Blue Ocean StrategyBook Review

Daisy, Sara, Cher, Sarah, Sean

Ch. 1 Creating Blue OceansRed Oceans Blue Oceans

Compete in existing market space.

Create uncontested market space.

Beat the competition. Make the competition irrelevant.

Exploit the existing demand. Create and capture new demand.

Make the value-cost trade-off. Break the value-cost trade-off.

Strategic choice of differentiation or low cost.

Pursuit of differentiation and low cost.

Value Innovation: Cornerstone of BOS• Approach to strategy separates the winners

from the losers. • Creators do not use the competition as a

benchmark.• Value Innovation

– Instead of beating the competition, focus on making competition irrelevant.

– Value innovation occurs when innovation is aligned with utility, price, and cost positions.

– Create Blue Oceans by pursuing differentiation and low cost simultaneously.

Six Principles of Blue Ocean StrategyReconstruct market boundariesFocus on the big picture, not the numbersReach beyond existing demandGet the strategic sequence rightOvercome key organizational hurdlesBuild execution into strategy

Ch. 2 Analytical Tool and Frameworks• Strategy Canvas

– An analytic framework that is central to value innovation and the creation of blue oceans.

– Value Curve• graphic depiction of a company’s relative performance across its

industry’s factors of competition.

• Four Actions Framework– Questions to challenge strategic logic and business model

• Eliminate-Reduce-Raise-Create Grid– Act on Four Actions to create a new value curve

• Characteristics of a Good Strategy– Focus, Divergence, & Compelling Tagline– Company is on the right track if it meets the criteria.

CH 3: Breaking from CompetitionBreak from the competition to create blue

oceans

Are there systematic patterns for reconstructing market boundaries to create blue oceans?

If so, can they be applied across all industry sectors? Yes, there are six basic approaches to remaking

market boundaries. Six Paths Framework

CH 3: Six Paths FrameworkPath 1: Look across Alternative IndustriesPath 2: Look Across Strategic Groups Within

Industry Path 3: Look Across the Chain of BuyersPath 4: Look Across Complementary Product

and Service Offerings Path 5: Look Across Functional or Emotional

Appeal to BuyersPath 6: Look Across Time

CH 4: Visual Awakening StrategyStep 1: Visual Awakening

As-Is strategy- compare your company with competitors

Step 2: Visual ExplorationSend managers into field to study use of

productsObserve advantages of alternative productsFind factors to eliminate, create or change in

your businessStep 3: Visual Strategy Fair

Business units present their strategy to everyone to see business portfolio and big picture

CH 4: Using the Pioneer-Migrator-Settler (PMS) MapPioneer- the businesses that offer unprecedented value

Pioneers have maximum growth potential but often consume cash to finance growth as they expand.

Settler - the businesses whose value curves conform to the basic shape of the industry’sEven though settlers have marginal growth potential, they

are frequently today’s cash generators.Migrators- lie somewhere in between the pioneers and

the settlers, and fall between red oceans and blue oceans.

Chapter 5: Reach Beyond Existing DemandHow do you maximize the size of the blue

ocean you are creating?You reach beyond existing demand (the 3rd

principle of blue ocean strategy)To maximize the size of your blue ocean you

need to concentrate your focus on non-customers and commonalities in what those buyers valueNon-customers before customersCommonalties before differencesDe-segmentation before finer segmentation

Chapter 5: Reach Beyond Existing DemandThree tiers of non-customers

Soon-to-be non-customersRefusing non-customersUnexplored non-customers

Within these three groups there is an ocean of untapped demand waiting to be released

Chapter 5: Reach Beyond Existing Demand

Remember you should go for the biggest catchment, or the biggest group of non-customers

Chapter 6: Get the Strategic Sequence RightThe 4th principle of blue ocean strategy: get

the strategic sequence rightDiscusses the strategic sequence of fleshing

out and validating blue ocean ideas to ensure their commercial viability

Chapter 6: Get the Strategic Sequence Right

Your business must pass all of these four tests to become a viable blue ocean idea

CH 7: Breaking through HurdlesBreak through the cognitive hurdleJump the resource hurdleJump the motivational hurdleKnock over the political hurdle

CH 7: Tipping Point LeadershipTipping Point Leadership-allows you to

overcome these four hurdles fast and at low cost while winning employees’ backing in executing a break from the status quo.

Ex. Target

CH 8: The power of fair processStrategy formulation process- fair processAttitudes-trust and commitmentBehavior-voluntary cooperationStrategy Execution-exceeds expectations

CH 8: Successful companiesSuccessful companies do not consist of top,

middle, and bottom hierarchies; it is a collective process that includes all who make up the organization.

Intangible capital(commitment, trust, voluntary cooperation) is a must have in order to be successful.

Ex. Target in the community

CH 9: ImitatorsOnce a company creates a blue ocean and their

performance is known…Sooner or later there will be companies trying to

imitateAs they succeed and expand the blue ocean, more

companies will try to join themselves.Barriers to Imitation

Some are operational, and others are cognitive.Most often a blue ocean strategy will go without

competition for 10 to 15 years. This is due to imitation barriers rooted in blue ocean

strategy

CH 9: Imitation BarriersValue innovation does not make sense to a

company’s conventional logic.Blue ocean strategy may conflict with other

companies’ brand image.Natural Monopoly: The market often cannot

support a second player.Patents of legal permits block imitation.High volume leads to rapid cost advantage

for the value innovator, discouraging followers from entering the market

CH 9: When to Value-Innovate Again

Almost every blue strategy will be imitated.Avoid the trap of competing by monitoring

value curves on the strategy canvas.This will signal when to value-innovate and

when not to.You should swim as far as possible in the blue

ocean, making yourself a moving target, distancing yourself from your early imitators, and discouraging them in the process.

You need to dominate the blue ocean over your imitators for as long as possible.

Conclusion: Blue Ocean StrategyCh 2: Six Principles to Blue Ocean StrategyCh 3: Six Paths FrameworkCh 5: Go for the biggest catchmentCh 6: The four tests: Utility, Price, Cost,

AdoptionCh 7: Breaking through HurdlesCh 9: Imitation Barriers