Blue ocean strategy 2013 07 11


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Blue ocean strategy 2013 07 11

  1. 1. You need a blue ocean strategy A’Ohlin Commercial Insights © 2013 How do you compete in overcrowded markets?
  2. 2. Blue Ocean Strategies - creating your own market space A’Ohlin Commercial Insights authors: Rebecca Chong & Anna Searle February 2013 A’Ohlin Commercial Insights © 2013
  3. 3. A business in the midst of an increasingly competitive industry will find itself sinking to the bottom: • Profits shrink • Growth shrinks This makes it all the more important to know what is happening in the market and to have the tools to know what will be there in the next five years. Stuck in an overcrowded industry? A’Ohlin Commercial Insights © 2013
  4. 4. A business stuck in an increasingly competitive industry is fighting in bloodied waters • also known as RED OCEANS Red Ocean characteristics include: • existing industries • defined boundaries • highly competitive • driving competition out of the market • trying to gain greater market share • overcrowded market • products turn into commodities • shrinking profits Overcrowded industries are RED OCEANS A’Ohlin Commercial Insights © 2013
  5. 5. Blue oceans are:  Industries not yet in existence  Untainted by competition  Unknown market spaces  Where demand is created  Completely new industries OR altering existing boundaries  Opportunities for growth The key to pushing out of the red oceans is to adopt a blue ocean strategy A’Ohlin Commercial Insights © 2013
  6. 6. A’Ohlin Commercial Insights © 2013 Blue ocean strategies make the competition irrelevant and create new demand Red Ocean Strategy Blue Ocean Strategy Compete in an existing market space Beat the competition Exploit existing demand Make the value-cost trade off Align the whole system of the company’s activities strategically choosing differentiation OR low cost Create uncontested market spaces Make the competition irrelevant Create and capture new demand No need for the value-cost trade off Align the whole system of the company’s activities in pursuit of differentiation AND low costs source: Kim W and Mauborgne, ‘Blue Ocean Strategy’, Harvard Business Review, October 2004, p. 5
  7. 7. Unheard of, or just emerging, 100 years ago • Automobiles • Music recording • Aviation • Petrochemicals • Health care • Management consulting A’Ohlin Commercial Insights © 2013 Look back 100 years and ask, how many of today's industries were then unknown? And 30 years ago? Even 10 years ago? Unheard of, or just emerging, 30 years ago • Mutual funds • Mobile phones • Gas fired electricity plants • Biotechnology • Discount retail • Express package delivery • Snowboards • Coffee bars • Home videos
  8. 8. A’Ohlin Commercial Insights © 2013 What can be expected over the next decade? Circus OR Theatre Circus + Theatre = Cirque How many industries that are unknown today will exist in 2023? ... Many Companies have a huge capacity to create new industries and re- create existing ones Gaming: hand held consoles Consumers: regular gamers Gaming: motion sensing controls, more user-oriented Consumers: regular gamers + non-regular gamers Mobile OR mp3 player OR PDA Smartphones Shops Local shops, online shops, online auctions Airlines: standard airlines Airlines: standard, budget, long-distance, short-distance THE PAST THE PRESENT WHAT LIES AHEAD?
  9. 9. What’s it all about? • Looking at the existing boundaries of competition and then ‘reordering and recombining’ to reconstruct the market boundaries • Not necessarily technological increases – It’s about reordering and reconstructing market realities and capturing new demand rather than pre-empting technological trends • Looking at your current business model from a different perspective and remodelling how it operates A’Ohlin Commercial Insights © 2013 By breaking the traditional boundaries between circus and theatre, Cirque du Soleil reinvented the circus and increased revenues by a factor of 22 over the last 10 years
  10. 10. A’Ohlin Commercial Insights © 2013
  11. 11. A’Ohlin Commercial Insights © 2013 Apple – iPod+ iTunes, iPhone, iPad  what next? late 2001 2010 Mid 2007
  12. 12. Confirmed by HTC’s latest profits • HTC reported an 80% drop in profits for the September quarter 2012 compared to the year ago quarter (Forbes, 2012) A’Ohlin Commercial Insights © 2013 The smartphone market is now becoming a bloodbath ... source: bloodbath-casualty
  13. 13. Weekly cost of the additional 4c a litre reduction By January 2013, both retailers were offering discounts of at least 8c per litre A’Ohlin Commercial Insights © 2013 Petrol discounting is another example of red ocean markets …petrol discounts were a sign that the grocery market was becoming increasingly irrational as Coles and Woolworths vied for market share… if the 8¢ a litre discounts are maintained all year they will cost each retailer an estimated $200 million $1.8 million $2.3 million Cost per WEEK source: Citigroup analyst Craig Woolford , AFR 2 Feb 2013
  14. 14. A’Ohlin Commercial Insights © 2013 The 14% of businesses that invested in creating new markets and industries delivered 38% of total revenues and 61% of total profits source: Kim W and Mauborgne R, ‘Blue Ocean Strategy’, Harvard Business Review, October 2004, p. 3 14% 86% New Ventures New markets or industries Line extensions 38% 62% Revenues 61% 39% Profits 86% of (the) new ventures were line extensions, (and) while (they) did account for 62% of the total revenues, they delivered only 39% of total profits
  15. 15. Which phase of the business life cycle is your business in? ‘80% of new businesses fail in the first five years; 52% fail due to management- related problems’. Don’t fight it out in bloody waters and become another casualty. Don’t rest on your laurels – If your offering is nothing more than an imitation or incremental improvement over your competition, you’ll only be treading water in a red ocean’ The clear blue ocean waters are becoming bloodied. ‘Sadly, most firms lack a clearly defined, robust and well-communicated innovation strategy. There is either no focus or they focus on the wrong arenas – on mature markets, old technologies or tired product categories that do not represent the growth engines of tomorrow’.8 Wake up to the strategy – you don’t want to drown in bloodied waters. You’re on a downhill slide but it’s not too late – ‘Every organization can break free of the head- to-head zero- sum competition and open up blue oceans’. A’Ohlin Commercial Insights © 2013
  16. 16. A’Ohlin Commercial Insights © 2013 A’Ohlin Commercial Insights can help you design your Blue Ocean Strategy If you are competing in red oceans. If your business needs an adrenalin injection to get going. If you need to redefine your business focus and priorities. If you need to re-engage your Board, executives, senior management, staff or clients. You need to engage a professional strategy consulting firm such as A’Ohlin Commercial Insights The clock is ticking Take action now Call A’Ohlin Commercial Insights on 0414 453 913
  17. 17. Key sources: • Kim W and Mauborgne, ‘Blue Ocean Strategy’, Harvard Business Review, October 2004 • Kim W and Mauborgne R, ‘Value innovation: a leap into the blue ocean’, Journal of Business Strategy • Misconceptions of blue ocean strategy • Study by Inc. Magazine and the National Business University of Buffalo Office of Science, Technology Transfer and Economic Outreach .cfm • Burt G, ‘Swim Blue Ocean’, Leadership Excellence Volume 24 Issue 5 (May 2007) • Cooper, R ‘Creating Bold Innovation in Mature Markets’, IESE Insight, Third Quarter 2012 Issue 14, p 31 • smartphone-bloodbath-casualty
  18. 18. Blue Ocean Strategies - creating your own market space A’Ohlin Commercial Insights authors: Rebecca Chong & Anna Searle February 2013 A’Ohlin Commercial Insights © 2013