Blue Ocean Strategy Book Review Team 4: Crystal Hill Stephen Lechtenberg Anand McGee Allison Purtell Jason Torres

Strategic Move Correct unit of analysis for explaining the creation of blue oceans and sustained high performance, versus the company or industry Correct unit of analysis for explaining the creation of blue oceans and sustained high performance, versus the company or industry Set of managerial actions and decisions involved in making a major market- created business offering Set of managerial actions and decisions involved in making a major market- created business offering

Red Ocean vs. Blue Ocean Red Oceans – Conventional Approach Focus on beating the competition Focus on beating the competition Compete in existing market space Compete in existing market space Build a defendable position within the existing industry Build a defendable position within the existing industry Use competition as a benchmark Use competition as a benchmark Exploit existing demand Exploit existing demand Choice between differentiation and low cost Choice between differentiation and low cost - Greater value for customers at a higher cost or a reasonable value at a lower cost Blue Oceans – Value Innovation (to capture market) Make competition irrelevant Make competition irrelevant Create a leap in value for buyers and the company Create a leap in value for buyers and the company Create new a market space Create new a market space Pursue both differentiation and low cost Pursue both differentiation and low cost

The Strategy Canvas Captures current state in known market space Captures current state in known market space Fundamentally shift from focus on competitors to alternatives and customers to non customers Fundamentally shift from focus on competitors to alternatives and customers to non customers Enables companies to see the future in the present Enables companies to see the future in the present Tells you if you’re drifting into a red ocean Tells you if you’re drifting into a red ocean –Time to value innovate

A New Value Curve 1.Eliminate Which factors that the industry takes for granted should be eliminated? 4. Create Which factors should be created that the industry has not seen before? 3. Raise Which factors should be raised well above the industry standard? 2. Reduce Which factors should be reduced well below the industry standard? The Four Actions Framework

Eliminate-Reduce-Raise-Create Grid The Case Of Starbucks Eliminate Underperforming Stores Raise Education of coffee with employees Reduce Amount of time employees spend making individual drinks Calories in certain specialty drinks Create More loyalty rewards A “better everyday brew”

Challenge Fundamental Assumptions Find Blue Oceans by looking at the six paths of framework: the six paths of framework: 1.) Look across alternative industries 2.) Look across strategic groups within industries 3.) Look across the chain of buyers 4.) Look across complementary product service offerings 5.) Look across functional of emotional appeal to buyers 6.) Look across time

Think Outside the Box Focus on the big picture instead of numbers. Focus on the big picture instead of numbers. –Potential blue oceans have focus, divergence, and a compelling tagline. Use Pioneer-Migrator-Settler Map Use Pioneer-Migrator-Settler Map –Pioneers- unprecedented value, profitable –Migrators- improved value but not innovative –Settlers- conform to red oceans

Reaching beyond existing demand Looking to non customers Looking to non customers Finding what buyers value Finding what buyers value 3 tiers of non consumers 3 tiers of non consumers –Soon to be customers –Refusing customers –Unexplored customers

Get the right strategic sequence Building a blue ocean through buyer: Building a blue ocean through buyer: –Utility, price, cost and adoption Testing for exceptional utility Testing for exceptional utility Choosing the right strategic price Choosing the right strategic price Target costing Target costing Cost Adoption Cost Adoption

Overcoming Key Organizational Hurdles Managers face four hurdles: Managers face four hurdles: –Cognitive: waking employees up to the need for a strategic shift. –Limited Resources –Motivation –Politics

Tipping Point Leadership in Action Strategy allows you to overcome the four hurdles Strategy allows you to overcome the four hurdles Bill Bratton appointed police chief of New York Bill Bratton appointed police chief of New York Murder, muggings, mafia hits, armed robberies at an all time high, department morale at an all time low. Murder, muggings, mafia hits, armed robberies at an all time high, department morale at an all time low. After two years: After two years: Felony crime fell 39% Felony crime fell 39% Murders 50% Murders 50% Theft 30% Theft 30% Public confidence in NYPD jumped from 37% to 73% Public confidence in NYPD jumped from 37% to 73% It was his 5 th strategic reversal It was his 5 th strategic reversal

Breaking Through the Cognitive Hurdle Ride the “electric sewer” (New York Subway) Ride the “electric sewer” (New York Subway) –Showing the worst reality to superiors and underlings can shift their mindset fast Meet with disgruntled Customers Meet with disgruntled Customers –Boston’s Police District 4 –Determined there was a gap in perceptions between residents and police.

Jump the Resource Hurdle Hot Spots, Cold Spots, and Horse Trading Hot Spots, Cold Spots, and Horse Trading Redistribute Resources to Your Hot Spots Redistribute Resources to Your Hot Spots Redirect Resources from your Cold Spots Redirect Resources from your Cold Spots Engage in Horse Trading Engage in Horse Trading

Jump the Motivational Hurdle kingpins, fishbowl management, and atomization kingpins, fishbowl management, and atomization Zoom in on all Kingpins Zoom in on all Kingpins Place Kingpins in a Fishbowl Place Kingpins in a Fishbowl Atomize to Get the Organization to change itself. Atomize to Get the Organization to change itself.

Knock Over the Political Hurdle Angels, Devils, and Consigliere Angels, Devils, and Consigliere Secure a Consilgiere on your top management team Secure a Consilgiere on your top management team Leverage your angels and silence your devils Leverage your angels and silence your devils Challenge conventional wisdom Challenge conventional wisdom

The Power of Fair Process Imperative to strategy execution Imperative to strategy execution Must reflect attitude and behavior deep within the organization Must reflect attitude and behavior deep within the organization Trepidation Trepidation Key variable in Blue Ocean Strategy Key variable in Blue Ocean Strategy People concerned about the actual process People concerned about the actual process

The 3 E’s of Fair Process Expectation Clarity Expectation Clarity –Standards of Judgement Explanation Explanation –Everyone should understand Engagement Engagement –Encouraging involvement

Why Fair Process Matters People at the front lines care People at the front lines care Intellectual and Emotional Recognition Theory Intellectual and Emotional Recognition Theory Blue Oceans: Blue Oceans: –Intangible capital –Building strategy formulation with execution –Trust and Trust