Creative & Innovative Minds Blue Ocean Strategy Leadership Discourse. 21 Oct 2011 Blue Ocean Strategy (BOS)

Creative & Innovative Minds Blue Ocean Strategy Leadership Discourse. 21 Oct 2011 Prof. W. Chan Kim Renée Mauborgne ● W. Chan Kim is Co-Director of the INSEAD Blue Ocean Strategy Institute and The Boston Consulting Group Bruce D. Henderson Chair Professor of Strategy and International Management at INSEAD. Prior to joining INSEAD, he was a professor at the University of Michigan Business School, USA. He has served as a board member as well as an advisor for a number of multinational corporations in Europe, the U.S. and Pacific Asia. He is an advisory member for the European Union and serves as an Advisor to Malaysian Government. ● Kim is a Fellow of the World Economic Forum. His Harvard Business Review articles, co- authored with Renée Mauborgne, are worldwide bestsellers and have sold over half a million reprints. Their Value Innovation and Fair Process articles were selected as among the best classic articles ever published in Harvard Business Review. They have co--authored articles in The Wall Street Journal, The Wall Street Journal Europe, The New York Times, The Financial 2

Creative & Innovative Minds Blue Ocean Strategy Leadership Discourse. 21 Oct 2011 Blue Ocean Strategy? … ● 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. ● While innovation has been seen as a random/experimental process where entrepreneurs and spin-offs are the primary drivers – as argued by Schumpeter and his followers – BOS offers systematic and reproducible methodologies and processes in pursuit of blue oceans by both new and existing firms. ● BOS frameworks and tools include: strategy canvas, value curve, four actions framework, six paths, buyer experience cycle, buyer utility map, and blue ocean idea index. 3

Creative & Innovative Minds Blue Ocean Strategy Leadership Discourse. 21 Oct 2011 … Blue Ocean Strategy? ● BOS frameworks and tools are designed to be visual in order to not only effectively build the collective wisdom of the company but also allow for effective strategy execution through easy communication. ● BOS covers both strategy formulation and strategy execution. ● The three key conceptual building blocks of BOS are: value innovation, tipping point leadership, and fair process. ● While competitive strategy is a structuralist theory of strategy where structure shapes strategy, BOS is a reconstructionist theory of strategy where strategy shapes structure. ● As an integrated approach to strategy at the system level, BOS requires organizations to develop and align the three strategy propositions: value proposition, profit proposition and people proposition. 4

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Creative & Innovative Minds Blue Ocean Strategy Leadership Discourse. 21 Oct 2011 Value Innovation The cornerstone of Blue Ocean Strategy Instead of focusing on beating 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 (pp. 12) 6

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Creative & Innovative Minds Blue Ocean Strategy Leadership Discourse. 21 Oct 2011 Red Ocean vs Blue Ocean Strategy RED OCEAN STRATEGYBLUE OCEAN STRATEGY Compete in the existing market space Create uncontested market space Beat the competitionMake the competition irrelevant Exploit existing demandCreate and capture new demand Make the value-cost trade-offBreak 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 8

Creative & Innovative Minds Blue Ocean Strategy Leadership Discourse. 21 Oct 2011 The six principles of BOS FORMULATON PRINCIPLES  Reconstruct market boundaries  Focus on the big picture, not the numbers  Reach beyond existing demand  Get the strategic sequence right RISK FACTOR EACH PRINCIPLE ATTENUATES ↓ Search risk ↓ Planning risk ↓ Scale risk ↓ Business model risk EXECUTION PRINCIPLES  Overcome key organizational hurdles  Build execution into strategy RISK FACTOR EACH PRINCIPLE ATTENUATES ↓ Organizational risk ↓ Management risk 9

Creative & Innovative Minds Blue Ocean Strategy Leadership Discourse. 21 Oct 2011 Analytical tools and frameworks ● The strategy canvas ● The four actions framework ● The eliminate-reduce-raise-create grid ● Value curves 10

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Creative & Innovative Minds Blue Ocean Strategy Leadership Discourse. 21 Oct 2011 Eliminate-reduce-raise-create grid: The case of (yellow tail) ELIMINATE  Enological terminology and distinctions  Aging qualities  Above-the-line marketing RAISE  Price vs. budget wines  Retail store involvement REDUCE  Wine complexity  Wine range  Vineyard prestige CREATE  Easy drinking  Ease of selection  Fun and adventure 14

Creative & Innovative Minds Blue Ocean Strategy Leadership Discourse. 21 Oct 2011 Eliminate-reduce-raise-create grid: The case of Cirque du Soleil ELIMINATE  Star performers  Animal show  Aisle concession sales  Multiple show arenas RAISE  Unique venue REDUCE  Fun and humor  Thrill and danger CREATE  Theme  Refined environment  Multiple productions  Artistic music and dance 15

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Creative & Innovative Minds Blue Ocean Strategy Leadership Discourse. 21 Oct 2011 Reconstruct market boundaries ● Look across alternative industries ● Look across strategic groups within industries ● Look across the chain of buyers ● Look across complimentary product and services offerings ● Look across functional or emotional appeal to buyers ● Look across time 17

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Creative & Innovative Minds Blue Ocean Strategy Leadership Discourse. 21 Oct 2011 From head-to-head competition to Blue Ocean creation Head-to-head competitionBlue Ocean Creation IndustryFocus on rivals within the industryLook across alternative industries Strategic groupFocus on competitive position within strategic group Look across strategic groups within industry Buyer groupFocus on better serving the buyer group Redefine the industry buyer group Scope of product or service offering Focus on maximizing the value of product and service offering within the bounds of its industry Look across to complementary product and service offerings Functional- emotional orientation Focus on improving price performance within the functional- emotional orientation of its industry Rethink the functional- emotional orientation of its industry TimeFocus on adapting to external trends as they occur Participates in shaping external trends over time 22

Creative & Innovative Minds Blue Ocean Strategy Leadership Discourse. 21 Oct 2011 FIGURE 4-4 Page 92

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Creative & Innovative Minds Blue Ocean Strategy Leadership Discourse. 21 Oct 2011 To-do-list? ● Develop the canvas strategy of global higher education sector? ● Develop the canvas strategy of higher education sector in Malaysia? ● Develop the canvas strategy in your respective sectors (water, energy, transportation etc)? ● Develop the Four Action Framework for UTM 29