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Blue ocean strategy primer

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  • 1. Blue Ocean Strategy Toolkit www.straligence.com -1-
  • 2. PART 1A BOS PRIMER Primer www.straligence.com -2-
  • 3. PRIMERSECTION TABLE OF CONTENTS1. INTRODUCTION Key concepts underlying Blue ocean strategies p. 4 Analytical tools and frameworks: The Strategy Canvas and the 4 Actions Framework p. 5 Blue ocean strategy principles: Overview p. 62. STRATEGY FORMULATION 6 paths to reconstructing market boundaries p. 7 Strategic planning: Focus on the big picture, not the numbers p. 8 Sizing up the Blue Ocean: Reach beyond existing demand p. 9 Crafting the Business Model: Get the strategic sequence right p. 103. STRATEGY EXECUTION Mobilizing the organization: Overcome key organizational hurdles p. 15 Execution: build execution into strategy p. 16The one-pager on Blue Ocean Strategy p. 17 www.straligence.com -3-
  • 4. Ch. 1Introduction ⎥ Key concepts underlying blue ocean strategiesIn red oceans, our efforts are focused on the conventional logic that we must outpace the competition with a better solution to a given problem. Blueocean strategy invites us to redefine the problem itself. It does so by breaking the value-cost trade-off in view of creating new uncontested marketplaces. Places where no one has been and where we would be the one defining the rules!THE DIFFERENCE BETWEEN RED AND BLUE OCEANS VALUE INNOVATION: THE HEART OF BLUE OCEAN STRATEGYIn red oceans, industry boundaries are defined and accepted. The Value without innovation tends to focus on value creation on ancompetitive rules of the game are known. Companies try to outperform incremental scale, i.e. something that improves value but is nottheir rivals in order to increase their share of the existing demand. sufficient to make us really stand out in the marketplace.As the market space gets crowded, profit and growth opportunities are Innovation without value tends to be technology-driven, marketreduced. Products become commodities, and cutthroat competition pioneering, or futuristic, often shooting beyond what buyers are readyturns the ocean bloody, i.e. red. to accept and pay for.Blue oceans are defined by untapped market space, demand creation, Value innovation occurs only if we align innovation with utility, price,and the opportunity for highly profitable growth. Some blue oceans are and cost positions. The focus here is not time-to-market, bleeding-edgecreated well beyond existing industry boundaries. Most are created technology or best practices. It is the ambition to break one of the mostwithin red oceans, by expanding industry boundaries. commonly accepted dogmas of competition-based strategy: the value- cost trade-off.In blue oceans, competition is irrelevant because the rules of the gameare yet to be set as we create a new market space. It is conventionally believed that companies can either create greater value to customers at a higher cost, or create reasonable value at aRed oceans will always matter. Traditional competitive strategy will lower cost. Here strategy is seen as making a choice betweencontinue to be a point of reference for growing and maintaining differentiation and cost. In contrast, to create blue oceans, we need torevenues at acceptable profit levels. But once supply exceeds demand, pursue differentiation and low cost simultaneously, by looking withincompeting for a share of an existing market will not be sufficient to and beyond our industry boundaries and redefining a marketsustain high performance. This is when we also need to go beyond altogether.competing. This is when, in order to seize new profit and growthopportunities, we also need to create blue oceans. Instead of focusing on beating the competition, value innovation focuses on making the competition irrelevant by creating a leap inEach ocean has its own approach to strategy. Red oceans call for value for buyers and our company, thereby opening up new andbuilding a defensible position within an existing industry. They focus on uncontested market space. The objective here is not to increase ourvalue creation, i.e. an incremental approach to delivering value to the competitiveness in the market as we know it. Rather, it is to create aexisting customers of an industry. Blue oceans follow a different whole new market where the rules of the games are yet to be created,strategic logic called value innovation. by us! www.straligence.com -4-
  • 5. Ch. 2Introduction ⎥ Analytical tools and frameworksThe strategy canvas is both the start and the end point of a blue ocean strategy formulation. An initial value curve depicts where the industry competes onand invests in. It is then transformed via the eliminate-reduce-raise-create actions framework. The resulting value curve shows a focused effort thatdiverges from existing market offerings and can be easily translated into a compelling tagline. THE STRATEGY CANVAS THE FOUR ACTIONS FRAMEWORK NEW VALUE CURVEIt facilitates the capture of the current state of play in the The four actions framework is used to reconstruct the buyer Our new value curve willknown market space. It visually plots a value curve that value elements that will define our future value curve. depict a viable strategy if itallows us to understand where the competition is currently First, we should ask ourselves which factors our company should has three characteristics:investing, the factors the industry currently competes on, eliminate. Often, these are factors the industry has longand what customers receive from the existing competitive competed on. They are based on implicit assumptions that have (1) FOCUS: it shows that weofferings in the market. been taken for granted even though they no longer have value, or do not diffuse our efforts may even reduce value. across all key factors of Then we look at whether products or services have been competition.To fundamentally shift the strategy canvas of our industry,we must begin by reorienting our strategic focus from overdesigned in the race to match and beat the competition. This (2) DIVERGENCE: the shapecompetitors to alternatives, and from customers to non- forces us to reduce those elements that over-serve customers, of our curve diverges fromcustomers of the industry. As we shift our focus, we gain and that increase our cost structure for no gain. those of other players.insight into how we can redefine the problem the industry At the same time, we should look at factors that are based on afocuses on and how we can reconstruct buyer value “compromise” within the industry and potentially raise them for (3) The curve can be easilyelements. As a result, we can decide how to reshape our greater customer appeal and satisfaction. translated into apositioning and related offerings to serve both existing Finally, we can discover entirely new sources of value for buyers clear, strong, truthful andcustomers and non-customers of an industry. and create new factors that generate demand and change the compelling TAGLINE. strategic pricing of the industry.THE INITIAL VALUE CURVE IS TRANSFORMED THROUGH… … THE ELIMINATE-REDUCE-RAISE-CREATE GRID, TO CREATE A… … NEW, FOCUSED, DIVERGING VALUE CURVE WITH A high // COMPELLING TAGLINE RELATIVE COSTSPOSITIONING Which of the factors Which factors should be // that the industry takes OF PLAYERS Eliminate for granted should be reduced well below the Reduce industry’s standard? eliminated? AND/OR // VALUE PLAYERS GROUPS INNOVATION low // Which factors should be Which factors should be created that the Create industry has never raised well above the Raise industry’s standard? Factor (a) Factor (b) Factor (c) Factor (n) offered? BUYER VALUE FACTORS THE INDUSTRY COMPETES ON AND INVESTS IN Design new factors of competition www.straligence.com -5-
  • 6. Introduction ⎥ Blue ocean strategy principles - overviewVenturing beyond an existing industry space implies a series of risks. The blue ocean strategy approach to strategy is based on six principles that cater forthe major risks of a new market creation project. Together, they define the underlying philosophy of blue oceans. 1 2 STRATEGY FORMULATION STRATEGY IMPLEMENTATION Search Risk Planning Risk Scale Risk Business Model Risk Organizational Risk Management Risk 6 PATHS STRATEGIC MARKET BUSINESS APPROACH PLANNING SIZING MODEL MOBILIZATION EXECUTION 1 2 3 4 5 6 Focus on the Reconstruct Reach beyond Get the Overcome key Build big picture, market existing strategic organizational execution into not the boundaries demand sequence right hurdles strategy numbers Consider six conventional Plan beyond incremental Challenge the Sequence business Through Tipping Point Via a Fair Process, boundaries of improvements via a conventional practice of model design to capture Leadership, tackle aim to motivate competition: visualization approach: finer segmentation and the newly created value: traditional hurdles: people to act on and ① Alternative industries resulting smaller target ① Buyer utility ① Cognitive execute a blue ocean ① Visual awakening markets. strategy in a ② Strategic groups mapping ② Resource Focus on demand sustained way, deep ③ Buyer groups ② Visual exploitation ② Pricing and the ③ Motivational aggregation by building in the organization: corridor of the ④ Complementary ③ on commonalities ④ Political Visual strategy fair masses ① Engagement product and service across non customers Identify and leverage offerings ③ Cost targets based ② Explanation ④ Visual groups: the factors of on pricing and ⑤ Functional-emotional communication ① Soon to be disproportionate ③ Clarity of desired margins orientation influence in the expectations ⑤ Pioneer, Migrator, ② Refusing ④ Potential adoption ⑥ Time organization. Settler map ③ Unexplored obstacles Each building block and their components are detailed in the following pages. www.straligence.com -6-
  • 7. Ch. 3 Blue ocean strategy principles ⎥ Strategy Formulation1. Reconstruct market boundariesThe six paths framework challenges the fundamental assumptions underlying many companies’ strategies. It encourages to look at alternative industries,strategic groups, chain of buyers, complementary offerings, functional and emotional appeal, and time. LOOK ACROSS LOOK ACROSS STRATEGIC GROUPS LOOK ACROSS 1 ALTERNATIVE INDUSTRIES 2 WITHIN INDUSTRIES 3 THE CHAIN OF BUYERS Focus on the purpose of a product or service and consider We should always consider the multiple players directly or In most industries you can capture the fundamental differences alternatives, not substitutes. indirectly involved in the buying decision: the purchasers (who among players within a small number of strategic groups (i.e. Substitutes are those that have a different form but offer the pay for the product or service); the users; and the influencers. group of companies pursuing a similar strategy). same functionality. Although these groups may overlap, they often differ and hold As a minimum, you can generally rank them on the basis of Alternatives are those that have different functions and forms different definitions of value. price and performance. but fulfill the same purpose. Challenging our industry’s conventional beliefs about which When looking for a blue ocean, the key is to break out of a buyer group should be targeted can lead to the discovery of • What are the alternative industries to our industry? strategic group and understand which factors drive customers’ new, locked values. For this, we should look across buyer decisions to trade up or down among groups. • How do customers make trade-offs across them? groups to gain new insight and draft new value curves. • What are the strategic groups in our industry? • What is the chain of buyers in our industry? • What makes them jump from an industry to another? • Why do customers trade up for the higher group? • Which buyer group does our industry focus on? Focus on the key factors that lead buyers to trade across • If we shifted the attention to another buyer group of our alternative industries and eliminate or reduce everything else. • Why do they trade down for the lower one? industry, how could we unlock new value? SIX PATHS TO RECONSTRUCT MARKET BOUNDARIES, BREAK FROM COMPETITION AND CREATE BLUE OCEANS LOOK ACROSS COMPLEMENTARY LOOK ACROSS FUNCTIONAL OR 4 PRODUCT & SERVICE OFFERINGS 5 EMOTIONAL APPEAL TO BUYERS 6 LOOK ACROSS TIME The total solution buyers seek when they choose a product or Blue ocean strategies rarely come out from projecting industry Competition in an industry tends to converge not only on the service may be composed of hidden complementary products trends. Instead, they arise from business insights into how scope of product and services, but also in terms of functional and services. trends will change value to customers and impact the /rational and feeling/emotional appeal. Yet the appeal of most A way to define the total solution is to explore what happens company’s business model. products or services is rarely one or the other. before, during and after our product or service is used. The idea is to look across time: the value a market delivers We should thus ask ourselves: • Does our industry compete on functionality or on today, vs. the value it might deliver tomorrow. • What is the context in which our product or service is emotional appeal? When looking at trends, we must focus on those that are used? • If we compete on emotional appeal, what elements can decisive to our business, that are irreversible and have a clear • What happens before, during and after? we strip out to make it functional? trajectory. Having identified these trends, we can look across • Can we identify the pain points? time at what the market would look like if they were taken to • If we compete on functionality, what elements can be • Can we eliminate these pain points through a their logical conclusion. Working back, we can identify what added to make it emotional? complementary product or service offering? must be changed today to unlock a new blue ocean. www.straligence.com -7-
  • 8. Ch. 4 Blue ocean strategy principles ⎥ Strategy Formulation2. Focus on the big pictureBuilding on the six paths framework, we can depict our “as-is", “alternative” and “best to-be” strategy canvases. To do so, there are four suggested stepsthat will help us create a visual representation of our strategy: visual awakening, visual exploration, visual strategy fair, and visual communication. VISUAL AWAKENING VISUAL EXPLORATION 1 2 Trigger change via our as-is canvas Drawing a canvas per every new opportunity • Having drawn our as-is canvas, we need to adopt a human-• We can compare the focus of our business to the one of our centered design approach, i.e. we must get into the field to competitors by drawing our “as-is” strategy canvas. watch customers use our products and services.• Here, we need to focus on the areas where we think our • We need to identify the array of complementary products and strategy needs to change. services that are consumed alongside our own. This will give• When we will start drawing the strategy canvas(es), we will get us an insight on how we could bundle opportunities. into productive arguments and contradictions. This will force • At the same time, we need to look for alternative ways of our teams and our leadership to share a common view on the fulfilling the need that our product or service satisfies. strategy essentials. • Each opportunity should be translated into a new value curve,• The diagram will make a stronger case for change than any e.g. one per each of the six paths, by looking at which factors argument based on numbers and words. we should eliminate, create or change. VISUAL STRATEGY FAIR VISUAL COMMUNICATION 3 4 Getting feedback for the best “to-be” canvas New vs. old value curve is the new metric• Each value curve should be clear and easily translatable into a compelling tagline. We should be able to explain each curve in • Every colleague (and strategic partner) should be able to ten minutes or less. compare the new vs. the old strategic profiles. They should• We can hang them on the walls, circulate them around and recognize where we stood and were we want to focus our capture their pro’s and cons, their blocks, challenges and efforts to create a compelling future. implications. • The new strategic profile is explained by all the executives who• We must emphasize: (1) factors that we thought were key to participated to its creation. They need to emphasize what our competitiveness but are in fact marginal to customers; (2) needs to be reduced, eliminated, increased and created. factors that we had previously overlooked. This way we can reassess some of our long-held assumptions. • The new picture is to become the reference point for each new• We will then be able to draw our best “to-be” strategy canvas initiative and investment decision, i.e. each new project is to be based on insights from field valued against its contribution to reshaping our existing value observations, customers, competitors’ customers, non- curve into our future one. customers, key partners and industry experts. www.straligence.com -8-
  • 9. Ch. 5 Blue ocean strategy principles ⎥ Strategy Formulation3. Reach beyond existing demandNon-customers tend to offer us far more insight into how to unlock and grow a blue ocean than do relatively content existing customers. Beyond our currentmarket are “soon to be”, “refusing”, and “unexplored” non-customers, representing untapped demand waiting to be released. DE-SEGMENTING MARKETS, AGGREGATING COMMONALITIES AND MAXIMIZING THE NEW MARKET This is the farthest away tier of non-customers from our industry’s existing customers. Typically, these Unexplored unexplored non-customers have not been targeted or thought of as potential customers by any player in our industry. That’s because their needs and the business opportunities associated with them have Non-customers who are in THIRD somehow always been assumed to belong to other markets. markets distant from ours Can we reach beyond existing customers and look across multiple markets to aggregate commonalities TIER into a new market? Refusing Refusing non-customers are people who either do not use or cannot afford to use the current market offerings because they find them unacceptable or beyond their means. Their needs are either dealt with SECOND Non-customers who by other means or ignored. TIER consciously choose against What are the key reasons non-customers refuse to use the products or services of our industry? our market Look for the commonalities across their responses. Focus on these, and not on their differences. Soon-to-be customers are those who minimally use the current market offerings to get by as they search Soon to be for something better. Upon finding any better alternative, they will eagerly jump ship. Locked within these FIRST Non-customers who are on first-tier non-customers is an ocean of untapped demand waiting to be released. What are the key reasons first-tier non-customers want to jump ship and leave our industry? TIER the edge of our market Look for commonalities across their response. Focus on these, and not on the differences among them. waiting to jump ship Look for commonalities across tiers. Our aim is to expand the market Our and create new demand. Market GO FOR THE BIGGEST CATCHMENT www.straligence.com -9-
  • 10. Ch. 6 Blue ocean strategy principles ⎥ Strategy Formulation4. Get the strategic sequence rightWe should not let costs drive prices. Nor should we scale down utility because high costs block our ability to profit at a strategic price that is easilyaccessible to the mass of target buyers. The right sequence for creating value innovation is (1) buyer utility, (2) price, (3) profit, (4) costs, and (5) adoption. Creation of Value Innovation and capturing of healthy profits Create a leap in Net Buyer Value 1 BUYER UTILITY 2 PRICE 3 COST 4 ADOPTION Can we produce our offering at the A Does our offering unlock Is our offering priced to attract the target cost and still earn a healthy What are the adoption hurdles in COMMERCIALL exceptional utility? mass of target buyers so that they profit margin? actualizing our business idea? Y VIABLE BLUE Is there a compelling reason for have a compelling ability to pay for Can we profit at the price easily the mass of people to buy it? it? accessible to the mass of target Are we addressing them up front? OCEAN IDEA buyers? No, rethink No, rethink No, rethink Look at the six stages of Identify the bandwidth Stick to to the logic that Educate the fearful: the buyer’s experience that captures the largest our strategic price drives employees, business cycle and identify blocks group of target buyers our target profit that partners and public to buyer’s utility. Identify while making it difficult drives our target cost. opinion at large. Openly the value proposition for our competitors to Hit target costing via discuss to solve issues that removes the biggest imitate us. streamlining, partnering upfront and get blocks allowing us to and/or pricing maximum buy in. turn non-customers into innovation. customers.Each step is further detailed in the pages hereafter. www.straligence.com - 10 -
  • 11. Blue ocean strategy principles ⎥ Strategy Formulation4. Get the strategic sequence right ⎥ 1. BUYER UTILITYDoes our offering unlock exceptional utility? Is there a compelling reason for the mass of people to buy it?By locating our proposed offering on the thirty-six spaces of the buyer utility map, we can clearly see how, and whether, the new idea not only creates adifferent utility proposition from existing offerings but also removes the biggest blocks to utility that stand in the way of converting non-customers intocustomers. If our offering falls on the same space or spaces as those of other players, chances are it is not a blue ocean offering. The buyer utility BUYER EXPERIENCE CYCLE ⎥ SIX STAGES OF BUYER EXPERIENCE CYCLE map 1. PURCHASE 2. DELIVERY 3. USE 4. SUPPLEMENTS 5. MAINTENANCE 6. DISPOSAL • How long does it take • How long does it take • Does the product • Do you need other • Does the product • Does the use of the to find the product to get the product require training or products and services require external product create waste you need? delivered? expert assistance? to make this product maintenance? items? • Is the product easy to work? • Is the place of • How difficult is it to store when not in • How easy is it to • How easy is it to purchase attractive “unpack and install” use? • If so, how costly are maintain and upgrade dispose of the and accessible? the new product? • How effective are the they? the product? product? • How secure is the • Do buyers have to product’s features • How much time do • How costly is • Are there legal or transaction arrange delivery and functions? they take? maintenance? environmental issues environment? themselves? • Does the product or in disposing of the If yes, how costly and service deliver far • How much pain do product safely? • How rapidly can you difficult is this? more power or they cause? make a purchase? options than required • How costly is • How easy are they to disposal? by the average user? obtain? Is it overcharged with bells and whistles? CUSTOMER In which stage are the biggest blocks to customer productivity? PRODUCTIVITY BLOCKS TO BUYER UTILITY SIMPLICITY In which stage are the biggest blocks to simplicity? CONVENIENCE In which stage are the biggest blocks to convenience? RISK In which stage are the biggest blocks to reducing risks? FUN AND IMAGE In which stage are the biggest blocks to fun and image? ENVIRONMENTA In which stage are the biggest blocks to environmental friendliness? L FRIENDLINESS www.straligence.com - 11 -
  • 12. Blue ocean strategy principles ⎥ Strategy Formulation 4. Get the strategic sequence right ⎥ 2. STRATEGIC PRICE Is our offering priced to attract the mass of target buyers so that they have a compelling ability to pay for it? STEP 1: STEP 2: IDENTIFY THE PRICE CORRIDOR OF THE MASS SPECIFY A PRICE LEVEL WITHIN THE PRICE CORRIDOR Same form Different form, Different form same function and DIFFICULT TO IMITATE function, same objective High degree of legal and resource protection CAN BE IMITATED WITH SOME DIFFICULTYPRICE Price Corridor of the Masses Some degree of legal and resource protection The price bandwidth that captures the largest Mid-level pricing groups of target buyers EASY TO IMITATE Low degree of legal and resource protection The size of circle is proportional to number of buyers that the product/service is able to attract. A good way to look outside industry boundaries is to list products and The second step helps us determine how high a price we can afford to services that fall into the three categories above. set within the corridor of the masses, without inviting competition to This allows us to see the full range of buyers that can be poached from imitate products or services. other industries as well as from non-industries. It provides a way to identify where the mass of target buyers is and what prices these buyers are prepared to pay for the products and services they currently use. www.straligence.com - 12 -
  • 13. Blue ocean strategy principles ⎥ Strategy Formulation4. Get the strategic sequence right ⎥ 3. TARGET COSTCan we produce our offering at the target cost and still earn a healthy profit margin? Can we profit at the price easily accessible to the mass of targetbuyers? If you are to arrive at a cost structure that is STRATEGIC TARGET TARGET both profitable and hard for potential followers PRICE PROFIT COST to match, you must tackle the price equation as price-minus costing, not cost-plus pricing. Three levers to hit ■ Can the service’s or product’s the cost target ■ In bringing a new product or raw materials be replaced by STREAMLININ service to market, many unconventional, less expensive 1 G AND COST PARTNERING 2 companies mistakenly try to carry ones? out all the production and INNOVATIONS ■ Can high-cost, low-value added distribution activities themselves. activities in our value chain be ■ Partnering provides a way for significantly eliminated, reduced companies to secure needed or outsourced? capabilities fast and effectively PRICING while dropping their cost ■ Can the physical location of our 3 product or service be shifted from INNOVATION structure. It allows a company to prime real estate locations to leverage other companies’ lower-cost locations? expertise and economies of ■ If streamlining and cost innovation and/or partnering does scale. ■ Can we truncate the number of parts of steps used in production not bring us to the desired target cost, is changing the ■ Partnering includes closing gaps by shifting the way things are pricing model of the industry a viable alternative? in capabilities through making made? ■ The aim is not to compromise on the strategic price, but to small acquisitions when doing so hit the target through a new price model, e.g. is faster and cheaper, providing ■ Can we digitize activities to renting/leasing vs. selling, equity interest in the customer’s access to expertise that has reduce costs? business, etc. already been mastered. www.straligence.com - 13 -
  • 14. Blue ocean strategy principles ⎥ Strategy Formulation4. Get the strategic sequence right ⎥ 4. ADOPTIONAlmost by definition, a blue ocean idea threatens the status quo. As a result, it may provoke resistance among employees, partners and the general public.Often underestimated or put aside because of its cost, educating the “fearful” can have a make or break impact on our new idea. Identifying threats toemployees and third parties and openly discussing issues upfront helps minimize risks and defuse negative opinions that would be much more costly toaddress later on. Educate the fearful ■ Before going public with an idea, we must communicate to our colleagues the threats and benefits posed by its execution. 1 Employees ■ We must work with our colleagues to find ways of defusing the threats so that everyone feels as comfortable as possible and is set to win, despite the shifts that will be necessary in people’s roles, responsibilities and rewards. ■ Will our partners fear that their revenue streams or market positions will be threatened by our new business idea? If so, we must openly discuss the issues with them and find a win-win solution upfront. Business 2 partners ■ Even if a common ground is not found and we are due to put an end to a business relationship, it is in our interest to find an agreement through an open conversation as early as possible. The worst thing that could happen is to see our efforts undermined by a partners’ sales force. ■ If the idea threatens established social or political norms, general public’s opinion could represent a fierce opposition. Again, the best recommendation is not to General 3 public underestimate the indirect negative impacts of third parties. ■ Engaging in an open discussion about why the adoption of the new idea is necessary and beneficial is the best way to defuse negative press upfront. www.straligence.com - 14 -
  • 15. Ch. 7 Blue ocean strategy principles ⎥ Strategy Implementation5. Key organizational hurdlesWe all know that strategy execution is at least as important as, if not more important than, strategy definition. The changes underlying a blue oceanstrategy make execution even more delicate. This is why carefully addressing four key organizational hurdles can make or break our initiative, no matterhow strong is our business case. COGNITIVE HURDLE POLITICAL HURDLE What are the three most important facts and How do we overcome potential corporate figures that we will use to make people aware politics, intrigue and plotting? of the need for a strategic shift and agree on TIPPING POINT LEADERSHIP APPROACH Who are the possible negative influencers who its causes? can fiercely and vocally oppose the new Identify, focus on and leverage people, acts and activities strategy? Are they only internal? Are they also How can we make people, and especially that exercise disproportionate influence on performance. external to our department, organization, or leadership, see the reality first hand? How can Fundamental changes can happen quickly when the beliefs company? customers or third parties help us? and energies of a critical mass of people create an The Consigliere will help us identify in advance epidemic movement toward an ideal. Key to unlocking an the possible land mines. He/she will profile What are the three most effective and practical epidemic movement is concentration, not those who have the most to win and to lose ways we could leverage to make executives dispersion/diffusion of effort. from the new corporate direction. He will help and employees experience and feel the need us isolate the detractors and discourage them for change? Employees with Employees with before their war starts to get any steam. disproportionate disproportionate influence influence Against Mass of In favor employees KINGPINS: Who are the people inside our HOT SPOTS: Which of our activities are group that are the most respected and currently poorly staffed but have a high persuasive natural leaders and influencers that potential to deliver superior results? have the ability to unlock or block access to “Consigliere” key resources? COLD SPOTS: Which activities do we pursue One of the key factors of our success, no matter how FISHBOWL: Can we motivate the kingpins by today that require a high input of resources but putting them in the spotlight and showing to strong our business case, is to know in advance all the deliver a low impact on our performance? others their actions (and inactions) in a likely angles of attack to our proposal. The Consigliere, a repeated and highly visible way? HORSE TRADING: How could we reshuffle highly respected insider, will help us know whom will fight ATOMIZED CHALLENGE: What are the “bite- our resources allocation for greater impact and us and whom will be naturally interested in aligning size atoms” of our initiative that are individually business performance? him/herself with the new strategy. attainable and collectively allow us to implement our strategy? RESOURCE HURDLE MOTIVATIONAL HURDLE www.straligence.com - 15 -
  • 16. Ch. 8 Blue ocean strategy principles ⎥ Strategy Implementation6. Build execution into strategyOur company will (continue to) stand apart as a great and consistent executor when our people embrace our new strategy with their minds and hearts.When of their own accord they will be willing to go beyond compulsory execution to voluntary cooperation. When trust and commitment will alignattitudes and behavior to the spirit of our strategy, not to its letter. Adopting a fair process to strategy execution will help us achieve this goal deep into allthe ranks of our company, across teams and departments. FAIR PROCESS: ENGAGEMENT, EXPLANATION, EXPECTATION CLARITY INTELLECTUAL AND TRUST VOLUNTARY COOPERATION IN EXCEED EXPECTATIONS EMOTIONAL RECOGNITION & COMMITMENT STRATEGY EXECUTION Emotional recognition: It is only through actions, not words, that When you and I are being considered, Our colleagues want to be appreciated for we will gain the trust and commitment of all valued and feeling recognized, we want to Building such an intrinsic and their value, for their individual worth, involved parties. We must walk our talk share. Recognizing our intellectual worth extrinsic motivation within our regardless of the hierarchical level. They and make others walk their talk. inspires us and makes us want to impress colleagues can help us pull together are not “resources”, “labor factor” or Indeed, we must create an environment of and confirm the expectations of those who our collective wisdom and generate “personnel”. They are human beings who trust towards those leading the new trust us and in whom we trust. brilliant new ideas, processes and want to and should be treated with full initiative as well as among those tricks to make us achieve our goals. respect and dignity. participating to it and being affected by it, Additionally, if there is an emotional People will be almost in an auto- Intellectual recognition: directly or indirectly. component to the recognition, we feel pilot mode because they will Our colleagues may have brilliant ideas Recognition and feedback will allow us to emotionally tied to the strategy and the understand what we are aiming for, and new points of view. We must leverage build a strong sense of commitment. end result. We are much more willing to go they are emotionally bound to the their willingness to be consulted and show Ideally it will drive ourselves and our the extra mile and give all we’ve got. result, they are being valued for that their perspective is appreciated and colleagues to override personal self- their intelligence and skills and trust given thoughtful reflection. interest. that this is done in a clear and equal way in the best interest of all of us. Open & collaborative strategic planning Positive and optimistic attitude Proactive and determined behavior ENGAGEMENT: We make sure that we involve our colleagues in the strategic decisions that affect them. We do so by asking for their input and by Potentially, such a momentum can allowing them to refute the merits of one another’s ideas and assumptions. Our teams show respect for individuals and for their ideas; they be further fuelled by a transcendent encourage refutation in order to sharpen our thinking and leverage collective wisdom. motivation, one that goes beyond the goals of the individual and of our EXPLANATION: We want every employee involved and affected by our strategy to understand why final strategic decisions are made as they are. By company. For example, a goal that sharing the thinking underlying our decisions, our colleagues will be confident that we have considered all options and opinions, and that is linked to a humanitarian cause decisions have been made impartially in the best interest of the company. linked to our project, to the well EXPECTATION CLARITY: Once our strategy is set, we must clearly set the new rules of the game. Goals, targets and milestones must be clearly being of customers beyond our communicated. So must responsibilities and rewards. As a result, political jockeying and favoritism should be killed, letting our people focus on products and services, or, to the executing strategy rapidly. extent our products and services allow us to, to the improvement of Our employees care as much about the justice of the process the society we live in. through which our outcome will be produced as they do about the outcome itself! www.straligence.com - 16 -
  • 17. THE ONE PAGER ON BLUE OCEAN STRATEGYRed vs. Blue - In red oceans, our efforts are focused on the conventional logic that we must outpace the competition with a better solution to a given problem. Blue ocean strategy invites usto redefine the problem itself. It does so by breaking the value-cost trade-off in view of creating new uncontested market places. Places where no one has been and where we would be theone defining the rules!Analytical Tools & Frameworks - The strategy canvas is both the start and the end point of a blue ocean strategy formulation. An initial value curve depicts where the industry competeson and invests in. It is then transformed via the eliminate-reduce-raise-create actions framework. The resulting value curve shows a focused effort that diverges from existing marketofferings and can be easily translated into a compelling tagline.Underlying principles - Venturing beyond an existing industry space implies a series of risks. The blue ocean strategy approach to strategy is based on six principles that cater for themajor risks of a new market creation project: search risk, planning risk, scale risk, business model risk, organizational risk and management risk. Together, they define the underlyingphilosophy of blue oceans.Six paths to reconstruct market boundaries - The six paths framework challenges the fundamental assumptions underlying many companies’ strategies. It encourages to look atalternative industries, strategic groups, chain of buyers, complementary offerings, functional and emotional appeal, and time.Strategic planning focused on the big picture - Building on the six paths framework, we can depict our “as-is", “alternative” and “best to-be” strategy canvases. To do so, there are foursuggested steps that will help us create a visual representation of our strategy: visual awakening, visual exploration, visual strategy fair, and visual communication.Reaching beyond existing demand - Non-customers tend to offer us far more insight into how to unlock and grow a blue ocean than do relatively content existing customers. Beyond ourcurrent market are “soon to be”, “refusing”, and “unexplored” non-customers, representing untapped demand waiting to be released.Getting the strategic sequence right - We should not let costs drive prices. Nor should we scale down utility because high costs block our ability to profit at a strategic price that is easilyaccessible to the mass of target buyers. The right sequence for creating value innovation is (1) buyer utility, (2) price, (2b) profit, (3) costs, and (4) adoption. 1. Buyer utility - Does our offering unlock exceptional utility? Is there a compelling reason for the mass of people to buy it? By locating our proposed offering on the thirty-six spaces of the buyer utility map, we can clearly see how, and whether, the new idea not only creates a different utility proposition from existing offerings but also removes the biggest blocks to utility that stand in the way of converting non-customers into customers. If our offering falls on the same space or spaces as those of other players, chances are it is not a blue ocean offering. 2. Strategic Price - Is our offering priced to attract the mass of target buyers so that they have a compelling ability to pay for it? 3. Target Cost - Can we produce our offering at the target cost and still earn a healthy profit margin? Can we profit at the price easily accessible to the mass of target buyers? 4. Adoption - Almost by definition, a blue ocean idea threatens the status quo. As a result, it may provoke resistance among employees, partners and the general public. Often underestimated or put aside because of its cost, educating the “fearful” can have a make or break impact on our new idea. Identifying threats to employees and third parties and openly discussing issues upfront helps minimize risks and defuse negative opinions that would be much more costly to address later on.Mobilizing the organization to overcome key organization hurdles - We all know that strategy execution is at least as important as, if not more important than, strategy definition. Thechanges underlying a blue ocean strategy make execution even more delicate. This is why carefully addressing four key organizational hurdles can make or break our initiative, no matterhow strong is our business case.Building execution into strategy via a fair process - Our company will (continue to) stand apart as a great and consistent executor when our people embrace our new strategy with theirminds and hearts. When of their own accord they will be willing to go beyond compulsory execution to voluntary cooperation. When trust and commitment will align attitudes and behavior tothe spirit of our strategy, not to its letter. Adopting a fair process to strategy execution will help us achieve this goal deep into all the ranks of our company, across teams and departments. www.straligence.com - 17 -
  • 18. Blue Ocean Strategy ToolsPrimer Methodology MS PowerPoint MS Excel Templates Forms www.straligence.com www.straligence.com - 18 -