Blue Ocean Strategy

BLUE OCEAN STRATEGY

A SUMMARY OF
THOUGHTS

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25 December 2006 – 3RD JANUARY 2007
© DKD

BLUE OCEAN STRATEGY – THE NEW MARKET SPACE

The only way to beat the competition is to stop trying to beat the competition.
The only way to beat the competition is to stop trying to beat the competition.

RED OCEANS. BLUE OCEANS.
RED OCEANS. BLUE OCEANS.

Known Market Space. Unknown Market Space.
Known Market Space. Unknown Market Space.
Represent all the industries in existence Denotes all the industries not in existence
Represent all the industries in existence Denotes all the industries not in existence
today. today. Largely uncharted.
today. today. Largely uncharted.

Industry boundaries are defined and Defined by untapped market space,
Industry boundaries are defined and Defined by untapped market space,
accepted. Competitive rules of the demand creation, and the opportunity
accepted. Competitive rules of the demand creation, and the opportunity
games are accepted. for highly profitable growth.
games are accepted. for highly profitable growth.

Blue Oceans are created well beyond existing industry boundaries.
Blue Oceans are created well beyond existing industry boundaries.
Most are created within red oceans by expanding existing industry boundaries.
Most are created within red oceans by expanding existing industry boundaries.

Overriding focus of strategic thinking has been on competition-based red ocean
Overriding focus of strategic thinking has been on competition-based red ocean
strategies, thus accepting the key constraining factors of war ––limited terrain and
strategies, thus accepting the key constraining factors of war limited terrain and
the need to beat the enemy to succeed, and to deny the distinctive strength of the
the need to beat the enemy to succeed, and to deny the distinctive strength of the
business world i.e. the capacity to create new market space that is uncontested.
business world i.e. the capacity to create new market space that is uncontested.

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THE IMPACT OF CREATING BLUE OCEANS

The Profit and Growth Consequences of Creating Blue Oceans
The Profit and Growth Consequences of Creating Blue Oceans

BUSINESS LAUNCH 86% 14%
86% 14%

REVENUE IMPACT 62% 38%
62% 38%

PROFIT IMPACT 39% 61%
39% 61%

Launches with Red Oceans Launches for creating Blue Oceans

•• 86% of launches were line extensions accounting for 62% of revenues and 29% of
86% of launches were line extensions accounting for 62% of revenues and 29% of
profits.
profits.
•• 14% of launches were aimed at creating blue oceans and generated 38% of revenues
14% of launches were aimed at creating blue oceans and generated 38% of revenues
and 61% of profits.
and 61% of profits.

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THE RISING IMPERATIVE OF CREATING BLUE OCEANS

DRIVING FORCES
DRIVING FORCES

Accelerated
Accelerated
Accelerated Technological Commoditization of
Accelerated Technological Commoditization of
Globalization  Trade
Globalization  Trade
Advances  Improved Products & Services 
Advances  Improved Products & Services 
Barriers are dismantled
Barriers are dismantled
Industrial Productivity Increasing Price Wars and
Industrial Productivity Increasing Price Wars and
shrinking Profit Margins
shrinking Profit Margins

Brands are becoming
Brands are becoming
Supply Exceeds Demands
Supply Exceeds Demands more similar  Increased
Unprecedented array of more similar  Increased
Unprecedented array of Instant information on
Instant information on
Products and Services purchased based upon
Products and Services purchased based upon
products & prices
products & prices price
price

The business environment in which most strategy and management
The business environment in which most strategy and management
approaches of the 20th century evolved is increasingly disappearing
approaches of the 20th century evolved is increasingly disappearing

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FROM COMPANY & INDUSTRY TO STRATEGIC MOVE

Strategic Move is the Right Unit of Analysis for explaining the creation of blue
Strategic Move is the Right Unit of Analysis for explaining the creation of blue
Oceans and Sustained High Performance.
Oceans and Sustained High Performance.

Strategic Move Delivers Products and
Strategic Move Delivers Products and
A Strategic Move is the Set of Managerial
A Strategic Move is the Set of Managerial Services that opened and captured New
Services that opened and captured New
Actions and Decisions involved in making
Actions and Decisions involved in making Market Space, with aasignificance leap in
Market Space, with significance leap in
aaMajor Market Creating Business Offering
Major Market Creating Business Offering Demand
Demand

Value Innovation – The Cornerstone of Blue Ocean Strategy
Value Innovation – The Cornerstone of Blue Ocean Strategy

•• Creators of Blue Oceans did not use the competition as their benchmark.
Creators of Blue Oceans did not use the competition as their benchmark.
•• Instead they followed aastrategic logic ––“Value Innovation” ––which places equal
Instead they followed strategic logic “Value Innovation” which places equal
emphasis on VALUE & INNOVATION vs. Competition-based Strategy, the value-cost
emphasis on VALUE & INNOVATION vs. Competition-based Strategy, the value-cost
trade-off.
trade-off.
•• Value Innovation occurs when companies align innovation with utility, price and cost
Value Innovation occurs when companies align innovation with utility, price and cost
positions i.e. pursuing differentiation and low cost simultaneously.
positions i.e. pursuing differentiation and low cost simultaneously.

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VALUE INNOVATION – THE CORNERSTONE OF BLUE
OCEAN STRATEGY
•• Value innovation is created in the region where aacompany’s actions favorably effect
Value innovation is created in the region where company’s actions favorably effect
both its cost structure and its value proposition to buyers.
both its cost structure and its value proposition to buyers.
•• Cost savings are made by eliminating and reducing the factors an industry and
Cost savings are made by eliminating and reducing the factors an industry and
competes on.
competes on.
•• Buyer value is lifted by raising and creating elements the industry has never offered.
Buyer value is lifted by raising and creating elements the industry has never offered.
•• Over time, costs are reduced further as scale economies kick in due to the high
Over time, costs are reduced further as scale economies kick in due to the high
sales that superior value generates.
sales that superior value generates.

•• Value Innovation is MORE THAN
Value Innovation is MORE THAN
COSTS
Innovation.
Innovation.
•• Its is about strategy that
Its is about strategy that
embraces the entire system of aa
embraces the entire system of
company's’ activities.
Value company's’ activities.
•• Value Innovation requires
Innovation
Value Innovation requires
companies to orient the whole
companies to orient the whole
system toward achieving aaLEAP
system toward achieving LEAP
in VALUE for both buyers and
in VALUE for both buyers and
BUYER VALUE
themselves.
themselves.

The Simultaneous Pursuit of Differentiation and Low Cost

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RED OCEAN VS. BLUE OCEAN STRATEGY

RED BLUE
OCEAN STRATEGY OCEAN STRATGEY
• Compete in Existing Market Space • Create Uncontested Market Space

• Beat the Competition • Make the Competition Irrelevant

• Exploit Existing Demand • Create and Capture New Demand

• Make the Value-Cost Trade-off • Break the Value-Cost Trade-off

• Align the Whole System of a Firm’s • Align the Whole System of a Firm’s
Activities with its Strategic Choice of Activities in pursuit of Differentiation
Differentiation or Low Cost and Low Cost

In the “Reconstructionist” World – the Strategic aim is to create New Best-
In the “Reconstructionist” World – the Strategic aim is to create New Best-
Practice Rules by breaking the existing Value-Cost Trade-off and thereby
Practice Rules by breaking the existing Value-Cost Trade-off and thereby
creating Blue Ocean.
creating Blue Ocean.

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FORMULATING AND EXECUTING BLUE OCEAN
STRATEGY
How can Companies systematically Maximize the Opportunities while simultaneously
How can Companies systematically Maximize the Opportunities while simultaneously
Minimizing the Risks of Formulating and Executing Blue Ocean Strategy?
Minimizing the Risks of Formulating and Executing Blue Ocean Strategy?
Strategy will always involve both Opportunity and Risk!
Strategy will always involve both Opportunity and Risk!

The Six Principles of Blue of Blue Ocean Strategy
FORMULATION PRINCIPLES RISK FACTOR FOR EACH PRINCIPLE
ATTENUATES
1. Reconstruct Market Boundaries Search Risk
1. Reconstruct Market Boundaries Search Risk

2. Focus on the Big Picture, not the Numbers Planning Risk
2. Focus on the Big Picture, not the Numbers Planning Risk

3. Reach Beyond Existing Demand Scale Risk
3. Reach Beyond Existing Demand Scale Risk

4. Get the Strategic Sequence Right Business Model Risk
4. Get the Strategic Sequence Right Business Model Risk

EXECUTION PRINCIPLES RISK FACTOR EACH PRINCIPLE
ATTENUATES
5. Overcome Key Organizational Hurdles Organizational Risk
5. Overcome Key Organizational Hurdles Organizational Risk

6. Build Execution into Strategy Management Risk
6. Build Execution into Strategy Management Risk

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ANALYTICAL TOOLS AND FRAMEWORKS

The Strategy Canvas is both aa Diagnostic and an Action Framework for building a Compelling Blue Ocean Strategy.
The Strategy Canvas is both Diagnostic and an Action Framework for building a Compelling Blue Ocean Strategy.
Captures the Current State-of-Play in the Known Market Space.
Captures the Current State-of-Play in the Known Market Space.
Effective Blue Ocean Strategy should be about Risk Minimization and not Risk Taking

1. The Strategy Canvas
• To set a company on a strong, profitable growth trajectory in the face of these industry conditions, benchmarking against the competitors and trying
to out-compete them by offering a little more for a little less will not work. Such a strategy may nudge sales up but will hardly drive a company to open
up uncontested market space.
• Nor is extensive customer research the path to blue oceans.
THE FOUR ACTION
THE FOUR ACTION
An illustration of a Strategy Canvas [yellow tail] Wine FRAMEWORK
FRAMEWORK
HIGH
QUESTIONS
QUESTIONS
Premium Wines

[yellow tail]

1stst Consider eliminating factors that
1  Consider eliminating factors that
companies in your industry have long
companies in your industry have long
competed on – No longer have value OR
competed on – No longer have value OR
may detract value.
may detract value.
2nd  Determine whether products or
2nd  Determine whether products or
Budget Wines
services have been over-designed in the
services have been over-designed in the
race to match the competition – over-
race to match the competition – over-
serve the customers, increasing cost
serve the customers, increasing cost
structure for no gain.
structure for no gain.

3rdrd Uncover and eliminate the
3  Uncover and eliminate the
compromises your industry forces
compromises your industry forces
customers to make.
customers to make.
LOW

4thth Discover entirely new sources of
4  Discover entirely new sources of
value for buyers and to creae new
Price Use of Above the value for buyers and to creae new
Aging Vineyard Wine Wine range Fun &
Easy Ease of
demand and shift the strategic pricing for
enological line Quality prestige complexity selection adventure
drinking demand and shift the strategic pricing for
the industry.
terminology marketing and legacy
the industry.

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The Strategy Canvas is both aaDiagnostic and an Action Framework for building aa
The Strategy Canvas is both Diagnostic and an Action Framework for building
Compelling Blue Ocean Strategy. Captures the Current State-of-Play in the Known
Compelling Blue Ocean Strategy. Captures the Current State-of-Play in the Known
Market Space.
Market Space.

2. The Eliminate-Reduce-Raise-Create Grid
Eliminate-Reduce-Raise-
Create Grid – [yellow tai]
2. REDUCE
THE FOUR 2. REDUCE
Which factors should be
ACTION Which factors should be ELIMINATE
reduced well below the
RAISE
reduced well below the
FRAMEWORK industry’s standard?
industry’s standard?
• Enological
• Price vs. budget
distinctions
wines
• Aging qualities
1. ELIMINATE
• Retail store
1. ELIMINATE 4. CREATE
A New • Above-the-line
Which of the factors that 4. CREATE
A New
Which of the factors that Which factors should be involvement
Value
the industry takes for Which factors should be
marketing
Value
the industry takes for created that the industry
Curve
granted should be created that the industry
Curve
granted should be has never offered?
eliminated? has never offered?
eliminated?
CREATE
REDUCE
• Easy drinking
• Wine complexity
3. RAISE
3. RAISE • Ease of selection
• Wine range
• Fun and
raised well above the the
raised well above the the • Vineyard prestige
adventure

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THREE CHARACTERISTICS OF A GOOD STRATEGY ––COMPLEMENTARY QUALITIES
THREE CHARACTERISTICS OF A GOOD STRATEGY COMPLEMENTARY QUALITIES
(1) FOCUS
(1) FOCUS
(2) DIVERGENCE
(2) DIVERGENCE
(3) COMPELLING TAGLINE
(3) COMPELLING TAGLINE
1. FOCUS  The company does not diffuse its efforts across all key areas of competition. The company’s
1. FOCUS  The company does not diffuse its efforts across all key areas of competition. The company’s
strategic profile or value curves should clearly show it.
strategic profile or value curves should clearly show it.
2. DIVERGENCE  The shape of its value curve diverges from the other players, aaresult of not
2. DIVERGENCE  The shape of its value curve diverges from the other players, result of not
benchmarking competitors but instead looking across alternatives. By applying the Eliminate-Reduce-
benchmarking competitors but instead looking across alternatives. By applying the Eliminate-Reduce-
Raise-Create actions, the company should differentiate its profile from the industry’s average profile.
Raise-Create actions, the company should differentiate its profile from the industry’s average profile.
3. TAGLINE  The tagline for the strategic profile is clear. Not only does ititdeliver aaclear message but
3. TAGLINE  The tagline for the strategic profile is clear. Not only does deliver clear message but
also advertise an offering truthfully or else customers will lose trust and interest.
also advertise an offering truthfully or else customers will lose trust and interest.
Car
• Focused Strategic
HIGH Transport
Profile or Value
Southwest
Curves
Airline
Average
Airline
• Differentiate
(Eliminate-Reduce-
Raise-Create)
Strategic Profiles

• Compelling Tagline –
LOW
“The Speed of a plane
at the Price of a Car –
Whenever You need
LOUNGES SPEED
SEATING
PRICE MEALS FREQUENT
HUB
CLASS CONNECTIVITY POINT TO it”
CHOIICES POINT
FRIENDLY
DEPARTURE
SERVICE

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READING THE VALUE CURVES
READING THE VALUE CURVES
1. The strategy canvas enables companies to see the future in the present.
1. The strategy canvas enables companies to see the future in the present.
2. Embedded in the value curves of an industry is wealth of strategic knowledge on the current status and
2. Embedded in the value curves of an industry is wealth of strategic knowledge on the current status and
future of aabusiness.
future of business.
st
1. The 11st question the value curve answers is whether a business deserves to be a winner.
1. The question the value curve answers is whether a business deserves to be a winner.
2. It’s on the right track when the value curve meets the three criteria –– focus, divergence, and a compelling tagline.
2. It’s on the right track when the value curve meets the three criteria focus, divergence, and a compelling tagline.
3. The three criteria serves as aa litmus test of the commercial viability of the blue ocean ideas.
3. The three criteria serves as litmus test of the commercial viability of the blue ocean ideas.

A Company caught in the Red
Strategic Contradictions
A company’s explicit or implicit strategy
Ocean Strategic inconsistencies can also be
tends to be trying to outdo its competition
found between the level of the offering
on the basis of cost or quality. This Offering a high level of competing and the price.
When the Value Curves signals slow growth! factor whilst ignoring others that
converges with its competitors.
support that factor.
Does the market share and profitability
The kind of language used in the strategy
reflect the investments?
Over-delivery without Payback An Internally Driven Company canvas gives insight as to whether a
To value-innovate, the company must
company’s strategic vision is built on an
decide which factors to eliminate and
“outside-in” perspective – driven by the
Company’s Vale Curves shown to Are Competing Factors stated in
reduce – not only those to raise and
demand side OR an “inside-out”
deliver high levels across all terms buyers can understand and
create – to construct a divergent Value
perspective that is operationally driven.
factors value?
Curve.

Intersection between the analytic techniques and the six
An incoherent strategy Strategy likely based upon independent
principles of formulating and executing blue oceans that
sub-strategies – a reflection of an
organization with divisional or functional allow companies to break from the competition and
Value Curve with no rhyme or silos.
unlock uncontested market space.
reason

Six Principles Eliminate-Reduce-
+ +
Strategy Canvas
4 Formulation + 2 Execution Raise-Create Grid

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BLUE OCEAN STRATEGY

PRINCIPLE 1

RECONSTRUCT MARKET BOUNDARIES

ATTENUATES SEARCH RISKS

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FORMULATING BLUE OCEAN STRATEGY

1. RECONSTRUCT MARKET BOUNDARIES
st
•• The 11stPrinciple of Blue Ocean Strategy is to reconstruct market boundaries to
The Principle of Blue Ocean Strategy is to reconstruct market boundaries to
break from the competition and create Blue Oceans.
break from the competition and create Blue Oceans.
•• Six basic approaches to remaking market boundaries ––THE SIX PATHS
Six basic approaches to remaking market boundaries THE SIX PATHS
FRAMEWORK.
FRAMEWORK.
•• These paths have general applicability across industry sectors ––based upon looking
These paths have general applicability across industry sectors based upon looking
at familiar data from aanew perspective.
at familiar data from new perspective.
•• These paths challenge he six fundamental assumptions underlying many
These paths challenge he six fundamental assumptions underlying many
companies’ strategies. Specifically, companies tend to do the followings:
companies’ strategies. Specifically, companies tend to do the followings:
•• Define their industry similarly and focus on being the best within it.
Define their industry similarly and focus on being the best within it.
•• Look at their industries through the lens of generally accepted strategic groups and
Look at their industries through the lens of generally accepted strategic groups and
strive to stand out in the strategic group they play in.
strive to stand out in the strategic group they play in.
•• Focus on the same buyer group, be ititthe purchaser, the user, or the influencer.
Focus on the same buyer group, be the purchaser, the user, or the influencer.
•• Define the scope of the products and services offered by their industry similarly.
Define the scope of the products and services offered by their industry similarly.
•• Accept their industry's functional or emotional orientation.
Accept their industry's functional or emotional orientation.
•• Focus on the same point in time ––and often on current competitive threats in
Focus on the same point in time and often on current competitive threats in
formulating strategy.
formulating strategy.
•• Need to look across alternative industries, across strategic groups, across buyer
Need to look across alternative industries, across strategic groups, across buyer
groups, across complementary product and service offerings, across the functional-
groups, across complementary product and service offerings, across the functional-
emotional orientation of an industry, and even across time.
emotional orientation of an industry, and even across time.
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A company competes not only with the other • Substitutes – Products or services that have different form but offer
Path 1:
firms in its own industry but also with companies the same functionality or core utility.
Look Across
in other industries that produce alternative • Alternatives – Products or services that have different functions and
Alternative Industries
products or services. forms but the same purpose.

Refers to a group of companies within an
Path 2: • Most companies focus on improving their competitive position within
industry that pursue similar strategy.
Look Across a strategic group.
In most industries, the fundamental strategic
Strategic Groups • Understand which factors determine customers’ decisions to trade
differences among industry players are captured
within Industries up or down from one group to the other.
by a small number of strategic groups.

Competitors converge around common definition
Path 3: • Purchasers – who pay for the product or service may differ from the
of who the target buyer is. In reality there is a
Look Across the actual “users”, and in some cases there are important “influencers”
chain of “Buyers” who are directly or indirectly
Chain of Buyers as well.
involved in the buying decision.

Path 4: Few products are used in a vacuum. In most
Look Across cases, other products and services affect their • Untapped value is often hidden in complementary products and
Complementary value. In most industries, rivals converge within services. The key is to define the total solution buyers seek.
Product & Service the bounds of their industry’s product and service • What happens before, during and after a product is used.
Offerings offerings.
Path 5: Competition in an industry tends to converge not • Emotionally-oriented industries offer many extras that add price
Look Across only on an accepted notion of the scope of its without enhancing functionality.
Functional or products and services BUT also on one or two • Functionally-oriented industries can often infuse commodity
Emotional Appeal to possible bases of appeal – Rational or products with new life by adding a dose of emotion to stimulate new
Buyers Emotional. demand.
All industries are subject to external trends that • Key insights arise from business insights into how the trend will
affect their business over time. Most companies change value to customers and impact the company's business
Path 8:
adapt incrementally and passively and pace model.
Look Across Time
actions to keep up with the development of the • Three principles- Decisive to the business, Must be Irreversible and
trends. Have Clear Trajectory.

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1. RECONSTRUCT MARKET BOUNDARIES ––CONCEIVING NEW MARKET SPACE
1. RECONSTRUCT MARKET BOUNDARIES CONCEIVING NEW MARKET SPACE
By thinking across conventional boundaries of competition, you can see how to make convention-altering, strategic
By thinking across conventional boundaries of competition, you can see how to make convention-altering, strategic
moves that construct established market boundaries and create Blue Oceans.
moves that construct established market boundaries and create Blue Oceans.

From Head-to-Head Competition to Blue Ocean Creation
From Head-to-Head Competition to Blue Ocean Creation
Head-to-Head Competition Blue Ocean Creation

INDUSTRY Focus on rivals within the industry Looks across alternate industries
INDUSTRY Focus on rivals within the industry Looks across alternate industries

STRATEGIC Focuses on competitive position Looks across strategic groups within the
STRATEGIC Focuses on competitive position Looks across strategic groups within the
GROUP within strategic group industry
GROUP within strategic group industry

Focuses on better serving the buyer
Focuses on better serving the buyer
BUYER GROUP Redefines the industry buyer group
BUYER GROUP Redefines the industry buyer group
group
group
SCOPE OF Focuses on maximizing the value of
SCOPE OF Focuses on maximizing the value of Looks across to complementary product
Looks across to complementary product
PRODUCT OR product and service offerings within
PRODUCT OR product and service offerings within and service offerings
and service offerings
SERVCIES the bounds of its industry
SERVCIES the bounds of its industry
FUNCTIONAL- Focuses on improving price
FUNCTIONAL- Focuses on improving price Rethinks the functional-emotional
Rethinks the functional-emotional
EMOTIONAL performance within the functional-
EMOTIONAL performance within the functional- orientation of its industry
orientation of its industry
ORIENTATION emotional orientation of its industry
ORIENTATION emotional orientation of its industry
Focuses on adapting to external Participates in shaping external trends over
Focuses on adapting to external Participates in shaping external trends over
TIME
TIME trends as they occur time
trends as they occur time

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BLUE OCEAN STRATEGY

PRINCIPLE 2

FOCUS ON THE BIG PICTURE, NOT THE
NUMBERS

ATTENUATES PLANNING RISKS

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2. FOCUS ON THE BIG PICTURE, NOT THE NUMBERS
Align your strategic planning process to focus on the BIG PICTURE and apply these ideas in drawing the Company’s Strategy
Canvas to arrive aa Blue Ocean Strategy
Canvas to arrive Blue Ocean Strategy
A TYPICAL STRATEGY PLAN BLUE OCEAN STRATEGY PLAN
Lengthy description of current industry conditions and the Draw a strategy Canvas – Overall Dynamics of the Industry
Lengthy description of current industry conditions and the Draw a strategy Canvas – Overall Dynamics of the Industry
competitive situation Visualizes the Company’s current Strategic Position – Helps Chart
competitive situation Visualizes the Company’s current Strategic Position – Helps Chart
future strategy
future strategy
Discussion of how to increase market share, capture new segments,
Discussion of how to increase market share, capture new segments,
or cut costs 1st: Shows the strategic profile of an industry depicting clearly the
or cut costs 1st: Shows the strategic profile of an industry depicting clearly the
factors that affect competition among industry players.
factors that affect competition among industry players.
2ndndShows the strategic profile of of current and potential
:
Outline of numerous Goals and Initiatives (KPI, BPR) 2 : Shows the strategic profile of of current and potential
Outline of numerous Goals and Initiatives (KPI, BPR) competitors, identifying which factors they invest in strategically.
competitors, identifying which factors they invest in strategically.
Finally: Shows the company’s strategic profile or value curve
Finally: Shows the company’s strategic profile or value curve
depicting how it invests in the factors of competition.
A full budget including graphs and spreadsheets depicting how it invests in the factors of competition.
A full budget including graphs and spreadsheets
Happens with “Highly Determined Leader” OR “In a Crisis”
Happens with “Highly Determined Leader” OR “In a Crisis”
Culminates with the preparation of a large document culled from a
Culminates with the preparation of a large document culled from a 44 STEPS OF VISUALIZING STRATEGY
STEPS OF VISUALIZING STRATEGY
mishmash of data provided by various parts of the organization who
mishmash of data provided by various parts of the organization who
often have conflicting agendas and poor communication
often have conflicting agendas and poor communication
VISUAL VISUAL
VISUAL VISUAL VISUAL VISUAL
VISUAL VISUAL STRATEGY COMMUNI-
AWAKENING EXPLORATION STRATEGY COMMUNI-
AWAKENING EXPLORATION FAIR CATION
Spend majority of strategic thinking filling in boxes and running FAIR CATION
Spend majority of strategic thinking filling in boxes and running
numbers instead of developing a clear picture of how to break from
GO AFTER CUSTOMERS & NON-CUSTOMERS
numbers instead of developing a clear picture of how to break from
GO AFTER CUSTOMERS & NON-CUSTOMERS
the competition
the competition
Revenue, Profitability, Market Share, and Customers
Revenue, Profitability, Market Share, and Customers
Satisfaction
Satisfaction
Most strategic plans don’t contain strategy at all but rather a MEASURES ON COMPANY’S CURRENT POSITION
Most strategic plans don’t contain strategy at all but rather a MEASURES ON COMPANY’S CURRENT POSITION
smorgasbord of tactics that individually makes sense but collectively
smorgasbord of tactics that individually makes sense but collectively
don’t add up to to a unified, clear direction that sets a company apart Balance between Profitable Growth and Cash-Flow at a given
don’t add up to to a unified, clear direction that sets a company apart Balance between Profitable Growth and Cash-Flow at a given
– let alone makes the competition irrelevant. point in time.
– let alone makes the competition irrelevant. point in time.

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44STEPS OF VISUALIZING STRATEGY
STEPS OF VISUALIZING STRATEGY
VISUAL
VISUAL
VISUAL VISUAL VISUAL
VISUAL VISUAL VISUAL
STRATEGY
STRATEGY
AWAKENING EXPLORATION COMMUNI-CATION
AWAKENING EXPLORATION COMMUNI-CATION
FAIR
FAIR
• Compare your business with • Go into the field to explore • Draw your “to be” strategy • Distribute your before-
• Compare your business with • Go into the field to explore • Draw your “to be” strategy • Distribute your before-
your competitors by drawing the six paths to creating canvas based on insights and-after strategic profiles
your competitors by drawing the six paths to creating canvas based on insights and-after strategic profiles
your “as is” strategy canvas. blue oceans. from field observations.. on one page for easy
your “as is” strategy canvas. blue oceans. from field observations.. on one page for easy
comparison.
comparison.
• Set where your strategy • Observe the distinctive • Get feedback on
• Set where your strategy • Observe the distinctive • Get feedback on
needs to change advantages of alternative alternative strategy • Support only those
needs to change advantages of alternative alternative strategy • Support only those
products and services. canvases from customers, projects and operational
products and services. canvases from customers, projects and operational
competitors’ customers, moves that allow your
competitors’ customers, moves that allow your
• See which factors you and non-customers. company to close the
• See which factors you and non-customers. company to close the
should eliminate, create, gaps to actualize the new
should eliminate, create, gaps to actualize the new
or change. • Use feedback to build the strategy.
or change. • Use feedback to build the strategy.
best “to be” future
best “to be” future
strategy.
strategy.
A company should never One page picture showing new
A company should never One page picture showing new
outsource its eyes. and old strategic profiles so that
Resolve differences about the outsource its eyes. and old strategic profiles so that
Resolve differences about the Great strategic insights is the Present strategy canvases at a every employee could see where
current state of play Great strategic insights is the Present strategy canvases at a every employee could see where
current state of play product of getting into the filed Visual Strategy Fair the company stood and where it
Accept the need for change product of getting into the filed Visual Strategy Fair the company stood and where it
Accept the need for change and challenging the boundaries had to focus its efforts to create a
and challenging the boundaries had to focus its efforts to create a
of competition compelling future
of competition compelling future

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© DKD


VISUALIZING STRATEGY AT THE CORPORATE LEVEL
VISUALIZING STRATEGY AT THE CORPORATE LEVEL
• •When business units present their strategy canvases to one another, they deepen their understanding of the other
When business units present their strategy canvases to one another, they deepen their understanding of the other
businesses in the corporate portfolio.
businesses in the corporate portfolio.
• •Example: Samsung Electronics has institutionalized the use of the strategy canvas in its key business creation decisions by
Example: Samsung Electronics has institutionalized the use of the strategy canvas in its key business creation decisions by
establishing the Value Innovation Program (VIP) Centre in 1998.
establishing the Value Innovation Program (VIP) Centre in 1998.
USING THE PIONEER-MIGRATOR-SETTLER (PMS) MAP
USING THE PIONEER-MIGRATOR-SETTLER (PMS) MAP

• •AA Company’s Pioneers are the businesses that offer unprecedented value.
Company’s Pioneers are the businesses that offer unprecedented value.
• •Settlers are businesses whose value curves conform to the basic shape of the industry’s.
Settlers are businesses whose value curves conform to the basic shape of the industry’s.
• •The potential of Migrators lies somewhere in between. Such businesses extend the industry’s curve by giving customers
The potential of Migrators lies somewhere in between. Such businesses extend the industry’s curve by giving customers
more for less, but they don’t alter its basic shape. These businesses offer improved value, but not innovative value.
more for less, but they don’t alter its basic shape. These businesses offer improved value, but not innovative value.

OVERCOMING THE LIMITATIONS
OVERCOMING THE LIMITATIONS
• •Strategic Planning should be more about Collective Wisdom building than top-down or bottom-up planning.
Strategic Planning should be more about Collective Wisdom building than top-down or bottom-up planning.
• •ItIt should be more conversational than solely documentation driven, should be more about building the big picture than about
should be more conversational than solely documentation driven, should be more about building the big picture than about
number crunching exercises.
number crunching exercises.
• •ItIt should have a creative component instead of being strictly analysis-driven, more motivational, invoking willing commitment,
should have a creative component instead of being strictly analysis-driven, more motivational, invoking willing commitment,
than bargain driven, producing negotiated commitment.
than bargain driven, producing negotiated commitment.

Aristotle pointed out ––“The Soul never thinks without an image”
Aristotle pointed out “The Soul never thinks without an image”
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3. REACH BEYOND EXISTING DEMAND
3. REACH BEYOND EXISTING DEMAND
Companies should challenge two conventional strategy practices:
Companies should challenge two conventional strategy practices:
1. Focusing on existing customers 2. The drive for finer segmentation to accommodate buyer differences.
1. Focusing on existing customers 2. The drive for finer segmentation to accommodate buyer differences.
Instead of concentrating on customers, need to look at non-customers.
Instead of concentrating on customers, need to look at non-customers.
Instead of focusing on customer differences, need to build on powerful commonalities in what buyers value.
Instead of focusing on customer differences, need to build on powerful commonalities in what buyers value.

THE THREE TIERS OF NON-CUSTOMERS
THE THREE TIERS OF NON-CUSTOMERS

First Tier: “soon-to-be”
First Tier: “soon-to-be” • • Focus on the Tier that represents the
Focus on the Tier that represents the
non-customers who
non-customers who biggest catchments.
biggest catchments.
are on the edge of your
are on the edge of your • • But, explore whether there are
But, explore whether there are
market
market overlapping commonalities across
overlapping commonalities across
all three tiers of non-customers.
all three tiers of non-customers.
Second Tier:
Second Tier: • • The natural strategic orientation is
The natural strategic orientation is
“Refusing” non-
“Refusing” non- toward retaining existing customers
toward retaining existing customers
customers who
2nd Third
Your First customers who and seeking further segmentation
and seeking further segmentation
consciously choose
Tier Tier
Market Tier consciously choose opportunities. This is especially true
opportunities. This is especially true
against your market
against your market in the face of competitive pressures.
in the face of competitive pressures.
• • However, we should reach beyond
However, we should reach beyond
Third Tier:
Third Tier: existing demand to non-customers.
existing demand to non-customers.
“Unexplored” non-
“Unexplored” non- • • IfIf no such opportunities arise, move
no such opportunities arise, move
customers who are in
customers who are in on to further exploit differences
on to further exploit differences
markets distant from
markets distant from among exist.
among exist.
yours.
yours.

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4. GET THE STRATEGIC SEQUENCE RIGHT

Companies need to build their blue ocean strategy in the sequence of buyer utility, price, cost, and adoption.
Companies need to build their blue ocean strategy in the sequence of buyer utility, price, cost, and adoption.

Buyer Utility
Buyer Utility
ADDRESSING THE REVENUE SIDE OF A COMPANY’S BUSINESS MODEL
Is there exceptional
SEQUENCE OF BLUE OCEAN STRATEGY

Is there exceptional
ADDRESSING THE REVENUE SIDE OF A COMPANY’S BUSINESS MODEL
buyer utility in your
buyer utility in your
business idea? No-Rethink
business idea?
1. The starting point is buyer utility –– Does your offering unlock exceptional utility?
1. The starting point is buyer utility Does your offering unlock exceptional utility?
Yes Is there aa compelling reason for the mass of people to buy it?
Is there compelling reason for the mass of people to buy it?
Price
Price 2. Remember aa company does not want to rely solely on price to create demand. Is
2. Remember company does not want to rely solely on price to create demand. Is
your offering priced to attract the mass of target buyers so that they have aa
Is your price easily
Is your price easily
your offering priced to attract the mass of target buyers so that they have
accessible to the mass
accessible to the mass compelling ability to pay for your offering?
compelling ability to pay for your offering?
No-Rethink
of buyers?
of buyers?
Yes ADDRESSING THE PROFIT SIDE
ADDRESSING THE PROFIT SIDE
Cost
Cost
3. Can you produce your offering at the target cost and still earn aa healthy profit
3. Can you produce your offering at the target cost and still earn healthy profit
Can you attain your
Can you attain your
cost target to profit at
cost target to profit at margin? You should not let costs drive prices, nor should you scale down utility
No-Rethink margin? You should not let costs drive prices, nor should you scale down utility
your strategic price?
your strategic price?
because high costs block yor ability to profit at the strategic price.
because high costs block yor ability to profit at the strategic price.
Yes
Adoption
Adoption IT IS THE COMBINATION OF EXCEPTIORNAL UTILITY, STRATEGIC
IT IS THE COMBINATION OF EXCEPTIORNAL UTILITY, STRATEGIC
PRICING & TARGET COSTING THAT ALLOWS COMPANIES TO ACHIEVE
What are the adoption
What are the adoption
PRICING & TARGET COSTING THAT ALLOWS COMPANIES TO ACHIEVE
hurdles in actualizing
hurdles in actualizing VALUE INNOVATION.
VALUE INNOVATION.
your business idea? Are
your business idea? Are
you addressing them
you addressing them No-Rethink
up-front? ADDRESSING THE ADOPTION HURDLES
up-front?
ADDRESSING THE ADOPTION HURDLES
Yes
A commercially
A commercially 4. What are the adoption hurdles in rolling out your idea? Have you addressed
4. What are the adoption hurdles in rolling out your idea? Have you addressed
viable blue these up front?
viable blue these up front?
ocean idea
ocean idea
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Testing for Exceptional Utility
Testing for Exceptional Utility
Unless the technology makes buyers’ lives dramatically simpler, more convenient, more productive, less risky, or more fun and
Unless the technology makes buyers’ lives dramatically simpler, more convenient, more productive, less risky, or more fun and
fashionable, itit will not attract the masses no matter how many awards it win.
fashionable, will not attract the masses no matter how many awards it win.
THE SIX STAGES OF BUYER EXPERIENCE
1 2 3 4 5 6
• •Outlines all the levers
PURCHASE DELIVERY USE SUPPLEMENTS MAINTENANCE DISPOSAL
Outlines all the levers
companies can pull to
companies can pull to
How long Does the Need other Require Does use of
How long Does the Need other Require Does use of
How long
How long deliver exceptional utility to
does it take product product to external product
does it take product product to external product
Customer deliver exceptional utility to
does it take
does it take to to deliver require make it maintenance waste buyers as well as the
to to deliver require make it maintenance waste
Productivity to find? buyers as well as the
to find? the product? training? work? ? items?
the product? training? work? ? items?
various experiences buyers
various experiences buyers
How rapidly Does it can have with aa product or
can have with product or
How rapidly Does it
How difficult How easy to
How difficult How easy to
can you require How easy to How easy to
can you require How easy to How easy to
Simplicity service.
to unpack maintain &
to unpack maintain &
make a expert obtain? dispose? service.
make a expert obtain? dispose?
and install? upgrade?
and install? upgrade?
purchase? assistance?
purchase? assistance?
THE SIX UTILITY LEVERS

• •This map allows managers
This map allows managers
Do buyers Effectivenes How much
Convenience Do buyers Effectivenes How much to identify the full range of
Is the place How costly How costly
Is the place How costly How costly to identify the full range of
have to s of features time do they
have to s of features time do they
accessible? to maintain? to dispose? utility spaces that aa product
utility spaces that product
accessible? to maintain? to dispose?
arrange? & functions? take?
arrange? & functions? take?
or service can potentially fill.
or service can potentially fill.
Will Things
Will Things
How secure Legal &
How secure Legal &
Risk How costly Go wrong? How costly Will there be
How costly Go wrong? How costly Will there be
• •To test for exceptional
is the Environment
is the Environment
and difficult? Ease of are they? repeat work? To test for exceptional
and difficult? Ease of are they? repeat work?
transaction? al issues?
transaction? al issues? utility, companies should
Warranty?
Warranty? utility, companies should
check whether their offering
Deliver more check whether their offering
Deliver more
Is the place Would How much Will it
Is the place Would How much Will it
Fun and has removed the greatest
Friendly and
options than Friendly and
options than has removed the greatest
attractive & customer be pain do they enhance
attractive & customer be pain do they enhance
Image transparent?
user blocks to utility across the
transparent?
user
fun? anxious? cause? CSR?
fun? anxious? cause? CSR? blocks to utility across the
require?
require?
entire buyer experience
entire buyer experience
Is purchase Is the cycle for customers and
Is purchase Is the Will it
Availability Will it
Availability cycle for customers and
Environmental made in a packaging Availability Does it meet
made in a packaging Availability Does it meet
enhance non-customers.
of user enhance
of user
Friendliness friendly user of manuals? standards? non-customers.
friendly user of manuals? standards?
manual? usability?
manual? usability?
manner? friendly?
manner? friendly?

Page 25
© DKD

Blue Ocean Strategy

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