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Workshops on Change using a Blue Ocean Strategy Framework

Workshops on Change using a Blue Ocean Strategy Framework

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  • 1. Change Matters Andrea J. Simon, Ph.D. Shared Slides 2008 Confidential
  • 2. Story in Brief
    • Change Matters—How do you change?
    • In particular, how can you find a really new “something” to open up a new market for you.
  • 3. Incremental Innovation
    • What you do to existing products and services that:
      • Improve functionality
      • Reduce cost
      • Even change appearance just for fashion’s sake
    • Constantly changing and improving
    60 innovations in 60 years
  • 4. Business Model Innovation
    • Developed significant competitive advantage
    • Deliver products and services in innovative ways
    • That created superior experiences for their customers.
  • 5. Breakthrough Innovation
    • Significant or radical departures from whatever’s already available in the market—discontinuous innovations.
        • They disrupt the marketplace.
        • Disrupt the organizations that come up with them.
    “ The 2007 Chrysler Town & Country puts more than twenty years of minivan leadership and innovation on the road”
  • 6. New Venture
    • Changes your Scope of Operations
      • Seeks to enhance the prospects by enlarging a company’s scope of operations into markets that are so different from its current markets that they must be addressed as entirely new entities.
      • Spin offs
      • Subsidiaries
      • Acquisitions opening new markets
    • Often, the future of the company is outside its current competencies.
  • 7. GE
    • GE was an industrial manufacturing company.
    • Transformed itself into a financial services giant where more than 50% of its revenues and most of its profits come from financial services.
      • “ We Bring Good Things to Life” has now become “Imagination at Work.”
  • 8. These are close to “Blue Oceans”
    • Renovation and Innovation within the same market space.
    • Benchmarking themselves against the competition.
    • Not alternatives, except that mini-van. Tend to be options within same framework.
  • 9. Blue Oceans and Red Oceans
    • What’s happening to make Blue Ocean Strategy such a hot topic, the hottest book in China?
    • How can you see, feel and think differently about users and non-users of your services?
  • 10. Innovation and Blue Ocean Strategy
    • Ren é e Mauborgne and W. Chan Kim
      • Created a “Blue Ocean Strategy”
    • Let’s see what they saw that successful companies were doing to:
      • Create new Market Space
      • Combine Value + Innovation
      • With Lower Cost structures
  • 11. Different ways to Renovate or Innovate
    • Seeing things in new ways is complex.
    • Innovation in Red Oceans come in different flavors:
      • Incremental Innovation
      • Business Model Innovation
      • Breakthrough or Product Innovation
      • New Venture Innovation
  • 12. Why Seek a Blue Ocean ?
    • Accelerated technological advances
    • Trade barriers are being dismantled
    • Unprecedented array of products
    • Supply is on the rise
    • Trend toward globalization
    • Global competition intensifies
  • 13. Leading to…
    • Accelerated Commoditization
    • Niche markets and havens for monopolies are disappearing
    • No clear evidence of increase in demand—
      • Even point to declining populations in developed markets
      • Population trends are important here
  • 14. See it in lots of places
    • Increasing price wars
    • Shrinking profit margins
    • Brands generally becoming similar, or
    • Overwhelming in their differentiation
    • Differentiating is becoming more difficult
    • People increasingly selecting based on price
  • 15. What is a Blue Ocean?
    • Blue Oceans are creating and pushing into new market space, creating solutions to needs that were not solved that way before.
  • 16. How did they create the theory “ Blue Ocean Strategy ?”
    • Studied 150 companies
    • From 1880-2000
    • >50 industries
    • Key questions:
      • How can a company break out of the Red Ocean of bloody competition?
      • How can it see, feel, think differently?
      • How can it sustain high performance?
  • 17. Not Just another Good Company
    • Too many companies that were thriving ended up dying
      • Atari’s, Data General, Cheesebrough-Pond’s, Wang
      • “ In Search of Excellence;” “Managing on the Edge”
      • 2/3 of the greats had fallen within 5 years of publication of Tom Peter’s best seller.
      • Even “Built to Last”; “Creative Destruction”
  • 18. Blue Ocean Strategy argues that…
    • There is no consistently excellent company … Likewise, there is no perpetually excellent industry.
    • In fact—
      • Neither industry nor organizational characteristics explain the distinction between Red Ocean and Blue Ocean success stories.
  • 19. Blue Ocean is all about you and your Strategy!
    • Success Stories abound in:
      • Small and large companies
      • Young and old managers
      • Attractive and unattractive industries
      • Private and Public Companies
    • Consistent and common pattern among success stories was all about the Strategic Moves people made to solve problems differently.
    • They saw solutions in different ways. And then made them happen.
  • 20. All about Strategy
    • The most appropriate unit of analysis for explaining the creation of blue oceans is the strategic move –
      • the set of managerial actions and decisions involved in making a major market-creating business offering.
      • How they see, feel and think about a customer and a non-customer is different.
  • 21. Leading to…
    • Value + Innovation
      • “ A new way of thinking about and executing strategy that results in the creation of a blue ocean and a break from the competition.”
      • Make the competition irrelevant
    • Aligned with “utility + price + cost position”
    • Change the “Value-Cost” Trade-off
    • People-focused
  • 22. Like Who?
  • 23. Blue Ocean Case Studies
    • What did these folks see and do that differentiated them, creating entirely new market space solutions? Same problems, new solutions.
      • Andre Rieu (video)
      • (yellow-tail) wine
      • Cirque du Soleil
      • Curves
  • 24. Andre Rieu
  • 25. What did he see, feel, think and do?
    • Let’s take a look at his version of classical music
      • The music
      • The costume
      • The setting
      • The experience
      • The feels
  • 26. What did these folks see?
    • (yellow-tail) wine
  • 27. Yellow tail’s Blue Ocean
    • Casella Wines started out trying to compete in the luxury, premium wine industry.
    • The new general manager, John Soutter, quickly launched new wines under the Carramar Estate label.
    • Undifferentiated, similar to any other Australian wine, the new products did not pass some of the most basic marketing tests.
    • Consumers gave the new wines a cold shoulder and it flopped painfully.
  • 28. Interesting industry to tackle
    • About 1,500 wine brands in US
    • All the most aggressive wine-producing countries are well represented
    • Ninety-six percent of those wine brands sold less than 100,000 cases in 2002, according to Impact Databank.
    • Only 23 wine brands sold at least 2 million cases each, accounting for 40 percent of a growing market of 245 million cases.
  • 29. What did it do?
    • (yellow tail) ignored the industry established keys to the promotion of wine as a unique beverage for the informed wine drinker, worthy of special occasions.
  • 30. Focus on the Non-User
    • Most Important:
      • Turned non-drinkers into frequent enjoyers.
      • How?
      • How do you focus on the non-user to find a new market space?
  • 31. See, Feel and Think Differently
    • “… convert this huge latent demand into real demand in the form of thriving new customers, companies need to deepen their understanding of the universe of noncustomers.” ( Chan and Mauborgne, Blue Ocean Strategy, page 103)
  • 32. But how?
    • Avoid segmenting current customers into smaller niches
    • Avoid focusing on current customers
    • Start to do a couple of things that are easy:
      • Spend a “Day in the Life of a Non-Customer”
      • Take a thought walk among them and see, feel and think about what they are doing and not doing
      • Don’t ask them what they want—try to see how they are solving problems that you can do better
      • Free your mind from its own limits by focusing on non-users and trying to think about why they don’t use your services or solutions.
  • 33. Let’s pretend
    • What if you were the folks at (yellow tail) wine?
    • You have a lot of good tasting wine to sell
    • Want to sell it to folks who don’t drink wine
    • What is the thought process to put a strategy together to go after the non-drinker of wine?
  • 34. Wine Red Ocean Strategy High Low Vineyard Prestige and Legacy Use enological terminology and distinctions in wine communication Price Above-the-line marketing Aging Quality Wine Complexity Budget Wines Wine Range Premium Wines How to make fun and nontraditional wine that’s easy to drink for everyone—particularly non-wine drinkers?
  • 35. Kim & Mauborgne 2005 Which factors should be reduced well below the industry’s standards Reduce A New Value Curve Raise Which factors should be raised well above the industry’s standard? Eliminate Create Which of the factors that the industry takes for granted should be eliminated ? Which factors should be created that the industry has never offered? What happens when you think you have something?
  • 36. For (yellow tail)… Eliminate Raise Enological terminology and distinctions Aging qualities Above-the-line marketing Price versus budget wines Retail store involvement Reduce Create Wine complexity Wine range Vineyard prestige Easy drinking Ease of selection Fun and adventure
  • 37. Strategy Canvas (yellow tail) wines
  • 38. Results
    • John Soutter expected to sell 25,000 cases in 2001, the first year Yellow Tail would hit the market.
    • Cautious but lucky--the wine sold 9 times as much!
    • With its bold branding, a good product and a very affordable price, the bottles with the fancy kangaroo leapt off the shelf.
  • 39. Lucky or Smart?
    • Production could not follow either. Not only was the equipment insufficient but additional quantities of wine had to be bought on the bulk market, further cutting into Casella's thin margins, estimated at 75 cents per bottle.
    • Nonetheless, Casella Wines sold 200,000 cases of Yellow Tail wines in 2001, and 2.2 million the following year.
    • They invested in a $2.5 million bottling line to reach their goal of 4 million cases for 2003.
  • 40. Execution helps
    • From a project management perspective, the launch was nicely planned and helped build enthusiasm in the take-off phase.
    • Indeed, retailers received the brightly colored branded displays on time to promote the new label and support a successful introduction at the point of sale.
  • 41. Cirque du Soleil
    • How about a non-circus circus?
  • 42. How about Cirque du Soleil
    • Strategy Canvases and Cirque du Soleil
      • Their story is a bit different
      • Street Jugglers in Canada
      • Began to see, feel and think differently about the circus and about traditional theater.
      • How did their vision look compared with the other options available for entertainment?
    • Not a Circus
    • Not the Theater
  • 43.                                                                                                                                                                                                                                                                                                                                                                 ©2006 Feld Entertainment, Inc.                                                                                                            Privacy Policy
  • 44. Strategy of Cirque du Soleil Price Star Performers Multiple show arenas Animal Shows Artistic music and dance Aisle concessions Fun & humor Multiple productions Refined watching environment Theme Unique venue Thrills & danger Low High Cirque du Soleil Value Curve Ringling Bros. and Barnum & Bailey Value Curve Smaller Regional Circuses
  • 45. What about Curves?
    • Saw an audience in need of a solution
    • Women who did not work out at home nor at a gym
      • The first was too cumbersome, no discipline, no place
      • The second was too Manly, to isolating and no fun
    • A new solution -- Curves
  • 46. Curves Curves is the largest fitness franchise in the world with 10,000 locations worldwide. Curves Clubs can be found in over 42 countries, including the United States, Canada, Europe, South America, The Caribbean, Mexico, Australia, New Zealand, South Africa, Japan, and we're still growing. We are the first fitness and weight loss facility dedicated to providing affordable, one-stop exercise and nutritional information for women. Only one place can give you the strength of over 4 million women...
  • 47. What Blue Ocean did Curves find?
    • Over 4 million members since 1995
    • Over ten thousand locations world-wide
    • Most important:
      • To an audience thought to be oversaturated with customers who wouldn’t want it.
      • Really nonusers.
  • 48. Strategy Canvas of Curves Curves Home Exercise Traditional Health Clubs low high Price Amenities Workout Equipment Workout Time Availability of Instructors Environment encourages discipline and motivation Non-threatening Same-Sex environment Convenience Womanly Environment
  • 49. What to do?
    • Fundamentally shift strategy canvas of an industry you must begin to reorient your strategic focus:
      • To Value Innovation + Cost Reduction
      • And from Customers to Non-users
      • From Competitors to Alternatives
  • 50. Let’s try to build your Strategic Canvas today and that of your Market Space Down here go each of those attributes/traits/values that matter to that audience you have using your services or products today
  • 51. One of my client’s stories
  • 52. Strategy Canvas of Their Competition
  • 53. What was not on there
  • 54. How to Visualize a Blue Ocean
  • 55. Six Paths to a Blue Ocean Kim & Mauborgne 2005 From Competing Within To Creating Across Find a new Blue Ocean if you look across … Industry Strategic group Buyer group Scope of product or service offering Functional-emotional orientation of an industry Time
  • 56. Examples to peek your minds
    • Look across industries
      • NetJets, fractional ownership
      • Not your own jet/not a commercial jet
    Kim & Mauborgne 2005
  • 57. Reconstruct Market Boundaries 2. Look across strategic groups within industries
  • 58. Reconstruct Market Boundaries
    • 3. Look across the chain of buyers
    • Users
    • Purchasers
    • Influencers
  • 59. Reconstruct Market Boundaries 4. Look across complementary product and service offerings
  • 60. Reconstruct Market Boundaries
    • Look across functional or emotional appeal to
    • buyers
    This may be what you've been looking for all your life. The largest Japan chain barber shop "QB House" opened three new shops in Hong Kong. QB (short for quick barber) offers 10-min just-cut service for HK$50.
  • 61. Reconstruct Market Boundaries 6. Look across time—Participate in shaping trends over time
  • 62. Shifting the Focus of Strategy Conventional Boundaries of Competition Head-to-Head Competition Creating New Market Space Industry Focus on rivals within industry Looks across substitute industries Strategic Group Focus on competitive position within strategic group Looks across strategic groups within industry Buyer Group Focuses on better serving the buyer group Redefines the buyer group of the industry Scope of product or service offerings Focuses on maximizing the value of product and service offerings within the bounds of its industry Looks across to complementary product and service offerings that go beyond the bounds of its industry Functional-emotional orientation of an industry Focuses on improving price-performance in line with the functional-emotional orientation of its industry Re-thinks the functional-emotional orientation of its industry Time Focuses on adapting to external trends as they occur Participates in shaping external trends over time
  • 63. It’s all about the potential customer
    • To pursue both value innovation and cost reduction resist benchmarking
      • Gain insight into how to redefine the problem
      • Reconstruct buyer value elements
      • This is not about offering better solutions than your rivals-- Not about the competition.
    • It is all about the potential customer.
  • 64. How can Y ou find a Blue Ocean Strategy?
    • It is all about the potential customer
      • What do you know about your Customers? Non-users? Their unarticulated desires?
      • Have you ever spent a day with them?
      • For B2B, about your Customer’s Customers?
      • About their needs that they don’t even know they have?
      • Are there ways to surprise them? Solutions they have never imagined?
    • How do you find a new Blue Ocean Market Space?
    • Don’t ask them…
  • 65. Can people see the future?
    • Henry Ford’s quote:
      • “ If I had asked people how I could improve their transportation they would have told me to make their horses go faster.”
  • 66. Or the Wristwatch
    • In 1907, newspaper story:
      • The wristwatch was a fad that was never going to go very far. The pocket watch was far superior and here to stay.
      • But by then, 93,000 wristwatches had been sold in Germany and the wristwatch was already 50 years old.
  • 67. Blue Ocean’s Findings
    • “… customers can scarcely imagine how to create uncontested market space.”
    • “ And what customers typically want more of are those product and service features that the industry currently offers.”
    • What to do?
  • 68. How do you find new market space?
    • How can you “See, Feel and Think” like a nonuser?
    • How might you discover tacit and explicit knowledge about market opportunities?
    • How to free your own minds from their resistance to see in new ways?
  • 69. Anthropology and Ethno-marketing
    • We are participant observers
    • Do things like:
      • Deep hanging out
      • Video diaries
      • “ Day in the life of a…”
    • “ We make explicit what is implicit. We help people see patterns that they could not see before.”
  • 70. Cool Results
    • Xerox green button
    • Huggies
    • Ericson phones
    • Mariott redesign of their lobbies
    • Paco Underhill and “Why we buy”
    • Creativegood.com and how we shop online
  • 71. How could you do it?
    • Tools for your tool kit are right in front of you so often.
    • Case studies tell us that we might be looking at that space but cannot see it.
    • What to do?
  • 72. Team-work
    • “ Thought Walks”
    • Innovation Swat Team that roams through the communities often of different cultures, looking for ideas to evoke and enrich and to engage with.
    • Look, ask questions, think about how something can be changed, innovate.
    • Black Books—everyone has one.
  • 73. Finding cool ideas
    • Idea hunting—seeking out and creating new ideas
      • Idea hunting expeditions, look across the industries, across other groups
      • Scenario Planning—early indicators of something happening
      • Technology road maps
  • 74. Or other ways…
      • White space mapping to find segments that are underserved or un-served
      • Brainstorming
      • Idea rooms
      • Idea Vaults-online databases
      • After-action reviews
  • 75. Let’s try one: Reverse Assumption Exercises
    • Reverse Assumption Exercises to free the brain from those barrier to seeing in new ways
    • Let’s pair up in teams.
    • Select one of your companies to use as a case.
    • Here is how a Reverse Assumption Exercise works.
  • 76. Reverse Assumption Exercise
    • List all the major elements of your company from a customer’s perspective
    • For each element, select its opposite
    • Then using the opposites as a new company, discuss as many ways as you can how you could do the opposite from what you think you do today.
  • 77. Reverse Assumptions for a Restaurant Today Opposite Menus No Menus Serve food Don’t serve food Pay for food Don’t pay for food Sit at tables Don’t sit at tables
  • 78. A new kind of restaurant Today Opposite New Element Menus No Menus Owner comes out and tells us what he found at the market today for our meal Serve food Don’t serve food Bring your own food and we entertain you—picnic style Pay for food Don’t pay for food Rent the space for a period of time and we give you free food Sit at tables Don’t sit at tables Chairs set up like a stadium and you watch oversized TV’s with exclusive entertainment on them
  • 79. Your turn
    • Let’s try a reverse assumption exercise and see what might happen.
  • 80. Blue Ocean Strategy Discovery Process
    • Starts with a view of core values you believe matter to your customers and how you and options (competitors and other options) compare to you.
    • Get out there and “See, Feel, Think” like a customer and non-customer.
    • Redefine that strategy canvas to find new market space that isn’t filled already.
    • Test, test, test and learn.
  • 81. Let’s Review -- the Blue Ocean Strategy
    • Not easy
    • Not common practice in management
    • Not intuitive
    • Not just about innovation and creativity
    • All about alignment, people, execution and strategy
    • But really necessary
  • 82. The Four Steps of Visualizing Strategy Visual Awakening Visual Exploration Visual Strategy Fair Visual Communications Compare your Business with competitors’ by drawing your “as is” strategy canvas. See where your strategy needs to change. Go into the field to explore the six paths to creating blue oceans. Observe the Distinctive advantages of alternative products and services. See which factors you should eliminate, create, or change 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. Distribute your before-and-after strategic profiles on one page for easy comparison. Support only those projects and operational moves that allow our company to close the gaps to actualize the new strategy
  • 83. Blue Oceans vs. Red Oceans Kim & Mauborgne 2005 Red Ocean Strategy Blue Ocean Strategy Compete in existing marketplace Create uncontested market space Beat the competition Make the competition irrelevant Exploit existing demand Create and capture new demand Make the value-cost trade off Break the value-cost trade-off Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost Align the whole system of a firm’s activities in pursuit of differentiation and low cost
  • 84. Blue Ocean Strategy Kim & Mauborgne 2005 Getting the Right Sequence Blue Ocean Idea! BUYER UTILITY – Is there exceptional buyer utility in our idea? PRICE – Is our price easily accessible to the mass of buyers? COST – Can we attain our cost target to profit adequately at our strategic price? ADOPTION – What are the adoption hurdles in actualizing our business idea? Are we addressing them up front?
  • 85. Freeing your minds
    • Neurosciences—this is tough
    • Change is Pain
    • Blue Ocean Strategy is trying to help you get there as well.
    • How to break out of what you think and know today and see something different for tomorrow?
  • 86. Should I Think about the Blue Ocean?
    • Because it might be your future
      • Competitiveness of firm really depends on it.
      • Customers recognize innovations as new sources of value and expect them, shop for them enthusiastically.
      • Those that fail to innovate often fail to survive.
      • But maybe you can find a new Blue Ocean…