1. Reconstruct Market Boundaries

2. Reconstructing Market Boundaries
The first principle of blue ocean strategy is to reconstruct market boundaries to break from the competition and create blue oceans.

3. Chapter Goals Are there systematic patterns?
Are these patterns applicable across all types of industry sectors?
Six Paths of remaking market boundaries

4. Red Ocean Strategy
Define industry similarly and focus on being the best within it
Generally accept strategic groups, and strive to stand out in the their group
Focus on the same buyer group
Define the scope of the products and services offered by their industry similarly
Accept their industry’s functional or emotional orientation
Focus on the same point in time—and often on current competitive threats—in formulating strategy

5. Six Paths Path 1: Look Across Alternative Industries
Path 2: Look Across Strategic Groups
Path 3: Look Across the Chain of Buyers
Path 4: Look Across Complimentary Product and Service Offerings
Path 5: Look Across Functional or Emotional Appeal to Buyers
Path 6: Look Across Time

6. Path 1 Look Across Alternative Industries Substitutes Alternatives
Example: A night out!

7. NetJets
Successful company using Fractional Jet Ownership as its blue ocean strategy
For only $375,000 (plus pilot, maintenance, and other monthly costs), a corporation can own one sixteenth share of a $6 million aircraft
Point to point flights
Alternative Charters
Favorite foods and drinks

8. NetJets Commercial Airlines Corporate Jets Low Capital Cost
High Travel Time
Crowded airports
D.C. to Sacramento
10.5 hour flight
High Capital Cost
No layovers
Small regional airports
D.C. to Sacramento
5.2 hour flight

9. NetJets’ Position IndustryB: Private Corporate Jets
IndusrtyA: Traditional Airlines
IndustryB: Private Corporate Jets
NETJETS

10. NTT DoCoMo
Internet
Cellphones I M O D E

11. What is I-Mode? Cell phone with Killer Apps
Goal: To make an affordable I-phone!!!

12. Path 2: Look Across Strategic Groups Within Industries
Blue Ocean Strategy is diversified through companies and their industrial make up
They market themselves towards foreseeable customers of their products or services

13. Example Businesses
Curves is a women’s fitness business that has flourished.
They target the women who have the thought of staying healthy yet aren’t the highest motivated.
Located to be easily visited
No men around
Machines in positions to motivate socializing
Machines suite women’s preferances
“full range aerobic and strength training machines, juice bar, instructors, locker room (shower, sauna)”

14. Examples Ralph “high fashion with no fashion” luxury
Toyota’s Lexus-high end Mercedes, BMW, and Jaguar at a price closer to the lower-end Cadillac and Lincoln
Sony with the Sony Walkman-appealed to people working out and commuters
Champion Enterprises- prefabricated houses that were cheap and allowed for the lower income to participate in living- appealed to wide variety

15. Best Buy
They marketed themselves as a large electronic business with great customer service
They labeled themselves with the “Geek Squad”
Able to help out customers with anything electronic to installing electronics in vehicles

16. Path 3: Look Across the Chain of Buyers
Purchasers of a product can be different from users and influencers
Groups can overlap, have different definitions of value
Corporate user vs. consumer user

17. Path 3: Look Across the Chain of Buyers
Example: Novo Nordisk, Danish insulin provider
Originally focused on key influencers – doctors
Started to focus on patients and their comfort
NovoPen, NovoLet, Innovo
Think in terms of users rather than influencers

18. Path 3: Look Across the Chain of Buyers
Bloomberg in the online financial industry
Previously dominated by Reuters and Telerate
Focused on purchasers – IT managers, who valued their standardized programs that made their lives easier
Bloomberg focused on the users, traders and analysts
Easy terminals and keyboards, two panel monitors, built in analytic capability
Added ways for analysts to purchase items to enhance their personal lives

19. Path 4: Look Across Complementary Product and Service Offerings
Few services are used in a vacuum. In most cases, other products and services affect their value
Movie theaters
Ease and cost of getting a babysitter and parking the car affect the perceived value of going to the movies
Think about what happens before, during, and after your product is used

20. Path 4: Look Across Complementary Product and Service Offerings
NABI, a Hungarian bus company
The industry had low quality buses for low cost
The low quality affects the bus needing more work done, thus spending more money
Created a bus build from fiberglass, killed 5 birds with one stone
Faster body repairs, cut fuel costs, fewer axels and lower powered engines, lower manufacturing costs, more space inside the bus
Value curve
cost more initially, but worth it. Revamped bus industry

21. Path 4: Look Across Complementary Product and Service Offerings
Philips Electric in the British teakettle industry
Lime scale found in tap water after boiling was a pain to remove from the teakettle
Philips created a mouth filter on the teakettle to capture lime scale as the water is poured
Kick started on a strong growth trajectory of British people all replacing their teakettles with new filtered teakettles

22. Path 4: Look Across Complementary Product and Service Offerings
Borders and Barnes & Noble
Don’t just sell books, sell the pleasure of reading
Lounges, knowledgeable staff, coffee bars
Celebrates reading, learning, intellectual exploration

23. Path 5: Look across functional or emotional appeal to buyers
Competition in an industry tends to converge not only on an accepted notion of the scope of the products but also on one of two possible bases of appeal.
Companies compete on calculations of utility or largely on feelings.

24. Competing on what you know!
Most prestigious companies compete on what they did in the past.
Behavior affects buyer’s expectations
Market research rarely reveals new insights into what attracts customers.

25. Emotional vs. Functional
Functionally industries in the challenge to change focus on finding new market space.
Infuse commodity products.
Emotionally orientated industries offer many extras that add price without enhancing functionally.
Relationships improve business.

26. Transitioning into functional
Companies over time still have the emotional appeal but are transitioning into more of a functional approach.
If your company competes on functionality, what elements can be incorporated so you still show emotion?

27. Path 6: Look Across Time
External trends affect all businesses over time
Ex. Internet and going green
Which direction will a technology evolve?
How it will be adopted
Whether it will become scalable
How will the trend change value to customers?

28. Accessing Trends Across Time
To form the basis of Blue Ocean Strategy…..
Must be decisive to your business
Must be irreversible
Must have clear trajectory
Ex: discontinuing technology, rise of new lifestyle, change in environment (regulatory or social)

29. The Euro Has been replacing Europe’s multiple currencies
Blue Oceans can continue to be created as the European Union keeps enlarging

30. Apple 1990’s illegal music downloading
Napster, Kazaa, LimeWire
By 2003, more than 2 billion illegal music files downloaded every month
No more desire to purchase CDs…need for digital music
2003 Apple launched iTunes

31. iTunes Legal, easily usable, flexible song downloads
Cheaper than purchasing a CD
Sound quality and excellent browsing and searching functions
Wide range of song options available, unlike when searching for illegal downloads
Protected recording companies by having copyright protection

32. Cisco Systems Growing demand for high-speed data exchange
Create breakthrough value for customers
Fast data exchanges and seamless networking environment
Value innovation and technology

33. Blue Oceans using Path 6 CNN HBO How will trends impact your industry?
24-hour global news network
Rising globalization
HBO
Sex and the City
Trend of more urban, successful women having trouble finding love and marrying later in life
How will trends impact your industry?
How can you open up unprecedented customer utility?

34. Six-Path Framework

35. Conceiving New Market Space
Recording market realities in a new way:
Reconstructing existing market elements across industry and market boundaries, leading them to free themselves from head-to-head competition in the red ocean
Now reframe strategy planning process to focus on the big picture and apply these paths in forming your blue ocean strategy!

36. Questions???