Strategonomic - Blue Ocean Strategy


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A very short introduction and key tools explanation of Blue Ocean Strategy.

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Strategonomic - Blue Ocean Strategy

  1. 1. BLUE OCEAN STRATEGY A Quick Summary
  2. 2. Key Idea <ul><li>Make the competition irrelevant by creating an uncontested new market space </li></ul><ul><li>Not by getting better for existing factors, but CREATE factors </li></ul><ul><li>Change the rules of the game </li></ul>
  3. 3. Companies tend to <ul><li>Define their industry similarly and focus on being the BEST within it </li></ul><ul><li>Look at their industries through the lens of generally accepted strategic groups (luxury automobile, economy cars etc) </li></ul><ul><li>Focus on same buyer group (influencer, purchaser, user) </li></ul><ul><li>Define the scope of products and services offered by their industry similarly </li></ul><ul><li>Accept their industry’s functional or emotional orientation </li></ul><ul><li>Focus on the same point in time and on current competitive threats </li></ul>
  4. 4. “… Everything that can be invented has been invented…” <ul><li>Look back 100 years … </li></ul><ul><li>These were not there: </li></ul><ul><li>Automobiles </li></ul><ul><li>Music recording </li></ul><ul><li>Aviation </li></ul><ul><li>Petrochemicals </li></ul><ul><li>Pharmaceuticals </li></ul><ul><li>… </li></ul><ul><li>Look back 30 years .. </li></ul><ul><li>These did not exist: </li></ul><ul><li>Mutual funds </li></ul><ul><li>Cell phones </li></ul><ul><li>Home videos </li></ul><ul><li>Bio technology </li></ul><ul><li>Laptops </li></ul><ul><li>… </li></ul>
  5. 5. Red Ocean vs. Blue Ocean Strategy Red Ocean Strategy Blue Ocean Strategy Compete in existing market space. Create uncontested market space. Beat the competition. Make the competition irrelevant. Exploit existing demand. Create and capture new demand. Make the value-cost trade-off. Break the value-cost trade-off. Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost. Align the whole system of a firm’s activities in pursuit of differentiation and low cost.
  6. 6. Value Innovation Value innovation is created in the region where a company’s actions favorably affect both its cost structure and its value proposition to buyers. Cost savings are made by eliminating and reducing the factors an industry competes on. Buyer value is lifted by raising and creating elements the industry has never offered. Over time, costs are reduced further as scale economies kick in due to the high sales volumes that superior value generates. Costs Buyer Value Value Innovation
  7. 7. The Six Principles of B.O.S. Formulation Principles Risk factor each principle attenuates <ul><li>Reconstruct market boundaries </li></ul><ul><li>Focus on the big picture, not the numbers </li></ul><ul><li>Reach beyond existing demand </li></ul><ul><li>Get the strategic sequence right </li></ul><ul><li>Search risk </li></ul><ul><li>Planning risk </li></ul><ul><li>Scale risk </li></ul><ul><li>Business model risk </li></ul>Evaluation principles Risk factor each principle attenuates <ul><li>Overcome key organizational hurdles </li></ul><ul><li>Build execution into strategy </li></ul><ul><li>Organizational risk </li></ul><ul><li>Management risk </li></ul>
  8. 8. Strategy Canvas <ul><li>The strategy canvas is both a diagnostic and an action framework for building a compelling blue ocean strategy. It captures the current state of play in the known market space. </li></ul><ul><li>This allows you to understand where the competition is currently investing, the factors the industry currently competes on in products, service, and delivery, and what customers receive from the existing competitive offerings on the market. </li></ul>
  9. 9. Strategy Canvas The horizontal axis captures the range of factors the industry competes on an invests in. The vertical axis captures the offering level that buyers receive across all these key competing factors. The value curve then provides a graphic depiction of a company’s relative performance across its industry’s factors of competition. High Low Price Use of enological terminology Above-the-line marketing Aging quality Vineyard prestige and legacy Wine complexity Wine range
  10. 10. Case: Cirque du Soleil
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  15. 15. Cirque Du Soleil “O” Las Vegas Best Show Ever!
  16. 16. Four Actions Framework The four actions framework offers an technique that breaks the trade-off between differentiation and low cost and to create a new value curve. It answers the four key questions of what industry takes for granted and needs to be eliminated; what factors need to be reduced below industry standards; what factors need to be raised above industry standards; and what should be created that the industry has never offered. A New Value Curve Reduce Eliminate Create Raise Which factors should be reduced well below industry standards? Which factors should be created that the industry has never offered? Which factors should be raised well above the industry’s standard? Which of the factors that the industry takes for granted should be eliminated ?
  17. 17. Effective Value Curve
  18. 18. Four Steps of Visualizing Strategy <ul><li>Visual Awakening </li></ul><ul><li>Visual Exploration </li></ul><ul><li>Visual Strategy Fair </li></ul><ul><li>Visual Communication </li></ul><ul><li>Compare your business with your competitors’ by drawing your “as is” strategy canvas. </li></ul><ul><li>See where your strategy needs to change </li></ul><ul><li>Go into the field to explore the six paths to creating blue oceans. </li></ul><ul><li>Observe the distinctive advantages of alternative products and services. </li></ul><ul><li>See which factors you should eliminate, create, or change. </li></ul><ul><li>Draw your “to be” strategy canvas based on insights from field observations. </li></ul><ul><li>Get feedback on alternative strategy canvases from customers, competitors’ customers, and noncustomers. </li></ul><ul><li>Use feedback to build the best “to be” future strategy. </li></ul><ul><li>Distribute your before-and-after strategic profiles on one page for easy comparison. </li></ul><ul><li>Support only those projects and operational moves that allow your company to close the gaps to actualize the new strategy. </li></ul>
  19. 19. Reorientating Strategic Focus <ul><li>From customers… to non customers of the industry </li></ul><ul><li>From competitors… to alternatives </li></ul>
  20. 20. Three Tiers of Noncustomers Your Market First Tier Second Tier Third Tier First Tier “ Soon To Be” non customer, former customer Second Tier Do not use or can not afford, hindered by access barriers (economic, techological, geographical) Third Tier Unexplored non customers, who have never thought of your market’s offerings as an option
  21. 21. Six Paths to reconstruct market boundaries Industry Strategic Group Buyer Group Scope of Product and Service Functional – emotional Time
  22. 22. Pioneer, Settler, Migrator Map Pioneers Migrators Settlers Today Tomorrow
  23. 23. Creating Barriers <ul><li>Conventional Logic  Case: CNN </li></ul><ul><li>Brand Image Conflict  Case:Bodyshop </li></ul><ul><li>Natural Monopoly  Case: Megaplex </li></ul><ul><li>Patent or Legal </li></ul><ul><li>High Volume  Rapid Cost Advantage </li></ul><ul><li>Network Externalities  Case: Facebook </li></ul><ul><li>Brand Buzz </li></ul>
  24. 24. Attribution <ul><li>W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy, 2005 </li></ul><ul><li>Jesse Starmers “Blue Ocean Strategy Summary”, Slideshare </li></ul>