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New4 bos blue ocean strategy


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blue ocean strategy / mavi okyanus stratejisi

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New4 bos blue ocean strategy

  1. 1. On Gap Analysis Class on Blue Ocean Strategy Ziya G. Boyacigiller This presentation was created and given by Ziya Boyacigiller who was leading Angel Investor and a loved mentor to many young entrepreneurs in Turkey. We have shared it on the web for everyone’s benefit. It is free to use but please cite Ziya Boyacigiller as the source when you use any part of this presentation. For more about Ziya Boyacigiller’s contributions to the start-up Ecosystem of Turkey, please go to
  2. 2. “GAP ANALYSIS” Blue Ocean Strategy How to Create Uncontested Market Space and Make the Competition Irrelevant Ziya G. Boyacıgiller Sabanci Universitesi Yonetim Bilimleri Fakultesi By W.Chan Kim & Renee Mauborgne
  3. 3. Ziya G. Boyacigiller (c) 2007 3 Why do some companies achieve sustained high-growth in revenues and profits?
  4. 4. Ziya G. Boyacigiller (c) 2007 4 How Can We Explain Sustained Growth & Profits?
  5. 5. Ziya G. Boyacigiller (c) 2007 5 Is it the COMPANY? Apple Inc. Growth
  6. 6. Ziya G. Boyacigiller (c) 2007 6 How Can We Explain Sustained Growth & Profits?  Is it the Company? No, even excellent companies do not stay that way over time…
  7. 7. Ziya G. Boyacigiller (c) 2007 7 Is it the INDUSTRY? Semiconductor Index Growth
  8. 8. Ziya G. Boyacigiller (c) 2007 8 How Can We Explain Sustained Growth & Profits?  Is it the Industry? No, even the most favored industries don’t stay attractive over time…
  9. 9. Ziya G. Boyacigiller (c) 2007 9 What is Causing Spurts of Growth? Apple Inc. Growth
  10. 10. It is the Strategic Moves ! Ziya G. Boyacigiller (c) 2007 10
  11. 11. Ziya G. Boyacigiller (c) 2007 11
  12. 12. Ziya G. Boyacigiller (c) 2007 12 Strategic Moves are the set of managerial actions and decisions that have delivered products and services that opened and captured new market space, with a significant leap in demand.
  13. 13. Ziya G. Boyacigiller (c) 2007 13 Line-Extension* vs. Innovation** Compared Business Launch 86% 14% 62% 38% 39% 61% Revenue Impact Profit Impact Launches within red oceans Launches within blue oceans (* Sustaining, ** Disruptive, see Innovation Models)
  14. 14. Ziya G. Boyacigiller (c) 2007 14 Challenges of Innovation  A new product has to: 1. offer customers exceptional utility 2. at an attractive price, and 3. the company must be able to deliver it at a tidy profit.  However, uncertainties surrounding innovation are so great even seasoned and insightful managers have a hard time being accurate. KEY SLIDE KEY SLIDE
  15. 15. x x x  Ziya G. Boyacigiller (c) 2007 15 Venture Capitalist’s Matrix (Benchmark Capital’s Andy Rechliff)ACCURATEBET CONCENSUS YES NO YESNO
  16. 16. Ziya G. Boyacigiller (c) 2007 16 How can we reduce the risk of innovation?
  17. 17. Ziya G. Boyacigiller (c) 2007 17 Conventional Competition  Red Oceans  competitive market space  Porter’s “Five Forces” says, “don’t get caught in the middle”, compete on:  Cost or  Differentiation
  18. 18. Ziya G. Boyacigiller (c) 2007 18 Blue Ocean Strategy says “can do both” ! value (=benefits for buyer /price ) Value Innovation simultaneous Value Innovation leads to creating Blue Oceans  New Markets / No Direct Competition KEY SLIDE KEY SLIDE Cost (=total cost for buyer)
  19. 19. Ziya G. Boyacigiller (c) 2007 19 Strategy Canvas of the Short-Haul Airline Industry Value Curves Key Factors of Competition (KFC)
  20. 20. Key-Factors-of-Competition KFCs Ziya G. Boyacigiller (c) 2007 20 These are for a given industry, what they compete on and what they invest in (use RPV model). Example: The wine industry key-factors KFCs are: • Price per bottle • Refined packaging/bottle image • Above the line-marketing directed to consumers and distributors/retailers • Aging quality of wines • Prestige of the wine’s vineyard and legacy (brand image) • Taste of wine • Diverse range of wine selection
  21. 21. In Class Exercise: You Start Work in a Design House… Your 1st assignment is: Define KFCs for wallet. Ziya G. Boyacigiller (c) 2007 21
  22. 22. Ziya G. Boyacigiller (c) 2007 22 “Blue Ocean” shifts the Strategy Canvas of an Industry To fundamentally shift the strategy canvas of an industry, you must begin by reorienting your strategic focus from competitors  alternatives, and from customers  noncustomers, of the industry. KEY SLIDE KEY SLIDE
  23. 23. Ziya G. Boyacigiller (c) 2007 23 Substitutes vs. Alternatives  Substitutes to “eating at an Italian Restaurant”:  All Italian restaurants,  Alternatives* to “eating at an Italian Restaurant”:  (job: satisfy hunger) Kebapci, Burger King, balik-ekmek, even “simit”/bagel and,  (job: entertainment) Movies, theater, concert, cruzing along the Bosporus, watching TV (* ALTERNATIVES ARE MEANINGFUL WHEN LINKED TO A “JOB”)
  24. 24. Ziya G. Boyacigiller (c) 2007 24 Listen to “noncustomers”? Look for “common pain” for “noncustomers” to identify your Blue Ocean opportunities (market gaps) KEY SLIDE KEY SLIDE
  25. 25. Ziya G. Boyacigiller (c) 2007 25 Look for “common pain”… Potential / Existing customers are not happy with the existing alternatives, yet no other choice exists… KEY SLIDE KEY SLIDE
  26. 26. Everyone you talk is NOT equally useful to you! You need to identify and classify the people you talk to for getting useful inputs.Ziya G. Boyacigiller (c) 2007 26
  27. 27. Ziya G. Boyacigiller (c) 2007 27 Who are the “noncustomers” we want? KEY SLIDE KEY SLIDE NOTE: “tier” rhymes with “beer” Listen to these inputs !
  28. 28. Defining Tiers Again…  Tier 1: • Their need for the product/service is so important that they can’t wait, they want it now. So, they already bought an alternative and are using. They will know best, what they like and don’t like about the alternative they are using now, and possibly about other alternatives they have looked at. Ziya G. Boyacigiller (c) 2007 28
  29. 29. Defining Tiers Again…  Tier 2: • Their need for the product/service is NOT as important, compared to Tier 1 customers, that although they looked for an alternative to buy, decided to wait, until an acceptable alternative comes to market. They will know what they like and don’t like about the alternatives they looked at. Ziya G. Boyacigiller (c) 2007 29
  30. 30. Defining Tiers Again…  Tier 3: • They have not recognized a need for the product/service yet. They have not even looked for alternatives. They will NOT know what they like and don’t like about the alternatives on the market currently – they can only guess… ➜DO NOT WASTE TIME WITH THEM! Ziya G. Boyacigiller (c) 2007 30
  31. 31. Your 2nd assignment is: Define a new wallet. Identify common pains. Ziya G. Boyacigiller (c) 2007 31 In Class Exercise: You Start Work in a Design House…
  32. 32. Ziya G. Boyacigiller (c) 2007 32 Casella Wines (Australian)  Looking at alternatives to wine:  Beer, Spirits, Ready-to-Drink Cocktails (which capture 3 times sales compared to US wine sales)  Mass of US adults (non-consumers) saw wine as a turn-off:  Intimidating, pretentious, flavor challenging  These non-consumers are drinking the alternatives  big potential market!
  33. 33. Ziya G. Boyacigiller (c) 2007 33 Four Actions Framework (how to reconstruct buyer value) 1. Which of the factors that the industry takes for granted should be eliminated? (have no value for customers, or even detract from value) 2. Which factors should be reduced well below the industry’s standard? (overdesigned in race to match or beat competition, overserving customers and increasing cost for no gain) 3. Which factors should be raised well above the industry’s standard? (uncover and eliminate the compromises forced on customers) 4. Which factors should be created that the industry has never offered? (discover entirely new sources of value for buyers and create new customers, shifting strategic pricing of the industry) dropscostsliftvalue&demand KEY SLIDE KEY SLIDE
  34. 34. Your 3rd assignment is: Create Product Strategy using Four Actions Framework for the wallet. What is your “tag line”? What is your mission? Ziya G. Boyacigiller (c) 2007 34 In Class Exercise: You Start Work in a Design House…
  35. 35. Ziya G. Boyacigiller (c) 2007 35 [yellow tail] •Fun, social drink accessible to nonwine drinkers •Fastest growing brand in the histories of both Australian and US wine industries •#1 imported wine into USA, surpassing wines of France, Italy •#1 red wine in 750ml bottle in USA, surpassing California labels •Sales in about 2 years hit over 4.5million cases •While competing with 1,600 wineries in the USA !
  36. 36. Ziya G. Boyacigiller (c) 2007 36
  37. 37. Ziya G. Boyacigiller (c) 2007 37 Strategy Canvas of [yellow tail]
  38. 38. Ziya G. Boyacigiller (c) 2007 38 Focus on alternatives & noncustomers others [yellow tail] Easy drinking Wine’s complicated taste is difficult to appreciate compared to alternatives [yellow tail] is soft in taste, with pronounced fruit flavors (easy drinking wine that doesn’t need developed appreciation over time) Ease of selection Isles of wine in markets overwhelmed and intimidated customers Only 2 to choose from (one white/one red (used same bottle design for both to reduce cost) Fun and adventure Elite image did not resonate with general public Australian theme, unusual label, no mention of vineyard or other intimidating wine vocabulary
  39. 39. Ziya G. Boyacigiller (c) 2007 39 Eliminate-Reduce-Raise-Create Grid for [yellow tail] Eliminate Enological terminology and distinctions Aging qualities Above-the-line marketing Raise Price compared to budget wines Retail store support and involvement Reduce Wine complexity Wine range (variety) Vineyard prestige Create Easy drinking Ease of selection Fun and adventure (new delightful experience) KEY SLIDE KEY SLIDE
  40. 40. Ziya G. Boyacigiller (c) 2007 40 I have to apologize, that I just tried a different boxed California cabernet, which tasted like a bad children's fruit drink. I have learned my lesson and will stick to yellow tail merlot! And I must say that I love yellow tail, because my wife loves yellow tail. I was never a wine drinker until I was introduced to Yellow Tail Chardonnay 3 years ago at a dinner party. I was immediately hooked! Now, there's nothing I look forward to more than coming home from work on a Friday night and pouring myself a glass of Yellow Tail to unwind. It's a standard at parties that I attend and it's always a welcome gift. Thanks for a wonderful product and keep up the good work! Is it Friday yet? What customers are saying… [yellow tales] from Casella web site
  41. 41. Ziya G. Boyacigiller (c) 2007 41 Three Characteristics of a Good Strategy  Focus Not trying to excel in all factors of competition  Divergence Not benchmarking against competitors looking across alternatives (value curves look different)  Compelling Tagline Is the strategy resulting in a unique and strong tagline (“The essence of a great land…Australia”) KEY SLIDE KEY SLIDE
  42. 42. Ziya G. Boyacigiller (c) 2007 42 Focused & Divergent FocusedKnowing what-to-do and not-to-do, DivergentUnlike other value curves
  43. 43. Ziya G. Boyacigiller (c) 2007 43 Where to Look to Create Blue Oceans (You can focus * on different areas to identify new opportunities) 1. Looking across Substitute Industries (NetJets) 2. Looking across Strategic Groups within Industries (Curves) 3. Looking across Value Chain of Buyers (Bloomberg) 4. Looking across Complementary Product and Service Offerings (Borders) 5. Looking across Functional Appeal to Buyers (Starbucks) 6. Looking across Emotional Appeal to Buyers (Body Shop) 7. Looking across Time (Intel) 8. Etc. etc.… (*) Using de Bono terminology, this is “focused creativity technique”. KEY SLIDE KEY SLIDE
  44. 44. Ziya G. Boyacigiller (c) 2007 44 Strategy Canvas of NetJets (looking across substitute industries)
  45. 45. Ziya G. Boyacigiller (c) 2007 45 Strategy Canvas of Curves (looking across strategic groups within industries)
  46. 46. Ziya G. Boyacigiller (c) 2007 46 Strategy Canvas of Bloomberg (looking across chain of buyers)
  47. 47. Ziya G. Boyacigiller (c) 2007 47 Strategy Canvas of Barnes&Noble and Borders (looking across complementary products & services)
  48. 48. Ziya G. Boyacigiller (c) 2007 48 Strategy Canvas of Body Shop (looking across functional or emotional appeal to buyers)
  49. 49. Ziya G. Boyacigiller (c) 2007 49 Four Steps to Visualizing Strategy (Why “visual”? Means  makes use of “strategy canvas”…) 1-Visual Awakening 2-Visual Exploration 3-Visual Strategy Fair 4-Visual Communication, Execution Compare your business with your competitors’ by drawing your “as is “ strategy canvas. See where your strategy needs to change. Go into the field to explore the six paths to creating blue oceans. Talk to: your customers,  competitors’ customers,  noncustomers,  end users Observe the distinctive advantages of alternative products and services. Discover adoptive hurdles for noncustomers Draw your “to be” strategy canvas based on insights from field observations. Get feedback on alternative strategy canvases from:  customers,  competitors’ customers,  noncustomers,  end users Use feedback to build the best “to be” future strategy. Distribute your before-and-after strategic profiles on one page for easy comparisons. Support only those projects, and operational moves that allow your company to close the gaps to execute the new strategy. KEY SLIDE KEY SLIDE
  50. 50. Ziya G. Boyacigiller (c) 2007 50 Challenges of Innovation  A new product has to: 1. offer customers exceptional utility 2. at an attractive price, and 3. the company must be able to deliver it at a tidy profit.  However uncertainties surrounding innovation are so great even seasoned and insightful managers have a hard time being accurate.
  51. 51. Innovation = Creativity + Monetization Ziya G. Boyacigiller (c) 2007 51 Doggone… She had an alarm installed…
  52. 52. difference between Innovation and Invention “In business, innovation can be easily distinguished from invention. Invention is the conversion of cash into ideas. Innovation is the conversion of ideas into cash. This is best described by comparing Thomas Edison with Nikolai Tesla. Thomas Edison was an innovator because he made money from his ideas. Nikolai Tesla was an inventor. Tesla spent money to create his inventions but was unable to monetize them. Innovators produce, market and profit from their innovations. Inventors may or may not profit from their work.” Ziya G. Boyacigiller (c) 2007 52
  53. 53. It takes creative focus to “find a way” to monetize a creative idea. Entrepreneurs not only need to create a differentiated product or service, but they may also need to create a new business model. Examples: Apple iTunes  99 cents songs, iPhone  Apps Ziya G. Boyacigiller (c) 2007 53
  54. 54. Ziya G. Boyacigiller (c) 2007 54 Uncovering the Buyer Experience Cycle DisposalMaintenanceSupplementsUseDeliveryPurchase •How long does it take to find the product you need? •Is the place of purchase attractive & accessible? •How secure is the transaction environment? •How rapidly can you make a purchase? •How long does it take to get the product delivered? •How difficult is it to unpack and deliver the product? •Does the product require training or expert assistance? •Is the product easy to store when not in use? •How effective are the product’s features and functions? •Do you need other products and/or services to make this product work? •If so, how costly and difficult to obtain are they? •Does the product require external maintenan ce? •How easy is it to maintain and upgrade the product? •Does use of the product create waste items? •How easy is it to dispose of the product and waste items?
  55. 55. page 55 02/06/15 Abraham Maslow’s Hierarchy of Needs
  56. 56. Ziya G. Boyacigiller (c) 2007 56 The Buyer Utility Map By locating a new product on one or more of the 36 spaces shown here, one can see how the new idea creates a different utility proposition for existing products. Six Stages of User Experience Cycle Purchase Delivery Use Supplements Maintenance Disposal SixUtilityLevers Environmental Friendliness Fun & image Risks Convenience Simplicity Customer Productivity In which stage are the biggest blocks to customer productivity? In which stage are the biggest blocks to simplicity? In which stage are the biggest blocks to convenience? In which stage are the biggest blocks to reducing risks? In which stage are the biggest blocks to fun & image? In which stage are the biggest blocks to environmental friendliness? KEY SLIDE KEY SLIDE
  57. 57. page 57 02/06/15 Thanks to Sahin Tulga / HP Turkiye for sharing this slide... I h Examples of Innovation Business (monetizer) and Utility (invention) created Norwich Insurance, Pricing depending on usage time of the rental car – “USE” stage “Tasarruf” Progressive Insurance, Offering the same prices as competition offers – “PRE-PURCHASE” stage “Productivity” Cappy Sun, Triangular pyramidal beverage box – “DISCARD” stage “Fun” Starbucks, Coffee in a comfortable & nice environment – “USE” stage “Fun” and “Image” DHL, Following up your package through the Internet – “FOLLOW-UP” stage “Ease” and “Security” HP, Alert to warn that the ink supply is running low – “USE” stage “Productivity” Maxim, Power Supply Design Software – “PRE-PURCHASE” stage “Productivity”
  58. 58. Ziya G. Boyacigiller (c) 2007 58 Sequence of Blue Ocean Thinking Buyer Utility Is there exceptional buyer utility in your idea? Price Is your price easily accessible to the masses of buyers? Cost Can you attain your cost target to profit at your strategic price? Adoption What are the adoption hurdles? Are you addressing them up front? YES YES YES YES NORETHINK COMMERCIALLY VIABLE BLUE OCEAN IDEA NORETHINK NORETHINK NORETHINK KEY SLIDE KEY SLIDE
  59. 59. Your 4th assignment is: Improve your utility for the wallet (create new KFCs) by using Utility Matrix. Ziya G. Boyacigiller (c) 2007 59 In Class Exercise: You Start Work in a Design House…
  60. 60. Ziya G. Boyacigiller (c) 2007 60 Conventional Strategic Logic Value Innovation Strategic Logic 1. Industry Assumptions Industry conditions are given Industry conditions can be shaped. (Don’t accept the status quo) 2. Strategic Focus A company should build competitive advantages. The aim is to beat competition. Competition is not the “benchmark”. A company should pursue a quantum leap in value to dominate the market. 3. Customers A company should retain and expand its customer base through further segmentation and customization, focusing on what customers value. A value innovator targets the mass of buyers and willingly lets some existing customers go. It focuses on the key commonalities in what customers value. 4. Assets and Capabilities A company should leverage its existing assets and capabilities. A company must not be constrained by what it already has. It must ask:”What would we do if we were starting anew?” 5. Product and service offerings An industry’s traditional boundaries determine the products and services a company offers. The goal is to maximize the value of those offerings. A value innovator thinks in terms of the total solution customers seek, even if that takes the company beyond its industry’s traditional offerings. Five Dimensions of Strategy KEY SLIDE KEY SLIDE
  61. 61. Ziya G. Boyacigiller © 2005 High Growth in Revenues & Profits Ref: C. Kim/R. Mauborgne Five Dimensions of Blue-Ocean Strategy KEY SLIDE KEY SLIDE Kinepolis Strategy Map resulting from its Value Innovation Monetization differentiation
  62. 62. Ziya G. Boyacigiller (c) 2007 62 Over time, competition forces the value curves in an industry to converge.
  63. 63. Success is a voyage, not a destination… Ziya G. Boyacigiller (c) 2007 63 Remember:
  64. 64. Ziya G. Boyacigiller (c) 2007 64 How Compaq stayed on top of the server industry?
  65. 65. “We will have to create faster than they can copy us!” Ziya G. Boyacigiller (c) 2007 65 Walt Disney, when his people rush to him in panic when they find out that others are copying Disney Studios’ film animation innovations…
  66. 66. Summarize… Q&A Ziya G. Boyacigiller (c) 2007 66