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Blue Ocean Strategy
How to Create Uncontested Market Space
  and Make the Competition Irrelevant



                   Facilitators : Yip Khai Biau (ymike27@hotmail.com)
                                  & Lieu Yoke Sun
                                                         Group/Presentation Title
                                                               Agilent Restricted
                                                                  Date ##, 200X
Blue Ocean Strategy (BOS)

              Introduction to BOS
              BOS Tools : Strategy Canvas & E.R.R.C.
              Awakening : As-Is Strategy Canvas
              Exploration : Reconstruct Market
               Boundaries
              Strategizing : To-Be Strategy Canvas
              Actualization : Identify actions to actualize
               the strategies
              Conclusion

                                 Facilitators : Yip Khai Biau (ymike27@hotmail.com)
                                                & Lieu Yoke Sun

              All Rights Reserved – KB Yip/YS Lieu                           Page : 2
Objectives

   Develop understanding of Blue Ocean Tool Sets and how
    to apply them effectively
        Strategy Canvas
        ERRC

   Perform As-Is Analysis to Compare Current Strategy of XYZ
    vs Competitors

   Explore Pathways to Breakaway from Market Boundaries to
    look for Bigger Playing Field

   Brainstorm and Agree on the To-Be Strategy for XYZ




                           All Rights Reserved – KB Yip/YS Lieu   Page : 3
Introduction to Blue Ocean Strategy


                                 History & Background
                                 Defining Red & Blue
                                  Ocean
                                 Six Principles of BOS
                                 Reach Beyond Existing
                                  Demand
                                 Value Innovation




          All Rights Reserved – KB Yip/YS Lieu            Page : 4
History & Background
       • Authored by W. Chan Kim and Renee Mauborgne in
         2005.

       • Based on a study of 150 strategic moves spanning
         more than 100 years and 30 industries.

       • BOS is the simultaneous pursuit of differentiation and
         low cost.

       • The aim of BOS is not to out-perform the competition
         in the existing industry, but to create new market
         space or a blue ocean, thereby making the
         competition irrelevant.

       • BOS offers systematic and reproducible
         methodologies and processes in pursuit of innovation
         by both new and existing firms.

       • BOS frameworks and tools are designed to be visual
         in order to not only effectively build the collective
         wisdom of the company but also to effectively execute
         through easy communication.

   All Rights Reserved – KB Yip/YS Lieu                     Page : 5
Defining Red and Blue Ocean
                   What’s Red, What’s Blue?

     Red Ocean Strategy                                Blue Ocean Strategy


•• Compete in existing market space
   Compete in existing market space              •• Create uncontested market space
                                                    Create uncontested market space
•• Beat the competition
   Beat the competition                          •• Make the competition irrelevant
                                                    Make the competition irrelevant
•• Exploit existing demand
   Exploit existing demand                       •• Create & capture new demand
                                                    Create & capture new demand
•• Make the value-cost trade off
   Make the value-cost trade off                 •• Break the value- cost trade off
                                                    Break the value- cost trade off
•• Align strategy choice of
    Align strategy choice of                     •• Simultaneous pursuit strategy of
                                                     Simultaneous pursuit strategy of
   differentiation or low cost
    differentiation or low cost                     differentiation and low cost
                                                     differentiation and low cost




                            All Rights Reserved – KB Yip/YS Lieu                      Page : 6
Examples of Red and Blue Ocean




        All Rights Reserved – KB Yip/YS Lieu   Page : 7
Six Principles of Blue Ocean Strategy
 Formulation Principles                       Execution Principles

1. Reach beyond existing                        5. Overcome key
   demand                                             organizational
2. Reconstruct market                                 hurdles
   boundaries                                   6. Build execution into
3. Focus on the big picture,                          strategy
   not the numbers
4. Get the strategic
   sequence right



                    All Rights Reserved – KB Yip/YS Lieu                  Page : 8
Reach Beyond Existing Demand

                                          First Tier: “Soon-to-be” non-
                                           customers who are on the edge of
                                           your market, waiting to jump ship
                     Third
                      Tier
            Second
       First Tier                         Second Tier: “Refusing non-
             cean
       Tier                                customers who consciously
 Yourlu
   B      eO                               choose against your market.
Market
                                          Third Tier: “Unexplored” non
                                           customers who are in markets
                                           distant from yours.



 Blue Ocean – Go for the Largest Catchment of Non-Customers


                     All Rights Reserved – KB Yip/YS Lieu                  Page : 9
Example – [yellow tail]




Traditional Wine :                                      [yellow tail] :
   • An elite, refined image in packaging with heavy         • No jargon.Simple and nontraditional label.
     use of wine terminology.                                • Aging is not important.
   • Aging quality.                                          • Vibrant and fun.
   • Prestige of a vineyard and its legacy.                  • Sweeter and easier to drink.
   • Complexity and sophistication of a wine’s taste,        • Only one Red (Shiraz) and one White
     such as tannins and oak.                                  (Chardonnay).
   • A diverse range of wines to cover all varieties
     of grapes & consumer preferences



                                    All Rights Reserved – KB Yip/YS Lieu                             Page : 10
Example – [yellow tail]
                             Tier 3 – Anyone that drinks water
Tier 1 – Wine drinker market                                               [yellow tail] did not focus
                                                                            on the wine market only



                                 Third                                                            Third
                                                                                                   Tier
                                  Tier                                                   Second
                      Second
                 First Tier                                                         First Tier
                 Tier                                                               Tier
                                                                        Your
     Red                                                                Your
                                                                       Market
     Wine                                                              Market
      X



                                                                      [yellow tail] created a Blue
                                                                      Ocean by making its wine
 Tier 2 – “Easier to drink” market, eg.,
       beer, cocktails, soft-drink
                                                                        more appealing to the
                                                                           bigger population
                                    All Rights Reserved – KB Yip/YS Lieu                            Page : 11
Reach Beyond Existing Demand


         Entertainment
                                                                         Entertainment
       Theater
     Performance                                                       Theater
                                                                     Performance
    Circus
                                                                    Circus
Circus
                                                                Circus
   X
                                                                   X




                         All Rights Reserved – KB Yip/YS Lieu                            Page : 12
Example – [Nintendo]
   Electronic Game                                                 Nintendo Wii
       Industry                                           Nintendo created a Blue Ocean by
                                                          reducing the complexity, add the
                                                                ease of use and fun!




                             Everyone                                                      Everyone
                     Girls     Else                                                Girls     Else
             Other                                                         Other
             Males                                                         Males
 Young                                                         Young
Antisocial                                                    Antisocial
 Males                                                         Males




                                 All Rights Reserved – KB Yip/YS Lieu                             Page : 13
Value Innovation – The Cornerstone of BOS
   Value innovation places equal emphasis on value and innovation.
   Value innovation is a new way of thinking about and executing strategy that
    results in the creation of a blue ocean.
   The creation of blue oceans is about driving costs down while simultaneously
    driving value up for buyers.


                   Cost                             Cost Saving – Eliminate &
                                                    Reduce Competing Factors




                     Value
                  Innovation




                                                    Buyer Value Lifted – Raise
                Buyer Value
                                                     & Create New Elements        Back

                               All Rights Reserved – KB Yip/YS Lieu               Page : 14
Blue Ocean Strategy Tools




    Strategy Canvas
    Eliminate-Reduce-Raise-Create
     (ERRC) Grid



          All Rights Reserved – KB Yip/YS Lieu   Page : 15
What is Strategy Canvas?
Degree of which each competitor                                            Value Curves
offers/invests in each factor

                 High

                                                                                            Competitor 1              Factors that
                                                                                                                      the industry
Offering Level




                                                                                                  Competitor 2        competes &
                 Mid
                                                                                                                      invests, also
                                                                                                                      potential
                                                                                            Your Company
                                                                                                                      areas where
                                                                                                                      customer
                 Low
                        Factor 1   Factor 2   Factor 3     Factor 4   Factor 5   Factor 6     Factor 7     Factor 8   value could be
                                                          Competing Factors                                           created.

                                          Graphical Representation of Strategy
                                                            +
                                                    Big Picture View
                                                            +
                                                  Landscape Scanning
                                                            +
                                          Relative Positioning vs. Competitors

                                                         All Rights Reserved – KB Yip/YS Lieu                                Page : 16
4 Actions Framework
Strategically
Reduce Cost
                                        Reduce
                                  Which factors should be
                                  reduced well below the
                                    industry's standard?




      Eliminate                                                            Raise
                                         A New
                                         A New
 Which of the factors that                                          Which factors should be
  the industry takes for
                                         Value
                                          Value                      raised well above the
    granted should be                    Curve
                                          Curve                            industry's
       eliminated?




                                                                       Strategically
                                         Create                          Invest in
                                 Which factors should be
                                 created that the industry
                                    has never offered?


                             All Rights Reserved – KB Yip/YS Lieu                         Page : 17
Eliminate-Reduce-Raise-Create
         (ERRC) Grid
  Eliminate                                          Raise




  Reduce                                             Create




                                                              Back

              All Rights Reserved – KB Yip/YS Lieu            Page : 18
Formulating Blue Ocean Strategy

            75 mins                             120 mins                              120 mins


                                          Exploration :                          Strategizing :
        Awakening :
                                       Reconstruct Market                       To-Be Strategy
       As-Is Analysis
                                          Boundaries                                Canvas

   Activity 1 (45 min)              Activity 3 (90 min)                   Activity 5 (90 min)
    • Split into 3 Groups             • Split into 3 Groups                  • Split into 3 Groups
    • Review As-Is Strategy           • Use 6 Paths Framework,               • Use ERRC to construct the
      Canvas (30 min)                   reconstruct market                     Desired Value Curve (60
                                        boundaries & identify
    • Presentation (5 min each,                                                mins)
                                        Divergent Factors (60 min)
      15 min total)                                                          • Presentation (10 min each,
                                      • Presentation (10 min each,             30 mins total)
   Activity 2 (30 min)                 30 min total)

    • Agree to ONE As-Is             Activity 4 (30 min)                 Activity 6 (30 min)
      Strategy Canvas
                                      • Agree to Top 3-5 Divergent           • Agree to ONE To-Be
                                        Factors                                Strategy Canvas




                                  All Rights Reserved – KB Yip/YS Lieu                                 Page : 19
Activity 1 & 2 : As-Is Analysis
                       Review XYZ As-Is Strategy Canvas


                 High         4.5
                               4
Offering Level




                              3.5

                               3

                 Mid          2.5

                               2
                              1.5                                                                    Competitors
                               1                                                                                                               XYZ
                              0.5
                 Low           0

                                            s              on                                h             rs
                                         es            iti                 ge              at            to             ie
                                                                                                                          s           ng                re
                                      n                                  a               P                          li t           di                ltu
                                   ve                gn                nk             er            li t
                                                                                                        a
                                                                                                                ac
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                       C                  io               In               m                                                         Li
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                   Fe                tit                                og
                                In
                                   s                                Pr          Competing Factors



                                                                                                                                                             Back

                                                     All Rights Reserved – KB Yip/YS Lieu                                                                    Page : 20
Reconstruct Market Boundaries
       There are 6 pathways to reconstruct the market boundaries


                         Across Alternate Industry


                          Across Strategic Groups


                           Across Buyer Groups
                                                                Blue
 Red
                      Across Complementary Scope of            Ocean
Ocean
                           Products & Services

                        Across Functional Emotional
                                Orientation

                                  Across Time


                        All Rights Reserved – KB Yip/YS Lieu        Page : 21
Across Alternative Industries
                            BOS Example –
   Alternatives include products or services that have different functions and
    forms but the same purpose.


            Commercial       Corporate                                                      Corporate
              Airline           Jet                  Commercial
                                                     Airlines                                     Jet


            • Pay per use    • Less Travel
                               Time
     Good   • No
              Maintenance    • Less Hassle
                             • P2P



                                                      1/16 Ownership                         Smaller
                                                                          50 hrs/yr
                                                          @ $375k                           Airplanes,
            • Not P2P
                                                                                             Airport,
            • High Travel
      Bad                    • High Cost                                                    Less Staff
              Time
            • Security
              Concern                                               Point-to-point, Faster,
                                                              Less Hassle, Increase Productivity


                                  All Rights Reserved – KB Yip/YS Lieu                         Page : 22
Strategy Canvas - NetJets
                        Eliminate                                     Raise

                                                     •    Speed of travel time
                                                     •    Ease of travel
                                                     •    Flexibility and Reliability
                                                     •    In flight service



                         Reduce                                      Create

            •   Price
            •   Need for customers to
                manage aircraft
            •   Deadhead costs



High



                                                                                 Private Jet

                                                                                             NetJets' Value
                                                                                                 Curve




                                                         Com m ercial Airlines



Low Price          Need for       Deadhead   Speed of total   Ease of travel   Flexibility and   In- flight service
                 customer's to      costs     travel time                         reliability
                manage aircraft



                        All Rights Reserved – KB Yip/YS Lieu                                                          Page : 23
Across Alternative Industries
                         BOS Example –
     Conventional Airline                                                     Coach



                                                  Across
                                                Alternative
                                                Industries                  Slow
                                                                            Cheap
                                                                            Point to Point

   Fast
   Expensive
   Better Services              Now Everyone Can Fly!
   Flight Connections

                                                                      Price of Coach &
                                                                       Speed of Flight
                                                                      P2P Direct Flight
                                                                      No Frill – User Pay
                                                                      Budget Travel
                                                                       Package




                            All Rights Reserved – KB Yip/YS Lieu                       Page : 24
Strategy Canvas - Air Asia
                                         Eliminate                                                           Raise

                           Price Competition                                             •     Quality of Safety
                           Seat Selection                                                •     Point to Point Direct
                           Free Food & Beverages                                               Flight
                           Air Ticket
                           VIP Lounge
                           Flight Connection


                                           Reduce                                                           Create

                           Air Fare                                                     •     Web Registration
                           Capital                                                      •     Express Boarding
                           Stopover time                                                •     Budget Hotel
                           Staffing (ground and
                            air)

High



                                                                                                                                         Air Asia
Offering Level




                                                                                                                      Other Local Airline



                                                                                                                         Land Transportation



Low
                      e        p         n        y         et       ge        on
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                                                                         ig                                          P          W      ss
                  Pr        S ea     F o                  VI                        opo                           P2                 re      ud
                                                                                                                                            B
                                                                                  St                                              Xp



                                             All Rights Reserved – KB Yip/YS Lieu                                                                         Page : 25
Reconstruct Market Boundaries
       There are 6 pathways to reconstruct the market boundaries


                         Across Alternate Industry


                          Across Strategic Groups


                           Across Buyer Groups
                                                                Blue
 Red
                      Across Complementary Scope of            Ocean
Ocean
                           Products & Services

                        Across Functional Emotional
                                Orientation

                                  Across Time


                        All Rights Reserved – KB Yip/YS Lieu        Page : 26
Across Strategic Groups
                             BOS Example –
   Strategic Groups –Groups of companies within an industry that pursue a similar
    strategy.
   E.g., Automobiles – Luxury (Mercedes, BMW), Economical (Toyota, Proton).

             Traditional       Home
             Health Club      Exercise               Traditional
                                                     Health Club
                                                                            Womanly
                                                                              Fun
            • Full range     • Low Cost
              exercise and
                             • Privacy                                                     >10k
     Good     sporting
              options                                                      Easy to Use   Outlets &
                                                                            Machine        > 4M
                                                                                         members
            • Expensive.                                                                  (as of
                                                                             Peer          Oct,
            • Not easily
              accessible.                                                   Support
      Bad                     • Low                                                       2006)
            • Complicated.      motivation

            • Lack of
              Privacy                                                      Affordable
                                                   Home Exercise


                                    All Rights Reserved – KB Yip/YS Lieu                      Page : 27
Strategy Canvas - Curves
          Eliminate                                         Raise

                                           •   Non threatening same
                                               sex environment




          Reduce                                           Create

 Price                                    •   Womanly fun
 Amenities                                    atmosphere

 Workout equipment
 Availability of Instructors


              High



                                                                                                                                        Curve s




                                                                                                                 Hom e Exercise Program




                                                                                                                         Traditional Health Clubs




               Low   Price    Amenit ies        Workout    Workout Time   A vailabilt y of    Environment     Nonthreatening   Convenience   Womenly fun
                                               Equipment                   instructors        encouraging       same- sex                    at mosphere
                                                                                             discipline and    environment
                                                                                             motivation in
                                                                                                exercise




                                               All Rights Reserved – KB Yip/YS Lieu                                                                        Page : 28
Across Strategic Groups
                            BOS Example – OldTown




   Expensive
   Hygienic
   Good Ambience &
    Relaxing Environment




                                                          Rightly Priced
   Economical                                            Hygienic
   Less Hygienic                                         Better Environment
   Less Appealing Environment                            Emotional Appeal


                                 All Rights Reserved – KB Yip/YS Lieu           Page : 29
Across Strategic Groups
                              BOS Example – Tune Hotel
           4/5 Stars Hotels

                                                                       Nice Sleep!
                                                                       Hot Shower!

   Luxury
   Expensive
   Service
   Facilities


        Backpacker Hostels




                                                              No Frill
                                                              Cheap - Pay For What You Use!
                                                              Optional Add-ons:
                       Cheap                                     Limited service, basic
                       Sleep & Go                                Low on price, high on personality
                                                                  Walk in

                                     All Rights Reserved – KB Yip/YS Lieu                         Page : 30
Reconstruct Market Boundaries
       There are 6 pathways to reconstruct the market boundaries


                         Across Alternate Industry


                          Across Strategic Groups


                           Across Buyer Groups
                                                                Blue
 Red
                      Across Complementary Scope of            Ocean
Ocean
                           Products & Services

                        Across Functional Emotional
                                Orientation

                                  Across Time


                        All Rights Reserved – KB Yip/YS Lieu        Page : 31
Across Chain of Buyers
                                   BOS Example –
   There is a chain of ‘buyers’ who are directly or indirectly involved in the buying
    decision.
           Purchasers – pay for the product or service
           Users – use the product or service
           Influencers – influence the decision in the purchase
                                                                  Corporate
                                                                      Jet
      Example : Novo Nordick - from insulin producer to a diabetes care company

                Traditionally                                                       Now


                       Prescribe                                          Request




      Better        Better                                                       Easy        No
     Medicine       Pricing                                                     To Use    Unpleasant
                                                                                           Feeling
             Insulin
            Industry


                                   All Rights Reserved – KB Yip/YS Lieu                          Page : 32
Across Chain of Buyers
                   BOS Example – Nintendo Wii
                        Everyone is a gamer!




                                                                      Everyone can play!

Reduced Graphics       Nintendo outsold Sony and
                       Microsoft 6:1. Can’t keep
                       product on shelves!




 Family Fun
                                  Wii Fit
                                                       Increased motion control

                     All Rights Reserved – KB Yip/YS Lieu                           Page : 33
Strategy Canvas : Nintendo Wii
                                              Eliminate                                                 Raise

                                  •   Complexity                                      •     Game Library
                                  •   Movie                                           •     Ease of Use




                                              Reduce                                                   Create

                                   Price                                         •       Interaction/Group Fun
                                   Graphics                                      •       Magic Wand
                                   Physics
                                   Online Pay




High
                                                                                                                                                 Nintendo Wii



                                                                                                                                             Gam e Industry


               e              s         s                   y              i ty               ie                      ry             se                   Fu
                                                                                                                                                            n                 d
Low       ic               ic         ic                  Pa             ex                ov                      ra                                                       an
       Pr                ph         ys                e               pl                  M                      ib                fU                up                 W
                       ra         Ph              nl
                                                    in
                                                                    om
                                                                                                                L                 o
                                                                                                                                                   ro              ic
                   G                                                                                        e                se                   G              ag
                                              O                 C                                      am                  Ea                  n/               M
                                                                                                   G                                        tio
                                                                                                                                        c
                                                                                                                                      ra
                                                                                                                                    te
                                                                                                                                  In




                                                  All Rights Reserved – KB Yip/YS Lieu                                                                                            Page : 34
Reconstruct Market Boundaries
       There are 6 pathways to reconstruct the market boundaries


                         Across Alternate Industry


                          Across Strategic Groups


                           Across Buyer Groups
                                                                Blue
 Red
                      Across Complementary Scope of            Ocean
Ocean
                           Products & Services

                        Across Functional Emotional
                                Orientation

                                  Across Time


                        All Rights Reserved – KB Yip/YS Lieu        Page : 35
Across Complementary Products & Services
                           BOS Example – NABI
   Define the total solution buyers seek when they choose a product or service.
   Think about what happens before, during, and after your product is used.


                                                                             Corporate
Example :                                                                       Jet
 Traditional : Buses made from Steel
                                    • Less Space
• Low Initial Price                  • More Fuel                         • High      •High


                                                       Supplementa Maintenanc
    Purchase           Delivery           Use                                        Disposal
                                                            ry          e


• High Initial Price                 • More Space                         • Low      • Low
                                       • Less Fuel

  NABI : Buses made from Fibre Glass

                                  All Rights Reserved – KB Yip/YS Lieu                       Page : 36
Strategy Canvas - NABI
                           Eliminate                                 Raise

                                                     •      Environmental
                                                            friendliness




                            Reduce                                   Create

                 Corrosion                           •     Aesthetic design
                 Maintenance cost                    •     Customer friendliness
                 Fuel consumption




High



                                                                                          NABI




                                                                   Average U.S Transit Bus




 Low

 Initial purchase   Corrosion   Maintenance      Fuel        Environmental    Aesthetic       Customer
        price                       cost      consumption     friendliness     design        friendliness




                         All Rights Reserved – KB Yip/YS Lieu                                               Page : 37
Across Complementary Products and Services
                    BOS Example:                               Operated 798 stores in all 50 U.S. states
                                                               and the District of Columbia, as well as
   Purchasing                                                  stores in Australia and Canada
   Process

          Before                              During                                 After

     Book Selection                      Customer Enquiry                   Go to Coffee Shop
     Sit Down                            Paying                             Read the Book
     Browse Through                                                          Book Signing
      Selection                                                               Buy DVD, Games, Gift
     Attend an event




                                                                                                Carrying bag
                                                                         Immediate Enjoyment!
         Book Selection




 Event : Story Telling for Kids                                                     DVD & Games
                                                    Book Signing
                                  All Rights Reserved – KB Yip/YS Lieu                                  Page : 38
Across Complementary Products and Services
                    BOS Example -
• Largest EMS (Electronics Manufacturing
  Services) in the World.
• Ranked 132 at Fortune Global with $51B
  revenue, higher than Intel (188), Motorola
  (200), Flextronics (292).
• Employs 550,000 employees worldwide
  with design centers/factories at >10
  countries.
• Make Apple Mac/iPod/iPhone, Intel
  motherboards, Dell, HP, Sony PlayStation,
  Nintendo Wii, Microsoft Xbox, cell phones
  for Nokia/Samsung/Motorola/LG/Sony-
  Ericsson.
• Shenzhen facility at Longhua
     • Covers about a square mile.
     • Has its own fire brigade, hospital,
       swimming pool, restaurants, banks,
       supermarkets, internet cafe.



                                     All Rights Reserved – KB Yip/YS Lieu   Page : 39
BOS Example - Foxconn
                                                  Repair &
                                                  Servicing

 Repair &
 Servicing
                                                 Logistics &
                                                 Distribution
                 Conventional
Distribution     EMS
                                                    Mass
                                                 Production


                Logistics
   Mass
Production                                         VI Part
                                                 Sourcing &
                                                 Production

                Inventory
Prototyping      Control
                                                 Prototyping


                Sourcing
  Design
                                                    Design
                                                                Vertical Integration
                                                                     (VI) Model

                     All Rights Reserved – KB Yip/YS Lieu                          Page : 40
Strategy Canvas - Foxconn
High




                                                                                                                                                      Foxconn


                                                  Othe r EM Se s




Low
                                         e   ss                       g   y               ss             er
                                                                                                           y            li ty                                     t   io
                                                                                                                                                                           n
                                                                                      e
                                      en                          olo              oc              e l iv          ua                                          ra
                                 iv                          hn               Pr                               Q                                           g
                          ti t                             ec
                                                                                               D
                                                                                                                                                  n   te
                     pe                                  T                                                                                 a   lI
                 m
            Co                                                                                                                     r   ti c
       st                                                                                                                       Ve
  Co




                                                                    All Rights Reserved – KB Yip/YS Lieu                                                                       Page : 41
Reconstruct Market Boundaries
       There are 6 pathways to reconstruct the market boundaries


                         Across Alternate Industry


                          Across Strategic Groups


                           Across Buyer Groups
                                                                Blue
 Red
                      Across Complementary Scope of            Ocean
Ocean
                           Products & Services

                        Across Functional Emotional
                                Orientation

                                  Across Time


                        All Rights Reserved – KB Yip/YS Lieu        Page : 42
Across Functional or Emotional Appeal
                              BOS Example – QB House
 Some industries compete principally on price and function - their appeal is
  rational.
 Other industries compete largely on feelings - their appeal is emotional.



                • Simple                                                               • Pricey
                • Low Cost                                                             • Extras
                • Low Price                                                            • Feelings

       Functional                                                                              Emotional




                                                                        Traditional Hair
                                                                         Saloon
                                                                        • Hot Towels
    QB House
                                  Rev                                   • Message
    • Emotional Service -> None
                                                                        • Tea/Coffee
    • Hair Wash -> Air Wash
                                                                        • Special Hair /Skin
    • $9                                                                  Treatments
                                    1996           2003                 • $27 - $45

                                        All Rights Reserved – KB Yip/YS Lieu                           Page : 43
Across Functional or Emotional Appeal
                   BOS Example –
    Institute / College




                            Across           High Fee
                            Multiple
                                             WW Recognized
                            Pathways
                                              Certification
   Low Fee                Strategic              Branches in UK, Africa
                                                    & China
                            Group
   Low Recognition of    • Functional ->
                                                   Collaboration w other
                                                    Universities
    Education Quality       Emotional                                            6000 students from 90 countries
                                             Open Education                     Vibrant, multicultural and international
   Conventional                              System
    Education System
                                             Free & Creative
   Many Environmental                        Environment
    Constraints                              Diverse Student Base                                 Academic Exchange
   Local Market                             Fun Learning

                                             Exposure
                                                Global Classroom               Encourage
                                                                             Entrepreneurship



                          All Rights Reserved – KB Yip/YS Lieu                                                  Page : 44
Strategy Canvas - LimKokWeng
                      Eliminate               Raise

                  Foreign Cert      •   Globalization
                                         Competition
                   Superiority
                                     •   Asian Culture
                  Environmental
                   Constraints       •   Creative Thinking
                                     •   Flexibility Culture
                                     •   Exposure
                                     •   Entrepreneurship

                      Reduce                 Create

                  Student            Unconventional
                   Constraints         Teaching Method
                  Fee Competition    Ecosystem




  High




                                                               Lim Kok Weng

                                                               Private Colleges


           Low
                                                         n
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                 All Rights Reserved – KB Yip/YS Lieu                             Page : 45
Reconstruct Market Boundaries
       There are 6 pathways to reconstruct the market boundaries


                         Across Alternate Industry


                          Across Strategic Groups


                           Across Buyer Groups
                                                                Blue
 Red
                      Across Complementary Scope of            Ocean
Ocean
                           Products & Services

                        Across Functional Emotional
                                Orientation

                                  Across Time


                        All Rights Reserved – KB Yip/YS Lieu        Page : 46
Across Time
                    BOS Example – iTune



                       Apple launched                                    Apple teamed up with
                       iTunes online                                      major Music & Picture
                       music store                                        Companies
                                                                          Sell Individual song /
                                                                           entire album
                                                                          30 sec free listening
                                                                          Strategically price




Napster started
                    > 2 billion illegally
                    music flies were being
online music file
                    traded every month
sharing service



                                                    iTunes had sold >
  1999                       2003                    4 billion songs      2008
                                                    20 million songs
                                                     on Dec 25, 2007


                          All Rights Reserved – KB Yip/YS Lieu                            Page : 47
Across Time
                  BOS Example :
                                                                  A video sharing website
                                                                   for upload, view and share
                                                                   video clips
                                                                  User can post video
                                                                   'responses' and subscribe
                                                                   to content feeds
                                                                  Created in mid-February
                                                                   2005 by three former
                                                                   PayPal employees
                                                                  Uses Adobe Flash
                                                                   technology to display a
                                                                   wide variety of user-
                                                                   generated video content
                                                                  Acquired by Google in Nov
                                                                   2006 for $1.6B



As of Apr 2008, hosting 83.4 million videos and 3.75 million user channels
           > 100 million videos were being watched every day


                        All Rights Reserved – KB Yip/YS Lieu                             Page : 48
Strategy Canvas - YouTube
                                                    Eliminate                                                                       Raise

                                  •        Need for HTML                                                      •         Web space allotted
                                           know-how                                                                     per user
                                  •        Hassle of
                                           undergoing
                                           numerous steps
                                  •        Fees

                                                    Reduce                                                                          Create

                                          Uploading /                                                        •         Ease of Use
                                           downloading time                                                             technology
                                                                                                              •         FLV technology
                                                                                                              •         Ready-made website
                                                                                                              •         Social networking
                                                                                                              •         Video tags & Search


             High


                                                                                                                                                                                    YouTube




                                                                                                                                                                Ordinary Webhosting
             Low

                             ow              sl
                                                e           es
                                                                                   e                     er                 gy                te                gy                     ng                   ch
                                                                               ti m                   us                  lo                si                lo                    ki                   ar
                           -h             as              Fe                                                                              eb                no                   or
                          w           H                                  oa
                                                                           d
                                                                                               pe
                                                                                                  r                     no               w                                   w                         se
                      kn
                        o
                                                                      nl                   d                          ch             e                    ch               et                      &
                                                                     w                   te                      te                ad                te                N                      gs
                  L
                                                                   do                 at                    se                   -m
                                                                                                                                                 V                al                        ta
                TM                                            d/                   oc                   f- u                                  FL                ci
               H                                            oa                 al
                                                                                  l                                        dy                                 So                    de
                                                                                                                                                                                      a
             r                                                                                        -o                 ea
        fo                                               pl          ce
                                                                                                 s                                                                               Vi
    d                                                U
                                                                   pa                          Ea                       R
 ee
N                                                              e bs
                                                              W




                                            All Rights Reserved – KB Yip/YS Lieu                                                                                                                                 Page : 49
Look across Time


                                 Weird Science


              Climate Change                           Future of the
                                                        Individual



 Longevity
 Medicine                                                              Innovation
                                 Ten Trends                             Economy
                                      of
                                 the Extreme
Fueling the
                                    Future
                                                                  Next Workforce
  Future



                                                       Securing the
              Globalization                               Future

                                 US- China Future




                      From the Book “Extreme Future”


                    All Rights Reserved – KB Yip/YS Lieu                            Page : 50
From Head-to-Head Competition to Blue Ocean Creation

                          Head-To-Head Competition                      Blue Ocean Creation

                                                                    Looks across alternative
 Industry               Focuses on rivals within its industry
                                                                    industries

                        Focuses on competitive position within Looks across strategic groups
 Strategic Group
                        strategic group                        within industries

                        Focuses on better serving the buyer         Redefines the industry buyer
 Buyer Group
                        group                                       group

                        Focuses on maximizing the value of
 Scope of Product or                                                Looks across to complementary
                        product and service offerings within
 Service Offering                                                   and service offerings
                        the bounds of its industry

                        Focuses on improving price                  Rethinks the functional-
 Functional-Emotional
 Functional-
                        performance within the functional -         emotional orientation of its
 Orientation
                        emotional orientation of its industry       industry

                        Focuses on adapting to external trends Participates in shaping external
 Time
                        as they occur                          trends over time


                             All Rights Reserved – KB Yip/YS Lieu                                  Page : 51
Across Multiple Pathways
           BOS Example – NV Multi Corporation
    Traditional Graveyard                             NV Multi Corporation
                                                       Total Peace of Mind




   Economical                              Expensive
   Unpleasant Environment                  Pleasant Environment
   Pollution                               1 Stop Service
   No Maintenance                          After Sales Service


                             All Rights Reserved – KB Yip/YS Lieu            Page : 52
Across Multiple Pathways
             BOS Example – NV Multi Corporation


                                          Complementary
                                                                   Prayer Service
 Service Team
                                        Products & Services

                    Professional Band                                                 White Ladies
                                                                             A Service Respect For Woman



                                                                                                    • Notifying Friend &
     Across Buyer                                                            Functional               Relatives
                                                                                                    • Thank You Cards
        Groups                                                              to Emotional            • Memory Lane
                                                                                                    • Video & Slideshow




                                              Across
                                            Alternative
                                            Industries
• Buyer -> User & User -> Buyer
• Pet Memorial Garden                                                      • Bereavement
• VIP Memorial Garden                                                        Product
                                                                           • Insurance Protection
                                                                           • Capital Gain


                                    All Rights Reserved – KB Yip/YS Lieu                                        Page : 53
Strategy Canvas - NV Multi Corporation
                                              Eliminate                                                 Raise

                               •       Price Competition                                •       Well Layout
                               •       Fear                                                     Cemetery

                               •       Taboos                                           •       Staff Appearance
                                                                                        •       Pre-arranged
                                                                                        •       One Stop Funeral
                                                                                                Services

                                               Reduce                                                   Create

                                Sophisticated                                          •       White Angels
                                 Process                                                •       Luxury Cemetery
                                Pollution
                                                                                        •       Customizable
                                                                                                Burial Plots
                                                                                        •       Care Plan


    High
                                                                                                                                    NV Multi




                                                                                                                     Private Cem etary

                                                                                                                          Public Cemetery
            Low




                                                                                                                                              s
                   on




                                                                n


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                                        All Rights Reserved – KB Yip/YS Lieu                                                                                 Page : 54
Activity 3 & 4 : Reconstruct Market Boundaries
                                Identify Divergent Factors


                  High    4.5
                           4                                              Competitors
 Offering Level




                          3.5
                           3

                  Mid     2.5

                           2
                          1.5
                            1                                      XYZ
                          0.5
                  Low
                           0


                                                              h
                                                             n
                                                            ss




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                                            Competing Factors
                        Pr
                       In




                                                                                Identify the
                                                                             Divergent Factors
                                                                           that Differentiate XYZ
                                                                             from Competitors


                                   All Rights Reserved – KB Yip/YS Lieu                             Page : 55
Activity 3 & 4 : Reconstruct Market Boundaries
                    Identify Divergent Factors

Sub-Group :


Divergent Factor                                     Description




Note : Each sub-group must determine at least ONE Divergent Factor.

                                                                      Back

                          All Rights Reserved – KB Yip/YS Lieu        Page : 56
Activity 5 & 6 : To-Be Strategy Canvas
  Construct Desired Value Curve for XYZ

              Eliminate            Create

                                         Divergent Factors
                                         X=
                                         Y=
                                         Z=



                Reduce               Raise




             All Rights Reserved – KB Yip/YS Lieu            Page : 57
Activity 5 & 6 : To-Be Strategy Canvas
     Construct Desired Value Curve for XYZ

             Eliminate       Create
Competencies                        Divergent Factors
                                    X=
                                    Y=
                                    Z=


               Reduce         Raise

Technology                              Quality
Process
                                        Talent                                                                               New Value
                                                                                                                             Curve


                 High           Existing Value
                                Curve

                  Mid

                  Low

                             Fee         Institutional   Industrial     Program       Facilitators   Facilities Lifestyle/   X    Y      Z
                         Competencies    Recognition      Linkage     & Career Path                              Culture




                           All Rights Reserved – KB Yip/YS Lieu                                                                  Page : 58
Three Characteristics of a Good Strategy




 1. Focus




            2. Divergence


                             Now Everyone Can Fly!
                              3. Compelling Tagline

               All Rights Reserved – KB Yip/YS Lieu   Page : 59
Barriers to Imitation


  Does not Make Sense                   Brand Image Conflicts                   Economies of Scale
 based on Conventional
                                      Chanel, CD, etc could not imitate       High volume generated by a
    Strategic Logic
                                      Body Shop as it would signal an        value innovation leads to rapid
 NBC, CBS and ABC rediculed             invalidation of their current               cost advantages
the idea of 24x7 real time news               business models
   without star broadcasters




  Political, Operational and                    1st to Market                       Natural Monopoly
      Cultural Changes
                                        When a company offers a leap in         Size of market does not make
 Major revisions in routing planes,     value, it rapidly earns brand buzz     sense to support another player
       retraining, changing                and a loyal following in the
  marketing/pricing/culture. Took                   marketplace
 MAS 6 years to come up Firefly                                                                     Back

                                  All Rights Reserved – KB Yip/YS Lieu                              Page : 60
Conclusion:
 Focus on the Big Picture, not the Numbers
    Awakening            Exploration            Strategy Fair         Communication


  Compare your                                Draw your To Be            Distribute your
                     Go into the field to
business with your                            Strategy Canvas          before- and-after
                      explore the six
  competitors' by                             based on insights       strategic profiles on
                     paths to creating
drawing your As Is                                from field           one page for easy
                       blue oceans
 Strategy Canvas                                observations              comparison


                                               Get feedback on        Support only those
                        Observe the
                                              alternative strategy       projects and
                         distinctive
 See where your                                  canvases from        operational moves
                       advantages of
strategy needs to                                  customers,           that allow your
                         alternative
     change                                       competitors’        company close the
                       products and
                                              customers and non        gaps to actualize
                          services
                                                   customers           the new strategy


                      See which factors
                                              Use feedback to
                         you should
                                             build the best 'to be'
                     eliminate, create or
                                                future strategy
                           change
                                                                                              Back

                           All Rights Reserved – KB Yip/YS Lieu                               Page : 61
Get the Strategic Sequence Right

Red Ocean
Sequence             Cost                 Price                 Utility         Adoption



   Buyer                                                        Adoption             Commercially
                       Price                 Cost                                        Viable
   Utility                                                      Hurdles             Blue Ocean Idea




      Is there         Is your price        Can you attain           What are
 exceptional buyer   easily accessible    your cost target to    adoption hurdles
   utility in your    to the mass of         profit at your        in actualizing
  business idea?          buyers?          strategic price?       your business
                                                                  idea? Are you
                                                                 addressing them
                                                                      up front?

                               All Rights Reserved – KB Yip/YS Lieu                         Page : 62
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
Blue Ocean Strategy - Summary and Examples
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Blue Ocean Strategy - Summary and Examples

  • 1. Blue Ocean Strategy How to Create Uncontested Market Space and Make the Competition Irrelevant Facilitators : Yip Khai Biau (ymike27@hotmail.com) & Lieu Yoke Sun Group/Presentation Title Agilent Restricted Date ##, 200X
  • 2. Blue Ocean Strategy (BOS)  Introduction to BOS  BOS Tools : Strategy Canvas & E.R.R.C.  Awakening : As-Is Strategy Canvas  Exploration : Reconstruct Market Boundaries  Strategizing : To-Be Strategy Canvas  Actualization : Identify actions to actualize the strategies  Conclusion Facilitators : Yip Khai Biau (ymike27@hotmail.com) & Lieu Yoke Sun All Rights Reserved – KB Yip/YS Lieu Page : 2
  • 3. Objectives  Develop understanding of Blue Ocean Tool Sets and how to apply them effectively  Strategy Canvas  ERRC  Perform As-Is Analysis to Compare Current Strategy of XYZ vs Competitors  Explore Pathways to Breakaway from Market Boundaries to look for Bigger Playing Field  Brainstorm and Agree on the To-Be Strategy for XYZ All Rights Reserved – KB Yip/YS Lieu Page : 3
  • 4. Introduction to Blue Ocean Strategy  History & Background  Defining Red & Blue Ocean  Six Principles of BOS  Reach Beyond Existing Demand  Value Innovation All Rights Reserved – KB Yip/YS Lieu Page : 4
  • 5. History & Background • Authored by W. Chan Kim and Renee Mauborgne in 2005. • Based on a study of 150 strategic moves spanning more than 100 years and 30 industries. • BOS is the simultaneous pursuit of differentiation and low cost. • The aim of BOS is not to out-perform the competition in the existing industry, but to create new market space or a blue ocean, thereby making the competition irrelevant. • BOS offers systematic and reproducible methodologies and processes in pursuit of innovation by both new and existing firms. • BOS frameworks and tools are designed to be visual in order to not only effectively build the collective wisdom of the company but also to effectively execute through easy communication. All Rights Reserved – KB Yip/YS Lieu Page : 5
  • 6. Defining Red and Blue Ocean What’s Red, What’s Blue? Red Ocean Strategy Blue Ocean Strategy •• Compete in existing market space Compete in existing market space •• Create uncontested market space Create uncontested market space •• Beat the competition Beat the competition •• Make the competition irrelevant Make the competition irrelevant •• Exploit existing demand Exploit existing demand •• Create & capture new demand Create & capture new demand •• Make the value-cost trade off Make the value-cost trade off •• Break the value- cost trade off Break the value- cost trade off •• Align strategy choice of Align strategy choice of •• Simultaneous pursuit strategy of Simultaneous pursuit strategy of differentiation or low cost differentiation or low cost differentiation and low cost differentiation and low cost All Rights Reserved – KB Yip/YS Lieu Page : 6
  • 7. Examples of Red and Blue Ocean All Rights Reserved – KB Yip/YS Lieu Page : 7
  • 8. Six Principles of Blue Ocean Strategy Formulation Principles Execution Principles 1. Reach beyond existing 5. Overcome key demand organizational 2. Reconstruct market hurdles boundaries 6. Build execution into 3. Focus on the big picture, strategy not the numbers 4. Get the strategic sequence right All Rights Reserved – KB Yip/YS Lieu Page : 8
  • 9. Reach Beyond Existing Demand  First Tier: “Soon-to-be” non- customers who are on the edge of your market, waiting to jump ship Third Tier Second First Tier  Second Tier: “Refusing non- cean Tier customers who consciously Yourlu B eO choose against your market. Market  Third Tier: “Unexplored” non customers who are in markets distant from yours. Blue Ocean – Go for the Largest Catchment of Non-Customers All Rights Reserved – KB Yip/YS Lieu Page : 9
  • 10. Example – [yellow tail] Traditional Wine : [yellow tail] : • An elite, refined image in packaging with heavy • No jargon.Simple and nontraditional label. use of wine terminology. • Aging is not important. • Aging quality. • Vibrant and fun. • Prestige of a vineyard and its legacy. • Sweeter and easier to drink. • Complexity and sophistication of a wine’s taste, • Only one Red (Shiraz) and one White such as tannins and oak. (Chardonnay). • A diverse range of wines to cover all varieties of grapes & consumer preferences All Rights Reserved – KB Yip/YS Lieu Page : 10
  • 11. Example – [yellow tail] Tier 3 – Anyone that drinks water Tier 1 – Wine drinker market [yellow tail] did not focus on the wine market only Third Third Tier Tier Second Second First Tier First Tier Tier Tier Your Red Your Market Wine Market X [yellow tail] created a Blue Ocean by making its wine Tier 2 – “Easier to drink” market, eg., beer, cocktails, soft-drink more appealing to the bigger population All Rights Reserved – KB Yip/YS Lieu Page : 11
  • 12. Reach Beyond Existing Demand Entertainment Entertainment Theater Performance Theater Performance Circus Circus Circus Circus X X All Rights Reserved – KB Yip/YS Lieu Page : 12
  • 13. Example – [Nintendo] Electronic Game Nintendo Wii Industry Nintendo created a Blue Ocean by reducing the complexity, add the ease of use and fun! Everyone Everyone Girls Else Girls Else Other Other Males Males Young Young Antisocial Antisocial Males Males All Rights Reserved – KB Yip/YS Lieu Page : 13
  • 14. Value Innovation – The Cornerstone of BOS  Value innovation places equal emphasis on value and innovation.  Value innovation is a new way of thinking about and executing strategy that results in the creation of a blue ocean.  The creation of blue oceans is about driving costs down while simultaneously driving value up for buyers. Cost Cost Saving – Eliminate & Reduce Competing Factors Value Innovation Buyer Value Lifted – Raise Buyer Value & Create New Elements Back All Rights Reserved – KB Yip/YS Lieu Page : 14
  • 15. Blue Ocean Strategy Tools  Strategy Canvas  Eliminate-Reduce-Raise-Create (ERRC) Grid All Rights Reserved – KB Yip/YS Lieu Page : 15
  • 16. What is Strategy Canvas? Degree of which each competitor Value Curves offers/invests in each factor High Competitor 1 Factors that the industry Offering Level Competitor 2 competes & Mid invests, also potential Your Company areas where customer Low Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor 6 Factor 7 Factor 8 value could be Competing Factors created. Graphical Representation of Strategy + Big Picture View + Landscape Scanning + Relative Positioning vs. Competitors All Rights Reserved – KB Yip/YS Lieu Page : 16
  • 17. 4 Actions Framework Strategically Reduce Cost Reduce Which factors should be reduced well below the industry's standard? Eliminate Raise A New A New Which of the factors that Which factors should be the industry takes for Value Value raised well above the granted should be Curve Curve industry's eliminated? Strategically Create Invest in Which factors should be created that the industry has never offered? All Rights Reserved – KB Yip/YS Lieu Page : 17
  • 18. Eliminate-Reduce-Raise-Create (ERRC) Grid Eliminate Raise Reduce Create Back All Rights Reserved – KB Yip/YS Lieu Page : 18
  • 19. Formulating Blue Ocean Strategy 75 mins 120 mins 120 mins Exploration : Strategizing : Awakening : Reconstruct Market To-Be Strategy As-Is Analysis Boundaries Canvas  Activity 1 (45 min)  Activity 3 (90 min)  Activity 5 (90 min) • Split into 3 Groups • Split into 3 Groups • Split into 3 Groups • Review As-Is Strategy • Use 6 Paths Framework, • Use ERRC to construct the Canvas (30 min) reconstruct market Desired Value Curve (60 boundaries & identify • Presentation (5 min each, mins) Divergent Factors (60 min) 15 min total) • Presentation (10 min each, • Presentation (10 min each, 30 mins total)  Activity 2 (30 min) 30 min total) • Agree to ONE As-Is  Activity 4 (30 min)  Activity 6 (30 min) Strategy Canvas • Agree to Top 3-5 Divergent • Agree to ONE To-Be Factors Strategy Canvas All Rights Reserved – KB Yip/YS Lieu Page : 19
  • 20. Activity 1 & 2 : As-Is Analysis Review XYZ As-Is Strategy Canvas High 4.5 4 Offering Level 3.5 3 Mid 2.5 2 1.5 Competitors 1 XYZ 0.5 Low 0 s on h rs es iti ge at to ie s ng re n a P li t di ltu ve gn nk er li t a ac i an u titi co Li re ci F Br /C pe lR e st ry C a Fa y le st om na du & fe C io In m Li e ut ra Fe tit og In s Pr Competing Factors Back All Rights Reserved – KB Yip/YS Lieu Page : 20
  • 21. Reconstruct Market Boundaries  There are 6 pathways to reconstruct the market boundaries Across Alternate Industry Across Strategic Groups Across Buyer Groups Blue Red Across Complementary Scope of Ocean Ocean Products & Services Across Functional Emotional Orientation Across Time All Rights Reserved – KB Yip/YS Lieu Page : 21
  • 22. Across Alternative Industries BOS Example –  Alternatives include products or services that have different functions and forms but the same purpose. Commercial Corporate Corporate Airline Jet Commercial Airlines Jet • Pay per use • Less Travel Time Good • No Maintenance • Less Hassle • P2P 1/16 Ownership Smaller 50 hrs/yr @ $375k Airplanes, • Not P2P Airport, • High Travel Bad • High Cost Less Staff Time • Security Concern Point-to-point, Faster, Less Hassle, Increase Productivity All Rights Reserved – KB Yip/YS Lieu Page : 22
  • 23. Strategy Canvas - NetJets Eliminate Raise • Speed of travel time • Ease of travel • Flexibility and Reliability • In flight service Reduce Create • Price • Need for customers to manage aircraft • Deadhead costs High Private Jet NetJets' Value Curve Com m ercial Airlines Low Price Need for Deadhead Speed of total Ease of travel Flexibility and In- flight service customer's to costs travel time reliability manage aircraft All Rights Reserved – KB Yip/YS Lieu Page : 23
  • 24. Across Alternative Industries BOS Example – Conventional Airline Coach Across Alternative Industries  Slow  Cheap  Point to Point  Fast  Expensive  Better Services Now Everyone Can Fly!  Flight Connections  Price of Coach & Speed of Flight  P2P Direct Flight  No Frill – User Pay  Budget Travel Package All Rights Reserved – KB Yip/YS Lieu Page : 24
  • 25. Strategy Canvas - Air Asia Eliminate Raise  Price Competition • Quality of Safety  Seat Selection • Point to Point Direct  Free Food & Beverages Flight  Air Ticket  VIP Lounge  Flight Connection Reduce Create  Air Fare • Web Registration  Capital • Express Boarding  Stopover time • Budget Hotel  Staffing (ground and air) High Air Asia Offering Level Other Local Airline Land Transportation Low e p n y et ge on l e g et y F g dg ote l ic m ct pl ck it a m fin ct Re oa r Pr Co ele up Ti un tC ap Ti af S af ire b H e S r Lo h C ve r St D e B ge t ic t S od Ai P Fl ig P W ss Pr S ea F o VI opo P2 re ud B St Xp All Rights Reserved – KB Yip/YS Lieu Page : 25
  • 26. Reconstruct Market Boundaries  There are 6 pathways to reconstruct the market boundaries Across Alternate Industry Across Strategic Groups Across Buyer Groups Blue Red Across Complementary Scope of Ocean Ocean Products & Services Across Functional Emotional Orientation Across Time All Rights Reserved – KB Yip/YS Lieu Page : 26
  • 27. Across Strategic Groups BOS Example –  Strategic Groups –Groups of companies within an industry that pursue a similar strategy.  E.g., Automobiles – Luxury (Mercedes, BMW), Economical (Toyota, Proton). Traditional Home Health Club Exercise Traditional Health Club Womanly Fun • Full range • Low Cost exercise and • Privacy >10k Good sporting options Easy to Use Outlets & Machine > 4M members • Expensive. (as of Peer Oct, • Not easily accessible. Support Bad • Low 2006) • Complicated. motivation • Lack of Privacy Affordable Home Exercise All Rights Reserved – KB Yip/YS Lieu Page : 27
  • 28. Strategy Canvas - Curves Eliminate Raise • Non threatening same sex environment Reduce Create  Price • Womanly fun  Amenities atmosphere  Workout equipment  Availability of Instructors High Curve s Hom e Exercise Program Traditional Health Clubs Low Price Amenit ies Workout Workout Time A vailabilt y of Environment Nonthreatening Convenience Womenly fun Equipment instructors encouraging same- sex at mosphere discipline and environment motivation in exercise All Rights Reserved – KB Yip/YS Lieu Page : 28
  • 29. Across Strategic Groups BOS Example – OldTown  Expensive  Hygienic  Good Ambience & Relaxing Environment  Rightly Priced  Economical  Hygienic  Less Hygienic  Better Environment  Less Appealing Environment  Emotional Appeal All Rights Reserved – KB Yip/YS Lieu Page : 29
  • 30. Across Strategic Groups BOS Example – Tune Hotel 4/5 Stars Hotels Nice Sleep! Hot Shower!  Luxury  Expensive  Service  Facilities Backpacker Hostels  No Frill  Cheap - Pay For What You Use!  Optional Add-ons:  Cheap  Limited service, basic  Sleep & Go  Low on price, high on personality  Walk in All Rights Reserved – KB Yip/YS Lieu Page : 30
  • 31. Reconstruct Market Boundaries  There are 6 pathways to reconstruct the market boundaries Across Alternate Industry Across Strategic Groups Across Buyer Groups Blue Red Across Complementary Scope of Ocean Ocean Products & Services Across Functional Emotional Orientation Across Time All Rights Reserved – KB Yip/YS Lieu Page : 31
  • 32. Across Chain of Buyers BOS Example –  There is a chain of ‘buyers’ who are directly or indirectly involved in the buying decision. Purchasers – pay for the product or service Users – use the product or service Influencers – influence the decision in the purchase Corporate Jet Example : Novo Nordick - from insulin producer to a diabetes care company Traditionally Now Prescribe Request Better Better Easy No Medicine Pricing To Use Unpleasant Feeling Insulin Industry All Rights Reserved – KB Yip/YS Lieu Page : 32
  • 33. Across Chain of Buyers BOS Example – Nintendo Wii Everyone is a gamer! Everyone can play! Reduced Graphics Nintendo outsold Sony and Microsoft 6:1. Can’t keep product on shelves! Family Fun Wii Fit Increased motion control All Rights Reserved – KB Yip/YS Lieu Page : 33
  • 34. Strategy Canvas : Nintendo Wii Eliminate Raise • Complexity • Game Library • Movie • Ease of Use Reduce Create  Price • Interaction/Group Fun  Graphics • Magic Wand  Physics  Online Pay High Nintendo Wii Gam e Industry e s s y i ty ie ry se Fu n d Low ic ic ic Pa ex ov ra an Pr ph ys e pl M ib fU up W ra Ph nl in om L o ro ic G e se G ag O C am Ea n/ M G tio c ra te In All Rights Reserved – KB Yip/YS Lieu Page : 34
  • 35. Reconstruct Market Boundaries  There are 6 pathways to reconstruct the market boundaries Across Alternate Industry Across Strategic Groups Across Buyer Groups Blue Red Across Complementary Scope of Ocean Ocean Products & Services Across Functional Emotional Orientation Across Time All Rights Reserved – KB Yip/YS Lieu Page : 35
  • 36. Across Complementary Products & Services BOS Example – NABI  Define the total solution buyers seek when they choose a product or service.  Think about what happens before, during, and after your product is used. Corporate Example : Jet Traditional : Buses made from Steel • Less Space • Low Initial Price • More Fuel • High •High Supplementa Maintenanc Purchase Delivery Use Disposal ry e • High Initial Price • More Space • Low • Low • Less Fuel NABI : Buses made from Fibre Glass All Rights Reserved – KB Yip/YS Lieu Page : 36
  • 37. Strategy Canvas - NABI Eliminate Raise • Environmental friendliness Reduce Create  Corrosion • Aesthetic design  Maintenance cost • Customer friendliness  Fuel consumption High NABI Average U.S Transit Bus Low Initial purchase Corrosion Maintenance Fuel Environmental Aesthetic Customer price cost consumption friendliness design friendliness All Rights Reserved – KB Yip/YS Lieu Page : 37
  • 38. Across Complementary Products and Services BOS Example: Operated 798 stores in all 50 U.S. states and the District of Columbia, as well as Purchasing stores in Australia and Canada Process Before During After  Book Selection  Customer Enquiry  Go to Coffee Shop  Sit Down  Paying  Read the Book  Browse Through  Book Signing Selection  Buy DVD, Games, Gift  Attend an event Carrying bag Immediate Enjoyment! Book Selection Event : Story Telling for Kids DVD & Games Book Signing All Rights Reserved – KB Yip/YS Lieu Page : 38
  • 39. Across Complementary Products and Services BOS Example - • Largest EMS (Electronics Manufacturing Services) in the World. • Ranked 132 at Fortune Global with $51B revenue, higher than Intel (188), Motorola (200), Flextronics (292). • Employs 550,000 employees worldwide with design centers/factories at >10 countries. • Make Apple Mac/iPod/iPhone, Intel motherboards, Dell, HP, Sony PlayStation, Nintendo Wii, Microsoft Xbox, cell phones for Nokia/Samsung/Motorola/LG/Sony- Ericsson. • Shenzhen facility at Longhua • Covers about a square mile. • Has its own fire brigade, hospital, swimming pool, restaurants, banks, supermarkets, internet cafe. All Rights Reserved – KB Yip/YS Lieu Page : 39
  • 40. BOS Example - Foxconn Repair & Servicing Repair & Servicing Logistics & Distribution Conventional Distribution EMS Mass Production Logistics Mass Production VI Part Sourcing & Production Inventory Prototyping Control Prototyping Sourcing Design Design Vertical Integration (VI) Model All Rights Reserved – KB Yip/YS Lieu Page : 40
  • 41. Strategy Canvas - Foxconn High Foxconn Othe r EM Se s Low e ss g y ss er y li ty t io n e en olo oc e l iv ua ra iv hn Pr Q g ti t ec D n te pe T a lI m Co r ti c st Ve Co All Rights Reserved – KB Yip/YS Lieu Page : 41
  • 42. Reconstruct Market Boundaries  There are 6 pathways to reconstruct the market boundaries Across Alternate Industry Across Strategic Groups Across Buyer Groups Blue Red Across Complementary Scope of Ocean Ocean Products & Services Across Functional Emotional Orientation Across Time All Rights Reserved – KB Yip/YS Lieu Page : 42
  • 43. Across Functional or Emotional Appeal BOS Example – QB House  Some industries compete principally on price and function - their appeal is rational.  Other industries compete largely on feelings - their appeal is emotional. • Simple • Pricey • Low Cost • Extras • Low Price • Feelings Functional Emotional Traditional Hair Saloon • Hot Towels QB House Rev • Message • Emotional Service -> None • Tea/Coffee • Hair Wash -> Air Wash • Special Hair /Skin • $9 Treatments 1996 2003 • $27 - $45 All Rights Reserved – KB Yip/YS Lieu Page : 43
  • 44. Across Functional or Emotional Appeal BOS Example – Institute / College Across  High Fee Multiple  WW Recognized Pathways Certification  Low Fee  Strategic  Branches in UK, Africa & China Group  Low Recognition of • Functional ->  Collaboration w other Universities Education Quality Emotional  6000 students from 90 countries  Open Education  Vibrant, multicultural and international  Conventional System Education System  Free & Creative  Many Environmental Environment Constraints  Diverse Student Base Academic Exchange  Local Market  Fun Learning  Exposure  Global Classroom Encourage Entrepreneurship All Rights Reserved – KB Yip/YS Lieu Page : 44
  • 45. Strategy Canvas - LimKokWeng Eliminate Raise  Foreign Cert • Globalization Competition Superiority • Asian Culture  Environmental Constraints • Creative Thinking • Flexibility Culture • Exposure • Entrepreneurship Reduce Create  Student  Unconventional Constraints Teaching Method  Fee Competition  Ecosystem High Lim Kok Weng Private Colleges Low n on d re ts g y p ts m re re es io ho rit kin hi in tu in titi te ti t su tu io Fe et ra rs ul ra pe in ys pe ul er po eu M st C st Th C os om up om on Ex en ty on g n Ec in e tS i li lC C ia C tC pr iv ch ib As er n at t re e ta ex en ea io Fe re C en En at Fl ud lT C n nm l iz ig St na ba re ro io Fo lo vi nt G En ve on nc U All Rights Reserved – KB Yip/YS Lieu Page : 45
  • 46. Reconstruct Market Boundaries  There are 6 pathways to reconstruct the market boundaries Across Alternate Industry Across Strategic Groups Across Buyer Groups Blue Red Across Complementary Scope of Ocean Ocean Products & Services Across Functional Emotional Orientation Across Time All Rights Reserved – KB Yip/YS Lieu Page : 46
  • 47. Across Time BOS Example – iTune Apple launched Apple teamed up with iTunes online major Music & Picture music store Companies  Sell Individual song / entire album  30 sec free listening  Strategically price Napster started > 2 billion illegally music flies were being online music file traded every month sharing service  iTunes had sold > 1999 2003 4 billion songs 2008  20 million songs on Dec 25, 2007 All Rights Reserved – KB Yip/YS Lieu Page : 47
  • 48. Across Time BOS Example :  A video sharing website for upload, view and share video clips  User can post video 'responses' and subscribe to content feeds  Created in mid-February 2005 by three former PayPal employees  Uses Adobe Flash technology to display a wide variety of user- generated video content  Acquired by Google in Nov 2006 for $1.6B As of Apr 2008, hosting 83.4 million videos and 3.75 million user channels > 100 million videos were being watched every day All Rights Reserved – KB Yip/YS Lieu Page : 48
  • 49. Strategy Canvas - YouTube Eliminate Raise • Need for HTML • Web space allotted know-how per user • Hassle of undergoing numerous steps • Fees Reduce Create  Uploading / • Ease of Use downloading time technology • FLV technology • Ready-made website • Social networking • Video tags & Search High YouTube Ordinary Webhosting Low ow sl e es e er gy te gy ng ch ti m us lo si lo ki ar -h as Fe eb no or w H oa d pe r no w w se kn o nl d ch e ch et & w te te ad te N gs L do at se -m V al ta TM d/ oc f- u FL ci H oa al l dy So de a r -o ea fo pl ce s Vi d U pa Ea R ee N e bs W All Rights Reserved – KB Yip/YS Lieu Page : 49
  • 50. Look across Time Weird Science Climate Change Future of the Individual Longevity Medicine Innovation Ten Trends Economy of the Extreme Fueling the Future Next Workforce Future Securing the Globalization Future US- China Future From the Book “Extreme Future” All Rights Reserved – KB Yip/YS Lieu Page : 50
  • 51. From Head-to-Head Competition to Blue Ocean Creation Head-To-Head Competition Blue Ocean Creation Looks across alternative Industry Focuses on rivals within its industry industries Focuses on competitive position within Looks across strategic groups Strategic Group strategic group within industries Focuses on better serving the buyer Redefines the industry buyer Buyer Group group group Focuses on maximizing the value of Scope of Product or Looks across to complementary product and service offerings within Service Offering and service offerings the bounds of its industry Focuses on improving price Rethinks the functional- Functional-Emotional Functional- performance within the functional - emotional orientation of its Orientation emotional orientation of its industry industry Focuses on adapting to external trends Participates in shaping external Time as they occur trends over time All Rights Reserved – KB Yip/YS Lieu Page : 51
  • 52. Across Multiple Pathways BOS Example – NV Multi Corporation Traditional Graveyard NV Multi Corporation Total Peace of Mind  Economical  Expensive  Unpleasant Environment  Pleasant Environment  Pollution  1 Stop Service  No Maintenance  After Sales Service All Rights Reserved – KB Yip/YS Lieu Page : 52
  • 53. Across Multiple Pathways BOS Example – NV Multi Corporation Complementary Prayer Service Service Team Products & Services Professional Band White Ladies A Service Respect For Woman • Notifying Friend & Across Buyer Functional Relatives • Thank You Cards Groups to Emotional • Memory Lane • Video & Slideshow Across Alternative Industries • Buyer -> User & User -> Buyer • Pet Memorial Garden • Bereavement • VIP Memorial Garden Product • Insurance Protection • Capital Gain All Rights Reserved – KB Yip/YS Lieu Page : 53
  • 54. Strategy Canvas - NV Multi Corporation Eliminate Raise • Price Competition • Well Layout • Fear Cemetery • Taboos • Staff Appearance • Pre-arranged • One Stop Funeral Services Reduce Create  Sophisticated • White Angels Process • Luxury Cemetery  Pollution • Customizable Burial Plots • Care Plan High NV Multi Private Cem etary Public Cemetery Low s on n y an s ar ot ed y e ss os ls ce t io er ic e er ic ge titi Fe Pl e pl bo ng et et n Pr l lu oc rv pe An ra m ial re Ta m ra Po Se Pr ea Ce Ca m Ce r ar te Bu Co pp d e- al hi te t ry ou er e Pr fA W ic a e xu bl ay n ic af iz a Fu Lu is t Pr lL St om ph p el o So W st St Cu ne O All Rights Reserved – KB Yip/YS Lieu Page : 54
  • 55. Activity 3 & 4 : Reconstruct Market Boundaries Identify Divergent Factors High 4.5 4 Competitors Offering Level 3.5 3 Mid 2.5 2 1.5 1 XYZ 0.5 Low 0 h n ss e s ng es re 10 11 9 at ti o ag or ne or tu rP i ti di ni at or or nk ul ci l ct i ve an og li t ee ct ct Fa C Li Fa ci Br Fa Fa tit ec e/ ar Fa ry pe yl lR C st st om du & na fe m In C Li ti o ra e itu og Fe st Competing Factors Pr In Identify the Divergent Factors that Differentiate XYZ from Competitors All Rights Reserved – KB Yip/YS Lieu Page : 55
  • 56. Activity 3 & 4 : Reconstruct Market Boundaries Identify Divergent Factors Sub-Group : Divergent Factor Description Note : Each sub-group must determine at least ONE Divergent Factor. Back All Rights Reserved – KB Yip/YS Lieu Page : 56
  • 57. Activity 5 & 6 : To-Be Strategy Canvas Construct Desired Value Curve for XYZ Eliminate Create Divergent Factors X= Y= Z= Reduce Raise All Rights Reserved – KB Yip/YS Lieu Page : 57
  • 58. Activity 5 & 6 : To-Be Strategy Canvas Construct Desired Value Curve for XYZ Eliminate Create Competencies Divergent Factors X= Y= Z= Reduce Raise Technology Quality Process Talent New Value Curve High Existing Value Curve Mid Low Fee Institutional Industrial Program Facilitators Facilities Lifestyle/ X Y Z Competencies Recognition Linkage & Career Path Culture All Rights Reserved – KB Yip/YS Lieu Page : 58
  • 59. Three Characteristics of a Good Strategy 1. Focus 2. Divergence Now Everyone Can Fly! 3. Compelling Tagline All Rights Reserved – KB Yip/YS Lieu Page : 59
  • 60. Barriers to Imitation Does not Make Sense Brand Image Conflicts Economies of Scale based on Conventional Chanel, CD, etc could not imitate High volume generated by a Strategic Logic Body Shop as it would signal an value innovation leads to rapid NBC, CBS and ABC rediculed invalidation of their current cost advantages the idea of 24x7 real time news business models without star broadcasters Political, Operational and 1st to Market Natural Monopoly Cultural Changes When a company offers a leap in Size of market does not make Major revisions in routing planes, value, it rapidly earns brand buzz sense to support another player retraining, changing and a loyal following in the marketing/pricing/culture. Took marketplace MAS 6 years to come up Firefly Back All Rights Reserved – KB Yip/YS Lieu Page : 60
  • 61. Conclusion: Focus on the Big Picture, not the Numbers Awakening Exploration Strategy Fair Communication Compare your Draw your To Be Distribute your Go into the field to business with your Strategy Canvas before- and-after explore the six competitors' by based on insights strategic profiles on paths to creating drawing your As Is from field one page for easy blue oceans Strategy Canvas observations comparison Get feedback on Support only those Observe the alternative strategy projects and distinctive See where your canvases from operational moves advantages of strategy needs to customers, that allow your alternative change competitors’ company close the products and customers and non gaps to actualize services customers the new strategy See which factors Use feedback to you should build the best 'to be' eliminate, create or future strategy change Back All Rights Reserved – KB Yip/YS Lieu Page : 61
  • 62. Get the Strategic Sequence Right Red Ocean Sequence Cost Price Utility Adoption Buyer Adoption Commercially Price Cost Viable Utility Hurdles Blue Ocean Idea Is there Is your price Can you attain What are exceptional buyer easily accessible your cost target to adoption hurdles utility in your to the mass of profit at your in actualizing business idea? buyers? strategic price? your business idea? Are you addressing them up front? All Rights Reserved – KB Yip/YS Lieu Page : 62