1. Blue Ocean Strategy
Team 4

2. Create New Markets Stop trying to beat the competition
Red Oceans vs. Blue Oceans
Red Oceans
Defined boundaries
Accepted rules
Blue Oceans
Untapped market space
High growth opportunity
The only way to beat the competition is to stop trying to beat the competition.
Red Oceans: All the industries in existence today.
Blue Oceans: All the industries not in existence today.
Red Oceans have clear defined boundaries and accepted rules.
Companies try to outperform each other.
Markets get crowded
Blue oceans are needed to get new profit and grow.
You need analytical frameworks to create blue oceans.

3. Red vs. Blue Red Ocean Strategy Blue Ocean Strategy
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.

4. Value Innovation The cornerstone of blue ocean strategy.
What is value innovation?
Make the competition irrelevant.
Create a leap in value.
Place equal emphasis on value and innovation.
Value innovation occurs when companies align innovation with utility, price, and cost positions.
Value innovation is a new way of thinking about and executing strategy that results in the creation of a blue ocean and break from the competition.
Instead of focusing on beating the competition you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space.
Value without innovation tends to focus on value creation on an incremental scale, which improves value but isn't enough to make you stand out.
Innovation without value tends to be technology driven and shoots beyond what buyers are ready for.
Based on the view that market boundaries can be reconstructed and industry structure is not given.

5. The Strategy Canvas
Captures the current state of play in the known market space.
Propels you to action by reorienting your focus from competitors to alternatives and from customers to noncustomers.
Allows you to understand where the competition is currently investing, the factors the industry currently competes on in products, service, and delivery, and what customers receive from the existing competitive offerings on the market.

6. Wine Strategy Canvas
Horizontal axis capture the range of factors the industry competes on and invests in.
Vertical axis captures the offering level that buyers receive across all these key competing factors.
Value curve is the basic component of the strategy canvas, a grpahic depiction of a company’s relative performance across its industry’s factors of competition.

7. Four Actions Framework
Used to reconstruct buyer value elements in crafting a new value curve.
Eliminate: Forces you to consider eliminating factors that companies in your industry have long competed on.
Reduce: Forces you to determine whether products or services have been overdesigned in the race to match and beat the competition.
These 2 questions help you gain insight on how to drop your cost structure in relation to competitors.
Raise: Pushes you to uncover and eliminate the compromises your industry forces customers to make.
Create: Helps you discover entirely new sources of value for buyers and to create new demand and shift strategic pricing of the industry.
These 2 questions provide you with insight into how to lift buyer value and create new demand.

8. Eliminate-Reduce-Raise-Create Grid Yellow Tail
Supplementary to the four actions framework.
Pushes companies to answer and act on the four questions to create a new value curve.

9. Three Characteristics of a Good Strategy
Focus
Divergence
Compelling Tagline
Want to focus on your value curve
Want to differentiate yourself from competitors, make your value curve stand apart.
Deliver a clear message and advertise an offering truthfully.

10. Reach Beyond Existing Demand
Companies need to deepen their understanding of the universe of noncustomers.
This offers big blue ocean opportunities
Three Tiers of Noncustomers
Soon-to-be noncustomers
Refusing noncustomers
Unexplored noncustomers

11. First Tier These are the “soon-to-be” noncustomers
They are labeled as being on the edge of your market waiting to jump ship.
They minimally use the current market offerings to get by as they search for better
They will eagerly jump ship
The first tier of noncustomers is an ocean of untapped demand waiting to be released

12. Second Tier Refusing noncustomers
People who either do not use or can’t afford to use the current market offerings
Their needs are either dealt with by other means or just ignored

13. Third Tier “Unexplored” noncustomers
They are usually the farthest away from an industry’s existing customers
Have not been targeted or thought of as potential customers by any player in the industry.
They belong to other markets.

14. Go for the Biggest Catchment
Focusing on existing customers is good to gain a competitive advantage, but it is not likely to produce a blue ocean that expands the market
Don’t focus on any specific tier
Look across the tiers
Focus on the tier that represents the biggest catchment

15. Get the Strategic Sequence Right
Companies need to build their blue ocean strategy in the sequence of
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 your adoption hurdles in actualizing your business idea?

16. Six Utility Levers
Customer Productivity, simplicity, convenience, risk, fun and image, and environmental friendliness
In each lever you want to find which stage of the buyer experience model has the biggest blocks.
The buyer experience model consists of:
Purchase
Delivery
Use
Supplements
Maintenance
Disposal

17. Blue Ocean Index
Companies should build their blue ocean strategy in the sequence of utility, price, cost, and adoption.
The BOI provides a simple but robust test of this system
This system help to show where they went wrong with respect to the four criteria

18. Where did they go wrong
Philips CD-i- Did not create buyer utility, priced out of reach from the mass of buyers, took more than 30 minutes to explain to customers, left no incentive for sales clerks to sell
Motorola Iridium-Unreasonably expensive, high production costs. Provided no attractive utility. Had a poor sales and marketing team.
NTT DoCoMo i-mode- (They did right) Ignored the technology race and brought the internet to cell phones. Offered exceptional buyer utility with an affordable low price

19. Reconstructing Market Boundaries
The first principle of blue ocean strategy is to reconstruct market boundaries to break from competition and create blue oceans.
Six Paths of Framework:
Look across Alternative Industries
Look across strategic groups within industries
Look across the chain of buyers
Look across complementary product and service offerings
Look across functional or emotional appeal to buyers
Look across time

20. Personal and Beauty
House and Home
Health and Wellness
Baby and Family
Pet Care and Nutrition

21. By thinking across conventional boundaries of competition, you can see how to make strategic moves that reconstruct established market boundaries and create blue oceans.
Diversifying the company’s horizons can lead to uncontested market space and making the competition irrelevant.

22. Focus on the Big Picture, not the numbers

23. Instead of a planning strategy which is mainly done by preparing documents, its better to draw it on a Strategy Canvas in order to become a blue ocean company.
By building a company’s strategic planning process around a strategy canvas, a company and its managers focus their main attention to the big picture rather than becoming immersed in numbers and jargon and getting caught up in operational details.

24. Use the four steps of visualizing strategy to help accomplish creating a strategy canvas.
Using the Pioneer-Migrator-Settler (PMS) Map at the corporate level to help visualize strategy.
All the details will fall into place more easily if the managers start with the big picture of how to break away from the competition.

25. Strategic planning is one of the most important business exercises because it keeps the company moving in a positive direction.
The Big Picture process allows managers and employees to look at their business from a much larger, more strategic way than focusing on just the details
Could very well be the basis of a company’s industry strategy, based on the fact it helps shape a persons image of what kinds of businesses do they want to be in

26. Executing Blue Ocean Strategy

27. Four hurdles to strategy execution:
Cognitive: red oceans are comfortable, but may not be path to future profitable growth
Limited resources: resources are being cut
Motivation: motivate key players to break from status quo – this takes time that managers don’t have
Politics: internal and external resistance to change

28. Tipping Point Leadership
Flip conventional wisdom by using tipping point leadership
Allows you to overcome 4 hurdles fast and at low cost, and wins employees’ backing for change to break from status quo
Example: NYPD
Builds on reality that there are people, acts, and activities that exercise a disproportionate influence on performance

29. Break Through Cognitive Hurdle
Ride the “Electric Sewer”
Come face-to-face with worst operational problems
Meet with Disgruntled Customers
Get managers out of office to see operational horror; listen to customers firsthand

30. Jump the Resource Hurdle
Redistribute Resources to Your Hot Spots
Reallocate staff to where the work is needed
Redirect Resources from Your Cold Spots
Engage in Horse Trading
Trade resources you don’t need for those you do need

31. Jump the Motivational Hurdle
Zoom in on Kingpins
Focus efforts of change on key influencers in the organization – natural leaders who are well respected and persuasive
Place Kingpins in a Fishbowl
Shine spotlight on actions in repeated and highly visible way
Actions and inaction are made transparent so that everyone can see who is shining and who is lagging
Atomize to Get the Organization to Change Itself
Relates to framing of the strategic challenge
People need to believe that strategic challenge is attainable

32. Knock Over the Political Hurdle
Secure a Consigliere on Your Top Management Team
Along with strong functional skills such as marketing, operations, and finance, tipping point leaders also engage a consigliere
Leverage Your Angels and Silence Your Devils
Don’t fight alone; create a win-win outcome for both detractors and supporters
Challenge Conventional Wisdom
Tipping point leadership changes mass by focusing on extremes: people, acts, and activities

33. Sixth principle of blue ocean strategy
To build people’s trust and commitment deep in the ranks and inspire their voluntary cooperation, companies need to build execution into strategy from the start.
Allows companies to minimize management risk of distrust, noncooperation, and sabotage.
Poor process can ruin strategy execution

34. The Power of Fair Process
When fair process is exercised in strategy-making process, people trust that a level playing field exists.
Three E Principles of Fair Process
Engagement
Explanation
Expectation clarity
Why does fair process matter?
Intellectual and emotional recognition
Individuals seek recognition of their value as human beings
They seek recognition that their ideas are sought after and given thoughtful reflection

35. Fair Process and Blue Ocean
Commitment, trust, and voluntary cooperation are intangible capital, not merely attitudes or behaviors
When there is trust, there is heightened confidence in one another’s intentions and actions
When there is commitment, people are willing to override personal self-interest in the interests of the company

36. Barriers to Imitation Some are operational, some are cognitive
More often than not, blue ocean strategy will go without credible challenges for years
Ex: Cirque de Soleil, Southwest Airlines, FedEx, Home Depot
Types of barriers:
Innovation does not make sense on conventional strategic logic
Brand image conflict
Natural monopoly – size of market cannot support another player
Patents or legal permits
High volume generated by value innovation leads to rapid cost advantages, placing imitators at ongoing cost disadvantage
Network externalities
Politics resisting change
When company offers leap in value, it creates brand buzz that competitors can rarely overcome

37. When to Value-Innovate Again
Eventually almost every BOS will be imitated
To avoid trap of competing, monitor value curves on strategy canvas
When company’s value curve still has focus, divergence, and compelling tagline, RESIST temptation to value-innovate again and focus on lengthening, widening, and deepening your rent stream through operational and geographical expansion
As rivalry intensifies and total supply exceeds demand, and competitors’ value curves begin to converge with yours, reach out for a new blue ocean

38. Takeaways
6 principles of blue ocean strategy in this book should serve as essential pointers for every company thinking about its future strategy
Because companies already understand how to compete in a red ocean, they need to learn how to make competition irrelevant
Creating blue oceans is not a static achievement but a dynamic process