1. Outcomes of BOS
The outcome will be sustainable competitive advantage through uncontested market space.
Your blue ocean strategy will be characterized by a focus on:
- Keeping current customers and attracting non or underserved customers
-Creating mass appeal opportunities
- Defining hard to copy opportunities
- Achieving high value and low costs

2. What is Strategy? Six Assumptions
Define the industry similarly and focus on being the best within it.
Strive to stand out in a selected, generally accepted industry group.
Focus on same buyer group and influencers.
Define scope of products and services offered by their industry similarly.
Accept their industry’s functional and emotional orientation.
Focus on the same point in time; often on current competitive threats.
We had agreed in our meeting to add a definition of the word tactic. Also note: M. Baldrige quotes are in participant materials.
123 cont’d

3. What is Strategy? Critical Drivers of Success
Innovation and sustainable differentiation
Execution
Internal evolution for long term impact
We had agreed in our meeting to add a definition of the word tactic. Also note: M. Baldrige quotes are in participant materials.

4. Strategy Comparison Red Ocean Strategies Blue Ocean Strategies
Work the fixed/defined market
Reconstruct / redefine market boundaries
Beat the competition
Make the competition irrelevant
Stay within existing industry order
Create a leap in value for buyers
Compete for same customers
Open new and uncontested markets
Make value/cost tradeoffs
Break value / cost tradeoffs
Choose between differentiation and low cost to buyers
Aggressively pursue differentiation and low cost
Increase features / increase costs to produce and deliver product or service
Increase value and decrease costs
There should be significant differences in strategies if you plan to live in the Red Ocean vs. the Blue Ocean.
Ex of red ocean strategy: Maintain competitive leadership through product enhancements.
Ex of blue ocean strategy: Research the customer experience and identify non-customers and their requirements/needs.
132

5. Blue Ocean Introduction
Head to Head Competition Blue Ocean Creation
Industry
Focus on rivals within industry
Looks across alternative industries
Strategic
Group
Focus on competitive position
within strategic group
Looks across strategic groups within industry
Buyer Group
Focus on better serving the
buyer group
Redefines the industry buyer group
Scope of
product or
service offered
Focus on maximizing the value of product/service offerings within the industry
Looks across complementary product and service offerings
Functional-
Emotional
Orientation
Focus on improving price performance within functional emotional orientation of industry
Rethinks the functional emotional orientation of its industry
Time
Focus on adapting to external trends as they occur
Participates in shaping external trends over time
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6. SMP Map Introduction
Purpose: Sustainability analysis to test our strategic potential.
Business products or services can be divided into 3 categories:
Pioneers –These are the “bleeding edge” products, that open up new and uncontested markets. (Value Innovation) The only ones with a mass following.
Migrators - The best in the crowd. Settlers that have been improved. (Value Improvement)
Settlers - Me-too products and services. Commodity market. (Value Imitator)
Q: Why is this tool an example of strategic thinking?
A: Because it is a futuring tool that can tell you a great deal about your potential for sustainability if status quo is maintained. Of equal importance, it helps to drive home the criticality of “value innovation”. Value up! Costs down! 
- W. Chan Kim & Renee Mauborgne, Blue Ocean Strategy
133

7. Testing Strategic Potential –SMP Map
Company A
Company B
Pioneers ?
Pioneers
Migrators
Migrators
Settlers
Settlers
Do they value innovate?
Does your organization believe that innovation builds margins or that innovation has a lengthy ROI cycle?
Is your innovation tied to sound research?
Is innovation a ‘process’ in your company? Is it a stable, repeatable process?
Note: The blue and red combinations can be used.
The PMS is the tool used to: 1) succinctly illustrate a company’s current industry landscape, and identify where its portfolio stands in relation to the competition, and; 2) see beyond today's performance and identify the growth potential of current and future businesses.
134

8. Strategy Canvas
“The strategy canvas is both a diagnostic and an action framework for building a compelling blue ocean strategy. It serves two purposes. First, 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.”
- W. Chan Kim & Renee Mauborgne, Blue Ocean Strategy
136

9. Exercise-As Is Strategy Canvas
1. Select one of your businesses or products/services. Indentify the dominant customer group your industry focuses on. Label this information on your Strategy Canvas.
Identify the key competitive factors your industry competes on/invests in to capture this dominant customer group. No less than 5, no more than Price is always included in your key competitive factors.
Rate your relative offering level of each factor on the horizontal axis. A relatively low offering level should be plotted lower, high offerings should be higher. Price is always an absolute figure; a high price is plotted high, etc.
Now connect the dots to create your “As Is” canvas.
Repeat this process for your “best competitor”.
Analyze the results using the questions provided.
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10. As Is Strategy Canvas Example
Barnum & Bailey/Ringling Brothers Circus
High
Low
The horizontal axis captures the range of factors the industry competes on and invests in.
The vertical axis rates the relative offering level of each factor on the horizontal axis. A relatively low offering level should be plotted lower, high offerings should be higher. Price is always an absolute figure; a high price is plotted high, etc.
- W. Chan Kim & Renee Mauborgne, Blue Ocean Strategy
137

11. As Is Strategy Canvas Example
The US Wine Industry hi
Premium Wines
offering level
Budget Wines
Yellow Tail’s beginning analysis. They could not plot their “As Is” condition because they had not entered the seemingly glutted market. Their targeted non-customer group ended up to be beer drinkers.
Note: First say: I’m going to use this example because its not a part of your industry, yet everyone can relate to this product. Also, using this example won’t bias you for creating your own in a little while.
I would introduce them to a billboard company that operates in the south called EDBI (Electronic/Digital Billboards, Inc). I create the strategy canvas with them on a flipchart. The factors are: Location, Visibility of Billboard, Traffic, Types of Ads, Size, Price to Install, Creation Costs, Environmental Impact.
Plot the red & Blue ocean for the billboard industry on a scale of 1 (lo) to 10 (hi)
Red Blue
Location – or 9
Visibility or 10
Traffic – 7 7
Types of Ads – 6 9 or 10
Size of Ad – 6 ??
You fill out the rest with the class lo
Use of enological
terminology and
distinctions in wine
communication
Above-the-
line
marketing
Aging
quality
Vineyard
prestige
and legacy
Price
Wine
complexity
Wine
range
- W. Chan Kim & Renee Mauborgne, Blue Ocean Strategy
138

12. Exercise
1. Using your “As Is” Strategy Canvas, create a draft “To Be”.
2. Do this by applying the “four” blue ocean principles – Reduce, Eliminate, Enhance, Create
3. Create a blue ocean graph.
4. What does this tell you about what your strategies should be?
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13. Blue Ocean Strategy-ERRC Grid
Reduce
Which factors should
be reduced below
industry standards?
Create
Which factors should
be created that the
industry has never
created?
Eliminate
Which factors should
be eliminated that the
industry takes for
granted?
A New
Value
Curve
Which one do you think is the hardest to analyze? Usually it is the “Eliminate”, people tell me there is nothing to eliminate. We know we have opportunities to eliminate things like: the need to call the Help Desk or Customer Service. If we need to do those things, this means that something is overly complex or not user friendly.
Raise
Which factors should
be raised above
industry standards?
144
- W. Chan Kim & Renee Mauborgne, Blue Ocean Strategy

14. “To Be” Strategy Canvas
Drawing your To Be Canvas
Analyze each factor in your As is Strategy Canvas, using the Eliminate, Reduce, Raise, Create Grid.
If you are using your As Is Strategy Canvas with non-customer groups, use the ERRC Grid for each distinct non-customer group.
Plot your To Be Strategy Canvas using the ERRC Grid.
Does the strategy canvas meet the three targets of a compelling strategy?
A. Is it divergent
B. It is focused?
C. Is there a tagline that speaks both internally and externally.
For First American: There is an exercise after the next couple of samples for them to do. You can also follow the procedure above and do a “blue ocean” graph for EDBI.
For Experienced Leader:
Unfortunately, this is not an exercise we can do in a one day class. Why? You have completed Steps I-III so you don’t have sufficient data.
My favorite taglines:
“It’s a good thing”
“Sense and sensibility”

15. “To Be” Strategy Canvas Example
Cirque du Soleil’s Strategy Canvas
High
Low
- W. Chan Kim & Renee Mauborgne, Blue Ocean Strategy

16. Example Strategy Canvas of [yellow tail] [yellow tail]hi
Premium Wines
[yellow tail]
Budget Wines
offering level
Note: refresh yourself from the book on this one, but Yellow Tail targeted beer drinkers as their non-customer group. lo
Use of enological
terminology
and distinctions
in wine
communication
Above-the-
line
marketing
Price
Aging
quality
Vineyard
prestige
and legacy
Wine
complexity
Wine
range
Easy
drinking
Ease of
selection
Fun &
Adventure
- W. Chan Kim & Renee Mauborgne, Blue Ocean Strategy

17. Four Hurdles to Successful Execution
Cognitive: Wedded to the status quo.
“This is how we’ve always done it here.”
Political: Opposition from powerful vested interests.
“NIMBY”/ “Not at our expense.”
Complacency.
“If it ain’t broke….”
Resource/Priorities:
“Five signatures to spend $50 on a customer!”

18. The Role of the Leader in Strategy
Requires self and others to think about factors, activities, processes and/or services that are well past their prime
Requires self and others to think about how customer values have changed
Requires self and others to think about non-customers
Provides insight into how the buyer experience works
Requires self and others to explore ways to create new demand by thinking outside the status quo
Requires self and others to uncover and eliminate some of the compromises we otherwise willingly make