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Blue ocean strategy

Course of Blue Ocean Strategy University College Cork Visiting professor: François Cazals (ISC Paris School of Management)

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Blue ocean strategy
Academic Journey
E-Business MBA Program – ISC Paris
                University College Cork

                Course of Blue Ocean
                Strategy
                February 21st , 2012
                Professor François Cazals




                                            2
Agenda
 ISC Paris School of
    Management
   The Professor
   Competition-based
    strategy
   A little film
   Blue Ocean Strategy




                          3
ISC Paris group
                              1800 students « grande
                               école »
                              250 students MBA’s



Business         Executive
           MBA
 School          Education




                                                        4
François Cazals
                           CEO Distriforce
                           ISC Paris
                              Affiliate Professor
                              Head
                                  ISC Executive Education
                                  E-Business MBA Program
                           Speaker
                              HEC Paris Executive
  fcazals@iscparis.com         Education
  Twitter: @distriforce       ESSEC Paris Executive
      Blog: cazals.fr          Education

                                                             5
Blue Ocean
Strategy
Creating
new market
space
Competition-based
strategy
Subtle War                      Brutal War
                         Blue                                Red




   “To subdue the enemy          “ War is an act of violence
without fighting is the acme       intended to compel our
          of skill”.            opponent to fulfill our will”.
Sun Tzu (544-496 BC J.-C.)        Clausewitz (1780-1831)
                                                                   8
A founding principle
“Competition is at the core
of the success or failure of
firms”.
1st sentence of Michael Porter’s
most important book




                                   9
 Michael PORTER
Two generic strategies
 Low Cost            Differentiation




Paris-Dublin
Ryanair      55 €
Air France   286 €



                                       10
A little film




      http://distriforce.net/insead.wmv

                                          11
The Book and the Authors
              Prof Chan Kim




                       Prof Renée
                       Mauborgne




                                    12
10
                 Strategy Canvas
9


8
                                                                                                       The value curve, the basic
                                                                                                       component of the strategy
7                                                                                                      canvas, is a graphic
6                                                                                                      depiction of a company’s
                                                                                                       relative performance across
5
                                                                                                       its industries factors of
4                                                                                                      competition.
3


2


1


0
     Comp Fact 1 Comp Fact 2 Comp Fact 3 Comp Fact 4 Comp Fact 5 Comp Fact 6 Comp Fact 7 Comp Fact 8
                                         Firm        Competitor


                                                                                                                                13
Strategic corridor
10

 9

 8

 7

 6

 5
     Corridor




 4

 3

 2

 1

 0
                Var 1   Var 2      Var 3     Var 4    Var 5     Var 6     Var 7   Var 8

                          Comp 1    Comp 2   Comp 3   Comp 4   Comp 5   Comp 6



                                                                                          14
Industry Cycle
Start         Growth   Maturity     Decline
                       Loyalty
                       One to One
 Innovation




                       Low Cost




                                              15
Red Ocean Vs. Blue Ocean
 Compete in existing market        Create uncontested market
    space                              space
    Beat the competition             Make the competition
    Exploit existing demand           irrelevant
    Make the value-cost trade-       Create and capture new
    off                                demand
    Align the whole system of a      Break the value-cost trade-
    firm’s activities with its         off
    strategic choice of               Align the whole system of a
    differentiation or low cost        firm’s activities in pursuit of
                                       differentiation and low cost
4 actions framework
            Reduce




            Create a
              new
Eliminate
             value
                       Create
             curve




            Raise



                                17
Raise
                         What factors
                       should be raised
                        well beyond the
                      industry standard?




  Eliminate                                     Create
   What factors                            What factors should
     should be                             be created that the
eliminated that the                        industry has never
industry has taken                              offered?
    for granted?




                         Reduce
                         What factors
                      should be reduced
                        well below the
                      industry standard?
6 Paths Framework      Head-to-head competition       Blue Ocean Creation
                       Focuses on rivals within its     Looks across alternative
Industry                        industry                       industries
                         Focuses on competitive         Looks across strategic
Strategic Group          position within strategic      groups within industry
                                  group
                        Focuses on better serving       Redefines the industry
Buyer Group                 the buyer group                 buyer group
                        Focuses on maximizing the          Looks across to
Scope of product or    value of product and service    complementary product
service offering       offerings within the bounds       and service offerings
                              of its industry
                       Focuses on improving price      Rethinks the functional-
Functional-Emotional     performance within the       emotional orientation of its
orientation               functional-emotional                industry
                        orientation of its industry
                         Focuses on adapting to         Participates in shaping
Time                     external trends as they       external trends over time
                                  occur
                                                                                     19
Look across alternative
 industries
Rent a apartment


                     +
                                Go to the hotel




=             Corporate Apartements
              = apart-hotel concept               20
Look across strategic groups within
industry



    +
                =
                                  21
Redefine the industry buyer group




                                    22
Look across to complementary product and
service offerings
Rethink the functional-emotional orientation
 of its industry




Functional              Emotional
                         Fonctionnel




                                           24
Participate in shaping external
trends over time




                                 3D TV


                 Ultra Flat TV

  Connected TV
                                         25
Blue ocean?




              26
3 Tiers of Non-customers




                           27
The
Gamers
• Men
• Under 35
• Sports, Fig
  hts, Cars,…
3 Tiers of Non-customers
 « Soon-to-be » non-
  customers
Men aged over 35
 « Refusing » non-
  costumers
Old people, parents, women
 « Unexplored » non-
  customers
Families



                             29
Business Case
How Apple has created a new
market space with the iPad
3 examples



Sony Vaio VPC-SB3L9E   SAMSUNG Netbook   iPad 2 64Go Wi-Fi
 W 13,3" LED USB 3.0      N145Plus




                                                             31
Red Ocean
Variables        Sony        Samsung
Price            899 €         239 €
Weight          1,720 kg      1,240 kg
Screen         13,3 inches   10,1 inches
Hard Drive      500 Go        250 Go
Connectivity     10/10          7/10
Keyboard          Yes           Yes
Design            7/10          5/10
Market          Laptops      Netbooks




                                           32
Strategy canvas

                                                             Differentiation

                                                                  Low Cost




  Price   Weight   Screen Hard Drive   Connectivity Keyboard Design




                                                                               33
Blue ocean
Variables        iPad
Price            489 €
Weight          0,613 kg
Screen         9,7 inches
Hard Drive       64 Go
Connectivity      3/10
Keyboard          No
Design            9/10
Touch             New
interface
iCloud            New
AppStore          New
Market         Touch Pads   34
Blue Ocean vs. Laptops


  E    R     R   C




                         35
Blue Ocean vs. Laptops
      Three Tests of a
      Blue Ocean Strategy:

  E
      1) R
         Focussed R      C

      2) Divergent
      3) Compelling Tagline



                              36
Blue ocean vs. Netbooks


  E   R    R     C




                          37
“If you dream it, you can do it”.

                                    Walt Disney




                                                  38
Annex
Exercise
•   1. List Factors of
    Competition
•   2. Top 2 or 3 in ERRC
    Grid Quadrants
•   Clearly define the
    group of “non-
    customer” that you are
    going after.
Examples
Exercise
3.   Write on
     Worksheet:      E
     left, C right
4.   Draw “As Is”
5.   Draw “To Be”
Examples
Exercise
Demonstrate
that iphone is a
blue ocean
strategy
compared to
blackberry (at
the beginning)

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Blue ocean strategy

  • 2. Academic Journey E-Business MBA Program – ISC Paris University College Cork Course of Blue Ocean Strategy February 21st , 2012 Professor François Cazals 2
  • 3. Agenda  ISC Paris School of Management  The Professor  Competition-based strategy  A little film  Blue Ocean Strategy 3
  • 4. ISC Paris group  1800 students « grande école »  250 students MBA’s Business Executive MBA School Education 4
  • 5. François Cazals  CEO Distriforce  ISC Paris  Affiliate Professor  Head  ISC Executive Education  E-Business MBA Program  Speaker  HEC Paris Executive fcazals@iscparis.com Education Twitter: @distriforce  ESSEC Paris Executive Blog: cazals.fr Education 5
  • 8. Subtle War Brutal War Blue Red “To subdue the enemy “ War is an act of violence without fighting is the acme intended to compel our of skill”. opponent to fulfill our will”. Sun Tzu (544-496 BC J.-C.) Clausewitz (1780-1831) 8
  • 9. A founding principle “Competition is at the core of the success or failure of firms”. 1st sentence of Michael Porter’s most important book 9 Michael PORTER
  • 10. Two generic strategies Low Cost Differentiation Paris-Dublin Ryanair 55 € Air France 286 € 10
  • 11. A little film http://distriforce.net/insead.wmv 11
  • 12. The Book and the Authors Prof Chan Kim Prof Renée Mauborgne 12
  • 13. 10 Strategy Canvas 9 8 The value curve, the basic component of the strategy 7 canvas, is a graphic 6 depiction of a company’s relative performance across 5 its industries factors of 4 competition. 3 2 1 0 Comp Fact 1 Comp Fact 2 Comp Fact 3 Comp Fact 4 Comp Fact 5 Comp Fact 6 Comp Fact 7 Comp Fact 8 Firm Competitor 13
  • 14. Strategic corridor 10 9 8 7 6 5 Corridor 4 3 2 1 0 Var 1 Var 2 Var 3 Var 4 Var 5 Var 6 Var 7 Var 8 Comp 1 Comp 2 Comp 3 Comp 4 Comp 5 Comp 6 14
  • 15. Industry Cycle Start Growth Maturity Decline Loyalty One to One Innovation Low Cost 15
  • 16. Red Ocean Vs. Blue Ocean  Compete in existing market  Create uncontested market space space  Beat the competition  Make the competition  Exploit existing demand irrelevant  Make the value-cost trade-  Create and capture new off demand  Align the whole system of a  Break the value-cost trade- firm’s activities with its off strategic choice of  Align the whole system of a differentiation or low cost firm’s activities in pursuit of differentiation and low cost
  • 17. 4 actions framework Reduce Create a new Eliminate value Create curve Raise 17
  • 18. Raise What factors should be raised well beyond the industry standard? Eliminate Create What factors What factors should should be be created that the eliminated that the industry has never industry has taken offered? for granted? Reduce What factors should be reduced well below the industry standard?
  • 19. 6 Paths Framework Head-to-head competition Blue Ocean Creation Focuses on rivals within its Looks across alternative Industry industry industries Focuses on competitive Looks across strategic Strategic Group position within strategic groups within industry group Focuses on better serving Redefines the industry Buyer Group the buyer group buyer group Focuses on maximizing the Looks across to Scope of product or value of product and service complementary product service offering offerings within the bounds and service offerings of its industry Focuses on improving price Rethinks the functional- Functional-Emotional performance within the emotional orientation of its orientation functional-emotional industry orientation of its industry Focuses on adapting to Participates in shaping Time external trends as they external trends over time occur 19
  • 20. Look across alternative industries Rent a apartment + Go to the hotel = Corporate Apartements = apart-hotel concept 20
  • 21. Look across strategic groups within industry + = 21
  • 22. Redefine the industry buyer group 22
  • 23. Look across to complementary product and service offerings
  • 24. Rethink the functional-emotional orientation of its industry Functional Emotional Fonctionnel 24
  • 25. Participate in shaping external trends over time 3D TV Ultra Flat TV Connected TV 25
  • 27. 3 Tiers of Non-customers 27
  • 28. The Gamers • Men • Under 35 • Sports, Fig hts, Cars,…
  • 29. 3 Tiers of Non-customers  « Soon-to-be » non- customers Men aged over 35  « Refusing » non- costumers Old people, parents, women  « Unexplored » non- customers Families 29
  • 30. Business Case How Apple has created a new market space with the iPad
  • 31. 3 examples Sony Vaio VPC-SB3L9E SAMSUNG Netbook iPad 2 64Go Wi-Fi W 13,3" LED USB 3.0 N145Plus 31
  • 32. Red Ocean Variables Sony Samsung Price 899 € 239 € Weight 1,720 kg 1,240 kg Screen 13,3 inches 10,1 inches Hard Drive 500 Go 250 Go Connectivity 10/10 7/10 Keyboard Yes Yes Design 7/10 5/10 Market Laptops Netbooks 32
  • 33. Strategy canvas Differentiation Low Cost Price Weight Screen Hard Drive Connectivity Keyboard Design 33
  • 34. Blue ocean Variables iPad Price 489 € Weight 0,613 kg Screen 9,7 inches Hard Drive 64 Go Connectivity 3/10 Keyboard No Design 9/10 Touch New interface iCloud New AppStore New Market Touch Pads 34
  • 35. Blue Ocean vs. Laptops E R R C 35
  • 36. Blue Ocean vs. Laptops Three Tests of a Blue Ocean Strategy: E 1) R Focussed R C 2) Divergent 3) Compelling Tagline 36
  • 37. Blue ocean vs. Netbooks E R R C 37
  • 38. “If you dream it, you can do it”. Walt Disney 38
  • 39. Annex
  • 40. Exercise • 1. List Factors of Competition • 2. Top 2 or 3 in ERRC Grid Quadrants • Clearly define the group of “non- customer” that you are going after.
  • 42. Exercise 3. Write on Worksheet: E left, C right 4. Draw “As Is” 5. Draw “To Be”
  • 44. Exercise Demonstrate that iphone is a blue ocean strategy compared to blackberry (at the beginning)