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Blue ocean strategy presentation

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  • 1. Ajay Mohan Goelajaymgoel@gmail.com
  • 2. A wake up Call!!!! Between 1975 and 1995, 60 percent of Fortune 500 companies were replaced on the list.  Markets are opening  Competitors are agile  Competitors can pick and choose where to compete In 10 years time will your market place still be populated by the same dominant industry players???? 2
  • 3. The Lessons we all need to learn Industries and companies continuously rise and fall. Therefore, there are no permanently great industries or companies Instead, there are strategic moves that propel companies and continuously create new industries. Example: Nokia  137 year old company, leading mobile manufacturer with USD 31 Billion in sales in 130 countries  Has practiced renewal for a lifetime, starting out making paper, then boots, rain coats, hunting rifles, consumer electronics and now mobile phones. 3
  • 4. Staying at the top is not about having a great newtechnology to deploy In strategy formation, innovation is often equated with technology requiring sizable development and investment.  In contrast, Value Inn0vation aims to substantially raise the value proposition towards customers (Hence “Innovation in Value”).  The question is: “How can we best identify and serve their overall needs and offer them unparalleled value?”  Example: IBM  Between 1991-1993, $16B in losses  In ‘93 first non-IT CEO switches co. focus from ‘technology driven’ to ‘customer solutions driven’, creating new “Global Services Group”  By 2001 the Global Services Group represents $35B of $86B in total sales. 4
  • 5. When should a company consider using value innovation Highly competitive industry Few differentiators Low entry barriers Downward margin pressures Limited opportunity for new customers Struggling to compete Leadership position stagnant Forced into acquisition model to sustain growth expectations. 5
  • 6. The Commerce Bank Experience – Blue Ocean Strategyin Financial ServicesThe Commerce Model Growth Retailers Not Bankers FANS Not Customers Unique Deposit Driven/Retail Focus Service Not Rate Drives Growth Growth is Essential to Success and Value 6
  • 7. How Commerce Bank changed the paradigm Key Elements of Product, Service and Delivery 7
  • 8. What did Commerce Bank do? Moving to a convenience retailer Assessing what’s really important to customers  Convenience (62%) Convenience (29%), Checking account (16%), Personal/Friendly/Nice, Treated well (9%), Good Service (8%)  Good Rates/Returns (3%) The Philosophy of Commerce Bank is ‘dare to be different’  Bankers Hours – Open 7 days  Need a pen  Paint your vans  Dogs rule!  Coins!Results are impressive: •Consistently winning consumer awards •Annual growth of 19% 8
  • 9. Comparing Conventional Thinking with Value Innovationapproaches Conventional Value InnovationIndustry Industry conditions are given Industry conditions can be shapedAssumptionStrategic Build competitive advantages to beat Create a quantum leap in buyer valueFocus the competition to dominate the marketCustomer Retain and expand the customer Go for the mass of buyers and base through further segmentation willingly let some existing customers and customisation. go. Think in terms of embracing key Think in terms of embracing customer value commonalities. customer differencesAssets & Think in terms of a company’s Think free from a company’s existingCapabilities existing assets and capabilities. assets and capabilities. Build on what it has. Ask, what if we start anew?Product/ Think in terms of products/ services Think in terms of buyer’s solutionService offered by the industry. Seek to even if that transcends the industry.offerings maximise the value of these Seek to solve buyer’s major offerings. bottlenecks/ chief compromises in using the products/services of the industry. 9
  • 10. What are the characteristics of Blue and Red Oceans  Market space is in existence today  Untapped Markets  Boundaries are defined  Products / Services not in existence  Competitive rules are known  Demand is yet to be created  Companies compete fiercely  Non-customers  Market space (Ocean) is crowded  Opportunity to earn high profits  Market share / profit share  No competition  Competition is cut –throat  Market space (ocean) ‘bloody’ 10
  • 11. Value Innovation encourages organisations to seekstrategies in ‘Blue’ rather than ‘Red’ oceansRED OCEAN STRATEGY BLUE OCEAN STRATEGYCompete in existing market space Create uncontested market spaceBeat the competition Make the competition irrelevantExploit existing demand Create and capture demandMake the value cost trade-off Break the value-cost trade offAlign the whole system of a firm’s Align the whole system of a firm’sactivities with its strategic choice of activities in pursuit of differentiationdifferentiation and low cost. 11
  • 12. Blue ocean strategy is all about customers and non-customers. Tier 1 ‘soon to be’ Tier 2 ‘refusing’ Tier 3 ‘unexplored Tier 1 Tier 2 Tier 3 12
  • 13. Cirque du Soliel – Revolutionising a dying industry109 9 Cirque du8 8 Soliel7 76 6 65 5432 Traditional circus 1 1 1 10 13
  • 14. Cirque du Soliel – Revolutionising a dying industry109 9 Cirque du8 8 Soliel7 76 6 6 REDUCED5 OR 54 ELIMINATED32 Traditional circus 1 1 1 10 14
  • 15. Cirque du Soliel – Revolutionising a dying industry109 9 Cirque du8 8 Soliel7 76 6 6 REDUCED5 OR 5 RAISED4 ELIMINATED & CREATED32 Traditional circus 1 1 1 10 15
  • 16. Cirque du Soliel – Revolutionising a dying industry109 Sales Increase 9 Cirque du X22 in 10 years8 8 Soliel7 76 6 6 REDUCED5 OR 5 RAISED4 ELIMINATED & CREATED32 Traditional circus 1 1 1 10 16
  • 17. Understanding where the value innovation took place at Cirque de Soleil •Opera Across •Theatre Industries •Rock Music •Ballet Across Across Time/ Strategic Trends Groups New Value Curve AcrossReduces Animal Emotional/ Across Focus on Adults Functional BuyersActs Appeal Across Complementary Offerings 17
  • 18. Eliminate-Reduce-Raise-Create Grid: Cirque du Soleil Eliminate Raise Star performers Unique venue Animal Shows Aisle concession sales Multiples show arenas Reduce Creates Fun and Humor Theme Thrill and danger Redefined environment Multiple productions Artistic music and dance 18
  • 19. Steps in Value Innovation Drawing the existing Value Curve Creating a new ‘Value Curve’ (‘to-be’) that fundamentally differentiates your offering In creating our ‘to-be’ value curves we seek to address four elements – eliminate, reduce, raise, create. This allows us to address the leap in value at the same time as reducing the cost structure PUSHING FOR A QUANTUN LEAP IN BUYER VALUE WHILE: PUSHING FOR A SHARP DROP IN THE INDUSTRY COST STRUCTURE 19
  • 20. Six Pathways Across Industries Across Time/ Trends Across Strategic Groups New Value Curve Across Emotional/Functional Across Buyers Appeal Across Complementary Offerings 20
  • 21. Six Pathways Across Industries Reduce Factors well below the industry standard Across Time/ Trends Across Strategic Groups Create Eliminate New Factors that the Factors that the industry has never industry has taken Value offered for granted Curve Across Emotional/Functional Reduce Across Buyers Appeal Factors well beyond the industry standard Across Complementary Offerings 21
  • 22. The Four steps of Value innovation1 VISUAL AWAKENING  Compare your “as is” strategy canvas with your ‘competitors’  See where your strategy needs to change2 VISUAL EXPLORATION  Go into the field to see how people use or not use your products  Discover adoption hurdles and advantages of alternative offerings3  Review both customers and non-customers VISUAL STRATEGY FAIR  Draw several “to be” strategy canvases based on field insights  Get feedback form customers, lost customers, competitors’4 customers and non-customers to build best “to be” strategy. VISUAL COMMUNICATION  Distribute old and new strategic profiles  Support only initiatives that meet new strategic needs 22
  • 23. Typical stages of a Value Innovation project Phase 1: Phase 2: Phase 3: Phase 4: Visual Awakening Visual Exploration Visual Strategy Fair Visual Commn. 1a. See the 2a. 3a. 4a. AwarenessObjectives Need for Broadening Determining & Change Perspectives “to be” strategy Internalisation Programmes of strategy & 1b. Start the 2b. Sourcing and initiatives Initiatives conversation for Feedback 3b. Teams “toDeliverables 1c. “As is” 4b. Effective 2c. Alternative be” Value Curves based commn. of “to be” Curves on current strategy strategy 3c. Proposed strategy canvas & canvas Programmes & blueprints initiatives initiatives 23
  • 24. Typical stages of a Value Innovation project 15/Dec 7/Feb Phase 1: Phase 2: Phase 3: Phase 4: Visual Awakening Visual Exploration Visual Strategy Fair Visual Commn. 1a. See the Activity Team led by DateObjectives Need for Kick off training Change for team 1b. Start the Create “as is” Value conversation curve Present “as is”Deliverables 1c. “As is” Value curve and Curves based finalise on current strategy blueprints 24
  • 25. Typical stages of a Value Innovation project 23/Dec 7/Feb 31/Apr Phase 1: Phase 2: Phase 3: Phase 4: Visual Awakening Visual Exploration Visual Strategy Fair Visual Commn. 2a. Activity Team led DateObjectives Broadening by Perspectives Study Customers, non- Customers, competitors 2b. Sourcing customers, placement clients, for Feedback Tech partners, BPs, Each team prepares six value curves eachDeliverables 2c. Alternative “to be” strategy canvas 25
  • 26. Typical stages of a Value Innovation project 1/5Dec 25/Jan 31/Apr 7/Jun Phase 1: Phase 2: Phase 3: Phase 4: Visual Awakening Visual Exploration Visual Strategy Fair Visual Commn. Activity Team led Date 3a.Objectives by Determining “to be” strategy Strategy Fair at 4 Zones Programmes Refinement of 6 value curves by and initiatives each team Strategy Fair at Delhi & Finalisation of “to be” value 3b. Teams “to curveDeliverables be” Value Curves Development of Proposed 3c. Proposed programmes & initiatives, Programmes & communication plan and action initiatives plan 26
  • 27. Typical stages of a Value Innovation project 1/Dec 7/Jan 28-Feb 9-Apr Phase 1: Phase 2: Phase 3: Phase 4: Visual Awakening Visual Exploration Visual Strategy Fair Visual Commn. 4a. Awareness Activity Resp: DateObjectives & Internalisation Implementation of action plan of strategy & & communication Initiatives Review implementationDeliverables 4b. Effective commn. of strategy canvas & initiatives 27

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