This document discusses the concepts of Blue Ocean Strategy and Red Oceans. Red Oceans represent existing industries that are competitive with defined boundaries. Blue Oceans represent all industries not yet in existence, and present opportunities. The document uses examples like Cirque du Soleil and Yellowtail wine to illustrate how companies have created new market space by expanding industry boundaries rather than competing directly. It advocates applying the four actions of eliminate, reduce, raise, and create factors to redefine the competitive landscape and create new blue ocean opportunities.

1. Blue OceansBlue Oceans
andand
Other BIG Strategic IdeasOther BIG Strategic Ideas

2. What You Will LearnWhat You Will Learn
• Become familiar with concepts behindBecome familiar with concepts behind
Blue Ocean StrategyBlue Ocean Strategy
• Learn what MPI has done to apply BlueLearn what MPI has done to apply Blue
Ocean concepts to your associationOcean concepts to your association
• Learn aboutLearn about net creation and opennet creation and open
innovationinnovation
• Formulate ideas on how you might be ableFormulate ideas on how you might be able
to apply these ideas to your own workto apply these ideas to your own work

3. RedRed OceansOceans represent all industries in existencerepresent all industries in existence
today.today.
They have defined rules, competitors, and marketThey have defined rules, competitors, and market
boundaries.boundaries.
Key words might includeKey words might include competitioncompetition,, price warsprice wars,,
market sharemarket share,, commoditization, benchmarking,commoditization, benchmarking,
strategic positioning, value addstrategic positioning, value add..

4. Blue OceansBlue Oceans represent all industriesrepresent all industries
NOTNOT
in existence today.in existence today.
This is undefined market space, otherwise knownThis is undefined market space, otherwise known
as OPPORTUNITY.as OPPORTUNITY.
Key words might beKey words might be value innovation, focus,value innovation, focus,
differentiation, creation of demand, newdifferentiation, creation of demand, new
marketplacemarketplace

5. MostMost blue oceansblue oceans are created fromare created from redred
oceanocean companies expanding industrycompanies expanding industry
boundaries.boundaries.
For example, Cirque du Soleil or [yellowtail]For example, Cirque du Soleil or [yellowtail]
(more on this in a bit)(more on this in a bit)

6. The phraseThe phrase “Blue oceans”“Blue oceans” is new, but theis new, but the
concept is not. Think of what industriesconcept is not. Think of what industries
existed in 1900.existed in 1900.
Take 3 minutes…Take 3 minutes…
At your table, brainstorm a list of industriesAt your table, brainstorm a list of industries
that have emerged since then.that have emerged since then.

7. Some of them might be…Some of them might be…
automotives, aviation, health care, plastics,automotives, aviation, health care, plastics,
DVDs, computers, personal entertainmentDVDs, computers, personal entertainment
devices (iPods, for example).devices (iPods, for example).
All of these industries createdAll of these industries created
new market space.new market space.

9. The premise is simpleThe premise is simple::
To win in the future, companies must stopTo win in the future, companies must stop
competing with each other.competing with each other.
The only way to beat the competition is to stopThe only way to beat the competition is to stop
tryingtrying to beat the competition.to beat the competition.

10. The business environment in which mostThe business environment in which most
business strategy and management hasbusiness strategy and management has
been based on is changing, evolving orbeen based on is changing, evolving or
disappearing.disappearing.
Some of this change is due to technology.Some of this change is due to technology.
Other reasons might be culture,Other reasons might be culture,
globalization, speed of new information, orglobalization, speed of new information, or
the role of demographics in the workplace.the role of demographics in the workplace.

11. Value innovationValue innovation is the “new” strategic logicis the “new” strategic logic
behindbehind Blue OceanBlue Ocean Strategy.Strategy.
Instead of focussing on beating the competition,Instead of focussing on beating the competition,
you focus onyou focus on making it irrelevantmaking it irrelevant by creating aby creating a
leap in value for buyers and creatingleap in value for buyers and creating
uncontested market space.uncontested market space.

12. Value innovationValue innovation only occurs whenonly occurs when
organizations have aligned innovation withorganizations have aligned innovation with
utility, price and costs.utility, price and costs.
The market must be ready to accept the product,The market must be ready to accept the product,
meaning thatmeaning that timingtiming is key.is key.
The focus is on both differentiation and low cost toThe focus is on both differentiation and low cost to
provide value to both customers and theprovide value to both customers and the
organization.organization.

13. Graph of Value InnovationGraph of Value Innovation

14. Case study: Cirque du SoleilCase study: Cirque du Soleil
Other circuses focused on:Other circuses focused on:
• Benchmarking the competitionBenchmarking the competition
• High-profile “stars”, which increased costsHigh-profile “stars”, which increased costs
but who were largely unknown to thebut who were largely unknown to the
general publicgeneral public
• Traditional venueTraditional venue
• Traditional audiencesTraditional audiences

15. Case study: Cirque du SoleilCase study: Cirque du Soleil
Cirque du Soleil focused on:Cirque du Soleil focused on:
 Creation of a hybrid between the circus and theCreation of a hybrid between the circus and the
theatretheatre
 Retention of the symbolic and glamorousRetention of the symbolic and glamorous
aspects of circus, such as the tent and the moreaspects of circus, such as the tent and the more
breathtaking aspects, such as acrobatsbreathtaking aspects, such as acrobats
 Incorporation of more comfort, sophistication,Incorporation of more comfort, sophistication,
elegance and theatrical plots; this brought notelegance and theatrical plots; this brought not
only the richness of theatre but a whole newonly the richness of theatre but a whole new
demographic of customersdemographic of customers
 It looked across market boundaries and createdIt looked across market boundaries and created
new ones.new ones.

16. The Strategy CanvasThe Strategy Canvas
• Captures the current state of play in theCaptures the current state of play in the
market by detailing the factors playersmarket by detailing the factors players
compete on in product, service andcompete on in product, service and
deliverydelivery
• For example, the wine industry competesFor example, the wine industry competes
on price per bottle, refined image inon price per bottle, refined image in
packaging, marketing strategies, agingpackaging, marketing strategies, aging
quality of wine, prestige of vineyard,quality of wine, prestige of vineyard,
complexity of taste and diverse productcomplexity of taste and diverse product
rangerange

17. Possible Wine Canvas
0
2
4
6
8
10
12
Price
Im
age
aging
com
plexityprestige
diverse
portfolio
easy
to
drinkaccessible
Fun
Competetive Factors
RankingScale
Quails Gate
Mission Hill
Yellowtail

18. The Strategy CanvasThe Strategy Canvas
• Each factor is plotted on the canvas, withEach factor is plotted on the canvas, with
a high score reflecting the level ofa high score reflecting the level of
investment a specific company makes ininvestment a specific company makes in
that factor (for example a high score onthat factor (for example a high score on
price means that the price per bottle isprice means that the price per bottle is
high)high)
• When you plot all US wineries, they scoreWhen you plot all US wineries, they score
remarkably similarlyremarkably similarly

19. Example of a Strategy CanvasExample of a Strategy Canvas
Blue
Ocean
Space

20. The Strategy CanvasThe Strategy Canvas
• To differentiate yourself in the marketTo differentiate yourself in the market
place, you must focus on alternatives andplace, you must focus on alternatives and
non-customers to re-define thenon-customers to re-define the
marketplacemarketplace
• For example, Casella Wines looked at theFor example, Casella Wines looked at the
strategy canvas and redefined thestrategy canvas and redefined the
question: How do you make a fun andquestion: How do you make a fun and
non traditional wine that is easy fornon traditional wine that is easy for
everyone to drink?everyone to drink?

21. Case Study: [yellowtail]Case Study: [yellowtail]
• Casella saw that most US consumersCasella saw that most US consumers
preferred beer, spirits and pre-packagedpreferred beer, spirits and pre-packaged
cocktails to winecocktails to wine
• Consumers saw wine as a turn-off due toConsumers saw wine as a turn-off due to
– It was pretentiousIt was pretentious
– The taste was too complexThe taste was too complex
– It could be intimidatingIt could be intimidating

22. Case Study: [yellowtail]Case Study: [yellowtail]
• They created a wine that broke out of theThey created a wine that broke out of the
red ocean by creating a wine that:red ocean by creating a wine that:
– Appealed to beer and spirits drinkers by beingAppealed to beer and spirits drinkers by being
fun and unpretentious as well as to winefun and unpretentious as well as to wine
drinkersdrinkers
– Had a less complex, sweeter and smoothHad a less complex, sweeter and smooth
tastetaste
– Was easy to select as it did not focus onWas easy to select as it did not focus on
prestige, aging, etc.prestige, aging, etc.
– They eliminated all factors that the wineThey eliminated all factors that the wine
industry had long competed onindustry had long competed on

23. Four Actions:Four Actions:
Eliminate/Reduce/Raise/CreateEliminate/Reduce/Raise/Create
• Which of the factors that the industry takesWhich of the factors that the industry takes
for granted should befor granted should be eliminatedeliminated??
• Which should beWhich should be reducedreduced??
• Which should beWhich should be raisedraised well abovewell above
standard?standard?
• Which factors should beWhich factors should be createdcreated that havethat have
not existed before?not existed before?

24. 3 Characteristics of3 Characteristics of
a Good Strategya Good Strategy
• It isIt is focusedfocused; it is not diffused across all; it is not diffused across all
potential aspects of the marketpotential aspects of the market
• The shape of the value curveThe shape of the value curve divergesdiverges
from any potential competitorsfrom any potential competitors
• It has a compellingIt has a compelling taglinetagline

25. Your Strategy CanvasYour Strategy Canvas
At your table, choose an industry one (orAt your table, choose an industry one (or
more) of you belong to.more) of you belong to.
• What industry are you in?What industry are you in?
• What factors does it traditionally competeWhat factors does it traditionally compete
on? (i.e. price, amenities, etc.)on? (i.e. price, amenities, etc.)
• Are there any factors that set you apart?Are there any factors that set you apart?
• Are there any factors that do not add anyAre there any factors that do not add any
value and could be dropped?value and could be dropped?
• What could be created to add value?What could be created to add value?

26. Creation Nets and Open InnovationCreation Nets and Open Innovation
• Open innovation is the concept that byOpen innovation is the concept that by
looking beyond your own boundaries, youlooking beyond your own boundaries, you
can gain access to better ideas,can gain access to better ideas,
knowledge and technology than you couldknowledge and technology than you could
by relying on your own resourcesby relying on your own resources
• ““Networks of creation”, or Creation NetsNetworks of creation”, or Creation Nets
are an extension of this conceptare an extension of this concept

27. Creation NetsCreation Nets
• Involve many – sometimes hundreds orInvolve many – sometimes hundreds or
even thousands of people – from diverseeven thousands of people – from diverse
backgrounds coming together, often overbackgrounds coming together, often over
the internet, to create knowledge, learnthe internet, to create knowledge, learn
best practices, and build on each other’sbest practices, and build on each other’s
work.work.
““Nobody is as smart as everybody”Nobody is as smart as everybody”
William C. Taylor, Founder of Fast CompanyWilliam C. Taylor, Founder of Fast Company

28. The Positive PressThe Positive Press
• For companies, creation nets have manyFor companies, creation nets have many
advantages:advantages:
– The rapid flow of change in today’s economyThe rapid flow of change in today’s economy
makes new knowledge valuable, as opposedmakes new knowledge valuable, as opposed
to the past where a private knowledge baseto the past where a private knowledge base
could give value overlong periodscould give value overlong periods
– Greater access to intellectual resourcesGreater access to intellectual resources
– Greater access to new and differentGreater access to new and different
technologiestechnologies
– Ability to tap into knowledge across traditionalAbility to tap into knowledge across traditional
knowledge boundaries and industriesknowledge boundaries and industries
– Creative breakthroughsCreative breakthroughs

29. The Negative PressThe Negative Press
• Trust can be hard to establishTrust can be hard to establish
• Concerns about proprietary informationConcerns about proprietary information
• Large groups of people working to innovateLarge groups of people working to innovate
together can be hard to controltogether can be hard to control
• Conflict among participants increases the moreConflict among participants increases the more
people involvedpeople involved
• Different tolerances for costDifferent tolerances for cost
• Uncertainty on how to create valueUncertainty on how to create value
• Loss of confidence in own abilitiesLoss of confidence in own abilities

30. Net Creation at WorkNet Creation at Work
• Development of iPod was stimulatedDevelopment of iPod was stimulated
through a creation net formed by a smallerthrough a creation net formed by a smaller
player in the marketplace, PortalPlayerplayer in the marketplace, PortalPlayer
• The development of Linux, a computerThe development of Linux, a computer
operating system, was through netoperating system, was through net
creation and involved companies such ascreation and involved companies such as
IBM, Intel and Hewlett PackardIBM, Intel and Hewlett Packard
• The discovery of gold in an Ontario mineThe discovery of gold in an Ontario mine
at Goldcorp, today considered the world’sat Goldcorp, today considered the world’s
richest minerichest mine

31. Net Creation at WorkNet Creation at Work
• Development of the internet itselfDevelopment of the internet itself
““The world’s most important technologyThe world’s most important technology
platform relies on ideas and computerplatform relies on ideas and computer
code generated largely by a decentralizedcode generated largely by a decentralized
corps of volunteer programmers, most ofcorps of volunteer programmers, most of
whom have never met each other and fewwhom have never met each other and few
of whom work together in any formalof whom work together in any formal
setting”setting”
William C. Taylor, Mavericks at WorkWilliam C. Taylor, Mavericks at Work

32. Net Creation SummaryNet Creation Summary
• Just because you are in charge doesn’tJust because you are in charge doesn’t
mean you need to have all the answersmean you need to have all the answers
• Just because people don’t work for youJust because people don’t work for you
doesn’t mean that they can’t work withdoesn’t mean that they can’t work with
you…but you have to invite themyou…but you have to invite them
• No one is as smart as everyoneNo one is as smart as everyone
• It is about the “architecture ofIt is about the “architecture of
participation” (participation” (Tom O’Reilly, O’Reilly MediaTom O’Reilly, O’Reilly Media))

33. Personal Creation NetworksPersonal Creation Networks
Find a partner:Find a partner:
• How can you utilize this concept eitherHow can you utilize this concept either
personally or at work?personally or at work?
• What technology exists that you can use?What technology exists that you can use?
At your table:At your table:
• Share your ideas.Share your ideas.
• Pick one that you can share with the roomPick one that you can share with the room