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 wider, deeper potential of market space that is not yet explored..
Value Innovation – Creates the Blue Ocean Eliminate Reduce Create Raise VI Value Innovation
Reconstruct Market Boundaries From Competing Within Buyer Group (Purchaser, User, or Influencer) Strategic Group (Focused on Competition) Scope (Maximise Products and Services) Orientation (Improve Price Performance Functional-Emotional orientation) Industry (Being the Best - Rivalry) Time (adapting to external trends as they occur) To Creating Across Blue Ocean Creation Path 1 : Looks across alternative industries Six Paths Framework Path 2 : Looks across strategic groups within industry Path 3 : Redefines the industry buyer group Path 4 : Looks across complementary product and service offerings Path 5 : Rethinks the functional –emotional orientation of its industry Path 6 : Participates in shaping external trends over time
Four Actions Framework – Creating Value Innovation Eliminate Which of the factors that the industry takes for granted should be eliminated? Reduce Which factors should be reduced well below the industry standard? Raise Which factors should be raised well above the industry standard? Create Which factors should be created that the industry has never offered? A new Value Curve
Visualisation: Strategy Canvas – Value Curve High Low Industry Value Curve Blue Ocean Strategy Move Competing Factors Offering Level
Visualisation Tool – Pioneer-Migrator-Settler (PMS) Map Pioneers are Businesses that offer unprecedented value. Blue Ocean Strategist Migrators are Businesses that offer improved value, but not innovative value. Blue Ocean Strategist Settlers are Businesses that conform to their industries. Stuck in Red Ocean Pioneers Migrators Settlers As-Is To-be
Reach Beyond Existing Demand 1 st Tier: “Soon-to-be” noncustomers who are on the edge of your market waiting to jump ship 2 nd Tier: “Refusing” noncustomers who consciously choose against your market 3 rd Tier: “Unexplored” noncustomers who are in markets distant from yours 3 rd Tier 2 nd Tier 1 st Tier Your Market
Sequence of Blue Ocean Strategy BUYER UTILITY : Is there exceptional buyer utility in your business idea? PRICE : Is your Price easily accessible to mass buyers? COST : Can you attain your cost target to profit at your strategic Price? ADOPTION : What are the adoption hurdles in actualising your business idea? Are you addressing them up front? A Commercially Viable Blue Ocean Idea NO – Re-Think YES NO – Re-Think NO – Re-Think NO – Re-Think YES YES YES
From Exceptional Utility to Strategic Pricing The Price Corridor of the Mass Size of the circle is proportional to number of buyers that product/service attracts Upper –level pricing Mid–level pricing Lower–level pricing Price Corridor of the Mass Step 1: Identify the price corridor of the mass Step 2: Specify a price level within the price corridor Three alternative products/service Types: Same Form Different form, same function Different form and function, same objective High degree of legal and resource protection. Difficult to imitate Some degree of legal and resource protection Low degree of legal and resource protection. Easy to imitate
From Strategic Pricing to Target Costing The Profit Model of Blue Ocean Strategy The Strategic Price The Target Cost Streamlining and Cost Innovations Partnering Pricing Innovation The Target Profit
Blue Ocean Idea Index Organisation Product or Service Utility Is there exceptional utility? Are there compelling reasons to buy your offering? + Price Is your price easily accessible to the mass buyers? - Cost Does your cost structure meet the target cost? +/- Adoption Have you addressed adoption hurdles up front? +
Executing Blue Ocean Strategy The Four Organisational Hurdles to Strategy Execution Meet with the Customers. Get involved Redirect Resources from your Hot Spots and Cold Spots. Engage in Horse Trading Zoom in on King Pins. Place King Pins in a Fish Bowl. Atomize to get the organisation to change itself Secure a consigliere on your top management team. Leverage your Angels and Silence your Devils COGNITIVE HURDLE An organisation wedded to the status quo MOTIVATIONAL HURDLE An organisation wedded to the status quo RESOURCE HURDLE An organisation wedded to the status quo POLITICAL HURDLE An organisation wedded to the status quo
Build Execution into Strategy The Power of Fair Process Strategy Formulation Process Attitudes Behaviour Strategy Execution How Fair Process Affects People’s Attitudes and Behaviour
Trust and Commitment
“ I feel my opinions count”
“ I’ll go beyond the call of duty”
The Sustainability and Renewal of Blue Ocean Strategy
Imitation Barriers to Blue Ocean Strategy
Value Innovation does not sense to a company’s conventional logic
Blue Ocean Strategy may conflict with other companies' brand image.
Natural Monopoly: The market often cannot often support a second player
Patents or legal permits block imitation
High volume leads to rapid cost advantage for the value innovator, discouraging followers from entering the market.
Network externalities discourage imitation.
Imitation often requires significant political, operational, and cultural changes.
Companies that value-innovative earn brand buzz and a loyal customer following that tends to shun imitators