Blue Ocean Strategy Takeaways How to Create Uncontested Market Space and Make the Competition Irrelevant TEAM 4 Carly Buell Ryan Buell Brian Cote Shana Hartford April Miller Brittany Snethkamp Austin Stewart

Red Ocean: Companies compete for customers Blue Ocean: Company creates a new market Red Ocean Strategy Focus on existing customers Compete in existing market space Beat the competition Exploit existing demand Make the value-cost trade-off Align the whole system of a firm’s activities with the strategic choice of differentiation or low cost Blue Ocean Strategy Focus on non-customers Create uncontested market space Make the competition irrelevant Create and capture new demand Break the value-cost trade-off Align the whole system of a firm’s activities in pursuit of differentiation and low cost

Value Innovation GOAL Decrease Costs Increase value to customer

Analytical Tools and Frameworks Strategy Canvas Four Actions Framework Eliminate-Reduce-Raise-Create Grid 3 Characteristics of Blue Ocean Strategy 1.Focus 2.Divergence 3.Compelling Tag line

The Strategy Canvas 1. Captures the current state of play in the known market space 2. It propels you to action by reorienting your focus from competitors to alternatives and from customers to noncustomers of the industry

The Four Actions Framework Reduce Which factors should be reduced well below the industry’s standard? Create Which factors should be created that the industry had never offered? Raise Which factors should be raised well above the industry’s standard? Eliminate Which of the factors that the industry takes for granted should be eliminated? A New Value Curve

The Four Actions Framework & The Eliminate-Reduce-Raise-Create Grid Eliminate Forces you to consider eliminating factors that companies in your industry have long competed on. Raise Pushes you to uncover and eliminate the compromises your industry forces customers to make. Reduce Forces you to determine whether products or services have been overdesigned in the race to match and beat the competition. Create Helps you discover entirely new sources of value for buyers, to create new demand and shift the strategic pricing of the industry.

Reconstruct Market Boundaries 6 Paths 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 and Service Offerings 5.Look Across Functional or Emotional Appeal to Buyers 6. Look Across Time

4 Steps of Visualizing Strategy 1.Visual Awakening: See where you are 2.Visual Exploration: See how others see you 3.Visual Strategy Fair: See where you could be 4.Visual Communication: Draw a map for everyone (Pioneer-Migrator-Settler [PMS] map)

Three Tiers of Noncustomers 3 rd Tier 2 nd Tier 1 st Tier Your Market 1 st Tier: Soon to be Noncustomers 2 nd Tier: Refusing noncustomers 3 rd Tier: Unexplored noncustomers

Sequence of Blue Ocean Strategy Buyer Utility Is there exceptional buyer utility in your business idea? No- Rethink Yes Price Is your price easily accessible to the mass of buyers? A Commercially Viable Blue Ocean Idea 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 up front?

Buyer Utility Map PurchaseDeliveryUseSupplementsMaintenanceDisposal Customer Productivity Simplicity Convenience Risk Fun and Image Environmental Friendliness Six Stages of the Buyer Experience Cycle Six Utility Levers

COGNITIVE HURDLE an organization weeded to the status quo POLITICAL HURDLE opposition from powerful vested interest MOTIVATIONAL HURDLE unmotivated staff RESOURCE HURDLE limited resources 4 Organizational Hurdles to Strategy Execution

Tipping Point vs. Conventional Wisdom Conventional Wisdom - Focus on the mass of employees for change Tipping point - Focus on the extremes for fast shift at low cost

Fair Process Trust and Commitment Voluntary Cooperation Exceeds Expectations A Visual of How Fair Process Affects the Workplace Strategy Formulation Process Attitudes Behavior Strategy Execution

The Execution Consequences of the Presence and Absence of Fair Process in Strategy Making Fair Process Intellectual and Emotional Recognition Trust and Commitment Voluntary Cooperation in Strategy Execution Violation of Fair Process Intellectual and Emotional Imagination Distrust and Resentment Refusal to Execute Strategy

6 Principles of Blue Ocean Strategy Formulation Principles 1. Reconstruct market boundaries 2. Focus on the big picture, not the numbers 3. Reach beyond existing demand 4. Get the Strategic sequence right Execution Principles 5. Overcome key organizational hurdles 6. Build execution into Strategy Risk Factor each principle attenuates – Decrease search risk – Decrease planning risk – Decrease scale risk – Decrease business model risk Risk Factor each principle attenuates – Decrease organizational risk – Decrease management risk