry.<br />The value curve is the basic component of the strategy canvas. It is a graphic depiction of a company's relative performance across its industry's factors of competition.<br />As you can see on the diagram above, what makes a good value curve is focus, divergence as well as a compelling tagline.<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  12. 12. Build a Blue Ocean<br />4 ActionsFramework(for create a new value curve)<br />To reconstruct buyer value elements in crafting a new value curve, we use the Four Actions Framework. As shown in the diagram, to break the trade-off between differentiation and low cost and to create a new value curve, there are four key questions to challenge an industry's strategic logic and business model.<br />The Eliminate-Reduce-Raise-Create Grid (ERRC) is complementary with the four actions framework.<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  13. 13. Build a Blue Ocean<br />Pioneer-Migrator-Settler Map (1)<br />A useful exercise for a corporate management team pursuing profitable growth is to plot the company's current and planned portfolios on the pioneer-migrator-settler (PMS) map.<br />If both the current portfolio and the planned offerings consist mainly of settlers, the company has a low growth trajectory, is largely confined to red oceans, and needs to push for value innovation. Although the company might be profitable today as its settlers are still making money, it may well have fallen into the trap of competitive benchmarking, imitation, and intense price competition. <br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  14. 14. Build a Blue Ocean<br />Pioneer-Migrator-Settler Map (2)<br />If current and planned offerings consist of a lot of migrators, reasonable growth can be expected. But the company is not exploiting its potential for growth, and risks being marginalized by a company that value-innovates. <br />In our experience the more an industry is populated by settlers, the greater the opportunity to value-innovate and create a blue ocean of new market space.<br />This exercise is especially valuable for managers who want to see beyond today's performance. Revenue, profitability, market share, and customer satisfaction are all measures of a company's current position.<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  15. 15. Build a Blue Ocean<br />Buyer Experience Cycle / Buyer Utility Map<br />The buyer utility map helps to get managers thinking from the right perspective. It outlines all the levers companies can pull to deliver utility to buyers as well as the different experiences buyers can have of a product or service. This lets managers identify the full range of utility propositions that a product or service can offer. By locating a new product on one of the 36 spaces of the buyer utility map, managers<br />can clearly see how the new idea creates a different utility proposition from existing products.<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  16. 16. Build a Blue Ocean<br />3 Tiers of Noncustomers<br />Typically, to grow their share of a market, companies strive to retain and expand existing customers. This often leads to finer segmentation and greater tailoring of offerings to better meet customer preferences.<br />To maximize the size of their blue oceans, companies need to take a reverse course. Instead of concentrating on customers, they need to look to noncustomers. And instead of focusing on customer differences, they need to build on powerful commonalities in what buyers value. That allows companies to reach beyond existing demand to unlock a new mass of customers that did not exist before. Although the universe<br />of noncustomers typically offers big blue ocean opportunities, few companies have keen insight into who noncustomers are and how to unlock them. <br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  17. 17. Build a Blue Ocean<br />Sequence of Blue Ocean Strategy<br />Companies need to build their Blue Ocean Strategy in the sequence of buyer utility, price, cost, and adoption.<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  18. 18. Build a Blue Ocean<br />Sequence of Blue Ocean Strategy<br />Companies need to build their Blue Ocean Strategy in the sequence of buyer utility, price, cost, and adoption.<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  19. 19. Build a Blue Ocean<br />Sequence of Blue Ocean Strategy<br />Companies need to build their Blue Ocean Strategy in the sequence of buyer utility, price, cost, and adoption.<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  20. 20. Build a Blue Ocean<br />Sequence of Blue Ocean Strategy<br />Companies need to build their Blue Ocean Strategy in the sequence of buyer utility, price, cost, and adoption.<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  21. 21. Build a Blue Ocean<br />Sequence of Blue Ocean Strategy<br />Companies need to build their Blue Ocean Strategy in the sequence of buyer utility, price, cost, and adoption.<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  22. 22. Build a Blue Ocean<br />Sequence of Blue Ocean Strategy<br />Companies need to build their Blue Ocean Strategy in the sequence of buyer utility, price, cost, and adoption.<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  23. 23. Build a Blue Ocean<br />4 Hurdles to Execution<br />The challenge of execution exists, of course, for any strategy. Companies, like individuals, often have a tough time translating thought into action whether in red or blue oceans. They face four hurdles:<br />A cognitive hurdle. waking employees up to the need for a strategic shift. So, why rock the boat?<br />Limited resources. The greater the shift in strategy, the greater it is assumed are the resources needed to execute it. <br />Motivation. How do you motivate key players to move fast and tenaciously to carry out a break from the status quo?<br />Politics. As one manager put it, “In our organization you get shot down before you stand up.”<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  24. 24. Build a Blue Ocean<br />4 Hurdles to Execution<br />The challenge of execution exists, of course, for any strategy. Companies, like individuals, often have a tough time translating thought into action whether in red or blue oceans. They face four hurdles:<br />A cognitive hurdle. waking employees up to the need for a strategic shift. So, why rock the boat?<br />Limited resources. The greater the shift in strategy, the greater it is assumed are the resources needed to execute it. <br />Motivation. How do you motivate key players to move fast and tenaciously to carry out a break from the status quo?<br />Politics. As one manager put it, “In our organization you get shot down before you stand up.”<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  25. 25. Build a Blue Ocean<br />4 Hurdles to Execution<br />The challenge of execution exists, of course, for any strategy. Companies, like individuals, often have a tough time translating thought into action whether in red or blue oceans. They face four hurdles:<br />A cognitive hurdle. waking employees up to the need for a strategic shift. So, why rock the boat?<br />Limited resources. The greater the shift in strategy, the greater it is assumed are the resources needed to execute it. <br />Motivation. How do you motivate key players to move fast and tenaciously to carry out a break from the status quo?<br />Politics. As one manager put it, “In our organization you get shot down before you stand up.”<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  26. 26. Build a Blue Ocean<br />4 Hurdles to Execution<br />The challenge of execution exists, of course, for any strategy. Companies, like individuals, often have a tough time translating thought into action whether in red or blue oceans. They face four hurdles:<br />A cognitive hurdle. waking employees up to the need for a strategic shift. So, why rock the boat?<br />Limited resources. The greater the shift in strategy, the greater it is assumed are the resources needed to execute it. <br />Motivation. How do you motivate key players to move fast and tenaciously to carry out a break from the status quo?<br />Politics. As one manager put it, “In our organization you get shot down before you stand up.”<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  27. 27. Build a Blue Ocean<br />4 Hurdles to Execution<br />The challenge of execution exists, of course, for any strategy. Companies, like individuals, often have a tough time translating thought into action whether in red or blue oceans. They face four hurdles:<br />A cognitive hurdle. waking employees up to the need for a strategic shift. So, why rock the boat?<br />Limited resources. The greater the shift in strategy, the greater it is assumed are the resources needed to execute it. <br />Motivation. How do you motivate key players to move fast and tenaciously to carry out a break from the status quo?<br />Politics. As one manager put it, “In our organization you get shot down before you stand up.”<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  28. 28. Build a Blue Ocean<br />Three E Principles of Fair Process<br />Fair process builds execution into strategy by creating people's buy-in up front. <br />When fair process is exercised in the strategy making process, people trust that a level playing field exists. <br />This inspires them to cooperate voluntarily in executing the resulting strategic decisions. <br />There are three mutually reinforcing elements that define fair process: engagement, explanation, and clarity of expectation. <br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  29. 29. Build a Blue Ocean<br />Conventional Wisdom vs Tipping Point Leadership<br />The conventional theory of organizational change rests on transforming the mass. So change efforts are focused on moving the mass, requiring steep <br />resources and long time frames — luxuries few executives can afford. tipping point leadershiptakes a reverse course. <br />To change the mass it focuses on transforming the extremes: the people, acts, and activities that exercise a disproportionate influence on performance. <br />By transforming the extremes, tipping point leaders are able to change the core fast and at low cost to execute their new strategy.<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  30. 30. Build a Blue Ocean<br />The sharks (competitors) could enter in your Blue Ocean………<br />………and the Blue Ocean become a Red Ocean. <br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  31. 31. Build a Blue Ocean<br />The sharks (competitors) could enter in your Blue Ocean………<br />………and the Blue Ocean become a Red Ocean. <br />You must always thinking to create a new Blue Ocean!<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  32. 32. How Blue is your Ocean?<br /><ul><li> Is your company facing heightened competition from domestic and international rivals?
  33. 33. Do your sales representatives increasingly argue they need to offer deeper and deeper </li></ul> price discounts to make sales? <br /><ul><li> Are you finding you need to advertise more to get noticed in the marketplace, yet the </li></ul> impact of each advertising money spent is falling?<br /><ul><li> Is your company focused more on cost cutting, quality control, and brand management </li></ul> at the expense of growth, innovation, and brand creation?<br /><ul><li> Do you blame your slow growth on your market?
  34. 34. Do you see outsourcing to low cost companies or countries as a principal prerequisite to </li></ul> regain competitiveness?<br /><ul><li> Are mergers and acquisitions the principal means your company sees to grow?
  35. 35. Is it easier to get funding to match a strategic move made by your competitor than it is </li></ul> to get internal funding to support a strategic move that allows you to break away from <br /> the competition?<br /><ul><li> Is commoditization of offerings a frequent worry of your company?
  36. 36. List your key competitive factors; now list your competition’s. Are they largely the </li></ul> same?<br />If you answered yes to a majority of these questions, then your company is stuck in the red ocean.<br />Source: Blue Ocean Strategy (W. C. Kim & R. Mauborgne; 2010)<br />
  37. 37. THANKS<br />Made By Francesco Guerrieri<br />

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