management tools

1. BLUE OCEAN STRATEGY
TOOLS
DR LEE OIWAH
MD (UKM)

2. RED OCEAN VS BLUE OCEAN
RED OCEAN BLUE OCEAN
Compete in existing market space. Create uncontested market space.
Beat the competition. Make the competition irrelevant.
Exploit existing demand. Create and capture new demand.
Make the value-cost trade-off. Break the value-cost trade-off.
Align the whole system of a firm’s activities with
its strategic choice of differentiation or low cost.
Align the whole system of a firm’s activities in pursuit of
differentiation and low cost.

3. VALUE INNOVATION
Cost savings are made by eliminating and
reducing the factors an industry competes on.
Buyer value is lifted by raising and creating
elements the industry has never offered.

4. VALUE INNOVATION
HOW TO BREAK VALUE-COST TRADE-OFF?
Which of the factors that the industry takes for granted should
be eliminated?
Which factors should be reduced well below the industry’s
standard?
What factors should be raised well above the industry’s
standard?
What factors should be created that the industry has never
offered?

5. VISUALIZING STRATEGY
Visual Awakening Visual Exploration Visual Strategy Fair Visual Communication
Compare your business
with your competitors’ by
drawing your “as
is” strategy canvas. See
where your strategy
canvas needs to change.
Go into the field to explore
the six paths to creating
blue oceans. Observe the
distinctive advantages of
alternative products and
services. See which
factors you should
eliminate, reduce raise,
create, or change.
Draw your “to be” strategy
canvas based on insights
from field observations.
Get feedback on
alternative strategy
canvases from customers,
competitors’ customers,
and noncustomers. Use
feedback to build the best
“to be” future strategy.
Distribute your before-
and-after strategic profiles
on one page for easy
comparison. Support only
those projects and
operational moves that
allow your company to
close the gaps to
actualize the new
strategy.
BENEFITS OF VISUALIZING STRATEGY:
• Promote better understanding of other businesses within the coporate portfolio.
• Foster the transfer of strategic best practices across units within organisation..

6. STRATEGY CANVAS
The strategy canvas is a central diagnostic tool and an action framework developed by W. Chan Kim and Renée
Mauborgne for building a compelling blue ocean strategy. It graphically captures, in one simple picture, the current
strategic landscape and the future prospects for a company.

7. STRATEGY CANVAS
o The strategy canvas serves two purposes:
i. To capture the current state of play in the known market space, which allows users to clearly see the factors that the
industry competes on and where the competition currently invests.
ii. To propel users to action by reorienting their focus from competitors to alternatives and from customers to noncustomers of
the industry.
o The value curve or strategic profile is the basic component of the strategy canvas. It is a graphic depiction of a company’s
relative performance across its industry’s factors of competition. A strong value curve has focus, divergence as well as
a compelling tagline.

8. 4 ACTIONS FRAMEWORK
Raise
Which factors should be raised well
above the industry’s standard?
Eliminate
Which factors that the industry has long
competed on should be eliminated ?
New Value Curve
Create
Which factors should be created that the
industry has never offered?
Reduce
Which factors should be reduced well
below the industry’s standard?
The Four Actions Framework developed by W. Chan Kim
and Renée Mauborgne is used to reconstruct buyer value
elements in crafting a new value curve or strategic profile.

9. ERRC GRID
The Eliminate-Reduce-Raise-Create (ERRC) Grid developed by W. Chan Kim and Renée Mauborgne is a simple
matrix like tool that drives companies to focus simultaneously on eliminating and reducing, as well as raising
and creating while unlocking a new blue ocean.
Eliminate
Which factors that the industry has long
competed on should be eliminated ?
Raise
Which factors should be raised well
abovethe industry’s standard?
Reduce
Which factors should be reduced well
below the industry’s standard?
Create
Which factors should be created that the
industry has never offered?

10. The grid gives companies four immediate benefits:
i. It pushes them to simultaneously pursue differentiation and low cost to break the value-cost trade off.
ii. It immediately flags companies that are focused only on raising and creating, thereby lifting
the cost structure and often over-engineering products and services – a common plight for many
companies.
iii. It is easily understood by managers at any level, creating a high degree of engagement in its application.
iv. Because completing the grid is a challenging task, it drives companies to thoroughly scrutinize every factor the industry
competes on, helping them discover the range of implicit assumptions they unconsciously make in competing.
BENEFITS OF ERRC GRID

11. 6 PATHS FRAMEWORK
Head-to-Head Competition Blue Ocean Creation
Focuses on rivals within its industry Looks across alternative industries
Focuses on competitive position within strategic group Looks across strategic groups within industry
Focuses on better serving the buyer group Redefines the industry buyer group
Focuses on maximizing the value of product and service offerings
within the bounds of its industry
Looks across to complementary product and service offerings
Focuses on improving the price performance within the functional-
emotional orientation of its industry
Rethinks the functional-emotional orientation of its industry
Focuses on adapting to external trends as they occur Participates in shaping external trends over time

12. PIONEER-MIGRATOR-SETTLER (PMS) MAP
Settlers are defined as me-too businesses,
migrators are business offerings better than
most in the marketplace, and a company’s
pioneers are the businesses that offer
unprecedented value. These are a company’s
blue ocean strategic moves, and are the most
powerful sources of profitable growth. They are
the only ones with a mass following of
customers.
If both the current portfolio and the planned offering consist mainly of
settlers, the company has a low growth trajectory, is largely confined
to red oceans, and needs to push for value innovation. Although the
company might be profitable today as its settlers are still making
money, it may well have fallen into the trap of competitive
benchmarking, imitation, and intense price competition.
If current and planned offerings consist of a lot of migrators,
reasonable growth can be expected. But the company is not
exploiting its potential for growth and risks being marginalized by a
company that value-innovates

13. 3 TIERS OF NON-CUSTOMERS
Customers of your industry
Soon-to-be non-customers; on the
edge of market, waiting to jump ship
Refusing non-customers; conciously
choosing against your market
Unexplored non-customers; in
market distant from yours

14. SEQUENCE OF BLUE OCEAN STRATEGY
■ Buyer Utility
Is there exceptional buyer utility in your business idea?
■ Price
Is your price easily accessible to the mass of buyers?
■ Cost
Can you attain your cost target to profit at your strategic price?
■ Adoption
What are the adoption hurdles in actualizing your business idea?
Are you addressing them upfront?

15. BUYER UTILITY MAP

16. THE PRICE CORRIDOR OF THE MASS

17. 4 HURDLES TO STRATEGY EXECUTION
Cognitive
An organization wedded to the
status quo
Resource
Limited Resources
Political
Opposition from powerful
vested interests
Motivational

18. TIPPING POINT LEADERSHIP
Conventional Wisdom The theory of organizational change rests on transforming the mass and
these efforts require steep resources and long timeframes.
Tipping Point
Leadership
To achieve a strategic shift at low cost, focus on the extremes – the people,
acts, and activities that exert a disproportionate influence on performance.

19. FAIR PROCESS
Engagement Explanation Expectation Clarity
Engagement means involving individuals
in the strategic decisions that affect them
by soliciting their input and allowing them
to refute the merits of one another’s ideas
and assumptions. Engagement
communicates management’s respect for
individuals and their point of view. The
result is better strategic decisions by
management and genuine commitment
from everyone involved in execution.
Explanation means that everyone involved
and affected should understand why final
strategic decisions are made. An explanation
of rationale engenders confidence among
employees that managers have considered
their opinions and have made decisions
impartially in the overall interest of the
company, even if their own ideas have been
rejected. It also serves as a powerful feedback
loop to enhance learning.
Expectation clarity requires that after a
strategy is set, managers clearly state the new
rules of the game. Although the expectations
may be demanding, employees know up front
the standards by which their work will be
judged and the consequences of failure. When
people clearly understand expectations,
political jockeying and favoritism are
minimized, and people can focus on executing
the strategy rapidly.
Fair process is a concept developed by W. Chan Kim and Renée Mauborgne that builds execution into strategy by creating
people’s buy-in up front. When fair process is exercised in the strategy formulation phase, people trust that a level playing field
exists, inspiring voluntary cooperation during the execution phase.There are three mutually reinforcing elements that define fair
process: engagement, explanation, and clarity of expectation. Whether people are senior executives or shop employees, they
all look to these elements. Kim and Mauborgne call them the three Ε principles of fair process.