Blue Ocean Tsl 2009

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Internal Training on Blue Ocean Strategy, Customer Centric Thinking

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Blue Ocean Tsl 2009

  1. 1. Strictly Private & Confidential Blue Ocean Strategy Introduction, Jan 09 Internal presentation
  2. 2. Agenda (45min) <ul><li>What is Blue Ocean Strategy? </li></ul><ul><li>Samples/Illustrations </li></ul><ul><ul><li>PC industry 2000 </li></ul></ul><ul><ul><li>Sony Walkman History </li></ul></ul><ul><ul><li>Music industry today.. </li></ul></ul><ul><ul><li>Airlines in Europe </li></ul></ul><ul><li>How do I get involve? </li></ul>Strictly Private & Confidential
  3. 3. What is Blue Ocean? <ul><li>What is Red Ocean? </li></ul><ul><li>What is Blue Ocean? </li></ul><ul><li>Ignore Current Rules in the Market </li></ul><ul><li>Customer Centric Thinking </li></ul><ul><li>Value Innovation </li></ul><ul><li>Extend Customer Value </li></ul>Strictly Private & Confidential Page
  4. 4. US Naval Strategy <ul><li>Google earth.. </li></ul><ul><li>Where is the Red Ocean for China? </li></ul><ul><li>Where is China’s Blue Ocean? </li></ul><ul><ul><li>Another space? </li></ul></ul><ul><ul><li>Another timeline? </li></ul></ul><ul><ul><li>Another battlefield? </li></ul></ul><ul><ul><li>Another market? </li></ul></ul>Strictly Private & Confidential Page
  5. 5. <ul><li>A PC Mouse </li></ul><ul><li>Ship tickets to Macau </li></ul><ul><li>MK CK sales </li></ul><ul><li>Baleno’s Polo shirt </li></ul><ul><li>Commodities, Can only compete on price </li></ul>Common Samples of Red Sea/Ocean Strictly Private & Confidential Page
  6. 6. PC market in 2000 <ul><li>Market Leader: Compaq PC </li></ul><ul><ul><li>1.5ghz Pentium III PC, 512MB, 10GB HD, Windows, Keyboard, Mouse </li></ul></ul><ul><ul><li>Sold at Broadway, Golden Shopping Center </li></ul></ul><ul><ul><li>Margin </li></ul></ul><ul><ul><ul><li>5% </li></ul></ul></ul><ul><ul><li>Credit Term? </li></ul></ul>Strictly Private & Confidential Page Value for Customer
  7. 7. Credit days for Compaq Strictly Private & Confidential Page Day 1 Order Pentium III @USD150 Day 20 Installed onto PC motherboard Day 30 Ship to Dealer Day 35 In Dealer stock Day 35+90 days credit to dealer Collect payment Within 90 days the dealer sells the product
  8. 8. Blue Ocean Player: Dell <ul><li>What does the customer wants? </li></ul><ul><ul><li>Newest Technology </li></ul></ul><ul><ul><li>Lowest price </li></ul></ul><ul><ul><li>DIY/Customize </li></ul></ul><ul><ul><li>Online </li></ul></ul><ul><ul><li>Quick delivery </li></ul></ul><ul><li>Dell.com </li></ul><ul><ul><li>Pentium IV, 20GB HD, </li></ul></ul><ul><ul><li>Lowered Price, </li></ul></ul><ul><ul><li>Better package </li></ul></ul><ul><li>Extending Value for Customer </li></ul>Strictly Private & Confidential Page Value for Customer
  9. 9. Credit days for Dell Strictly Private & Confidential Page Day 1 Erwin order on Dell.com; Pentium IV (@US150)with Larger HD 20GB Day 1 Order from Intel Factory; IBM stock house next door, robot ships newest component over Day 30 Visa payment arrived Zero inventory?
  10. 10. How Does the Model work? <ul><li>Factory next to Intel, IBM </li></ul><ul><li>Beyond JIT supply, </li></ul><ul><li>Payment terms? </li></ul><ul><li>How many days </li></ul><ul><li>Margin </li></ul><ul><ul><li>15% </li></ul></ul><ul><li>Econ of Scale and Econ of Scope </li></ul><ul><li>What happened to Compaq? </li></ul>Strictly Private & Confidential Page
  11. 11. Sony Walkman <ul><li>Market Leader: 20 years </li></ul><ul><li>Cassette, MD, CD.. </li></ul><ul><li>Offer Value for Customer: </li></ul><ul><ul><li>Portable </li></ul></ul><ul><ul><li>Style/Fashion </li></ul></ul><ul><ul><li>Good Quality </li></ul></ul><ul><ul><ul><li>Sound </li></ul></ul></ul><ul><ul><ul><li>Design </li></ul></ul></ul><ul><ul><li>Compatible </li></ul></ul><ul><ul><li>Self Record </li></ul></ul><ul><ul><li>Music selection </li></ul></ul>Strictly Private & Confidential Page
  12. 12. Music Industry <ul><li>CD Music Publisher </li></ul><ul><ul><li>Universal, BMG, Sony, Emperor </li></ul></ul><ul><li>CD Retailer </li></ul><ul><ul><li>Tower Records </li></ul></ul><ul><ul><li>HMV </li></ul></ul><ul><li>Value for Customer </li></ul><ul><ul><li>Top Singers, Top Songs Charts </li></ul></ul><ul><ul><li>Thousands of CD Selection </li></ul></ul><ul><ul><li>Color Poster included in CD </li></ul></ul><ul><ul><li>Try at store </li></ul></ul>Strictly Private & Confidential Page
  13. 13. Demo Apple iTune/iPhone Strictly Private & Confidential Page
  14. 14. Blue Ocean: Apple iTune/iPod <ul><li>What does the Customer wants? </li></ul><ul><li>How does Apple Extend Customer Value? </li></ul><ul><ul><li>Style/Fashion? </li></ul></ul><ul><ul><li>Why do I have to buy the “whole CD”? </li></ul></ul><ul><ul><li>How much do I “value” each good song? </li></ul></ul><ul><ul><li>Library for Life? </li></ul></ul><ul><ul><li>Buy once, use anywhere, Home, Street, Office, Car any device </li></ul></ul><ul><ul><li>Millions of Songs </li></ul></ul><ul><ul><li>DIY </li></ul></ul><ul><ul><li>Community </li></ul></ul>Strictly Private & Confidential Page
  15. 15. How Does the Model Work? <ul><li>How do they do it? </li></ul><ul><li>Customer life cycle: </li></ul><ul><ul><li>Buy 1 st Low Cost iPod (any price point), Make a friend </li></ul></ul><ul><ul><li>iTune Buy Songs at Value price, (many songs overtime) </li></ul></ul><ul><ul><li>Buy 2 nd iPod </li></ul></ul><ul><ul><li>Buy iPhone.. </li></ul></ul><ul><li>Launch many iPods (cover all price point, always stylish) </li></ul><ul><li>Get a lot Music </li></ul><ul><li>A Simple Life with Apple </li></ul><ul><li>A fashionable Life with Apple </li></ul><ul><li>Is Apple a Hardware company? Or a Software company? </li></ul><ul><ul><li>Or a Service company? </li></ul></ul><ul><li>What happened to Sony Walkman? (the hardware company) </li></ul><ul><li>What happened to the Music Industry? (the software companies) </li></ul>Strictly Private & Confidential Page
  16. 16. Travel in Europe in 2000 <ul><li>Red Ocean </li></ul><ul><ul><li>Large Airlines </li></ul></ul><ul><ul><li>Expensive flights </li></ul></ul><ul><ul><li>Same boring service </li></ul></ul><ul><ul><li>Same boring food </li></ul></ul><ul><ul><li>Same lounge </li></ul></ul><ul><ul><li>Long wait, Long travel time to airport </li></ul></ul><ul><li>E.g. travel from London to Basel </li></ul><ul><li>Guess how much is the ticket? </li></ul>Strictly Private & Confidential Page
  17. 17. Blue Ocean Player: Easyjet <ul><li>Demo </li></ul><ul><li>Guess, how much it takes to fly from London to Basel? </li></ul>Strictly Private & Confidential Page
  18. 18. What does Easyjet offer <ul><li>Extend Customer Value </li></ul><ul><ul><li>Low Cost </li></ul></ul><ul><ul><li>On time </li></ul></ul>Strictly Private & Confidential Page
  19. 19. How Does the Model Work? <ul><li>How do they do it? </li></ul><ul><li>Small Airport = Lower tax, lower fee </li></ul><ul><li>EasyJet become the most important customer at that airport = good service </li></ul><ul><ul><li>Have you fly Dragon air in HK airport? </li></ul></ul><ul><li>Focus on the Core value for customer </li></ul><ul><li>Cut everything else </li></ul><ul><ul><li>No drinks, no seats assignment, 1 luggage only, no magazine.. </li></ul></ul><ul><li>Technical: </li></ul><ul><ul><li>Airbus flying range, 3 flights per day, least idle time, </li></ul></ul><ul><li>Why does Oasis Airline fail? </li></ul><ul><ul><li>They choose to Fight in the Red Ocean </li></ul></ul>Strictly Private & Confidential Page
  20. 20. Summary <ul><li>Blue Ocean Strategy: </li></ul><ul><ul><li>Create Un-contested Market Space </li></ul></ul><ul><ul><li>Make your Competition Irrelevant </li></ul></ul><ul><li>Value Innovation </li></ul><ul><li>Customer Centric Thinking </li></ul><ul><ul><li>Extend the offering </li></ul></ul><ul><li>Samples: </li></ul><ul><ul><li>Apple iTune/iPod: ease of purchase, ease of use, reasonable price, style, large selection, community, DIY.. Customer Life Cycle </li></ul></ul><ul><ul><li>Dell: extend the low price of material to the customer, DIY, quick deliver of most high tech equipment, Econ of scale/Econ of scope </li></ul></ul><ul><ul><li>EasyJet: CHEAP ticket, ease of use, cut away not needed elements </li></ul></ul>Strictly Private & Confidential Page
  21. 21. <ul><li>What are the rules? (of the Red Ocean) </li></ul><ul><ul><li>Ignore them </li></ul></ul><ul><li>Ask: </li></ul><ul><ul><li>What do the Customer Wants? </li></ul></ul><ul><ul><li>Extend the Value Offering </li></ul></ul>How do I get involve? Strictly Private & Confidential Page
  22. 22. 4 sessions in this ”Blue Ocean” course <ul><li>Intro </li></ul><ul><li>Live Sample </li></ul><ul><li>TSL Sample </li></ul><ul><li>Case Study </li></ul><ul><li>A way of thinking </li></ul><ul><li>Take away: </li></ul><ul><ul><li>Walking into a store, observe </li></ul></ul><ul><ul><li>What does the Customer Value? </li></ul></ul><ul><ul><li>How to extend the value </li></ul></ul>Strictly Private & Confidential Page
  23. 23. TSL Challenge <ul><li>MK Red Sea </li></ul><ul><li>Product Red Sea </li></ul>Strictly Private & Confidential Page
  24. 24. Moving Forward!! Strictly Private & Confidential 1 st Generation HK Manufacturing Entrepreneur Modern Retailer for Chinese Low Cost High Value Skill and Knowhow in Production Design, Fashionable Branding Mass, Economy of Scale Targeted, Economy of Scope Vertically Integrated Manufacturer Quick Response Efficient Retailer Supplier driven business model Customer Value driven business model Traditional Apprentices System Re-engineered Corp Governance Trusted Brand name Trusted Brand name Believe in Service, go the extra step Believe in Service, go the extra step Long term loyal customer Long term loyal customer Care and Love for the Customer Care and Love for the Customer

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