chapter2

1. Business Model
Copyright of Bart Clarysse and Sabrina Kiefer
The Smart Entrepreneur

2. Blue Oceans = value innovation
(a new market space within mature
industry)
• Compete in existing market space
• Beat the competition head-on
• Exploit existing demand
• Make the value/cost trade off
• Create uncontested market space
• Make competition irrelevant
• Create and capture new demand
• Break the value/cost trade off
Red Oceans
(most businesses)
Copyright of Bart Clarysse and Sabrina Kiefer
The Smart Entrepreneur

3. 62% 38%
Revenue Impact
39% 61%
Profit Impact
86% 14%
Business Launches
Pioneer, Innovation in Customer Value
Me-too & Value Improvement
• Why seek Value Innovation?
14% of firms in a ‘Blue Ocean’ space
61% of overall profits
(Kim’s & Mauborgne’s observation
of 108 companies over a 100-year period)
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The Smart Entrepreneur

4. Tools to find Blue Oceans
The Strategy Canvas:
captures the current state of play in the known market space;
reorients focus from competitors to alternatives and from customes to non customers
the range of factors
the industry competes on and invests in
the offering level that buyers receive across all of
these key competing factors.
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The Smart Entrepreneur

5. Four actions framework (observations):
Factors that no longer are valuable to
potential customers are avoidable costs
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The Smart Entrepreneur

6. Eliminate-reduce-raise-create grid
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The Smart Entrepreneur

7. Value innovation example:
[yellow tail]
Australian vineyard Casella Wines
sought a way to increase US sales in a
hugely crowded and competitive industry
space with falling margins
The US Wine market –
hardly attractive
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The Smart Entrepreneur

8. Casella Wines’ value innovation
1. What did the US wine industry strategy canvas look like
(on what factors were producers competing)?
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The Smart Entrepreneur

9. US wine industry - Factor 1: price
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The Smart Entrepreneur

10. US wine industry - Factor 2: labelling for connoisseurs
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The Smart Entrepreneur

11. US wine industry - Factor 3: mass media advertising
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The Smart Entrepreneur

12. US wine industry - Factor 4: aging quality – age=better
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The Smart Entrepreneur

13. US wine industry - Factor 5: heritage = prestige
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The Smart Entrepreneur

14. US wine industry - Factor 6: complex bouquet = desirable product
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The Smart Entrepreneur

15. US wine industry - Factor 7: wide product range = better label
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The Smart Entrepreneur

16. The US Wine Industry – strategy canvas
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The Smart Entrepreneur

17. [yellow tail] – 1 and 2
1. Industry Strategy Canvas
• Price, packaging, above the line marketing, aging quality, prestige of the
vineyard, complexity of taste, diverse range of wines
2. Four actions framework - observations
• Wine was only accessible to a limited number of people + takes years to
appreciate wine
• French and worldwide producers were all competing on the factors on
the strategy canvas, bringing down margins
• Blue Ocean: not competing on wine market, but on the alternative
market for beers, spirits and cocktails
>> Create a new market of new wine drinkers
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The Smart Entrepreneur

18. [yellow tail] - 3
3. The eliminate-reduce-raise-create grid
• Eliminated
» Enological terms on wine packaging,
» above the line marketing – (replace with in-store merchandising)
» aging quality
» => costs and working capital declined
• Reduced
» Vineyard prestige,
» complexity of taste and range (2 products: Chardonnay and Shiraz)
• Raised
» Price versus budget wines,
» retail store involvement (display stands, merchandised clothing for staff)
• Created
» 3 new factors: easy drinking, easy to select, and ‘fun and adventure’ image of
Australia
Copyright of Bart Clarysse and Sabrina Kiefer
The Smart Entrepreneur

19. Smaller product range, simpler labelling
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The Smart Entrepreneur

20. In-store merchandising
Retail store
involvement
Wal-Mart displays
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The Smart Entrepreneur

21. [yellow tail] value line vs US wine industry
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The Smart Entrepreneur

22. [yellow tail] - Results
Copyright of Bart Clarysse and Sabrina Kiefer
The Smart Entrepreneur

23. Further Reading
Kim, W.C. and Mauborgne, R., 2005. Blue Ocean Strategy: How to Create
uncontested Market Space and Make the Competition Irrelevant. Boston:
Harvard Business School Press.
Copyright of Bart Clarysse and Sabrina Kiefer
The Smart Entrepreneur