1. Blue Oceans and Other BIG Strategic Ideas

2. What You Will Learn
Become familiar with concepts behind Blue Ocean Strategy
Learn what MPI has done to apply Blue Ocean concepts to your association
Learn about net creation and open innovation
Formulate ideas on how you might be able to apply these ideas to your own work

3. Red Oceans represent all industries in existence today.
They have defined rules, competitors, and market boundaries.
Key words might include competition, price wars, market share, commoditization, benchmarking, strategic positioning, value add.

4. Blue Oceans represent all industries NOT in existence today.
This is undefined market space, otherwise known as OPPORTUNITY.
Key words might be value innovation, focus, differentiation, creation of demand, new marketplace

5. For example, Cirque du Soleil or [yellowtail]
Most blue oceans are created from red ocean companies expanding industry boundaries.
For example, Cirque du Soleil or [yellowtail]
(more on this in a bit)

6. The phrase “Blue oceans” is new, but the concept is not
The phrase “Blue oceans” is new, but the concept is not. Think of what industries existed in 1900.
Take 3 minutes…
At your table, brainstorm a list of industries that have emerged since then.

7. All of these industries created
Some of them might be…
automotives, aviation, health care, plastics, DVDs, computers, personal entertainment devices (iPods, for example).
All of these industries created
new market space.

9. To win in the future, companies must stop competing with each other.
The premise is simple:
To win in the future, companies must stop competing with each other.
The only way to beat the competition is to stop trying to beat the competition.

10. The business environment in which most business strategy and management has been based on is changing, evolving or disappearing.
Some of this change is due to technology. Other reasons might be culture, globalization, speed of new information, or the role of demographics in the workplace.

11. Value innovation is the “new” strategic logic behind Blue Ocean Strategy.
Instead of focussing on beating the competition, you focus on making it irrelevant by creating a leap in value for buyers and creating uncontested market space.

12. Value innovation only occurs when organizations have aligned innovation with utility, price and costs.
The market must be ready to accept the product, meaning that timing is key.
The focus is on both differentiation and low cost to provide value to both customers and the organization.

13. Graph of Value Innovation

14. Case study: Cirque du Soleil
Other circuses focused on:
Benchmarking the competition
High-profile “stars”, which increased costs but who were largely unknown to the general public
Traditional venue
Traditional audiences

15. Case study: Cirque du Soleil
Cirque du Soleil focused on:
Creation of a hybrid between the circus and the theatre
Retention of the symbolic and glamorous aspects of circus, such as the tent and the more breathtaking aspects, such as acrobats
Incorporation of more comfort, sophistication, elegance and theatrical plots; this brought not only the richness of theatre but a whole new demographic of customers
It looked across market boundaries and created new ones.

16. The Strategy Canvas
Captures the current state of play in the market by detailing the factors players compete on in product, service and delivery
For example, the wine industry competes on price per bottle, refined image in packaging, marketing strategies, aging quality of wine, prestige of vineyard, complexity of taste and diverse product range
Have a bottle of regular wine and a bottle of [yellowtail] to pass around.

18. The Strategy Canvas
Each factor is plotted on the canvas, with a high score reflecting the level of investment a specific company makes in that factor (for example a high score on price means that the price per bottle is high)
When you plot all US wineries, they score remarkably similarly

19. Example of a Strategy Canvas
Blue Ocean Space

20. Competitive Advantage Example
SunSpring’s value proposition is increased efficiency, flexibility, mobility, reliability and operation simplicity vis-à-vis its competitors
PVRO Competitors
SunSpring
No Battery
Reliability
Efficiency" on the x-axis, which encompasses actual energy efficiency (liters produced per energy input) but also that this leads to reduced cost by reducing the required # of solar panels and also increases mobility because you dont have to pack up so many.
On the Y-axis, he had "reliability." Mainly capturing the lack of battery.
W/ Battery
Low
High
Efficiency
Tap the sun.

21. The Strategy Canvas
To differentiate yourself in the market place, you must focus on alternatives and non-customers to re-define the marketplace
For example, Casella Wines looked at the strategy canvas and redefined the question: How do you make a fun and non traditional wine that is easy for everyone to drink?

22. Case Study: [yellowtail]
Casella saw that most US consumers preferred beer, spirits and pre-packaged cocktails to wine
Consumers saw wine as a turn-off due to
It was pretentious
The taste was too complex
It could be intimidating

23. Example: A highly competitive Industry
The American Wine Industry

24. What the industry offers
Premium Wines
Budget Wines
Polarised Strategic Groups
Massive Choice

25. American Wine Industry
3rd largest in world: worth $20 billion
Californian makes 66% - the rest is from Italy, France, Spain, Chile, Argentina, Australia
Exploding number of new wines – new vineyards in Oregon, Washington, New York
Customer base stagnant
31st in the world in per capita consumption!

26. American Wine Industry
3rd largest in world: worth $20 billion
Californian makes 66% - the rest is from Italy, France, Spain, Chile, Argentina, Australia
Exploding number of new wines – new vineyards in Oregon, Washington, New York
Customer base stagnant
31st in the world in per capita consumption!

27. American Wine Industry
Top 8 producers had 75% of the market; had the remaining 25%
$ millions spent in marketing - Titanic battles – intense competition
Sever price pressure
The dominant growth strategy was towards premium wines – more complexity, better image, more prestigious vineyards, number of medals won at wine festivals.

28. What wine customers said …
“It is too confusing and complex”
Wine descriptions and terminology
The shopping experience
The lack of clear guidance on what to buy and drink
Thus, massively intimidating for ‘noncustomers’ (the large majority of the US population who were not wine drinkers)

29. What are people looking for in a wine?

30. Segmentation of Market and Brands
Low Involvement
High Involvement
Easy Going
Enjoyers
Aspirationals
Appreciators
Connoisseurs
Glass with friends
Least care choosing a wine
Not wine preferrers
Price is a strong influencer
Everyday enjoyment
To relax/unwind
Stick with limited list of known brands
Choose in-store
Not interested in wine language
Influenced by major brand advertising
Image important
Wine preferrers (sic)
Varietal knowledge
Interested in some wine language
Enjoy trying new wines
Visit wineries / read wine articles
Want to discover wine
Knowledge of wine regions
Frequently buy >$10 wines
Join wine clubs
Don’t stick to known brands
Ideal wine is complex & interesting
Sophisticated drinker
Discerning wine tastes
Don’t decide in store
Have a cellar
Less influenced by specials/ promotions
Actively pursue wine knowledge
Brand:
Lindemans
Rosemount Estate
Wolf Blass
Penfolds
Demographic:
M/F: 50/50 Age: 35-49
M/F: 30/70; Age: 30-40
M/F: 70/30; Age: 35-50
Age: 40+

31. Strategy Canvas High Low
The strategy canvas is both a diagnostic and an action framework for building a compelling blue ocean strategy. It captures the current state of play in the known market space. This 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. The horizontal axis captures the range of factors the industry competes on an invests in. The vertical axis captures the offering level that buyers receive across all these key competing factors. The value curve then provides a graphic depiction of a company’s relative performance across its industry’s factors of competition.
High
Premium Wines
Budget Wines
Low
Above-the-line marketing
Vineyard prestige and legacy
Wine range
Price
Use of enological terminology
Aging quality
Wine complexity

32. Four Steps of Visualizing
1. Visual Awakening
2. Visual Exploration
3. Visual Strategy Fair
4. Visual Communication
Compare your business with your competitors’ by drawing your “as is” canvas
See where your strategy needs to change
Go into the field to explore the six paths to creating blue oceans
Observe the distinctive advantages of alternative products and services
See which factors you should eliminate, create or change
Draw your “to be” canvas based on insights from field observations
Get feedback on alternative strategy canvases from customers, competitors’ customers, and non- customers
Use feedback to build the best “to be” future strategy
Distribute your before-and-after strategic profiles on one page for easy comparison
Support only those projects and operational moves that allow your company to close gaps and actualize the new strategy 32

33. Four Actions to create a Blue Ocean
What factors should be raised well beyond the industry standard?
Raise
What factors should be eliminated that the industry has taken for granted?
Eliminate
What factors should be created that the industry has never offered?
Create
What factors should be reduced well below the industry standard?
Reduce

34. ERRC Grid yellow tail

35. To Be Canvas
Eliminate
Reduce
Raise
Create

36. Yellow Tail Only 2 types initially – Chardonnay and Shiraz
Fruity, soft on palette, sweet-ish – great for those who had not drunk wine before
Same bottle for red and white – low logistics costs
Simple vibrant packaging – lower case letters/kangaroo
Un-intimidating
They were selling “The essence of a great land … Australia” – ie they were not selling the wine
Australian clothing for the retail staff – they enthusiastically promoted a wine they could understand.

37. Value Innovation of [yellow tail]
Utility proposition
(customers, distributors and retailers)
Creating of a social drink that is accessible to anyone
Easy drinking, ease of selection, sense of fun and adventure
Limit number of SKUs
Price to move at volume
Price proposition
Targeted at the mass of customers
Priced against the alternative (6-pack)
Cost structure
Elimination of working capital tied up in aging wines
Fast product turnover

38. Results
No 1 imported wine (outsells France and Italy)
Fastest growing imported wine in the history of the USA industry
New consumers of wine
Jug drinkers trade up
Premium wine drinkers trade down
Industry criticizes them mercilessly at first
Now wine press blurb gives it a “best buy” for value; winning wine awards.

39. Example: Cirque du Soleil
Each show, like a theater production, had its own unique theme and storyline This allowed customers to return to the show more frequently They also did away with the traditional high- priced concessions and vendors thereby cutting costs 39

40. Example: Cirque du Soleil
Cirque du Soleil effectively combined the best of both the circus and the theater while eliminating everything else This allowed them to achieve both differentiation and low cost 40

41. Eliminate-Reduce-Raise-Create
Star Performers
Animal shows
Aisle concession sales
Multiple show arenas
Raise
Unique venues
Reduce
Fun and humor
Thrill and danger
Create
Theme
Refined environment
Multiple productions
Artistic music and dance 41

42. The Strategy Canvas of Cirque du Soleil
Eliminate
Reduce
Raise
Create hi
Ringling Brothers
Theme
Refined Viewing Environment
Multiple
Productions
Artistic Music
& Dance
Cirque du Soleil
offering level
Smaller Regional Circus lo
Price
Animal Shows
Multiple Show
Arenas
Thrills & Danger
Star Performers
Aisle Concessions
Fun & Humor
Unique Venue
© Kim & Mauborgne 2006

43. Four Actions: Eliminate/Reduce/Raise/Create
Which of the factors that the industry takes for granted should be eliminated?
Which should be reduced?
Which should be raised well above standard?
Which factors should be created that have not existed before?

44. 3 Characteristics of a Good Strategy
It is focused; it is not diffused across all potential aspects of the market
The shape of the value curve diverges from any potential competitors
It has a compelling tagline

45. Your Strategy Canvas
At your table, choose an industry one (or more) of you belong to.
What industry are you in?
What factors does it traditionally compete on? (i.e. price, amenities, etc.)
Are there any factors that set you apart?
Are there any factors that do not add any value and could be dropped?
What could be created to add value?