Blue Ocean Strategy 07
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Transcript of Blue Ocean Strategy 07
Blue Ocean StrategyBlue Ocean Strategy
Business Creativity & Business Creativity & InnovationInnovation
Creating uncontested market Creating uncontested market spacespace
and make the competition and make the competition irrelevantirrelevant
W. Chan Kim
Renée Mauborgne
Group Members
• Abhijna E Rao• Apurva Gupta• Pallavi Shukla• Pallavi Sinha• Sai Shyam Somala
Two worlds …Two worlds …
Red OceanCompete in crowded markets
Blue OceanCreate and capture new
market space
Blue Oceans• How many of today’s industries were
unknown 100 years ago?
4 Actions Framework : Key to Value CurveReduce
What factors should be reduced well below the industry standard?
Raise
What factors should be raised well above the industry standard?
The key to discovering a new value curve lies in answering four basic questions
Creating new markets:A new value curve
Creating new markets:A new value curve
Eliminate
What factors that the industry has taken for granted should be eliminated?
Create/Add
What factors that the industry has never offered should be created or added?
Yellow tail wine
Wine production in U.S – • The top 8 companies produce more than 75
percent.• 1600 other wineries produce the remaining 25
percent
Four Actions Framework
Value Innovation
Costs
Buyer Value
EliminateEnological terminology and distinctions
Aging qualities
Above-the-line marketing
RaisePrice versus budget wines
Retail store involvement
ReduceWine complexity
Wine range
Vineyard prestige
CreateEasy drinking
Ease of selection
Fun and adventure
RED RED vs vs BLUEBLUE
Red Ocean Strategy Blue Ocean Strategy
Compete in existing market space.
Create uncontested market space.
Beat the competition. Make the competition irrelevant.
Exploit existing demand. Create and capture new demand.
Make the value-cost trade-off. Break the value-cost trade-off.
Align the whole system of a strategic firm's activities with its choice of differentiation or low cost.
Align the whole system of a firm's activities in pursuit of differentiation and low cost.
VALUE INNOVATION
Six path framework
Path 1:Look Across Alternative Industries
• Net jet airways: offering business class comfort at economic class fare.
Path 2:Look across strategic groups within industries
• Toyota’s Lexus: higher end luxury at lower end prices.
Path 3:Look across chain of buyers.Path 4 : Look across complementary products and
service offerings.• Theatres with baby sitting servicesPath 5 : Look across functional or emotional appeal to
buyersPath 6 : Look across time• Mountain Asian Crisis
Four Steps of Visualizing1. 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
BOS Logic: Reconstruct market boundaries
IndustryFocuses on rivals within its industry
Strategic GroupFocuses on competitive position within strategic group
Buyer GroupFocuses on better serving the buyer group
Scope of Product and Service
Offerings
Focuses on maximizing the value of product and service offerings within the bounds of its industry
Functional-emotional Orientation of an
Industry
Focuses on improving price-performance with the functional-emotional orientation of this industry
Time/TrendsFocuses on adapting to external
trends as they occur
Looks across alternative industries
Looks across strategic groups within its industry
Redefines the buyer group of the industry
Looks across to complementary product and service offerings that go beyond the bounds of its industry
Rethinks the functional-emotional orientation of its industry
Participation in shaping external trends over time
Boundaries of Competition
Head-to-HeadCompetition
Creating New Market Space
Reach Beyond Existing DemandTwo Conventional Strategy Practices:•Focus on existing Customers•Drive for finer segmentation to accommodate buyer differences
Three Tiers of Non Customers
1st
2nd
3rd
There is a universe of There is a universe of noncustomers which can be turned noncustomers which can be turned into customers to offer a big blue into customers to offer a big blue ocean market.ocean market.
1st tier: “Soon-to-be” 1st tier: “Soon-to-be” noncustomers who are on the noncustomers who are on the edge of your marketedge of your market
2nd tier: “Refusing” 2nd tier: “Refusing” noncustomers who consciously noncustomers who consciously choose against your marketchoose against your market
3rd tier: “Unexplored” 3rd tier: “Unexplored” noncustomers who are in noncustomers who are in markets distant from yoursmarkets distant from yours
Sequence of Blue Ocean Strategy
Testing Exceptional Utility
Is Your offering priced to attract target buyers so that they are compelling to Pay??
• Strategic Pricing
Target Costing• Streamline operations and introduce cost
innovations• Partnering• Change pricing model of the industry. Eg: Blockbuster
Profit Model of Blue Ocean Strategy
Adoption
• Employees• Business Partners• General Public
Overcome Key Organizational Hurdle
To deal with these four hurdles. Two approaches can be taken into consideration: Conventional wisdom Tipping point leadership
These hurdles can be tackled by tipping point leadership in following ways
Cognitive hurdle: Ride the “ electric sewer” meet with the disgruntled customers.
Resource hurdle: hot spots, cold spots, and horse trading.
Motivational hurdle: kingpins, fishbowl management, and atomization.
Political :leveraging angels, silencing devils, and getting a consigliore on their top management team.
Example of Bill Bratton and NYPD (New York police Department)
BUILDING EXECUTION INTO STRATEGY
• 6th Principle of Blue Ocean Strategy.• “To build people’s trust and commitment”• Minimizes risk of:1.Distrust2.Non-cooperation3.Sabotage• Example: Lubber
FAIR PROCESS
• What is fair process?• 3E principles of fair process1.Engagement2.Explanation3.Clarity of Expectation• Ex: Elco
• “Intellectual and emotional recognition”
SUSTAINABILTY OF BLUE OCEAN STRATEGY
• Barriers to imitation:1. Ridicule2. Brand image conflict3. Natural monopoly4. Patents or legal permits5. High volume generation6. Network externalities7. Political aspects8. Brand buzz and loyalty
CONCLUSION• Renewal of Blue Ocean Strategy• When to value-innovate again?• Imitation is unavoidable• Monitor value curves on strategy
canvas• Need for continuous value
innovation: 1. Ex1: The Body Shop2. Ex2: Yellow tail
Thank you….