Blue Ocean Strategy Concepts
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Blue Ocean Strategy Concepts






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Blue Ocean Strategy Concepts Blue Ocean Strategy Concepts Presentation Transcript

  • Transformational - Value Innovation Strategy
    • Industry Boundaries defined/accepted
      • Competitive rules of the game known
    • Compete in existing Market Space
    • Divide up existing Demand
      • Zero sum game
      • Products become commodities
      • Price Wars
    • Benchmark/Emulate Competition
    • Outperform the Competition
      • Focus on competitors
      • Build defensible position
      • Incremental improvements
      • Strategy is either Differentiation,
      • Low Cost or Niche
    • Value and Cost seen as Tradeoffs
      • Increases in Value increase Cost
      • Innovation linked to new technology,
      • processes
    • Industry Boundaries expanded
      • Reset rules of the game
    • Reconstruct/Create new Market Space
    • Grow Demand
      • Stimulate new demand
      • Products create new value
      • Focus on Value vs. Price
    • Breakaway from Competition
    • Make Competition irrelevant
      • Focus on creating leap in Customer and Company value
      • Value Innovation
      • Large scale improvements
      • Strategy is Differentiation and Low Cost
    • Simultaneously pursue Improvements in Value and Cost to break Value-Cost tradeoff
      • Increases in Value = increase in Cost
      • Innovation linked to what Buyer’s value
        • Simplify the offering, technology
        • Existing technology can be utilized
    Create Uncontested Market Space that makes Competition Irrelevant Traditional Transformational
  • Value Innovation Strategy
    • Four key questions to challenge industry’s strategic logic and business model
      • Which of the industry factors that the industry takes for granted should be eliminated ?
      • Which factors should be reduced well below the industry’s standard?
      • Which factors should be raised well above the industry’s standard?
      • Which factors should be created that the industry has never offered?
    • Three key elements of strategy
      • Focus – emphasis on a few compelling factors valued by the Customer
      • Divergence – unique value and strategy that differentiates from industry profile
      • Compelling tag line – communicates clear message of what value the company offers
    • Guiding Principles in Strategy Formulation
      • Reconstruct market boundaries - create uncontested Market Space across diverse industry domains
      • Go beyond incremental improvement to value innovation
      • Maximize size of opportunity - aggregate demand vs. Market Segmentation through building on commonality across non-customers
      • Build a viable business model - allow you to profit from the new space you created
        • Quality of Buyer Experience, Unlocking Exceptional Utility, Strategic Pricing, Target Costing
    • Examples
      • Auto: Ford Model T, Chrysler Minivan, Japanese Fuel-efficient/Low-Cost Car Invasion
      • Aerospace : Southwest Airlines, NetJets, F-35
      • Computers : IBM 360, Compaq PC Server, Apple/IBM Home Computer, Dell business model
      • Retail/Entertainment : Starbucks, Cirque du Soleil, Yellow Tail Wine
  • Reconstruct Market Boundaries
  • Strategy Visualization
  • Strategy Canvas for Net Jets Low price of Commercial Airline Travel with Convenience and Speed of a Private Jet Factors of Competition Relative Position
  • Portfolio Management
    • Revenue, Profitability, Market Share, Customer Satisfaction – measures of company’s
    • current performance
      • Historical, not a predictor of the future as changes in environment are too rapid
    • Value and Innovation utilized as important parameters
      • Value Creation - extent Customers are willing to pay for innovative ideas
        • W/O Innovation, companies are stuck in trap of competitive, incremental improvements
      • Three categories:
        • Pioneers – Value curve diverges from competitors, Innovative Value, Highest Growth
        • Migrators – Marginally better, incremental not innovative value, Reasonable Growth
        • Settlers – “me-too” business, stuck in the competition, Low Growth
    A A B B C C D D E E Focus to be shifted toward Pioneers as path to Profitable Growth Balance needed Between Pioneers (cash users) and Settlers (generators) PMS Map
  • Reach Beyond Existing Demand
    • Key component of achieving value innovation
    • Challenges conventional strategy of
      • Focusing on Existing Customers
      • Drive for finer Market Segmentation to accommodate Buyer differences
    • Work to maximize size of opportunity
      • Instead of concentrating solely on Customers – look at Noncustomers
      • Instead of focusing on Customer differences – build upon Commonalities in what Buyers value
      • Instead of finer segmentation – think Desegmentation
    • Three categories of Buyers :
      • !st Tier : who minimally purchase industry’s offering – out of necessity, rather not
      • 2 nd Tier : who refuse to use your industry’s offerings – have seen it, don’t want it
      • 3 rd Tier : who have never thought of your industry’s offerings
    Your Market 1 st Tier 2 nd Tier 3 rd Tier Examples: Tier 1 – Calloway Golf Clubs Tier 2 – JC Decaux Outdoor Advertising Tier 3 – JSF Program
  • Business Model
    • Offer to unlock exceptional utility – compelling reason to buy
      • Utility levers to pull – Productivity, Simplicity, Convenience, Risk, Fun/Image, Environmental Friendliness
      • Across Stages of buyer Experience – Purchase, Delivery, Use, Supplements, Maintenance, Disposal
      • Exceptional utility and value achieved by removing greatest blocks to utility across entire buyer experience for customers and noncustomers
    • Strategic pricing to attract mass of target buyers – create leap in buyer value
      • Consider products of same form; different form, but same function; different form and function, same objective
      • Pricing level dependent upon degree of legal resource protection, ability to imitate
      • Considerations: development cost amortization, economies of scale
    • Target costing – Price minus costing (strategic price - desired margin = target cost)
      • Requires strategic profile that has divergence and strips out cost
      • Tactics: Streamline Operations (Ford, Swatch), Partnering (SAP), Changing pricing model of industry (NetJets)
  • Implementation of Blue Ocean Strategy
    • Pursue combination of Traditional and Transformational ( Blue Ocean ) strategies
    • Establish Value Innovation Program concept
      • Discussion with, potential utilization of Blue Ocean authors
      • Visit a couple of the firms who have implemented strategy – Samsung, etc.
      • Institutionalize use of Strategy Canvas and PMS Maps in Strategic Planning
        • Establish common language, corporate culture that drives business from “ red ” to “ blue ” oceans
      • Pursue set of strategic projects and establish Core Cross-Functional Teams
        • Setup project rooms – discuss strategic projects, develop strategy canvases, assist
        • in making product/service decisions
      • Establish 4-Step Visualization process
      • Incorporate new business model – Utility, Strategic Pricing, Target Costing
      • Consider funding mechanism outside normal business operation – higher risk projects
    • Adoption hurdles addressed upfront – cognitive need for strategic shift
      • Desire to preserve status quo; limited resources; motivating key players to change;
      • politics - internal & external resistance to change
      • Strategies:
        • See and Experience operational issues, disgruntled customers
        • Free up low return resources and redirect to high-impact areas
        • Get key influencers involved in implementing change in manageable bites
        • Identify land mines and resistance to change, leverage supporters
  • Implementation of Advanced Concepts Strategy
    • R&D Success requires Collaborative & Cross-Functional approach to max ROI
      • Product/Service concepts and potential evolution – Product/Service Roadmaps
      • Definition of needed competencies, technologies – potential sources, Technology Roadmaps
      • Launch Customers – develop relationships w/Key Customers, Noncustomers
      • Collaboration – Customer needs (Marketing, R&D), Partners for Technology, Market Access, Supply Chain
    • Skunkworks Concept of Operation – outside mainstream of business
    • Core Team – Chief Engineer, Marketing – in the market, comfortable with Customers and technology
      • New Products & Technology different breed – inquisitive, open-minded, solutions vs. product orientation
    • Tools – Market & Customer Research, Focus Groups, Advanced Product concepts
    • Budget and Resources – who owns the Gold?
    • Integration with Business Units – Ideation  Commercialization
      • Selection, Prioritization with Business Units, Pilot on into the Market
      • Maximize size of opportunity while minimizing risk
    Ideation Project Selection Product Development Commercialization Basic Research – Conception, Definition of new ideas - # of new ideas per year Apple, Google Keen understanding Of Customers – End-User Input & Observation Black & Decker, ITW Speed & Efficiency Of Process – Joint Technology Dev. Consortiums Toyota, CAT Doing the Right R&D Doing the R&D Right Bringing to Market, Adaptation - % of Revenues from Prdts into last 5 yrs Sandisk, Symantec
  • Implementation of Advanced Concepts Strategy
    • “ Product/Technology Pipeline ” is a staged, concept to implementation process flow that provide for exploration of concepts through off-line development to program implementation and reuse.
      • Phased approach for a staged pipeline, gated design process
      • Funding increases as concept mature to off-line development
    • Need to define Pipeline phase-gate criteria and processes, establish finding mechanism
    Concepts Technology Maturity Concept Exploration Concept Validation Off-Line Development Ties to technology planning, technology supply chain and customers Emphasis on Blue Ocean strategies CONCEPTS