It’s the opposite to a red oceanPursues untapped market spacesFocuses on demand creationHas the opportunity for highly profitable growthIt’s a framework to identify new markets and manage risk
Value innovationFoundation of the blue ocean strategyTraditionally, you have to either choose to differentiate OR to lower costs.Create a blue ocean by driving costs down while driving value up for buyersAchieve a massive leap in value – for the customer and the companyAligns every function of the organisation together – which makes it a sustainable strategy.
Car sharePay a monthly subscription fee, and then pay per hour to use the carBook onlineSwipe a card across the windscreen to unlockAll petrol is included in the costParked all around inner city suburbs in Sydney and MelbourneLaunched in Melbourne, 200590 cars2500 members30% business members1
Value innovation – mapped to four actions frameworkTo simultaneously raise customer value and lower company costs, use this frameworkLook at the key competitive factors for each industry, and decide which ones to:ReduceEliminateRaise and CreateFlexicar chose to reduce…
Here are the four actions mapped out – making the ‘strategy canvas’ Drawing the strategy canvas is a key part of developing a blue ocean strategyYou are looking for three things with the value curve:Focus – not attempting to go after all the key factors of competitionDivergence – from the competitionCompelling Tagline ‘Around the corner, around the clock’ Show car value curveShow Flexicar value curveShow P/T curveShow – when competing against car ownership
Creating a blue ocean strategyLook for commercial opportunities using a variety of methods including looking at alternative industries, across strategic groups, at different buyers, or switching emotional and functional product qualities. Draw the strategy canvasMaximise the size of your blue ocean by looking at non-customers of similar industries, and finding their commonalities. Creates a new mass market. This step is to make sure you have passes some key hurdles: buyer utility, strategic pricing, company costs, and adoption strategies. Make sure your organisation is behind youHave a good, fair process for implementation.
This model has a few key strengths for the entrepreneurThe competitive advantage lasts for 10-15 yearsLess organisational barriers for entrepreneursForces you to focus on profitable opportunitiesScalable – it goes after new mass marketsWeaknesses – it shouldn’t stand alone Need to have traditional competitive strategies in your tool kitCould have more info on how to decide what are the key competitive factors to focus onNeed to dominate your new blue ocean as soon as possible to protect your positionCreating a blue ocean strategy requires clear and careful strategic thinking, but the benefits are long-term.
Blue Ocean Strategy
Blue oceans for entrepreneurs<br />Kim, W & Mauborgne, R 2005, Blue Ocean Strategy, Harvard Business School <br />Image by Brendan Landis, under CC licence: http://www.flickr.com/photos/qf8/265819544/<br />
What is a blue ocean?<br />It’s the opposite to a red ocean<br />Pursues untapped market spaces<br />Focuses on demand creation<br />Has the opportunity for highly profitable growth<br />It’s a framework to identify new markets and manage risk<br />
It’s all about breaking the value/cost trade-off<br />Costs<br />Cost savings: eliminate and reduce the factors an industry competes on<br />Value innovation<br />Buyer value: raising and creating the elements the industry has never offered<br />Buyer Value<br />
Flexicar – a blue ocean industry<br /><ul><li>Car sharing service, one of the first in Australia
How do you do it? The steps to a blue ocean strategy<br />1. Reconstruct market boundaries<br />2. Focus on the big picture, not the numbers<br />3. Reach beyond existing demand<br />4. Get the strategic sequence right<br />5. Overcome key organisational hurdles<br />6. Build execution into strategy<br />
Why use this model?<br />Requires clear and careful strategic thinking, but the benefits are long-term<br />1. van Stel, A & Burke, A 2010, “Blue Ocean vs Five Forces.” Harvard Business Review, p. 28. <br />