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Strategy crash course making the competition irrelevant.pps


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Strategy crash course making the competition irrelevant.pps

  1. 1. STRATEGY FAST TRACK: MAKING THE COMPETITION IRRELEVANTBlue Ocean Strategy + Lean Startup = Blue Ocean Startup Gil Rachlin @gilrachlin
  2. 2. Table of Contents • Introductions • Basic Definitions • Blue Ocean Strategy Basics – Value Innovation • Finding Blue Ocean Strategy • Strategic Pricing • Execution • When to Innovate Again Innovation + Execution = Success - Blue Ocean Startup- 2
  3. 3. Introductions: Name What you do? What would you like to achieve from the class?Who am I? @gilrachlin 3
  4. 4. Basics Definitions:INNOVATION and STRATEGY 4
  5. 5. Some Definitions: INNOVATION Innovation is the creation of better or more effective Products, Processes, Services, Technologies, or Ideas that are accepted by Markets, Government, and Society. Innovation From Wikipedia, the free encyclopedia Innovation used in Product, Business Model, Disruptive Innovation, Sustaining Innovation, Open Innovation, Innovation Management - Blue Ocean Startup- 5
  6. 6. How Do Most Companies Promote Innovation Vertical Innovation Approach • Random connections • Different skill sets • Provide best chance for new and innovative advancements (pixar) Common Innovation Approach • Use separate and divided internal / External groups • Skills hand offs towards innovation development. • Typically: - Lengthy timelines - Diluted ideas and - Responsibility drops. Open Innovation Approach • External / Internal ideas • External / Internal paths to market - Blue Ocean Startup- 6
  7. 7. Some Definitions: STRATEGY STRATEGY is a plan of action designed to achieve a vision…gaining (or being prepared to gain) a position of advantage over adversaries or best exploiting emerging possibilities. Strategy From Wikipedia, the free encyclopedia Generally, strategic planning deals with at least one of three key questions: "What do we do?" "For whom do we do it?" "How do we excel?" Strategic Planning From Wikipedia, the free encyclopedia - Blue Ocean Startup- 7
  8. 8. Examples of InnovativeCompanies with GoodStrategy? 8
  9. 9. Innovative and strategic Companies Entertainment PublishingGovernment InformationTransportation What made them Different from other players? - Blue Ocean Startup- 9
  10. 10. Evaluating a Good Company Strategy 10
  11. 11. Three Characteristics of a good strategy Focus Split Catchy Clear differentiation Slogan from existing trend • friendly service, Speed and frequency • “Speed of a plane at the price of a car anytime you need it” • The digital entertainment center of your world • "Welcome to the digital music revolution." (2004) • Monthly subscription, No late fee, no due dates • “Save gas and time. Let Netflix deliver your movies again” How to create innovation? - Blue Ocean Startup- 11
  12. 12. Blue Ocean Startup? 12
  13. 13. Blue Ocean Startup? Blue Ocean StartupInnovate Execute Blue Ocean Strategy Lean Startup W. Chan Kim / Renée Mauborgne • Eric Ries • Make the competition irrelevant Allocate resources as DIFFERENTIATION and LOW COST = efficiently as possible: Value innovation • Develop MVP • Validated Learning • Build Measure Learn - Blue Ocean Startup- 13
  14. 14. Focusing on Blue Ocean Strategy….. Red Ocean vs. Blue Ocean 14
  15. 15. Red Ocean vs Blue Ocean Strategy RED OCEAN STRATEGY BLUE OCEAN STRATEGYCompete in existing market space Create uncontested market spaceBeat the competition Make the competition irrelevantExploit existing demand Create and capture new demandMake the value-cost trade-off Break the value-cost trade-offAlign the whole system of a firm’s Align the whole system of a firm’sactivities with its strategic choice of activities in pursuit of differentiationdifferentiation or low cost and low cost - Blue Ocean Startup- 15
  16. 16. Blue Ocean Strategy Basics Value Innovation 16
  17. 17. Value Innovation Overall strategy of all company activities to bring value to themselves and to customers Industry Customers 1) What is our industry? Players? 1) Who are our clients? 2) Industry elements? Characteristics? 2) Main usage of offering? - Blue Ocean Startup- 17
  18. 18. Creating Value Innovation (ERRC) 2) Reduce – below industry Drop Cost Reduce standards New 4) Create – Eliminate Value Create factors that industry Curve never offered 1) Eliminate – elements taken for granted by the industry 3) Raise – Add Raise above industry Customer standards Value - Blue Ocean Startup- 18
  19. 19. Visualizing Value Innovation:Value Curve 19
  20. 20. Value Curve – The Core of BOS • Visual Representation of the differentiation and added valueWHY VISUAL:•Effective Wisdom Collection  Strategy Formulation•Effective execution through communication  Strategy Execution - Blue Ocean Startup- 20
  21. 21. Value Curve EvaluationExample: SouthWest Airlines 21
  22. 22. Southwest Airlines – 4 Elements Table (ERRC)List possible competitive elements !!! Eliminate: Raise: New Value Curve Reduce: Create: - Blue Ocean Startup- 22
  23. 23. Southwest Airlines – 4 Elements Table (ERRC)List and place the competitive elements !!! Eliminate: Raise: • Class Choice • Friendly Service • Central Airport • Speed New Value Curve Reduce: Create: • Price • Frequency • Lounges • Meals - Blue Ocean Startup- 23
  24. 24. Value Curve – Southwest Airlines Eliminate Reduce Raise Create - Blue Ocean Startup- 24
  25. 25. Back to Curve Evaluation –Three Characteristics of a good strategy • Focus Clear and focused strategic profile – Southwest: friendly service, Speed and frequency • Split Clear differentiation from existing trend – Value curve always stands on its own • Catchy Slogan Clear and convincing Southwest: “Speed of a plane at the price of a car anytime you need it” - Blue Ocean Startup- 25
  26. 26. Frameworks and Tools ToFinding Blue Ocean Strategy 26
  27. 27. Frameworks and Tools Include • Six Paths from Red to Blue • Buyer Experience Cycle • Barriers to copying BOS - Blue Ocean Startup- 27
  28. 28. Finding a way across oceans - Blue Ocean Startup- 28
  29. 29. Redefining Market Borders :The six conventional boundaries of competition Industry Best in Same Alternative Sector Definition Same competing group Strategic Groups Different (e.g. luxury cars, economic Differentiation cars, and family cars) Improve service to Same customer Buyer groups Redefine customers (buyer, user or influencer) Maximize Existing value Complementing Scope of product or In range similar to their products and service offering sector. services Accept Existing Functional-emotional Improve pricing inside orientation of industry Redefine industry Define trends over Present Time line time - Blue Ocean Startup- 29
  30. 30. Apple iTunes (ERRC) Path from Red to Blue Eliminate: Raise: • Buy Whole CD for one song • Best Sound Quality • Control on Usage and Usage learning • Availability for users (one place to find all) • UI, Browse, Search New Value Curve Reduce: Create: • Price per song (+Try Before • Complement with iPod/ you buy) Mac • Liberal Licensing to download digital content - Blue Ocean Startup- 30
  31. 31. What did Apple iTunes Realize? Eliminate Reduce Raise Create - Blue Ocean Startup- 31
  32. 32. Beyond Existing Demand 32
  33. 33. Going beyond existing demand – Non CustomersFind user resemblance Third Layer (teeth whitening) (Never Used) Second Layer (Refuse toWhy refuse? Use)Static ads on bus stops of benches Your Market First Layer (minimal useGive value on usage ready to (Prêt a Manger) jump ship) Go for the largest potential market - Blue Ocean Startup- 33
  34. 34. Netflix (ERRC) goes beyond existing demand Eliminate: Raise: • Fees (Late, Shipping, • Search Capability Handling) • Partnerships, Affiliates • Due Dates New Value Curve Reduce: Create: • Num office/store Locations • flat-fee unlimited rentals. • Mail Service • Online Streaming - Blue Ocean Startup- 34
  35. 35. Value curve of the Netflix Eliminate Reduce Raise Create - Blue Ocean Startup- 35
  36. 36. Competitive Barriers 36
  37. 37. Barriers to Copying BOS • Non conventional Logic • Clash with Other Companies’ Brand • Natural Monopoly • Legal Barriers (e.g. Patents) • Sales Volume • External Factors not supporting competition • Extraordinary changes requirements • Consumer loyalty to Innovative companies. - Blue Ocean Startup- 37
  38. 38. Strategic Pricing 38
  39. 39. Strategic Pricing Flow Extraordinary Benefit Define Pricing Corridor Strategic Pricing Target Profit From Benefit, Price, and Cost Target Cost to Adaptation Efficient and Partnerships Innovative Pricing Pricing Innovation - Blue Ocean Startup- 39
  40. 40. Pricing Corridor of the Masses Diff shape and function Same Diff Shape Same purpose Same function Shape Large Barrier of Entry Hard to Copy Some Barrier of Entry Med Price Pricing Corridor of the masses Low Barrier of Entry Easy to mimic (*) Shape size is proportionate to number of buyers that product attracts - Blue Ocean Startup- 40
  41. 41. BOS Validation Cycle 41
  42. 42. Validate the Buyer Experience Cycle Consumer Benefit Is there an extraordinary value to the consumer (Purchase, Delivery, Usage, Add-ons, Maintenance, Removal) No – rethink yes Price Is your price accessible to mass consumers No – rethink yes Cost Can you reach target cost for revenue at strategic price No – rethink yes Adaptation What are the barriers in implementing your strategy? Are you dealing with them? No – rethink yes BOS is Valid - Blue Ocean Startup- 42
  43. 43. Executing Innovation 43
  44. 44. Solving Organizational Barriers 44
  45. 45. Solve the 4 Barriers to Strategy Implementation •Seeing means believing •Meet unsatisfied customers Cognitive Challenging Existing Status •Maximize budget value•Enlist Angels, Silence Devils Quo •Focus on clear, mainand…. channels(most influential•Use Secret Advisor to senior people in org).management. Political Financial Resistance from Limited powerful parties Resources Motivational Lack of withFair Process: employeesEngagement! •Aquarium Effect (viewed by all)Explanation!! •Achievable fractions (start with MVP)Expectation (Clarify)!!! - Blue Ocean Startup- 45
  46. 46. Value curve of the NYPD with Bill Burton (1994) Eliminate Reduce Raise Create - Blue Ocean Startup- 46
  47. 47. Implementing InnovationLean Startup Style 47
  48. 48. Innovate - Build – Measure – Learn Ideas/ BOS Innovation Learn / Insights Build / Two Hypothesis: Resources • Value Creation Hypothesis - BOS • Growth Engine Hypothesis / Drivers (Growth Engine: Viral, Sticky, Paid) Product / Data / MVP Reports Base Line Measure / • Product Analytics: Metrics • Customer Analytics • Marketing Analytics - Blue Ocean Startup- From Lean Startup Loop 48
  49. 49. What is Measured? KPI – Key Performance Indicators • Product Analytics: – Insights to usage patterns, bug paths etc. – Improve product roadmap, customer service etc. • Customer Analytics – Customer behavior to optimize services for customers and dealers. • Marketing Analytics – Keyword bidding to improve performance and reduce costs – Weblog data to offer additional services etc. - Blue Ocean Startup- 49
  50. 50. Measurement Types / Innovation Accounting: • Vanity Metrics – e.g. PageViews, Unique Visitors,1 Million Messages per day, funding – Interesting blog entry: away-vanity-metrics/ • Actionable Metrics - Cause and Effect (vs. Vanity) – Help make decisions: a/b testing, pricing, cost per acquisition. – E.g. when we shipped feature X, did it affect customer behavior? • Cohort Analysis – Go to the lowest level of analysis on groups of users with something in common. - Blue Ocean Startup- 50
  51. 51. Cohort Analysis: Core engagement metric: Time on Site Cohort retention• Did you make product alteration that only Week 3 cohort is exposed to?• Did you change your advertising that week?• Does Week 3 correspond with any major holidays or events? Courtesy of: - Blue Ocean Startup- 51
  52. 52. Engine of Growth Funnel Metrics: AARRR Initial MVP After Optimization Engine of Growth Viral Paid Acquisition: Visit Site / 5% 1 7% Registration Rate Activation: Sign Up 17% 90% Retention: Come Back Too Low 5% Referral: Invite Friends Too Low 4% Revenue: Buys Product 1% 11% Lifetime Value Minimal $1 per backup
  53. 53. Sample Success Metrics 1 • Growth Driver: Recurring subscribers. Product Usage after releasing a new recurring revenue feature
  54. 54. Important tips: • Marketing Goal - Not reduced cost  acquire customers and maximize your profits • Metrics depend on Industry / business type - Focus on Customer Value - Focus on Conversions, sales and profits - Set your Base Line and Time Frame • Examples: - Profitability of Each Customer (Life Time Customer Value) - Cost of Acquiring New Customers - Repeat Purchase Rate of Existing Customers - At least 1000 orders/impressions/clicks for 3% margin of error - Blue Ocean Startup- 54
  55. 55. Some Known Tools to use: • (goal seeking) • (customer focus) • (events based) • (mobile apps) • (open source web analytics) • (BI focus for sales) - Blue Ocean Startup- 55
  56. 56. When to Innovate Again 56
  57. 57. When to Innovate again? Ongoing Process to develop Blue Ocean next to Red Oceans. Innovate when the barriers go down! Or else….?!Borders and Barnes &Nobles: Amazon –Blue Ocean – In Store Service Repeated Blue Ocean:Nook – Too late? - Online book store to - Online market place to - Mobile book to - Online cloudBlockbuster: Netflix–Blue Ocean – Rental of movies for Repeated Blue Ocean:few dollars Instead of high cost of - Subscription (no late fees)movies. - Online StreamingSubscription / Streaming – Too late? - Blue Ocean Startup- 57
  58. 58. Highlights• Value Innovation • ERRC (Eliminate, Reduce, Raise, Create) • Value Curve • Evaluate (Focus, Split, Catchy Slogan) • 6 Paths (Industry, Strategic Group, Buyer Group, Scope of product/service offering, Functional-Emotional orientation, Time) • Beyond Existing Demand • Competitive Barriers of Entry • Strategic Pricing• Execute • Tipping Point Leadership and Fair Process • MVP • Validated Learning (Build Measure Learn)• Repeat - Blue Ocean Startup- 58
  59. 59. Question????Remember:If you get over the hill, you’ll begin to pick up speed!!! Stay Hungry, Stay Foolish! Steve Jobs. - Blue Ocean Startup- 59
  60. 60. Thank you!!!! Gil Rachlin.Slides: Feedback: Info: 646.580.0058 @gilrachlinSite: www.blueoceanstartup.comFree Gift: 31st: Hands on Workshops (15% off – 15OFF): - Blue Ocean Startup- 60
  61. 61. Additional Info: 61
  62. 62. Lean Startup – New-business strategy which directs startup companies to: Allocate resources as efficiently as possible. – Origins from the Lean Manufacturing theories. • Develop an MVP (Minimum Viable Product) • Validated Learning • Build Measure Learn Developed by: Eric Ries -Silicon Valley entrepreneur and author. - Recognized for pioneering the Lean Startup movement - Blue Ocean Startup- 62
  63. 63. Blue Ocean Strategy • Simultaneous pursuit of DIFFERENTIATION and LOW COST = Value innovation • Methodically innovate without competition (make the competition irrelevant) Based on150 strategic moves over a 100 years (1880-2000) Developed by: W. Chan Kim - Co-Director of the INSEAD Blue Ocean Strategy Institute. -The Boston Consulting Group Bruce D. Henderson Chair. - Professor of Strategy and International Management at INSEAD, France. Renée Mauborgne -The INSEAD Distinguished Fellow and a professor of strategy at INSEAD. -Co-Director of the INSEAD Blue Ocean Strategy Institute. - Blue Ocean Startup- 63
  64. 64. Cirque Du Soleil Case Study 64
  65. 65. Cirque Du Soleil – 4 Elements Table (ERRC) Eliminate: Raise: • Stars Shows • Uniqueness • Animal Shows • Seat based pricing • Parallel stage shows New Value Curve Reduce: Create: • Humor Entertainment • Subject Theme • Thrill and Danger • Comfortable Viewing environment • Different Shows • Music and Dance Choreographies - Blue Ocean Startup- 65
  66. 66. Value curve Sample - Cirque du Soleil - Blue Ocean Startup- 66
  67. 67. ERRC in Value curve - Cirque du Soleil Eliminate Reduce Raise Create - Blue Ocean Startup- 67
  68. 68. Value Curve Evaluation 68
  69. 69. Curve Evaluation –Three Characteristics of a good strategy • Focus Clear and focused strategic profile – Cirque Du Soleil: Themed entertaining shows with acrobatics mixed with music, dance and, of course, the effects of light and scenery. – The acts of Nouvelle Expérience blend theatre, music, circus arts and dance • Split Clear differentiation from existing trend – Value curve always stands on its own • Catchy Slogan Clear and convincing – Cirque Du Soleil: “dramatic mix of circus arts and street entertainment….. “ – Cirque Du Soleil: “A world of fantasy… find a story of fantasy and dream, where all your wishes come true – Cirque Du Soleil: “…thousands of artists gather with a single purpose: to prove that magic exists.” - Blue Ocean Startup- 69