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Blue Ocean Strategy
How to Create Uncontested Market Space
  and Make the Competition Irrelevant



                   Fac...
Blue Ocean Strategy (BOS)

              Introduction to BOS
              BOS Tools : Strategy Canvas & E.R.R.C.
      ...
Objectives

   Develop understanding of Blue Ocean Tool Sets and how
    to apply them effectively
        Strategy Canv...
Introduction to Blue Ocean Strategy


                                 History & Background
                             ...
History & Background
       • Authored by W. Chan Kim and Renee Mauborgne in
         2005.

       • Based on a study of ...
Defining Red and Blue Ocean
                   What’s Red, What’s Blue?

     Red Ocean Strategy                          ...
Examples of Red and Blue Ocean




        All Rights Reserved – KB Yip/YS Lieu   Page : 7
Six Principles of Blue Ocean Strategy
 Formulation Principles                       Execution Principles

1. Reach beyond ...
Reach Beyond Existing Demand

                                          First Tier: “Soon-to-be” non-
                   ...
Example – [yellow tail]




Traditional Wine :                                      [yellow tail] :
   • An elite, refined...
Example – [yellow tail]
                             Tier 3 – Anyone that drinks water
Tier 1 – Wine drinker market       ...
Reach Beyond Existing Demand


         Entertainment
                                                                    ...
Example – [Nintendo]
   Electronic Game                                                 Nintendo Wii
       Industry      ...
Value Innovation – The Cornerstone of BOS
   Value innovation places equal emphasis on value and innovation.
   Value in...
Blue Ocean Strategy Tools




    Strategy Canvas
    Eliminate-Reduce-Raise-Create
     (ERRC) Grid



          All Ri...
What is Strategy Canvas?
Degree of which each competitor                                            Value Curves
offers/in...
4 Actions Framework
Strategically
Reduce Cost
                                        Reduce
                             ...
Eliminate-Reduce-Raise-Create
         (ERRC) Grid
  Eliminate                                          Raise




  Reduce...
Formulating Blue Ocean Strategy

            75 mins                             120 mins                              120...
Activity 1 & 2 : As-Is Analysis
                       Review XYZ As-Is Strategy Canvas


                 High         4....
Reconstruct Market Boundaries
       There are 6 pathways to reconstruct the market boundaries


                        ...
Across Alternative Industries
                            BOS Example –
   Alternatives include products or services that...
Strategy Canvas - NetJets
                        Eliminate                                     Raise

                   ...
Across Alternative Industries
                         BOS Example –
     Conventional Airline                            ...
Strategy Canvas - Air Asia
                                         Eliminate                                             ...
Reconstruct Market Boundaries
       There are 6 pathways to reconstruct the market boundaries


                        ...
Across Strategic Groups
                             BOS Example –
   Strategic Groups –Groups of companies within an ind...
Strategy Canvas - Curves
          Eliminate                                         Raise

                              ...
Across Strategic Groups
                            BOS Example – OldTown




   Expensive
   Hygienic
   Good Ambience...
Across Strategic Groups
                              BOS Example – Tune Hotel
           4/5 Stars Hotels

              ...
Reconstruct Market Boundaries
       There are 6 pathways to reconstruct the market boundaries


                        ...
Across Chain of Buyers
                                   BOS Example –
   There is a chain of ‘buyers’ who are directly ...
Across Chain of Buyers
                   BOS Example – Nintendo Wii
                        Everyone is a gamer!




    ...
Strategy Canvas : Nintendo Wii
                                              Eliminate                                    ...
Reconstruct Market Boundaries
       There are 6 pathways to reconstruct the market boundaries


                        ...
Across Complementary Products & Services
                           BOS Example – NABI
   Define the total solution buyer...
Strategy Canvas - NABI
                           Eliminate                                 Raise

                       ...
Across Complementary Products and Services
                    BOS Example:                               Operated 798 sto...
Across Complementary Products and Services
                    BOS Example -
• Largest EMS (Electronics Manufacturing
  Se...
BOS Example - Foxconn
                                                  Repair &
                                         ...
Strategy Canvas - Foxconn
High




                                                                                       ...
Reconstruct Market Boundaries
       There are 6 pathways to reconstruct the market boundaries


                        ...
Across Functional or Emotional Appeal
                              BOS Example – QB House
 Some industries compete princ...
Across Functional or Emotional Appeal
                   BOS Example –
    Institute / College




                       ...
Strategy Canvas - LimKokWeng
                      Eliminate               Raise

                  Foreign Cert      •  ...
Reconstruct Market Boundaries
       There are 6 pathways to reconstruct the market boundaries


                        ...
Across Time
                    BOS Example – iTune



                       Apple launched                              ...
Across Time
                  BOS Example :
                                                                  A video sha...
Strategy Canvas - YouTube
                                                    Eliminate                                   ...
Look across Time


                                 Weird Science


              Climate Change                          ...
From Head-to-Head Competition to Blue Ocean Creation

                          Head-To-Head Competition                  ...
Across Multiple Pathways
           BOS Example – NV Multi Corporation
    Traditional Graveyard                          ...
Across Multiple Pathways
             BOS Example – NV Multi Corporation


                                          Compl...
Strategy Canvas - NV Multi Corporation
                                              Eliminate                            ...
Activity 3 & 4 : Reconstruct Market Boundaries
                                Identify Divergent Factors


              ...
Activity 3 & 4 : Reconstruct Market Boundaries
                    Identify Divergent Factors

Sub-Group :


Divergent Fac...
Activity 5 & 6 : To-Be Strategy Canvas
  Construct Desired Value Curve for XYZ

              Eliminate            Create
...
Activity 5 & 6 : To-Be Strategy Canvas
     Construct Desired Value Curve for XYZ

             Eliminate       Create
Com...
Three Characteristics of a Good Strategy




 1. Focus




            2. Divergence


                             Now Ev...
Barriers to Imitation


  Does not Make Sense                   Brand Image Conflicts                   Economies of Scale...
Conclusion:
 Focus on the Big Picture, not the Numbers
    Awakening            Exploration            Strategy Fair      ...
Get the Strategic Sequence Right

Red Ocean
Sequence             Cost                 Price                 Utility       ...
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
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Blue Ocean Strategy - Summary and Examples

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This is a workshop presentation developed by KB Yip and YS Lieu for a Learning Institution. It can be easily customized to suit the needs for other organizations. Please contact KB Yip (ymike27@hotmail.com) if you need to get a copy of this presentation.

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Transcript of "Blue Ocean Strategy - Summary and Examples"

  1. 1. 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
  2. 2. 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
  3. 3. 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
  4. 4. 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
  5. 5. 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
  6. 6. 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 •• Simultaneous pursuit strategy of Simultaneous pursuit strategy of differentiation or low cost differentiation or low cost differentiation and low cost differentiation and low cost All Rights Reserved – KB Yip/YS Lieu Page : 6
  7. 7. Examples of Red and Blue Ocean All Rights Reserved – KB Yip/YS Lieu Page : 7
  8. 8. Six Principles of Blue Ocean Strategy Formulation Principles Execution Principles 1. Reach beyond existing 5. Overcome key demand organizational 2. Reconstruct market hurdles boundaries 6. Build execution into 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
  9. 9. Reach Beyond Existing Demand  First Tier: “Soon-to-be” non- customers who are on the edge of your market, waiting to jump ship Third Tier Second First Tier  Second Tier: “Refusing non- cean Tier customers who consciously Yourlu B eO choose against your market. Market  Third Tier: “Unexplored” non customers who are in markets distant from yours. Blue Ocean – Go for the Largest Catchment of Non-Customers All Rights Reserved – KB Yip/YS Lieu Page : 9
  10. 10. Example – [yellow tail] Traditional Wine : [yellow tail] : • An elite, refined image in packaging with heavy • No jargon.Simple and nontraditional label. use of wine terminology. • Aging is not important. • 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, • Only one Red (Shiraz) and one White such as tannins and oak. (Chardonnay). • A diverse range of wines to cover all varieties of grapes & consumer preferences All Rights Reserved – KB Yip/YS Lieu Page : 10
  11. 11. Example – [yellow tail] Tier 3 – Anyone that drinks water Tier 1 – Wine drinker market [yellow tail] did not focus on the wine market only Third Third Tier Tier Second Second First Tier First Tier Tier Tier Your Red Your Market Wine Market X [yellow tail] created a Blue Ocean by making its wine Tier 2 – “Easier to drink” market, eg., beer, cocktails, soft-drink more appealing to the bigger population All Rights Reserved – KB Yip/YS Lieu Page : 11
  12. 12. Reach Beyond Existing Demand Entertainment Entertainment Theater Performance Theater Performance Circus Circus Circus Circus X X All Rights Reserved – KB Yip/YS Lieu Page : 12
  13. 13. Example – [Nintendo] Electronic Game Nintendo Wii Industry Nintendo created a Blue Ocean by reducing the complexity, add the ease of use and fun! Everyone Everyone Girls Else Girls Else Other Other Males Males Young Young Antisocial Antisocial Males Males All Rights Reserved – KB Yip/YS Lieu Page : 13
  14. 14. 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 Cost Saving – Eliminate & Reduce Competing Factors Value Innovation Buyer Value Lifted – Raise Buyer Value & Create New Elements Back All Rights Reserved – KB Yip/YS Lieu Page : 14
  15. 15. Blue Ocean Strategy Tools  Strategy Canvas  Eliminate-Reduce-Raise-Create (ERRC) Grid All Rights Reserved – KB Yip/YS Lieu Page : 15
  16. 16. What is Strategy Canvas? Degree of which each competitor Value Curves offers/invests in each factor High Competitor 1 Factors that the industry Offering Level Competitor 2 competes & Mid invests, also potential Your Company areas where customer Low Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor 6 Factor 7 Factor 8 value could be Competing Factors created. Graphical Representation of Strategy + Big Picture View + Landscape Scanning + Relative Positioning vs. Competitors All Rights Reserved – KB Yip/YS Lieu Page : 16
  17. 17. 4 Actions Framework Strategically Reduce Cost Reduce Which factors should be reduced well below the industry's standard? Eliminate Raise A New A New Which of the factors that Which factors should be the industry takes for Value Value raised well above the granted should be Curve Curve industry's eliminated? Strategically Create Invest in Which factors should be created that the industry has never offered? All Rights Reserved – KB Yip/YS Lieu Page : 17
  18. 18. Eliminate-Reduce-Raise-Create (ERRC) Grid Eliminate Raise Reduce Create Back All Rights Reserved – KB Yip/YS Lieu Page : 18
  19. 19. Formulating Blue Ocean Strategy 75 mins 120 mins 120 mins Exploration : Strategizing : Awakening : Reconstruct Market To-Be Strategy As-Is Analysis Boundaries Canvas  Activity 1 (45 min)  Activity 3 (90 min)  Activity 5 (90 min) • Split into 3 Groups • Split into 3 Groups • Split into 3 Groups • Review As-Is Strategy • Use 6 Paths Framework, • Use ERRC to construct the Canvas (30 min) reconstruct market Desired Value Curve (60 boundaries & identify • Presentation (5 min each, mins) Divergent Factors (60 min) 15 min total) • Presentation (10 min each, • Presentation (10 min each, 30 mins total)  Activity 2 (30 min) 30 min total) • Agree to ONE As-Is  Activity 4 (30 min)  Activity 6 (30 min) Strategy Canvas • Agree to Top 3-5 Divergent • Agree to ONE To-Be Factors Strategy Canvas All Rights Reserved – KB Yip/YS Lieu Page : 19
  20. 20. Activity 1 & 2 : As-Is Analysis Review XYZ As-Is Strategy Canvas High 4.5 4 Offering Level 3.5 3 Mid 2.5 2 1.5 Competitors 1 XYZ 0.5 Low 0 s on h rs es iti ge at to ie s ng re n a P li t di ltu ve gn nk er li t a ac i an u titi co Li re ci F Br /C pe lR e st ry C a Fa y le st om na du & fe C io In m Li e ut ra Fe tit og In s Pr Competing Factors Back All Rights Reserved – KB Yip/YS Lieu Page : 20
  21. 21. Reconstruct Market Boundaries  There are 6 pathways to reconstruct the market boundaries Across Alternate Industry Across Strategic Groups Across Buyer Groups Blue Red Across Complementary Scope of Ocean Ocean Products & Services Across Functional Emotional Orientation Across Time All Rights Reserved – KB Yip/YS Lieu Page : 21
  22. 22. Across Alternative Industries BOS Example –  Alternatives include products or services that have different functions and forms but the same purpose. Commercial Corporate Corporate Airline Jet Commercial Airlines Jet • Pay per use • Less Travel Time Good • No Maintenance • Less Hassle • P2P 1/16 Ownership Smaller 50 hrs/yr @ $375k Airplanes, • Not P2P Airport, • High Travel Bad • High Cost Less Staff Time • Security Concern Point-to-point, Faster, Less Hassle, Increase Productivity All Rights Reserved – KB Yip/YS Lieu Page : 22
  23. 23. Strategy Canvas - NetJets Eliminate Raise • Speed of travel time • Ease of travel • Flexibility and Reliability • In flight service Reduce Create • Price • Need for customers to manage aircraft • Deadhead costs High Private Jet NetJets' Value Curve Com m ercial Airlines Low Price Need for Deadhead Speed of total Ease of travel Flexibility and In- flight service customer's to costs travel time reliability manage aircraft All Rights Reserved – KB Yip/YS Lieu Page : 23
  24. 24. Across Alternative Industries BOS Example – Conventional Airline Coach Across Alternative Industries  Slow  Cheap  Point to Point  Fast  Expensive  Better Services Now Everyone Can Fly!  Flight Connections  Price of Coach & Speed of Flight  P2P Direct Flight  No Frill – User Pay  Budget Travel Package All Rights Reserved – KB Yip/YS Lieu Page : 24
  25. 25. Strategy Canvas - Air Asia Eliminate Raise  Price Competition • Quality of Safety  Seat Selection • Point to Point Direct  Free Food & Beverages Flight  Air Ticket  VIP Lounge  Flight Connection Reduce Create  Air Fare • Web Registration  Capital • Express Boarding  Stopover time • Budget Hotel  Staffing (ground and air) High Air Asia Offering Level Other Local Airline Land Transportation Low e p n y et ge on l e g et y F g dg ote l ic m ct pl ck it a m fin ct Re oa r Pr Co ele up Ti un tC ap Ti af S af ire b H e S r Lo h C ve r St D e B ge t ic t S od Ai P Fl ig P W ss Pr S ea F o VI opo P2 re ud B St Xp All Rights Reserved – KB Yip/YS Lieu Page : 25
  26. 26. Reconstruct Market Boundaries  There are 6 pathways to reconstruct the market boundaries Across Alternate Industry Across Strategic Groups Across Buyer Groups Blue Red Across Complementary Scope of Ocean Ocean Products & Services Across Functional Emotional Orientation Across Time All Rights Reserved – KB Yip/YS Lieu Page : 26
  27. 27. 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 Home Health Club Exercise Traditional Health Club Womanly Fun • Full range • Low Cost exercise and • Privacy >10k Good sporting options Easy to Use Outlets & Machine > 4M members • Expensive. (as of Peer Oct, • Not easily accessible. Support Bad • Low 2006) • Complicated. motivation • Lack of Privacy Affordable Home Exercise All Rights Reserved – KB Yip/YS Lieu Page : 27
  28. 28. Strategy Canvas - Curves Eliminate Raise • Non threatening same sex environment Reduce Create  Price • Womanly fun  Amenities atmosphere  Workout equipment  Availability of Instructors High Curve s Hom e Exercise Program Traditional Health Clubs Low Price Amenit ies Workout Workout Time A vailabilt y of Environment Nonthreatening Convenience Womenly fun Equipment instructors encouraging same- sex at mosphere discipline and environment motivation in exercise All Rights Reserved – KB Yip/YS Lieu Page : 28
  29. 29. Across Strategic Groups BOS Example – OldTown  Expensive  Hygienic  Good Ambience & Relaxing Environment  Rightly Priced  Economical  Hygienic  Less Hygienic  Better Environment  Less Appealing Environment  Emotional Appeal All Rights Reserved – KB Yip/YS Lieu Page : 29
  30. 30. Across Strategic Groups BOS Example – Tune Hotel 4/5 Stars Hotels Nice Sleep! Hot Shower!  Luxury  Expensive  Service  Facilities Backpacker Hostels  No Frill  Cheap - Pay For What You Use!  Optional Add-ons:  Cheap  Limited service, basic  Sleep & Go  Low on price, high on personality  Walk in All Rights Reserved – KB Yip/YS Lieu Page : 30
  31. 31. Reconstruct Market Boundaries  There are 6 pathways to reconstruct the market boundaries Across Alternate Industry Across Strategic Groups Across Buyer Groups Blue Red Across Complementary Scope of Ocean Ocean Products & Services Across Functional Emotional Orientation Across Time All Rights Reserved – KB Yip/YS Lieu Page : 31
  32. 32. 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 Request Better Better Easy No Medicine Pricing To Use Unpleasant Feeling Insulin Industry All Rights Reserved – KB Yip/YS Lieu Page : 32
  33. 33. 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
  34. 34. Strategy Canvas : Nintendo Wii Eliminate Raise • Complexity • Game Library • Movie • Ease of Use Reduce Create  Price • Interaction/Group Fun  Graphics • Magic Wand  Physics  Online Pay High Nintendo Wii Gam e Industry e s s y i ty ie ry se Fu n d Low ic ic ic Pa ex ov ra an Pr ph ys e pl M ib fU up W ra Ph nl in om L o ro ic G e se G ag O C am Ea n/ M G tio c ra te In All Rights Reserved – KB Yip/YS Lieu Page : 34
  35. 35. Reconstruct Market Boundaries  There are 6 pathways to reconstruct the market boundaries Across Alternate Industry Across Strategic Groups Across Buyer Groups Blue Red Across Complementary Scope of Ocean Ocean Products & Services Across Functional Emotional Orientation Across Time All Rights Reserved – KB Yip/YS Lieu Page : 35
  36. 36. 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 Example : Jet Traditional : Buses made from Steel • Less Space • Low Initial Price • More Fuel • High •High Supplementa Maintenanc Purchase Delivery Use Disposal ry e • High Initial Price • More Space • Low • Low • Less Fuel NABI : Buses made from Fibre Glass All Rights Reserved – KB Yip/YS Lieu Page : 36
  37. 37. Strategy Canvas - NABI Eliminate Raise • Environmental friendliness Reduce Create  Corrosion • Aesthetic design  Maintenance cost • Customer friendliness  Fuel consumption High NABI Average U.S Transit Bus Low Initial purchase Corrosion Maintenance Fuel Environmental Aesthetic Customer price cost consumption friendliness design friendliness All Rights Reserved – KB Yip/YS Lieu Page : 37
  38. 38. Across Complementary Products and Services BOS Example: Operated 798 stores in all 50 U.S. states and the District of Columbia, as well as Purchasing stores in Australia and Canada Process Before During After  Book Selection  Customer Enquiry  Go to Coffee Shop  Sit Down  Paying  Read the Book  Browse Through  Book Signing Selection  Buy DVD, Games, Gift  Attend an event Carrying bag Immediate Enjoyment! Book Selection Event : Story Telling for Kids DVD & Games Book Signing All Rights Reserved – KB Yip/YS Lieu Page : 38
  39. 39. 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/Sony- Ericsson. • 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
  40. 40. BOS Example - Foxconn Repair & Servicing Repair & Servicing Logistics & Distribution Conventional Distribution EMS Mass Production Logistics Mass Production VI Part Sourcing & Production Inventory Prototyping Control Prototyping Sourcing Design Design Vertical Integration (VI) Model All Rights Reserved – KB Yip/YS Lieu Page : 40
  41. 41. Strategy Canvas - Foxconn High Foxconn Othe r EM Se s Low e ss g y ss er y li ty t io n e en olo oc e l iv ua ra iv hn Pr Q g ti t ec D n te pe T a lI m Co r ti c st Ve Co All Rights Reserved – KB Yip/YS Lieu Page : 41
  42. 42. Reconstruct Market Boundaries  There are 6 pathways to reconstruct the market boundaries Across Alternate Industry Across Strategic Groups Across Buyer Groups Blue Red Across Complementary Scope of Ocean Ocean Products & Services Across Functional Emotional Orientation Across Time All Rights Reserved – KB Yip/YS Lieu Page : 42
  43. 43. 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. • Simple • Pricey • Low Cost • Extras • Low Price • Feelings Functional Emotional Traditional Hair Saloon • Hot Towels QB House Rev • Message • Emotional Service -> None • Tea/Coffee • Hair Wash -> Air Wash • Special Hair /Skin • $9 Treatments 1996 2003 • $27 - $45 All Rights Reserved – KB Yip/YS Lieu Page : 43
  44. 44. Across Functional or Emotional Appeal BOS Example – Institute / College Across  High Fee Multiple  WW Recognized Pathways Certification  Low Fee  Strategic  Branches in UK, Africa & China Group  Low Recognition of • Functional ->  Collaboration w other Universities Education Quality Emotional  6000 students from 90 countries  Open Education  Vibrant, multicultural and international  Conventional System Education System  Free & Creative  Many Environmental Environment Constraints  Diverse Student Base Academic Exchange  Local Market  Fun Learning  Exposure  Global Classroom Encourage Entrepreneurship All Rights Reserved – KB Yip/YS Lieu Page : 44
  45. 45. Strategy Canvas - LimKokWeng Eliminate Raise  Foreign Cert • Globalization Competition Superiority • Asian Culture  Environmental Constraints • Creative Thinking • Flexibility Culture • Exposure • Entrepreneurship Reduce Create  Student  Unconventional Constraints Teaching Method  Fee Competition  Ecosystem High Lim Kok Weng Private Colleges Low n on d re ts g y p ts m re re es io ho rit kin hi in tu in titi te ti t su tu io Fe et ra rs ul ra pe in ys pe ul er po eu M st C st Th C os om up om on Ex en ty on g n Ec in e tS i li lC C ia C tC pr iv ch ib As er n at t re e ta ex en ea io Fe re C en En at Fl ud lT C n nm l iz ig St na ba re ro io Fo lo vi nt G En ve on nc U All Rights Reserved – KB Yip/YS Lieu Page : 45
  46. 46. Reconstruct Market Boundaries  There are 6 pathways to reconstruct the market boundaries Across Alternate Industry Across Strategic Groups Across Buyer Groups Blue Red Across Complementary Scope of Ocean Ocean Products & Services Across Functional Emotional Orientation Across Time All Rights Reserved – KB Yip/YS Lieu Page : 46
  47. 47. Across Time BOS Example – iTune Apple launched Apple teamed up with iTunes online major Music & Picture music store Companies  Sell Individual song / entire album  30 sec free listening  Strategically price Napster started > 2 billion illegally music flies were being online music file traded every month sharing service  iTunes had sold > 1999 2003 4 billion songs 2008  20 million songs on Dec 25, 2007 All Rights Reserved – KB Yip/YS Lieu Page : 47
  48. 48. 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 user- generated 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
  49. 49. Strategy Canvas - YouTube Eliminate Raise • Need for HTML • Web space allotted know-how per user • Hassle of undergoing numerous steps • Fees Reduce Create  Uploading / • Ease of Use downloading time technology • FLV technology • Ready-made website • Social networking • Video tags & Search High YouTube Ordinary Webhosting Low ow sl e es e er gy te gy ng ch ti m us lo si lo ki ar -h as Fe eb no or w H oa d pe r no w w se kn o nl d ch e ch et & w te te ad te N gs L do at se -m V al ta TM d/ oc f- u FL ci H oa al l dy So de a r -o ea fo pl ce s Vi d U pa Ea R ee N e bs W All Rights Reserved – KB Yip/YS Lieu Page : 49
  50. 50. Look across Time Weird Science Climate Change Future of the Individual Longevity Medicine Innovation Ten Trends Economy of the Extreme Fueling the Future Next Workforce Future Securing the Globalization Future US- China Future From the Book “Extreme Future” All Rights Reserved – KB Yip/YS Lieu Page : 50
  51. 51. From Head-to-Head Competition to Blue Ocean Creation Head-To-Head Competition Blue Ocean Creation Looks across alternative Industry Focuses on rivals within its industry industries Focuses on competitive position within Looks across strategic groups Strategic Group strategic group within industries Focuses on better serving the buyer Redefines the industry buyer Buyer Group group group Focuses on maximizing the value of Scope of Product or Looks across to complementary product and service offerings within Service Offering and service offerings the bounds of its industry Focuses on improving price Rethinks the functional- Functional-Emotional Functional- performance within the functional - emotional orientation of its Orientation emotional orientation of its industry industry Focuses on adapting to external trends Participates in shaping external Time as they occur trends over time All Rights Reserved – KB Yip/YS Lieu Page : 51
  52. 52. Across Multiple Pathways BOS Example – NV Multi Corporation Traditional Graveyard NV Multi Corporation Total Peace of Mind  Economical  Expensive  Unpleasant Environment  Pleasant Environment  Pollution  1 Stop Service  No Maintenance  After Sales Service All Rights Reserved – KB Yip/YS Lieu Page : 52
  53. 53. Across Multiple Pathways BOS Example – NV Multi Corporation Complementary Prayer Service Service Team Products & Services Professional Band White Ladies A Service Respect For Woman • Notifying Friend & Across Buyer Functional Relatives • Thank You Cards Groups to Emotional • Memory Lane • Video & Slideshow Across Alternative Industries • Buyer -> User & User -> Buyer • Pet Memorial Garden • Bereavement • VIP Memorial Garden Product • Insurance Protection • Capital Gain All Rights Reserved – KB Yip/YS Lieu Page : 53
  54. 54. Strategy Canvas - NV Multi Corporation Eliminate Raise • Price Competition • Well Layout • Fear Cemetery • Taboos • Staff Appearance • Pre-arranged • One Stop Funeral Services Reduce Create  Sophisticated • White Angels Process • Luxury Cemetery  Pollution • Customizable Burial Plots • Care Plan High NV Multi Private Cem etary Public Cemetery Low s on n y an s ar ot ed y e ss os ls ce t io er ic e er ic ge titi Fe Pl e pl bo ng et et n Pr l lu oc rv pe An ra m ial re Ta m ra Po Se Pr ea Ce Ca m Ce r ar te Bu Co pp d e- al hi te t ry ou er e Pr fA W ic a e xu bl ay n ic af iz a Fu Lu is t Pr lL St om ph p el o So W st St Cu ne O All Rights Reserved – KB Yip/YS Lieu Page : 54
  55. 55. Activity 3 & 4 : Reconstruct Market Boundaries Identify Divergent Factors High 4.5 4 Competitors Offering Level 3.5 3 Mid 2.5 2 1.5 1 XYZ 0.5 Low 0 h n ss e s ng es re 10 11 9 at ti o ag or ne or tu rP i ti di ni at or or nk ul ci l ct i ve an og li t ee ct ct Fa C Li Fa ci Br Fa Fa tit ec e/ ar Fa ry pe yl lR C st st om du & na fe m In C Li ti o ra e itu og Fe st Competing Factors Pr In Identify the Divergent Factors that Differentiate XYZ from Competitors All Rights Reserved – KB Yip/YS Lieu Page : 55
  56. 56. 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
  57. 57. 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
  58. 58. Activity 5 & 6 : To-Be Strategy Canvas Construct Desired Value Curve for XYZ Eliminate Create Competencies Divergent Factors X= Y= Z= Reduce Raise Technology Quality Process Talent New Value Curve High Existing Value Curve Mid Low Fee Institutional Industrial Program Facilitators Facilities Lifestyle/ X Y Z Competencies Recognition Linkage & Career Path Culture All Rights Reserved – KB Yip/YS Lieu Page : 58
  59. 59. 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
  60. 60. Barriers to Imitation Does not Make Sense Brand Image Conflicts Economies of Scale based on Conventional Chanel, CD, etc could not imitate High volume generated by a Strategic Logic Body Shop as it would signal an value innovation leads to rapid NBC, CBS and ABC rediculed invalidation of their current cost advantages the idea of 24x7 real time news business models without star broadcasters Political, Operational and 1st to Market Natural Monopoly Cultural Changes When a company offers a leap in Size of market does not make Major revisions in routing planes, value, it rapidly earns brand buzz sense to support another player retraining, changing and a loyal following in the marketing/pricing/culture. Took marketplace MAS 6 years to come up Firefly Back All Rights Reserved – KB Yip/YS Lieu Page : 60
  61. 61. Conclusion: Focus on the Big Picture, not the Numbers Awakening Exploration Strategy Fair Communication Compare your Draw your To Be Distribute your Go into the field to business with your Strategy Canvas before- and-after explore the six competitors' by based on insights strategic profiles on paths to creating drawing your As Is from field one page for easy blue oceans Strategy Canvas observations comparison Get feedback on Support only those Observe the alternative strategy projects and distinctive See where your canvases from operational moves advantages of strategy needs to customers, that allow your alternative change competitors’ company close the products and customers and non gaps to actualize services customers the new strategy See which factors Use feedback to you should build the best 'to be' eliminate, create or future strategy change Back All Rights Reserved – KB Yip/YS Lieu Page : 61
  62. 62. Get the Strategic Sequence Right Red Ocean Sequence Cost Price Utility Adoption Buyer Adoption Commercially Price Cost Viable Utility Hurdles Blue Ocean Idea Is there Is your price Can you attain What are exceptional buyer easily accessible your cost target to adoption hurdles utility in your to the mass of profit at your in actualizing business idea? buyers? strategic price? your business idea? Are you addressing them up front? All Rights Reserved – KB Yip/YS Lieu Page : 62
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