Blueoceanstrategy | Youtube Strategy
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Blueoceanstrategy | Youtube Strategy

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Blue Ocean Strategy

Blue Ocean Strategy

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Blueoceanstrategy | Youtube Strategy Blueoceanstrategy | Youtube Strategy Presentation Transcript

  • Blue Ocean Strategy How to Create Uncontested Market Space and Make the Competition Irrelevant Facilitators : Yip Khai Biau (ymike27@hotmail.com) & Lieu Yoke Sun Group/Presentation Title Agilent Restricted Date ##, 200X
  • Blue Ocean Strategy (BOS)  Introduction to BOS  BOS Tools : Strategy Canvas & E.R.R.C.  Awakening : As-Is Strategy Canvas  Exploration : Reconstruct Market Boundaries  Strategizing : To-Be Strategy Canvas  Actualization : Identify actions to actualize the strategies  Conclusion Facilitators : Yip Khai Biau (ymike27@hotmail.com) & Lieu Yoke Sun All Rights Reserved – KB Yip/YS Lieu Page : 2
  • Objectives  Develop understanding of Blue Ocean Tool Sets and how to apply them effectively   Strategy Canvas ERRC  Perform As-Is Analysis to Compare Current Strategy of XYZ vs Competitors  Explore Pathways to Breakaway from Market Boundaries to look for Bigger Playing Field  Brainstorm and Agree on the To-Be Strategy for XYZ All Rights Reserved – KB Yip/YS Lieu Page : 3 View slide
  • Introduction to Blue Ocean Strategy  History & Background  Defining Red & Blue Ocean  Six Principles of BOS  Reach Beyond Existing Demand  Value Innovation All Rights Reserved – KB Yip/YS Lieu Page : 4 View slide
  • History & Background • Authored by W. Chan Kim and Renee Mauborgne in 2005. • Based on a study of 150 strategic moves spanning more than 100 years and 30 industries. • BOS is the simultaneous pursuit of differentiation and low cost. • The aim of BOS is not to out-perform the competition in the existing industry, but to create new market space or a blue ocean, thereby making the competition irrelevant. • BOS offers systematic and reproducible methodologies and processes in pursuit of innovation by both new and existing firms. • BOS frameworks and tools are designed to be visual in order to not only effectively build the collective wisdom of the company but also to effectively execute through easy communication. All Rights Reserved – KB Yip/YS Lieu Page : 5
  • Defining Red and Blue Ocean What’s Red, What’s Blue? Red Ocean Strategy Blue Ocean Strategy •• Compete in existing market space Compete in existing market space •• Create uncontested market space Create uncontested market space •• Beat the competition Beat the competition •• Make the competition irrelevant Make the competition irrelevant •• Exploit existing demand Exploit existing demand •• Create & capture new demand Create & capture new demand •• Make the value-cost trade off Make the value-cost trade off •• Break the value- cost trade off Break the value- cost trade off •• Align strategy choice of Align strategy choice of differentiation or low cost differentiation or low cost •• Simultaneous pursuit strategy of Simultaneous pursuit strategy of differentiation and low cost differentiation and low cost All Rights Reserved – KB Yip/YS Lieu Page : 6
  • Examples of Red and Blue Ocean All Rights Reserved – KB Yip/YS Lieu Page : 7
  • Six Principles of Blue Ocean Strategy Formulation Principles 1. Reach beyond existing Execution Principles 5. Overcome key organizational demand 2. Reconstruct market hurdles 6. Build execution into boundaries 3. Focus on the big picture, strategy not the numbers 4. Get the strategic sequence right All Rights Reserved – KB Yip/YS Lieu Page : 8
  • Reach Beyond Existing Demand  Yourlu B Market  Second Tier: “Refusing noncustomers who consciously choose against your market.  Second First Tier Tier First Tier: “Soon-to-be” noncustomers who are on the edge of your market, waiting to jump ship Third Tier: “Unexplored” non customers who are in markets distant from yours. Third Tier cean eO Blue Ocean – Go for the Largest Catchment of Non-Customers All Rights Reserved – KB Yip/YS Lieu Page : 9
  • Example – [yellow tail] [yellow tail] : Traditional Wine : • An elite, refined image in packaging with heavy use of wine terminology. • No jargon.Simple and nontraditional label. • Aging quality. • Vibrant and fun. • Prestige of a vineyard and its legacy. • Sweeter and easier to drink. • Complexity and sophistication of a wine’s taste, such as tannins and oak. • Only one Red (Shiraz) and one White (Chardonnay). • Aging is not important. • A diverse range of wines to cover all varieties of grapes & consumer preferences All Rights Reserved – KB Yip/YS Lieu Page : 10
  • Example – [yellow tail] Tier 3 – Anyone that drinks water [yellow tail] did not focus on the wine market only Tier 1 – Wine drinker market Second First Tier Tier Third Tier Second First Tier Tier Third Tier Your Your Market Market Red Wine X Tier 2 – “Easier to drink” market, eg., beer, cocktails, soft-drink [yellow tail] created a Blue Ocean by making its wine more appealing to the bigger population All Rights Reserved – KB Yip/YS Lieu Page : 11
  • Reach Beyond Existing Demand Entertainment Theater Performance Entertainment Theater Performance Circus Circus Circus X Circus X All Rights Reserved – KB Yip/YS Lieu Page : 12
  • Example – [Nintendo] Electronic Game Industry Girls Other Males Young Antisocial Males Nintendo Wii Nintendo created a Blue Ocean by reducing the complexity, add the ease of use and fun! Everyone Else Girls Other Males Everyone Else Young Antisocial Males All Rights Reserved – KB Yip/YS Lieu Page : 13
  • Value Innovation – The Cornerstone of BOS  Value innovation places equal emphasis on value and innovation.  Value innovation is a new way of thinking about and executing strategy that results in the creation of a blue ocean.  The creation of blue oceans is about driving costs down while simultaneously driving value up for buyers. Cost Saving – Eliminate & Reduce Competing Factors Cost Value Innovation Buyer Value Buyer Value Lifted – Raise & Create New Elements All Rights Reserved – KB Yip/YS Lieu Back Page : 14
  • Blue Ocean Strategy Tools  Strategy Canvas  Eliminate-Reduce-Raise-Create (ERRC) Grid All Rights Reserved – KB Yip/YS Lieu Page : 15
  • What is Strategy Canvas? Degree of which each competitor offers/invests in each factor Value Curves High Offering Level Competitor 1 Competitor 2 Mid Your Company Low Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor 6 Factor 7 Competing Factors Factor 8 Factors that the industry competes & invests, also potential areas where customer value could be created. Graphical Representation of Strategy + Big Picture View + Landscape Scanning + Relative Positioning vs. Competitors All Rights Reserved – KB Yip/YS Lieu Page : 16
  • 4 Actions Framework Strategically Reduce Cost Reduce Which factors should be reduced well below the industry's standard? Eliminate Which of the factors that the industry takes for granted should be eliminated? Raise A New A New Value Value Curve Curve Which factors should be raised well above the industry's Create Strategically Invest in Which factors should be created that the industry has never offered? All Rights Reserved – KB Yip/YS Lieu Page : 17
  • Eliminate-Reduce-Raise-Create (ERRC) Grid Eliminate Raise Reduce Create Back All Rights Reserved – KB Yip/YS Lieu Page : 18
  • Formulating Blue Ocean Strategy 75 mins 120 mins Exploration : Reconstruct Market Boundaries Awakening : As-Is Analysis  Activity 1 (45 min) 120 mins  Activity 3 (90 min) Strategizing : To-Be Strategy Canvas  Activity 5 (90 min) • Split into 3 Groups • Split into 3 Groups • Split into 3 Groups • Review As-Is Strategy Canvas (30 min) • Use 6 Paths Framework, reconstruct market boundaries & identify Divergent Factors (60 min) • Use ERRC to construct the Desired Value Curve (60 mins) • Presentation (5 min each, 15 min total)  • Presentation (10 min each, 30 min total) Activity 2 (30 min) • Agree to ONE As-Is Strategy Canvas  Activity 4 (30 min) • Agree to Top 3-5 Divergent Factors All Rights Reserved – KB Yip/YS Lieu • Presentation (10 min each, 30 mins total)  Activity 6 (30 min) • Agree to ONE To-Be Strategy Canvas Page : 19
  • Activity 1 & 2 : As-Is Analysis Review XYZ As-Is Strategy Canvas Offering Level High 4.5 4 3.5 3 Mid 2.5 2 1.5 Competitors XYZ 1 Low 0.5 0 h s s on rs at ge ie es iti to a P n li t a i nk gn er li t ve ac Li ci iti co re t F e a ry Fa C pe st lR & du om na m C In io ra e ut tit og Fe s Pr In Competing Factors ng di an Br re ltu u /C le y st fe Li Back All Rights Reserved – KB Yip/YS Lieu Page : 20
  • Reconstruct Market Boundaries  There are 6 pathways to reconstruct the market boundaries Across Alternate Industry Across Strategic Groups Across Buyer Groups Red Ocean Across Complementary Scope of Products & Services Blue Ocean Across Functional Emotional Orientation Across Time All Rights Reserved – KB Yip/YS Lieu Page : 21
  • Across Alternative Industries BOS Example –  Alternatives include products or services that have different functions and forms but the same purpose. Commercial Airline • Pay per use Good • No Maintenance Corporate Jet Corporate Jet Commercial Airlines • Less Travel Time • Less Hassle • P2P 1/16 Ownership @ $375k • Not P2P Bad • High Travel Time • Security Concern • High Cost 50 hrs/yr Smaller Airplanes, Airport, Less Staff Point-to-point, Faster, Less Hassle, Increase Productivity All Rights Reserved – KB Yip/YS Lieu Page : 22
  • Strategy Canvas - NetJets Raise Eliminate • Speed of travel time • Ease of travel • Flexibility and Reliability • In flight service Create Reduce • Price • Need for customers to manage aircraft • Deadhead costs High Private Jet NetJets' Value Curve Com m ercial Airlines Low Price Need for customer's to manage aircraft Deadhead costs Speed of total travel time Ease of travel Flexibility and reliability All Rights Reserved – KB Yip/YS Lieu In- flight service Page : 23
  • Across Alternative Industries BOS Example – Conventional Airline Coach Across Alternative Industries        Fast Expensive Better Services Flight Connections Slow Cheap Point to Point Now Everyone Can Fly!     All Rights Reserved – KB Yip/YS Lieu Price of Coach & Speed of Flight P2P Direct Flight No Frill – User Pay Budget Travel Package Page : 24
  • Strategy Canvas - Air Asia Raise Eliminate  Price Competition • Quality of Safety  Seat Selection • Point to Point Direct Flight  Free Food & Beverages  Air Ticket  VIP Lounge  Flight Connection Create Reduce  Air Fare • Web Registration  Capital • Express Boarding  Stopover time • Budget Hotel  Staffing (ground and air) High Offering Level Air Asia Other Local Airline Land Transportation Low l l e y F y g p g n e et dg ote on ge ic ct et m it a pl m ct fin ck Re oa r af Pr un le Ti tC H ire ap af up Ti Co b S e t h r B D S C r e Lo e St ig ve ge P t S od W ic Ai P ss Fl ea o po ud Pr VI P2 re S F o B Xp St All Rights Reserved – KB Yip/YS Lieu Page : 25
  • Reconstruct Market Boundaries  There are 6 pathways to reconstruct the market boundaries Across Alternate Industry Across Strategic Groups Across Buyer Groups Red Ocean Across Complementary Scope of Products & Services Blue Ocean Across Functional Emotional Orientation Across Time All Rights Reserved – KB Yip/YS Lieu Page : 26
  • Across Strategic Groups BOS Example –  Strategic Groups –Groups of companies within an industry that pursue a similar strategy.  E.g., Automobiles – Luxury (Mercedes, BMW), Economical (Toyota, Proton). Traditional Health Club Good • Full range exercise and sporting options Home Exercise Traditional Health Club Womanly Fun • Low Cost • Privacy Easy to Use Machine • Expensive. Bad • Not easily accessible. • Complicated. Peer Support • Low motivation • Lack of Privacy >10k Outlets & > 4M members (as of Oct, 2006) Affordable Home Exercise All Rights Reserved – KB Yip/YS Lieu Page : 27
  • Strategy Canvas - Curves Raise Eliminate • Non threatening same sex environment Create Reduce  Price •  Amenities Womanly fun atmosphere  Workout equipment  Availability of Instructors High Curve s Hom e Exercise Program Traditional Health Clubs Low Price Amenit ies Workout Equipment Workout Time A vailabilt y of instructors Environment encouraging discipline and motivation in exercise Nonthreatening same- sex environment Convenience All Rights Reserved – KB Yip/YS Lieu Womenly fun at mosphere Page : 28
  • Across Strategic Groups BOS Example – OldTown       Expensive Hygienic Good Ambience & Relaxing Environment Economical Less Hygienic Less Appealing Environment     Rightly Priced Hygienic Better Environment Emotional Appeal All Rights Reserved – KB Yip/YS Lieu Page : 29
  • Across Strategic Groups BOS Example – Tune Hotel 4/5 Stars Hotels Nice Sleep! Hot Shower!     Luxury Expensive Service Facilities Backpacker Hostels      Cheap Sleep & Go No Frill Cheap - Pay For What You Use! Optional Add-ons:  Limited service, basic  Low on price, high on personality  Walk in All Rights Reserved – KB Yip/YS Lieu Page : 30
  • Reconstruct Market Boundaries  There are 6 pathways to reconstruct the market boundaries Across Alternate Industry Across Strategic Groups Across Buyer Groups Red Ocean Across Complementary Scope of Products & Services Blue Ocean Across Functional Emotional Orientation Across Time All Rights Reserved – KB Yip/YS Lieu Page : 31
  • Across Chain of Buyers BOS Example –  There is a chain of ‘buyers’ who are directly or indirectly involved in the buying decision. Purchasers – pay for the product or service Users – use the product or service Influencers – influence the decision in the purchase Corporate Jet Example : Novo Nordick - from insulin producer to a diabetes care company Traditionally Now Prescribe Better Medicine Request Better Pricing Easy To Use Insulin Industry All Rights Reserved – KB Yip/YS Lieu No Unpleasant Feeling Page : 32
  • Across Chain of Buyers BOS Example – Nintendo Wii Everyone is a gamer! Everyone can play! Reduced Graphics Nintendo outsold Sony and Microsoft 6:1. Can’t keep product on shelves! Family Fun Wii Fit Increased motion control All Rights Reserved – KB Yip/YS Lieu Page : 33
  • Strategy Canvas : Nintendo Wii Raise Eliminate • Complexity • Game Library • Movie • Ease of Use Create Reduce  Price • Interaction/Group Fun  Graphics • Magic Wand  Physics  Online Pay High Nintendo Wii Gam e Industry Low ic Pr e G s ic ph ra s ic ys Ph O e in nl y Pa C i ty ex pl om ie ov M G am e ry ra ib L se Ea All Rights Reserved – KB Yip/YS Lieu se fU o c ra te In up ro G n/ io t n Fu ic ag M W d an Page : 34
  • Reconstruct Market Boundaries  There are 6 pathways to reconstruct the market boundaries Across Alternate Industry Across Strategic Groups Across Buyer Groups Red Ocean Across Complementary Scope of Products & Services Blue Ocean Across Functional Emotional Orientation Across Time All Rights Reserved – KB Yip/YS Lieu Page : 35
  • Across Complementary Products & Services BOS Example – NABI  Define the total solution buyers seek when they choose a product or service.  Think about what happens before, during, and after your product is used. Corporate Jet Example : Traditional : Buses made from Steel • Less Space • More Fuel • Low Initial Price Purchase • High Initial Price Delivery Use • High Supplementa Maintenanc ry e • More Space • Less Fuel • Low •High Disposal • Low NABI : Buses made from Fibre Glass All Rights Reserved – KB Yip/YS Lieu Page : 36
  • Strategy Canvas - NABI Raise Eliminate • Environmental friendliness Create Reduce  Corrosion • Aesthetic design  Maintenance cost • Customer friendliness  Fuel consumption High NABI Average U.S Transit Bus Low Initial purchase price Corrosion Maintenance cost Fuel consumption Environmental friendliness Aesthetic design All Rights Reserved – KB Yip/YS Lieu Customer friendliness Page : 37
  • Across Complementary Products and Services BOS Example: Operated 798 stores in all 50 U.S. states and the District of Columbia, as well as stores in Australia and Canada Purchasing Process Before     Book Selection Sit Down Browse Through Selection Attend an event During   Customer Enquiry Paying     Go to Coffee Shop Read the Book Book Signing Buy DVD, Games, Gift Immediate Enjoyment! Book Selection Event : Story Telling for Kids After Book Signing All Rights Reserved – KB Yip/YS Lieu Carrying bag DVD & Games Page : 38
  • Across Complementary Products and Services BOS Example • Largest EMS (Electronics Manufacturing Services) in the World. • Ranked 132 at Fortune Global with $51B revenue, higher than Intel (188), Motorola (200), Flextronics (292). • Employs 550,000 employees worldwide with design centers/factories at >10 countries. • Make Apple Mac/iPod/iPhone, Intel motherboards, Dell, HP, Sony PlayStation, Nintendo Wii, Microsoft Xbox, cell phones for Nokia/Samsung/Motorola/LG/SonyEricsson. • Shenzhen facility at Longhua • Covers about a square mile. • Has its own fire brigade, hospital, swimming pool, restaurants, banks, supermarkets, internet cafe. All Rights Reserved – KB Yip/YS Lieu Page : 39
  • BOS Example - Foxconn Repair & Servicing Repair & Servicing Logistics & Distribution Distribution Conventional EMS Mass Production Mass Production Prototyping Logistics VI Part Sourcing & Production Inventory Control Prototyping Design Sourcing Design All Rights Reserved – KB Yip/YS Lieu Vertical Integration (VI) Model Page : 40
  • Strategy Canvas - Foxconn High Foxconn Othe r EM Se s Low Co st Co m pe ti t iv e en ss hn ec T g olo y Pr e oc ss D y er l iv e Q ua li ty r Ve All Rights Reserved – KB Yip/YS Lieu a ti c n lI te g t ra io n Page : 41
  • Reconstruct Market Boundaries  There are 6 pathways to reconstruct the market boundaries Across Alternate Industry Across Strategic Groups Across Buyer Groups Red Ocean Across Complementary Scope of Products & Services Blue Ocean Across Functional Emotional Orientation Across Time All Rights Reserved – KB Yip/YS Lieu Page : 42
  • Across Functional or Emotional Appeal BOS Example – QB House Some industries compete principally on price and function - their appeal is rational.  Other industries compete largely on feelings - their appeal is emotional.  • Pricey • Simple • Low Cost • Low Price • Extras • Feelings Emotional Functional Traditional Hair Saloon QB House • • • • Rev • Emotional Service -> None • Hair Wash -> Air Wash • $9 1996 2003 Hot Towels Message Tea/Coffee Special Hair /Skin Treatments • $27 - $45 All Rights Reserved – KB Yip/YS Lieu Page : 43
  • Across Functional or Emotional Appeal BOS Example – Institute / College Across Multiple Pathways  Low Fee  Low Recognition of Education Quality    Conventional Education System  Strategic Group • Functional -> Emotional  High Fee  WW Recognized Certification   Branches in UK, Africa & China Collaboration w other Universities  Open Education System  6000 students from 90 countries  Vibrant, multicultural and international  Free & Creative Environment Many Environmental Constraints  Diverse Student Base Local Market  Fun Learning  Exposure  Global Classroom All Rights Reserved – KB Yip/YS Lieu Academic Exchange Encourage Entrepreneurship Page : 44
  • Strategy Canvas - LimKokWeng Raise Eliminate • Asian Culture • Creative Thinking Flexibility Culture Exposure • Reduce Globalization Competition •  Environmental Constraints • •  Foreign Cert Superiority Entrepreneurship Create  Student Constraints  Unconventional Teaching Method  Fee Competition  Ecosystem High Lim Kok Weng Private Colleges Fo re ig n Fe C es er En tS vi ro up nm er io en rit ta y lC on st ra Fe in ts e C om St pe ud titi en on tC G lo on ba st l iz ra at in io ts n C om pe ti t io As n ia n C ul C tu re re at iv e Th in Fl kin ex g ib i li ty C ul tu re Ex U po nc En su on t re re ve pr nt en io na eu lT rs ea hi p ch in g M et ho d Ec os ys te m Low All Rights Reserved – KB Yip/YS Lieu Page : 45
  • Reconstruct Market Boundaries  There are 6 pathways to reconstruct the market boundaries Across Alternate Industry Across Strategic Groups Across Buyer Groups Red Ocean Across Complementary Scope of Products & Services Blue Ocean Across Functional Emotional Orientation Across Time All Rights Reserved – KB Yip/YS Lieu Page : 46
  • Across Time BOS Example – iTune Apple launched iTunes online music store Apple teamed up with major Music & Picture Companies  Sell Individual song / entire album  30 sec free listening  Strategically price Napster started online music file sharing service 1999 > 2 billion illegally music flies were being traded every month 2003  iTunes had sold > 4 billion songs  20 million songs on Dec 25, 2007 All Rights Reserved – KB Yip/YS Lieu 2008 Page : 47
  • Across Time BOS Example :  A video sharing website for upload, view and share video clips  User can post video 'responses' and subscribe to content feeds  Created in mid-February 2005 by three former PayPal employees  Uses Adobe Flash technology to display a wide variety of usergenerated video content  Acquired by Google in Nov 2006 for $1.6B As of Apr 2008, hosting 83.4 million videos and 3.75 million user channels > 100 million videos were being watched every day All Rights Reserved – KB Yip/YS Lieu Page : 48
  • Strategy Canvas - YouTube Raise Eliminate • Need for HTML know-how • Hassle of undergoing numerous steps • Fees • Web space allotted per user Create Reduce  Uploading / downloading time • Ease of Use technology • FLV technology • Ready-made website • Social networking • Video tags & Search High YouTube Ordinary Webhosting Low d ee N fo L TM H r ow -h w o kn H e sl as es Fe U d/ oa pl d oa nl w do ce pa bs e W e ti m d te at oc l al r pe er us s Ea se f- u -o te gy lo no ch dy ea R e ad -m te si eb w V FL te gy lo no ch al ci So N w et All Rights Reserved – KB Yip/YS Lieu ng ki or a de Vi gs ta & ch ar se Page : 49
  • Look across Time Weird Science Future of the Individual Climate Change Longevity Medicine Innovation Economy Ten Trends of the Extreme Future Fueling the Future Next Workforce Securing the Future Globalization US- China Future From the Book “Extreme Future” All Rights Reserved – KB Yip/YS Lieu Page : 50
  • From Head-to-Head Competition to Blue Ocean Creation Head-To-Head Competition Blue Ocean Creation Looks across alternative industries Industry Focuses on rivals within its industry Strategic Group Focuses on competitive position within Looks across strategic groups strategic group within industries Buyer Group Focuses on better serving the buyer group Redefines the industry buyer group Scope of Product or Service Offering Focuses on maximizing the value of product and service offerings within the bounds of its industry Looks across to complementary and service offerings Functional-Emotional FunctionalOrientation Focuses on improving price performance within the functional emotional orientation of its industry Rethinks the functionalemotional orientation of its industry Time Focuses on adapting to external trends Participates in shaping external as they occur trends over time All Rights Reserved – KB Yip/YS Lieu Page : 51
  • Across Multiple Pathways BOS Example – NV Multi Corporation Traditional Graveyard NV Multi Corporation Total Peace of Mind     Economical Unpleasant Environment Pollution No Maintenance     Expensive Pleasant Environment 1 Stop Service After Sales Service All Rights Reserved – KB Yip/YS Lieu Page : 52
  • Across Multiple Pathways BOS Example – NV Multi Corporation Complementary Products & Services Service Team Prayer Service White Ladies A Service Respect For Woman Professional Band Across Buyer Groups Functional to Emotional • Notifying Friend & Relatives • Thank You Cards • Memory Lane • Video & Slideshow Across Alternative Industries • Buyer -> User & User -> Buyer • Pet Memorial Garden • VIP Memorial Garden • Bereavement Product • Insurance Protection • Capital Gain All Rights Reserved – KB Yip/YS Lieu Page : 53
  • Strategy Canvas - NV Multi Corporation Raise Eliminate • Price Competition • Fear • Taboos • Well Layout Cemetery • Staff Appearance • Pre-arranged • One Stop Funeral Services Create Reduce  Sophisticated Process • • Luxury Cemetery • Customizable Burial Plots •  Pollution White Angels Care Plan High NV Multi Private Cem etary Public Cemetery an s ot pl re Ca Bu r ial Pl er y et e iz a bl om Cu st Lu xu ry Ce m An ge ls ic e s W hi te ed er al Fu n p St o O ne Se rv ra ng ce Pr e- ar ea ra n et er y St af fA pp t io n ay ou t Ce m ss Po l lu el lL W is t ic a te d Pr oc e bo os ar Fe titi m pe Ta So ph Pr ic e Co Pr ic e on Low All Rights Reserved – KB Yip/YS Lieu Page : 54
  • Activity 3 & 4 : Reconstruct Market Boundaries Identify Divergent Factors High 4.5 Competitors 3.5 3 Mid 2.5 2 1.5 1 Low XYZ 0.5 e C om In pe st itu tit i ve ti o ne na ss lR ec og In ni du ti o st Pr n ry og Li ra nk m ag & e C ar ee rP at h Fa ci li t at or s Fa ci l i ti es Br an Li di fe ng st yl e/ C ul tu re Fa ct or 9 Fa ct or 10 Fa ct or 11 0 Fe Offering Level 4 Competing Factors All Rights Reserved – KB Yip/YS Lieu Identify the Divergent Factors that Differentiate XYZ from Competitors Page : 55
  • Activity 3 & 4 : Reconstruct Market Boundaries Identify Divergent Factors Sub-Group : Divergent Factor Description Note : Each sub-group must determine at least ONE Divergent Factor. Back All Rights Reserved – KB Yip/YS Lieu Page : 56
  • Activity 5 & 6 : To-Be Strategy Canvas Construct Desired Value Curve for XYZ Eliminate Create Divergent Factors X= Y= Z= Reduce Raise All Rights Reserved – KB Yip/YS Lieu Page : 57
  • Activity 5 & 6 : To-Be Strategy Canvas Construct Desired Value Curve for XYZ Eliminate Competencies Create Divergent Factors X= Y= Z= Reduce Raise Technology Process Quality Talent High New Value Curve Existing Value Curve Mid Low Fee Competencies Institutional Recognition Industrial Linkage Program & Career Path All Rights Reserved – KB Yip/YS Lieu Facilitators Facilities Lifestyle/ Culture X Y Z Page : 58
  • Three Characteristics of a Good Strategy 1. Focus 2. Divergence Now Everyone Can Fly! 3. Compelling Tagline All Rights Reserved – KB Yip/YS Lieu Page : 59
  • Barriers to Imitation Does not Make Sense based on Conventional Strategic Logic Brand Image Conflicts Chanel, CD, etc could not imitate Body Shop as it would signal an invalidation of their current business models NBC, CBS and ABC rediculed the idea of 24x7 real time news without star broadcasters Political, Operational and Cultural Changes Major revisions in routing planes, retraining, changing marketing/pricing/culture. Took MAS 6 years to come up Firefly Economies of Scale High volume generated by a value innovation leads to rapid cost advantages 1st to Market Natural Monopoly When a company offers a leap in value, it rapidly earns brand buzz and a loyal following in the marketplace Size of market does not make sense to support another player All Rights Reserved – KB Yip/YS Lieu Back Page : 60
  • Conclusion: Focus on the Big Picture, not the Numbers Awakening Exploration Strategy Fair Communication Compare your business with your competitors' by drawing your As Is Strategy Canvas Go into the field to explore the six paths to creating blue oceans Draw your To Be Strategy Canvas based on insights from field observations Distribute your before- and-after strategic profiles on one page for easy comparison See where your strategy needs to change Observe the distinctive advantages of alternative products and services Get feedback on alternative strategy canvases from customers, competitors’ customers and non customers Support only those projects and operational moves that allow your company close the gaps to actualize the new strategy See which factors you should eliminate, create or change Use feedback to build the best 'to be' future strategy All Rights Reserved – KB Yip/YS Lieu Back Page : 61
  • Get the Strategic Sequence Right Red Ocean Sequence Buyer Utility Is there exceptional buyer utility in your business idea? Cost Price Price Is your price easily accessible to the mass of buyers? Cost Can you attain your cost target to profit at your strategic price? Utility Adoption Adoption Hurdles Commercially Viable Blue Ocean Idea What are adoption hurdles in actualizing your business idea? Are you addressing them up front? All Rights Reserved – KB Yip/YS Lieu Page : 62
  • Buyer Utility Map The Six Stages of the Buyer Experience Cycle 1 2 3 Purchase Delivery Use 4 5 Supplement Maintenance Productivity the product you need? the product delivered? Training or expertise assistance required? Simplicity How rapidly can you make a purchase? How difficult to install the new product? Easy to store when not in used? How much time do they take? How easy to maintain and upgrade? Do buyers have to arrange delivery themselves? How effective are features and functions? How easy are they to obtain? Disposal How costly? Customer How long to find How long to get The Six Utility Levels 6 Convenience Risk Fun and Image Is place of purchase attractive & accessible? Need other products to make it work? How secure is the transaction environment? Require external maintenance? Create waste items? How easy to dispose? Create waste items? Overcharged with bell and whistles? How much pain do they cause? Legal or environmental issue of the product disposal? Environmental Friendliness All Rights Reserved – KB Yip/YS Lieu Page : 63
  • Buyer Utility Map – XYZ’s To-Do The Six Stages of the Buyer Experience Cycle 1 2 3 4 5 6 Purchase HR V.I. Delivery Use Supplement Maintenance Disposal Customer Insourcing Global Guru The Six Utility Levels Productivity Simplicity Convenience Risk Fun and Image Environmental Friendliness All Rights Reserved – KB Yip/YS Lieu Page : 64
  • Strategic Pricing • Conventional – Test water with price insensitive customers. Drop price over time to attract mainstream buyers. • BOS Strategic Pricing – Start with Pricing to capture Mass Market. • Why ? • Volume gives Economy of Scale. E.g., Microsoft Windows XP. • All or Nothing. E.g., eBay. • Lack of Excludability would give rise to Free-Riding. E.g., Air Asia, OldTown. • An offering’s reputation must be earned from Day One => Buyers can’t refuse. All Rights Reserved – KB Yip/YS Lieu Page : 65
  • Price Corridor of the Mass 1. Identify the Price Corridor of the mass 2. Specify a Price Level within the Price Corridor Three alternative product/service types: Different Form Same Form Same Function Different Form and Function, Same Objective High degree of legal and resource protection Difficult to Imitate (E.g., Dyson) cing l pri ve er-le Upp Price Corridor of the Mass Some degree of legal and resource protection Mid-level pricing Low -lev el p ricin g Low degree of legal protection Easy to Imitate (E.g., Air Asia) Size of circle is proportion to number of buyers that product/service attracts All Rights Reserved – KB Yip/YS Lieu Page : 66
  • Mid to Lower Strategic Pricing Suitable for companies with no patent and asset protection (e.g., expensive production factory). • Their Blue Ocean offering has high fixed costs and marginal variable costs. • Their attractiveness depends heavily on network externalities (all-or-nothing proposition such as eBay). • Their cost structure benefits from steep economies of scale and scope. Volume brings with it significant cost advantages. All Rights Reserved – KB Yip/YS Lieu Page : 67
  • Profit Model of BOS The Strategic Price The Target Profit The Target Cost Streamlining and Cost Innovative Partnering • 1500 partners over 50 countries • Metal/leather -> plastic • 150 -> 51 parts • Cheaper assembly Pricing Innovation All Rights Reserved – KB Yip/YS Lieu Page : 68
  • Overcome Key Organizational Hurdles Cognitive Hurdle Resource Hurdle Motivational Hurdle Political Hurdle All Rights Reserved – KB Yip/YS Lieu Page : 69
  • Toppling the 4 Hurdles to Actions Cognitive Sewer – Underground pipe carrying drainage water or waste Bring those in denial to feel the pain and meet the customers  Ride the electric sewer - Experience first hand the ‘real situation on the ground’  Meet with Disgruntled Customers - ‘You can’t outsource your eyes’ - Get feedback from biggest critics Resource Where are XYZ’s Hot spots and Cold spots ? Revenue vs Resource ? Beside headcounts, what other resources can you trade ? Meeting room ?  Hot spots Motivational  Focus on ‘kingpins’ – the key influencers Who are your kingpings ?  Fishbowl management of kingpins What review/metrics do you use ? - Kingpins’ actions and inactions are made as transparent to others as are fish in a bowl of water  Atomization - Break down overall strategic objective into bite sized chunks; different levels understand their goal Political  Leveraging angels - Low resources input but high potential performance gains - Angels = those who have the most to gain from the strategic shift  Silencing devils  Cold spots - Activities that have high resource input but low performance impact - Redistribute resources to hot spots from cold spots  Horse trading - Swap resources around to where it is needed How do we breakdown the 3 differentiators into sizeable chunks? - Devils = those who have the most to lose from it Who will align the most with XYZ ? Who will fight with XYZ ? What can you lobby to become your Godfather ?  Getting a consigliere on their top management team - Consigliere = politically adept but highly respected insider who knows in advance all the land mines, including who will fight you and who will support you All Rights Reserved – KB Yip/YS Lieu Page : 70
  • Build Execution into Strategy Strategy Formulation Process Fair Process Engagement Explanation Expectation clarity Trust &Commitment Attitude “I feel my opinion counts.” Volunteer Cooperation Behavior “I’ll go beyond the call of duty.” Strategy Execution Exceeds Expectation All Rights Reserved – KB Yip/YS Lieu Self-Initiated Page : 71
  • Barriers to Imitation Does not Make Sense based on Conventional Strategic Logic Brand Image Conflicts Chanel, CD, etc could not imitate Body Shop as it would signal an invalidation of their current business models NBC, CBS and ABC rediculed the idea of 24x7 real time news without star broadcasters Political, Operational and Cultural Changes Major revisions in routing planes, retraining, changing marketing/pricing/culture. Took MAS 6 years to come up Firefly Economies of Scale High volume generated by a value innovation leads to rapid cost advantages 1st to Market Natural Monopoly When a company offers a leap in value, it rapidly earns brand buzz and a loyal following in the marketplace Size of market does not make sense to support another player All Rights Reserved – KB Yip/YS Lieu Back Page : 72
  • Acknowledgement  Professor Kim and Mauborgne for enlightening us with such a great book.  You All, for being such a wonderful audience ! All Rights Reserved – KB Yip/YS Lieu Page : 73
  • Back Up All Rights Reserved – KB Yip/YS Lieu Page : 74
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  • So, are Red Ocean Strategies Worthless? NO! 1. A company must master its traditional markets using conventional strategic planning tools. - ‘It will always be important to swim successfully in the red ocean by out competing rivals. Red oceans will always matter and will always be a fact of business life’. - But ‘to focus on the red ocean is therefore to accept the key constraining factors of war- limited terrain and the need to beat an enemy to succeed – and to deny the distinctive strength of the business world: the capacity to create new market space that is uncontested.’ 2. But to sustain high performance, companies must create their own blue oceans, and make the competition irrelevant! - But blue oceans are largely uncharted a) no analytic fireworks to guide its creation and implementation, b) no principles to effectively manage risk, c) therefore too risky for managers to pursue. The book provides practical examples and guides to create blue oceans. All Rights Reserved – KB Yip/YS Lieu Page : 76
  • Successful Application of BOS World Congress on Information Technology (WCIT) 2008 • A premier global ICT forum that brings together global leaders in business, government and academia. • Held at the Kuala Lumpur Convention Centre on May 18 – 22, 2008, 5 days-event. • Themed “The Global Impact of Information and Communications Technology: Enable Businesses, Empower Societies, Enrich Economies”, • Very successful event, drew more than 2,500 delegates from over 80 countries! Mapping the blue ocean strategies From a strategic point of view, the 16th edition of Witsa's World Congress on Information Technology (Witsa's WCIT 2008) is conceived using the "blue ocean" strategy methodology. WCIT 2008 is constructed from the ground up to be similar to previous editions, primarily from the point of view of its focus on the global impact of ICT. Yet it is significantly different because of the collection of multiple events that are held concurrently. The former gives it continuity while the latter brings additional depth to an outstanding series that started with the first World Congress in 1978. Creating "blue oceans" is a dynamic process of strategising and execution. It is also about doing the right thing at the right time. At first, the organising committee needs to establish the ultimate goals, which must be achieved within a realistic time frame. Overall, there are three phases of development, which span two years. The phases include fundraising, programme formulation and production. At each phase, there are specific strategies being worked out and execution plans being carried out based on the "eliminate-reduce-raise-create" grid. This "E-R-R-C" grid mapped out the ultimate "blue ocean" framework for organising the WCIT 2008. With this framework, the organising committee managed to work out a unique WCIT 2008 strategy canvas for achievements. The strategy set out action plans to eliminate whatever that is redundant, outdated and trivial to the overall organisation of the event. It also eliminated many challenges to minimise operating cost and, at the same time, raise overall quality and create unique value propositions. Source : The Edge Daily Title : 19 May 2008 CEO's Laptop: All set for a most prestigious event by David Wong David Wong - Pikom chairman and group CEO of SnT Global Sdn Bhd All Rights Reserved – KB Yip/YS Lieu Page : 77
  • Successful Application of BOS Nintendo Wii All Rights Reserved – KB Yip/YS Lieu Page : 78