Blue Ocean StrategyGo where the profits and growth are - and where the competition isn’t
Blue Ocean Strategy Create uncontested market space Make the competition irrelevantBlue Ocean Create and capture new demand Porter contested •It’s not Differentiation or Low Cost •It’s Differentiation and Low Cost
Summary Conventional Logic Blue Ocean LogicAssets & Think in terms of a Think free from a company’sCapabilities company’s existing assets existing assets and and capabilities. capabilities. Build on what it has. Ask, what if we start a new?Product/ Think in terms of Think in terms of buyers’Service products/services offered by solution even if that transcendsofferings the industry. Seek to the industry. Seek to solve maximize the value of these buyers’ major bottlenecks/chief offerings. compromises in using the products/services of the industry.
Value Innovation: The Cornerstone of BOS Costs Value Innovation Buyer ValueThe Simultaneous Pursuit of Differentiation and Low Cost
Value Innovation Region where a company’s actions favourably affect both its cost structure and its value proportion to buyers Cost savings by eliminating and reducing the factors an industry competes on Buyer values is lifted by raising & creating elements the industry has never offered Over time, costs are reduced further as scale economies kick in
Reed Ocean Versus Blue Ocean Stratégie Red Ocean Strategy Blue Ocean StrategyCompete in existing market space Create uncontested market space Beat the competition Make the competition irrelevant Differentiation or low cost Differentiation and low cost Competitive Advantage Value Innovation Segment existing customers Attract noncustomers Exploit existing demand Create and capture new demand
Minimizing Risks and Maximizing Opportunities in Formulating and Executing Blue Ocean Strategy Formulation Principles Formulation RisksReconstruct market boundaries Search RiskFocus on the big picture, not the numbers Planning RiskReach beyond existing demand Scale RiskGet the strategic sequence right Business Model Risk Execution Principles Execution RisksOvercome key organizational hurdles Organizational RiskBuild execution into strategy Management Risk
Strategy Canvas US Wine Industry in the late 1990sHigh Budget WinesLow Price Above-the-line Vineyard prestige Wine range Use of enological marketing Aging Wine complexity terminology and quality distinctions in wine communication
Four Actions Framework REDUCE Which factors should be reduced well below the industrys standard? ELIMINATE Which of the factors that CREATEthe industry take for granted A New Which factors should be should be eliminated? Value created that the industry has never offered? Curve RAISE Which factors should be raised well above the industry’s standard?
A New Value Curve – Strategy CanvasHigh [Blue Ocean] RAISE CREATELow Price REDUCE ELIMINATE
Strategy Canvas: Southwest AirlinesHigh Southwest Airlines Average Airlines Car TransportLow Price Meals Lounges Seating Hub Friendly Speed Frequent class choice connectivity Service Pint-to- point departure
Eliminated: Many of the rules/criteria in the industry Reduced: Focus on some of the rules below industry standard Raised: Focus on some of the rules above industry standard Created: A new rules of their own
Strategy Canvas: Hub Spot1412 Hub Spot108 CRM Vendors6 Hubspot4 CRM2 Vendors0 Sales Features Price Add Ease of Familiar Help Unified Referral Hand Advice Service team Ons use UI Offering Force Holding Network 18
Eliminate: The large sales force by putting the CMR money which is the important activity. Creating: An innovative "referral force" which provides rich incentives for our customers to refer us to other small businesses as that is the way small businesses tend to make decisions. Emphasis on "handholding" and "advice" which is apart from traditional support and consulting. Raise: Increased emphasis ease of use, help[Audio/video, Integration[Apps] increasing emphasis on "handholding" and "advice" which is apart from traditional support and consulting. Reduce: Emphasis relative to the industry on feature richness/depth and on platform/add-ons (small companies do not have resources to deal with the complexity of multiple vendors products)
Use of Blue Ocean Strategy in India Blue Ocean Strategy in India Use of value curves-- Indian Angle
Case Study 3 : Cricket Before IPLHigh Test CricketLow One Day Spectator Classic Value of Team Emphasis on Entertainment Pacy Definite Athleticism Time Technique Reputation Patience & Result Perseverance
Case Study 3: Cricket After IPLHighLow Test Cricket One Day 20-20 Spectator Time Classic Value of Team Emphasis on Entertainment Pacy Definite Result Athleticism City Loyalty Open to Technique Reputation Patience & Dummies Perseverance
Case Study 3 : Value Curve for IPL Reduce Spectator Time Invested (Competes with Movie/Football) Emphasis on Classic Techniques (Batting/Bowling) Emphasis on Patience, Perseverance Raise Emphasis on Athleticism Pace of the Game Entertainment with Bollywood, Cheerleaders etc. Certainty of Result Create City Loyalty Welcome to Dummies
Get the Strategic Sequence Right Buyer Commercially Price Cost Adoption Viable Blue Utility Ocean Idea What are adoption Is there Is your price Can you attain hurdles inexceptional buyer easily accessible your cost target actualizing your utility in your to the mass of to profit at your business idea? Are business idea? buyers? strategic price? you addressing them up front?
Reach Beyond Existing Demand First Tier: “Soon-to-be” non- customers who are on the edge of your market, waiting Third to jump ship Tier Second First Tier Tier Second Tier: “Refusing non- Your customers who consciouslyMarket choose against your market. Third Tier: “Unexplored” non customers who are in markets distant from yours.