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Blue Ocean Strategy presntation

Blue Ocean Strategy presntation

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    Blue Ocean Simple Blue Ocean Simple Presentation Transcript

    • Blue Ocean Strategy Prof. W. Chan Kim and Prof. Renee Mauborgne Dvir@simplesolutions.co.il
    • Background Red ocean = strong competition Blue Ocean Strategy (BOS) aims to create a new market space, by challenging the conventional assumptions about how to compete (business innovation) 14% 38% 39% 62% 61% 86%Sales New products Sales Profits * According to survey of 108 large firms in USA 2
    • Example - Cirque du Soleil The circus industry in North America - a declining industry, mainly for children (low prices), “once in a life time”, stars, alternative forms of entertainment. Declining revenue and profits, unattractive market Cirque du Soleil – – Theater show with circus format – Adults and corporate clients (higher price), several times – Created in 1984 by a group of street performers. Achieved revenues that took the global champion of the circus industry more than one hundred years to attain 3
    • Value Innovation Traditional strategy process - SWOT analysis, firms try to compete better in their business environment Blue Ocean Strategy reconstructs market boundaries in order to reach beyond existing demand Establish it through business innovation and new values for customers Align the whole system – values, price, cost 4
    • Example – US wine industry Strong competition (from domestic and imported wines). Price pressure, high advertisement costs, high power of buyers, steady demand High Fine wine Commodities Low Price Terms Sales Aging Reputation Complexity Variety and effort awards 5
    • Four actions to create a new value curve New values that have never been offered Create new values to create a new market space Raise existing values well above market standards Eliminate Values Cost reduction Reduce existing values well below market standards 6
    • Example cont. - Australia's Casella Winery Small and unknown. In 2001 started to market wine to customers who used to drink beer and cocktails. Most customers didn’t care about complexity or aging. They decreased the aging (fast incomes) and the variety (less inventory), created simple and designed labels (easy understanding), suggested adventure feeling. Number one imported wine, fastest growing brand in the history High Fine wine Commodities Casella Low Price Terms Sales Aging Reputation Complexity Variety Soft Easy to Adventure and effort drink choose awards 7
    • Good strategy Unique and efficient business profile New values that reconstruct market boundaries Large market that interests in these values Adjust all other parameters to strategy 8
    • Reconstructing market boundaries Firms tend to: Define their industry similarly Look at their industries through the lens of generally accepted strategic groups Focus on the same buyer group Focus on the same point in time To swim out from the red ocean - you should examine six paths 9
    • Path 1- Look Across Alternative Industries Products or services may have different forms but offer same functionality Customers have alternative solutions from different industries Yet, firms don’t examine other industry’s customers You should analyse why custemrs chose one alternative over the other 10
    • Example – Netjets The most lucrative customers in the aviation industry are corporate travelers. Executives can fly business/first class or purchase a private aircraft. NetJets offers its customers one-sixteenth ownership of an aircraft , each one entitled to fifty hours of flight time per year. A jet is available with four hours’ notice Seventy thousand flights, a multibillion-dollar business High Private airplane Netjets Business flight Low Investment On going Cost per Time Easiness Flexibility Service cost flight 11
    • Path 2 - Look Across Strategic Groups within Industries Each branch has strategic groups which distinct in two dimensions: – Price – Performance You should understand which factors determine customers’ decisions to trade up or down between groups 12
    • Example: Curves - women’s fitness company Redefining market boundaries between health clubs (12% of the entire population) and home exercise programs for women Smaller spaces in nonprime locations, Low price, Simple machines for women, circle, nonjudgmental atmosphere Two million members, revenues of US$ 1 billion High Traditional health clubs Curves Low Home exercise Price Services Equipment Trainers Discipline Non Arrival Women judgmental time company atmosphere 13
    • Path 3 - Look Across the Chain of Buyers Many people are involved in the purchase decision (buyers, end users, consultants, market leaders and more) An industry typically converges on a single buyer group (pharmaceutical industry – doctors, Office equipment - purchasing departments, Computers – IT departments) Challenging which buyer group to target can lead to the discovery of a blue ocean Example - Novo Nordisk – Insulin producer – The industry focused on doctors, who wanted pure insulin – Novo Nordisk examined patients’ needs and developed NovoPen, the first user-friendly insulin delivery solution 14
    • Path 4 – Complementary services Most products require complementary service in order to be effective A firm should understand the connection between its product to these services, what do customers do before and after using its product and to offer other values Examples – – Barnes & Noble - lounges and coffee bars to create an environment that celebrates reading. In six years, emerged as one of the two largest bookstore chains in the United States – Movie theaters – offered baby sitting services 15
    • Path 5 - Functional or emotional orientation Usually there is major functional or emotional factor that drives the purchasing decision Firm should think if it can supply values that will change the relevant factor Examples: – Swatch – changed the low end watches market from functional to emotional one – Body Shop made the opposite for the cosmetics products 16
    • Path 6 – Looking across the time Companies should understand trends and their influence Examples – – Apple - Observed the flood of illegal music file sharing. Launching iTunes in 2003. Agreement with five major music. Offered legal individual song downloads. – Cisco – Observed the need for high speed data transfer – HBO – Saw the trend of unmarried women and developed “Sex and the city” 17
    • Six paths to blue ocean The six conventional boundaries of competition Industry (Netjets) Strategic group (Curves) Buyer group (Novo Nordisk) From To creating competing Scope of product or service across within (B&N) Functional – emotional (Swatch) Time (Apple) 18
    • Create new market space We want to find an ocean and not a puddle We need to find markets of “non customers” "Refusing” non customers- Soon to be non chose against customers – your market waiting to jump ship 2nd 1st 3rd Our "Unexplored” tier tier tier market non customers – in markets distant from yours 19
    • Three tiers of noncustomers Tier Characteristics Example Soon to be non Minimally purchase an Pret a Manger – Healthy customers industry’s offering out of sandwiches for office workers necessity Refusing non Saw your industry’s JCDecaux - street facilities customers offerings, but voted (in 1964) for advertisers that against them didn’t like bus commercials Unexplored Never thought of your Toothpaste producer - offer non customers market’s offerings as an whitening products, which option were regarded as dentists’ business 20
    • Target Price Target price should be attractive and to bring fast conquering of the market Two parameters: – Customer’s alternatives (including not to buy anything) – Entering of new competitors Refine the whole system to support that price – Increasing efficiency – Cancellation of unimportant values 21
    • Pioneer-Migrator-Settler (PMS) Map Pioneer Migrator Settler 22
    • Strategy Implementation Company LOB’s level level Managerial Our markets, workshop, PMS Map, Current value Market Trends, curve, six paths Technology … ……… …............................... Change management Different Effective solution features “Big ideas” Not in the road map 23
    • Other Blue Oceans Ford Chrysler IBM Microsoft Ralph GM Viagra Model T Mini Van PC Office Lauren Canon Quicken iPhone UPS Simple Dell Bloomberg Google 90$ finance copiers SW Bagir ECI Checkpoint Fox Tiv Taam Washable CDMA suites Nintendo Kodak Akzo Nobel Samsung Total Universiti Wii Traceless Paint pot Petrochemicals Sain Malaysia Microsoft Nokia McDonald's SAS Carlsberg Raytheon 24
    • FAQ’s Risks (today)? Strategy – it’s coming from Management / part of bigger Standards or organization list of “must” features We are already have a new innovative idea 25
    • Summary Most firms invest their efforts in the red ocean battle Structure and market boundaries exist only in managers’ minds Many firms (from various industries) found their blue ocean Business innovation (in our business) Profits are high (even from BOS analysis) Next step – Implementation session, team, LOB Start. Time is running 26