Business Model Innovation with the Blue Ocean Strategy

Business Model
Innovation with the
Blue Ocean Strategy
Davender Gupta, MS, MBA
TheScaleupProject.com
April 2021
©2021 Davender Gupta. All rights reserved. davender@davender.com

Blue Ocean Strategy
The objective of the Blue Ocean
Strategy is to create and capture an
uncontested market space,
thus making the competition irrelevant
through the simultaneous pursuit of
differentiation and cost reduction.
2

3

Value Innovation
Value
Innovation
INCREASE VALUE TO BUYER
LOWER PRODUCTION COST
The value to the buyer increases by
raising and creating elements the
industry has never offered
Cost savings are made by
eliminating and reducing the
factors an industry competes on.
Value Innovation is achieved when the
whole system of utility, price and cost is aligned.
4

Example:
Booster Fuels
• Problem for the motorist:
have to go to a gas station, waiting
too long, smell of gas on clothes
• Problem for the distributor: razor-
thin margins on sales of gas because
of high fixed costs (real estate)
• Innovation:
Bring the gas directly to the car.
Order and pay by app.
• Result: 10x the sales volume of a
normal gas station – reducing
operating cost for the distributor
and increasing utility for the
motorist
• Skip the fixed costs of a
conventional gas station
5

A technology
innovation IS NOT a
value innovation
• How does the technology innovation
increase the utility for the user?
reduce costs for the producer?
change the decision criteria for the
buyer?
The most sustainable competitive
advantage is NOT technology, it is
utility.
6

The Strategy Canvas
7
price
portability
Ease
of
repair
Number
of
ports
User
interface
Screen
quality
Design
cachet
Compatibility
with
old
software
Corporate
acceptability
APPLE MAC
WINDOWS MACHINES

Example :
Westjet
• Standardize aircraft size and seat options;
• Point to point (like a bus) rather than hub and
spoke;
• Use of secondary airports;
• Avoid interline exchange, code sharing or travel
agencies;
• Direct ticket sales through company web site;
• Employees are shareholders;
• Sale of ancillary services such as on-board meals
and charging for luggage.
Result -
Break Air Canada’s monopoly
8

Questions
What are one or two alternatives to
your offer?
• Either competitors or workarounds for
your customer
Why do your customers choose the
competitors?
• Look for at least three factors
Why would your customers choose
you?
• Look for at least three factors
 Draw the Strategy Canvas
9

The E-R-R-C Grid
10
What factors
should we raise
well above the
industry standard?
What factors
should we reduce
compared to the
industry standard?
What factors
should we create
that the industry
has never offered?
What factors do
eliminate?
ELIMINATE RAISE CREATE
REDUCE

Example: Wii
• Before: Video games were complicated,
expensive, and required advanced tech skills
• Eliminate: Need to understand computers
• Reduce: Simplify functionality to attract new
users
• Raise: Accessories and peripherals to
encourage the “Wii-Fit” movement
• Create: Movement detection technology
Result: Creation of a new market – PlayStation
and others came after
11

Question
Compared to the industry standard, what can you
12
REDUCE

Look for non-customers Current customers of
the market
1
Marginal
non-customers
(conditional
participation)
2
Non-customers who
refuse to participate in
the market
3
Unexplored non-
customers who don’t
even know you exist
13

Example: Kiva
Existing market: NGO, charities
1st level of non-customers:
conditional participation
• Frustrated donors who don’t have
control or who do not see the results
2nd level of non-customers:
refusal to participate
• Belief that a little amount is useless
• Looking for a more direct connection
• Not convinced of donation efficiency
3rd level of customers:
unexplored
• Too complicated
• Not familiar with the concept of micro-
loans
14
Micro-loans to entrepreneurs
in developing countries

Question
Who could be a type
of non-customer for
each category?
15

To innovate
your business
model:
Get out of the conventional mindset of
“competition”
Banish
Redefine the parameters of the market
Redefine
Keep an eye on the overall picture
Keep
Venture beyond existing offer and demand
towards new market spaces
Venture
Ensure you execute in the right sequence
Execute

17
Innovation
de
valeur
INCREASE VALUE TO BUYER
LOWER PRODUCTION COST
REDUCE

18

Davender Gupta, MS, MBA
linkedin.com/in/coachdavender
slideshare.com/coachdavender
facebook.com/coachdavender
davender@davender.com
+1-514-448-1894
19
Concepts and drawings from http://blueoceanstrategy.com

Business Model Innovation with the Blue Ocean Strategy

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