Blue Ocean Strategy

Contents
Blue Ocean Vs. Red Ocean Strategy
Blue Ocean Strategy Tools
Strategy Canvas and Four Action Framework
Six Principles of Blue Ocean Strategy
Formulating Blue Ocean Strategy
Executing Blue Ocean Strategy
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Blue Ocean Vs. Red Ocean Strategy

Blue Ocean vs. Red Ocean Strategy
Create uncontested market space
Make the competition irrelevant
Create and capture new demand
Compete in existing market space
Beat the competition
Exploit existing demand
Blue Ocean Strategy Red Ocean Strategy

Blue Ocean vs. Red Ocean Strategy
Break the value- cost trade off
Align the whole system of a firm’s activities with its strategic choice of differentiation and low cost
Make the value-cost trade off
Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost
Blue Ocean Strategy Red Ocean Strategy

Blue Ocean Strategy Tools Strategy Canvas
A diagnostic tool for building a compelling blue ocean strategy
It captures the current state of play in the known market space
Allow you to understand :
where the competition is currently investing
the factors the industry currently competes on in product, service and delivery
what customers receive from existing competitive offerings on the market

Four Action Framework Eliminate Reduce Raise Create

Four Action Framework Eliminate Reduce Raise Create Which of the factors that the industry takes for granted should be eliminated? Which factors should be reduced well below the industry’s standard? Which factors should be created that the industry has never offered? Which factors should be raised well above the industry’s standard?

Four Action Framework The Case of Cirque du Soleil (A Circus Company)
Theme
Refined environment
Multiple productions
Artistic music and dance
Eliminate Reduce Raise Create
Star performers
Animal shows
Aisle concession sales
Multiple show arenas
Fun and humor
Thrill and danger
Unique venue

Six Principles of Blue Ocean Strategy
Reconstruct market boundaries
Focus on the big picture, not the numbers
Reach beyond existing demand
Get the strategic sequence right
Overcome key organizational hurdles
Build execution into strategy
Formulation Principles Execution Principles

Formulating Blue Ocean Strategy

1. Reconstruct Market Boundaries
Focus on rivals within industry
Focuses on competitive position within strategic group
Focuses on better serving the buyer group
Head-to-Head Strategy Blue Ocean Strategy
Looks across alternative industries
Looks across strategic group within industry
Redefines the industry buyer group

1. Reconstruct Market Boundaries
Focuses on maximizing the value of product or service offerings within the bounds of its industry
Focuses on adapting to external trends as they occur
Head-to-Head Strategy Blue Ocean Strategy
Looks across to complementary product and service offerings
Participates in shaping external trends over time

2. Focus on the Big Picture, not the Numbers Focus on the Big Picture , not the Numbers The Four Steps of Visualizing Strategy
Visual Awakening
Visual Exploration
Visual Strategy Fair
Visual Communication

2. Focus on the Big Picture, not the Numbers Visual Awakening
Compare your business with your competitors’ by drawing your “as is” strategy canvas
See where your strategy needs to change

2. Focus on the Big Picture, not the Numbers Visual Exploration
Go to 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

2. Focus on the Big Picture, not the Numbers Visual Strategy Fair
Draw your “to be” strategy canvas based on insights from field observations
Get feedback on alternative strategy canvases from customers, competitors’ customers, and noncustomers
Use feedback to build the best “to be” future strategy

2. Focus on the Big Picture, not the Numbers Visual Communication
Distribute your before-and-after strategic profiles on one page for easy comparison
Support only those projects and operational moves that allow your company to close the gap to actualize the new strategy

3. Reach Beyond Existing Demand The Three Tier of Non-customers
First tier: “Soon to be” non-customers who are the edge of your market, waiting to jump ship
Second tier: “Refusing” non-customers who consciously choose against your market
Third tier: “Unexplored” non-customers who are in markets distant from yours

4. Get The Strategic Sequence Right The Sequence of Blue Ocean Strategy Buyer utility Is there exceptional buyer utility in your business idea? Price Is your price easily accessible to the mass of buyers? Cost Can you attain your cost target to profit at your strategic price? Adoption What are the adoption hurdles in actualizing your business idea? A commercially viable blue ocean idea

Executing Blue Ocean Strategy

5. Overcome Key Organizational Hurdles Overcome Key Organizational Hurdles Cognitive Hurdle Motivational Hurdle Resource Hurdle Political Hurdle

5. Overcome Key Organizational Hurdles Cognitive Hurdle (status quo) Resource Hurdle
Ride the “Electric Sewer”
Meet with Disgruntled Customers
Redistribute resources to your hot spots
Redirect resources from your cold spots
Engage in horse trading

5. Overcome Key Organizational Hurdles Motivational Hurdle Political Hurdle
Zoom in on Kingpins (key influencers)
Place kingpins on a fishbowl
Atomize to get the organization to change itself
Secure a consigliere on your top management team
Leverage your angels and silence your devils

5. Build Execution Into Strategy Fair Process of Strategy Strategy Formulation Process Fair Process – Engagement, Explanation, Expectation clarity Attitudes Trust and Commitment – “I feel my opinion counts” Behavior Voluntary Cooperation – “I’ll go beyond the call of duty” Strategy Execution Exceeds Expectation – self initiated

Source of Reference
W. Chan Kim (Author) and Renée Mauborgne (Author), Blue Ocean Strategy , HBS Publication

End of Material

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Blue Ocean Strategy

by Yodhia Antariksa on May 19, 2007

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