Blue Ocean Strategy

13,031 views

Published on

Published in: Education, Business
0 Comments
27 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
13,031
On SlideShare
0
From Embeds
0
Number of Embeds
185
Actions
Shares
0
Downloads
2,104
Comments
0
Likes
27
Embeds 0
No embeds

No notes for slide

Blue Ocean Strategy

  1. 1. BLUE OCEAN STRATEGY A SUMMARY OF THOUGHTS Page 1 25 December 2006 – 3RD JANUARY 2007 © DKD
  2. 2. 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. Page 2 25 December 2006 – 3RD JANUARY 2007 © DKD
  3. 3. 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. Page 3 25 December 2006 – 3RD JANUARY 2007 © DKD
  4. 4. 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 Page 4 25 December 2006 – 3RD JANUARY 2007 © DKD
  5. 5. 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. Page 5 25 December 2006 – 3RD JANUARY 2007 © DKD
  6. 6. 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 Page 6 25 December 2006 – 3RD JANUARY 2007 © DKD
  7. 7. 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. Page 7 25 December 2006 – 3RD JANUARY 2007 © DKD
  8. 8. 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 Page 8 25 December 2006 – 3RD JANUARY 2007 © DKD
  9. 9. 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 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. Page 9 25 December 2006 – 3RD JANUARY 2007 © DKD
  10. 10. ANALYTICAL TOOLS AND FRAMEWORKS 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. Effective Blue Ocean Strategy should be about Risk Minimization and not Risk Taking Effective Blue Ocean Strategy should be about Risk Minimization and not Risk Taking 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 Which factors should be • Wine range Which factors should be • Fun and raised well above the the raised well above the the • Vineyard prestige industry’s standard? adventure industry’s standard? Page 10 25 December 2006 – 3RD JANUARY 2007 © DKD
  11. 11. ANALYTICAL TOOLS AND FRAMEWORKS 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 Page 11 25 December 2006 – 3RD JANUARY 2007 © DKD
  12. 12. ANALYTICAL TOOLS AND FRAMEWORKS 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 Page 12 25 December 2006 – 3RD JANUARY 2007 © DKD
  13. 13. BLUE OCEAN STRATEGY PRINCIPLE 1 RECONSTRUCT MARKET BOUNDARIES ATTENUATES SEARCH RISKS Page 13 25 December 2006 – 3RD JANUARY 2007 © DKD
  14. 14. FORMULATING BLUE OCEAN STRATEGY 1. RECONSTRUCT MARKET BOUNDARIES 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. Page 14 25 December 2006 – 3RD JANUARY 2007 © DKD
  15. 15. FORMULATING BLUE OCEAN STRATEGY 1. RECONSTRUCT MARKET BOUNDARIES 1. RECONSTRUCT MARKET BOUNDARIES 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. Page 15 25 December 2006 – 3RD JANUARY 2007 © DKD
  16. 16. FORMULATING BLUE OCEAN STRATEGY 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 Page 16 25 December 2006 – 3RD JANUARY 2007 © DKD
  17. 17. BLUE OCEAN STRATEGY PRINCIPLE 2 FOCUS ON THE BIG PICTURE, NOT THE NUMBERS ATTENUATES PLANNING RISKS Page 17 25 December 2006 – 3RD JANUARY 2007 © DKD
  18. 18. FORMULATING BLUE OCEAN STRATEGY 2. FOCUS ON THE BIG PICTURE, NOT THE NUMBERS 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 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. Page 18 25 December 2006 – 3RD JANUARY 2007 © DKD
  19. 19. FORMULATING BLUE OCEAN STRATEGY 2. FOCUS ON THE BIG PICTURE, NOT THE NUMBERS 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 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 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 Page 19 25 December 2006 – 3RD JANUARY 2007 © DKD
  20. 20. FORMULATING BLUE OCEAN STRATEGY 2. FOCUS ON THE BIG PICTURE, NOT THE NUMBERS 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 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 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” Page 20 25 December 2006 – 3RD JANUARY 2007 © DKD
  21. 21. BLUE OCEAN STRATEGY PRINCIPLE 3 REACH BEYOND EXISTING DEMAND ATTENUATES SCALE RISKS Page 21 25 December 2006 – 3RD JANUARY 2007 © DKD
  22. 22. FORMULATING BLUE OCEAN STRATEGY 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. Page 22 25 December 2006 – 3RD JANUARY 2007 © DKD
  23. 23. BLUE OCEAN STRATEGY PRINCIPLE 4 GET THE STRATEGIC SEQUENCE RIGHT ATTENUATES BUSINESS MODEL RISKS Page 23 25 December 2006 – 3RD JANUARY 2007 © DKD
  24. 24. FORMULATING BLUE OCEAN STRATEGY 4. GET THE STRATEGIC SEQUENCE RIGHT 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 Page 24 25 December 2006 – 3RD JANUARY 2007 © DKD
  25. 25. FORMULATING BLUE OCEAN STRATEGY 4. GET THE STRATEGIC SEQUENCE RIGHT 4. GET THE STRATEGIC SEQUENCE RIGHT 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 25 December 2006 – 3RD JANUARY 2007 © DKD

×