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Transcript of New4 bos blue ocean strategy
On Gap Analysis Class on Blue Ocean Strategy
Ziya G. Boyacigiller
This presentation was created and given by Ziya Boyacigiller who was leading Angel Investor and a loved mentor to many young entrepreneurs in Turkey. We have shared it on the web for everyone’s benefit. It is free to use but please cite Ziya Boyacigiller as the source when you use any part of this presentation. For more about Ziya Boyacigiller’s contributions to the start-up Ecosystem of Turkey, please go to www.ziyaboyacigiller.com
“GAP ANALYSIS”Blue Ocean Strategy
How to Create Uncontested Market Space and Make the Competition Irrelevant
Ziya G. BoyacıgillerSabanci UniversitesiYonetim Bilimleri Fakultesi
By W.Chan Kim & Renee Mauborgne
Ziya G. Boyacigiller (c) 2007 3
Why do some companies achieve
sustained high-growth
in revenues and profits?
Ziya G. Boyacigiller (c) 2007 6
How Can We Explain Sustained Growth & Profits? Is it the Company?
No, even excellent companies do not stay that way over time…
Ziya G. Boyacigiller (c) 2007 8
How Can We Explain Sustained Growth & Profits? Is it the Industry?
No, even the most favored industries don’t stay attractive over time…
Ziya G. Boyacigiller (c) 2007 12
Strategic Moves are the set of managerial actions and decisions that have delivered products and services that
opened and captured new market space,
with a significant leap in demand.
Ziya G. Boyacigiller (c) 2007 13
Line-Extension* vs. Innovation** Compared
Business Launch 86% 14%
62% 38%
39% 61%
Revenue Impact
Profit Impact
Launches within red oceans Launches within blue oceans
(* Sustaining, ** Disruptive, see Innovation Models)
Ziya G. Boyacigiller (c) 2007 14
Challenges of Innovation
A new product has to:
1. offer customers exceptional utility 2. at an attractive price, and 3. the company must be able to deliver it at a
tidy profit.
However, uncertainties surrounding innovation are so great even seasoned and insightful managers have a hard time being accurate.
KEY SLIDEKEY
SLIDE
x x x
Ziya G. Boyacigiller (c) 2007 15
Venture Capitalist’s Matrix(Benchmark Capital’s Andy Rechliff)
AC
CU
RA
TE B
ET
CONCENSUSYES NO
YES
NO
Ziya G. Boyacigiller (c) 2007 17
Conventional Competition Red Oceans competitive market space
Porter’s “Five Forces” says, “don’t get caught in the middle”, compete on:
Cost
or
Differentiation
Ziya G. Boyacigiller (c) 2007 18
Blue Ocean Strategysays “can do both” !
value (=benefits for buyer /price )
Value Innovation
simultaneous
Value Innovation leads to creating
Blue Oceans New Markets / No Direct Competition
KEY SLIDEKEY
SLIDE
Cost (=total cost for buyer)
Ziya G. Boyacigiller (c) 2007 19
Strategy Canvas of the Short-Haul Airline Industry
Value
Curves
Key Factors of Competition (KFC)
Key-Factors-of-CompetitionKFCs
Ziya G. Boyacigiller (c) 2007 20
These are for a given industry, what they compete on and what they invest in (use RPV model).
Example: The wine industry key-factors KFCs are:
• Price per bottle• Refined packaging/bottle image• Above the line-marketing directed to consumers and distributors/retailers• Aging quality of wines• Prestige of the wine’s vineyard and legacy (brand image)• Taste of wine• Diverse range of wine selection
In Class Exercise:
You Start Work in a Design House…
Your 1st assignment is:
Define KFCs for wallet.
Ziya G. Boyacigiller (c) 2007 21
Ziya G. Boyacigiller (c) 2007 22
“Blue Ocean” shifts the Strategy Canvas of an Industry
To fundamentally shift the strategy canvas of an industry, you must begin by reorienting your strategic focus from
competitors alternatives,
and from
customers noncustomers,
of the industry.
KEY SLIDEKEY
SLIDE
Ziya G. Boyacigiller (c) 2007 23
Substitutes vs. Alternatives Substitutes to “eating at an Italian Restaurant”:
All Italian restaurants,
Alternatives* to “eating at an Italian Restaurant”:
(job: satisfy hunger) Kebapci, Burger King, balik-ekmek, even “simit”/bagel
and,
(job: entertainment)Movies, theater, concert, cruzing along the Bosporus, watching TV
(* ALTERNATIVES ARE MEANINGFUL WHEN LINKED TO A “JOB”)
Ziya G. Boyacigiller (c) 2007 24
Listen to “noncustomers”?
Look for “common pain”
for “noncustomers” to
identify your Blue Ocean
opportunities (market gaps)
KEY SLIDEKEY
SLIDE
Ziya G. Boyacigiller (c) 2007 25
Look for “common pain”…
Potential / Existing customers
are not happy with the existing
alternatives, yet no other choice
exists…
KEY SLIDEKEY
SLIDE
Everyone you talk is NOT equally useful to you!
You need to identify and classify the people you talk to for getting useful inputs. Ziya G.
Boyacigiller (c) 2007 26
Ziya G. Boyacigiller (c) 2007 27
Who are the “noncustomers” we want?
KEY SLIDEKEY
SLIDE
NOTE: “tier” rhymes with “beer”
Listen to these inputs !
Defining Tiers Again… Tier 1:
• Their need for the product/service is so important that they can’t wait, they want it now. So, they already bought an alternative and are using.
They will know best, what they like and don’t like about the alternative they are using now, and possibly about other alternatives they have looked at.
Ziya G. Boyacigiller (c) 2007 28
Defining Tiers Again… Tier 2:
• Their need for the product/service is NOT as important, compared to Tier 1 customers, that although they looked for an alternative to buy, decided to wait, until an acceptable alternative comes to market.
They will know what they like and don’t like about the alternatives they looked at.
Ziya G. Boyacigiller (c) 2007 29
Defining Tiers Again… Tier 3:
• They have not recognized a need for the product/service yet. They have not even looked for alternatives.
They will NOT know what they like and don’t like about the alternatives on the market currently – they can only guess…
➜DO NOT WASTE TIME WITH THEM!
Ziya G. Boyacigiller (c) 2007 30
Your 2nd assignment is:
Define a new wallet.
Identify common pains.
Ziya G. Boyacigiller (c) 2007 31
In Class Exercise:
You Start Work in a Design House…
Ziya G. Boyacigiller (c) 2007 32
Casella Wines (Australian) Looking at alternatives to wine:
Beer, Spirits, Ready-to-Drink Cocktails (which
capture 3 times sales compared to US wine sales)
Mass of US adults (non-consumers) saw wine as a turn-off: Intimidating, pretentious, flavor challenging
These non-consumers are drinking the alternatives big potential market!
Ziya G. Boyacigiller (c) 2007 33
Four Actions Framework(how to reconstruct buyer value)
1. Which of the factors that the industry takes for granted should be eliminated? (have no value for customers, or even detract from value)
2. Which factors should be reduced well below the industry’s standard? (overdesigned in race to match or beat competition, overserving customers and increasing cost for no gain)
3. Which factors should be raised well above the industry’s standard? (uncover and eliminate the compromises forced on customers)
4. Which factors should be created that the industry has never offered? (discover entirely new sources of value for buyers and create new customers, shifting strategic pricing of the industry)
dro
ps c
osts
lift
valu
e &
dem
an
dKEY
SLIDEKEY
SLIDE
Your 3rd assignment is:
Create Product Strategy using Four Actions Framework for the wallet.
What is your “tag line”?What is your mission?
Ziya G. Boyacigiller (c) 2007 34
In Class Exercise:
You Start Work in a Design House…
Ziya G. Boyacigiller (c) 2007 35
[yellow tail]
•Fun, social drink accessible to nonwine drinkers
•Fastest growing brand in the histories of both Australian and US wine industries
•#1 imported wine into USA, surpassing wines of France, Italy
•#1 red wine in 750ml bottle in USA, surpassing California labels
•Sales in about 2 years hit over 4.5million cases
•While competing with 1,600 wineries in the USA !
Ziya G. Boyacigiller (c) 2007 38
Focus on alternatives & noncustomers
others [yellow tail]Easy drinking
Wine’s complicated taste is difficult to appreciate compared to alternatives
[yellow tail] is soft in taste, with pronounced fruit flavors (easy drinking wine that doesn’t need developed appreciation over time)
Ease of selection
Isles of wine in markets overwhelmed and intimidated customers
Only 2 to choose from (one white/one red (used same bottle design for both to reduce cost)
Fun and adventure
Elite image did not resonate with general public
Australian theme, unusual label, no mention of vineyard or other intimidating wine vocabulary
Ziya G. Boyacigiller (c) 2007 39
Eliminate-Reduce-Raise-Create Grid for [yellow tail]
EliminateEnological terminology and distinctionsAging qualitiesAbove-the-line marketing
RaisePrice compared to budget winesRetail store support and involvement
ReduceWine complexityWine range (variety)Vineyard prestige
CreateEasy drinkingEase of selectionFun and adventure (new delightful experience)
KEY SLIDEKEY
SLIDE
Ziya G. Boyacigiller (c) 2007 40
I have to apologize, that I just tried a different boxed California cabernet, which tasted like a bad children's fruit drink. I have learned my lesson and will stick to yellow tail merlot! And I must say that I love yellow tail, because my wife loves yellow tail.
I was never a wine drinker until I was introduced to Yellow Tail Chardonnay 3 years ago at a dinner party. I was immediately hooked! Now, there's nothing I look forward to more than coming home from work on a Friday night and pouring myself a glass of Yellow Tail to unwind. It's a standard at parties that I attend and it's always a welcome gift. Thanks for a wonderful product and keep up the good work! Is it Friday yet?
What customers are saying…
[yellow tales] from Casella web site
Ziya G. Boyacigiller (c) 2007 41
Three Characteristics of a Good Strategy
FocusNot trying to excel in all factors of competition
DivergenceNot benchmarking against competitors looking
across alternatives (value curves look different)
Compelling TaglineIs the strategy resulting in a unique and strong tagline (“The essence of a great land…Australia”)
KEY SLIDEKEY
SLIDE
Ziya G. Boyacigiller (c) 2007 42
Focused & DivergentFocusedKnowing what-to-do and not-to-do,DivergentUnlike other value curves
Ziya G. Boyacigiller (c) 2007 43
Where to Look to Create Blue Oceans (You can focus
* on different areas to identify new opportunities)
1. Looking across Substitute Industries (NetJets)
2. Looking across Strategic Groups within Industries (Curves)
3. Looking across Value Chain of Buyers (Bloomberg)
4. Looking across Complementary Product and Service Offerings (Borders)
5. Looking across Functional Appeal to Buyers (Starbucks)
6. Looking across Emotional Appeal to Buyers (Body Shop)
7. Looking across Time (Intel)
8. Etc. etc.…
(*) Using de Bono terminology, this is “focused creativity technique”.
KEY SLIDEKEY
SLIDE
Ziya G. Boyacigiller (c) 2007 45
Strategy Canvas of Curves(looking across strategic groups within industries)
Ziya G. Boyacigiller (c) 2007 47
Strategy Canvas of Barnes&Noble and Borders(looking across complementary products & services)
Ziya G. Boyacigiller (c) 2007 48
Strategy Canvas of Body Shop(looking across functional or emotional appeal to buyers)
Ziya G. Boyacigiller (c) 2007 49
Four Steps to Visualizing Strategy(Why “visual”? Means makes use of “strategy canvas”…)
1-Visual Awakening
2-Visual Exploration
3-Visual Strategy Fair
4-Visual Communication, Execution
Compare your business with your competitors’ by drawing your “as is “ strategy canvas.
See where your strategy needs to change.
Go into the field to explore the six paths to creating blue oceans.
Talk to: your customers, competitors’ customers, noncustomers, end users
Observe the distinctive advantages of alternative products and services.
Discover adoptive hurdles for noncustomers
Draw your “to be” strategy canvas based on insights from field observations.
Get feedback on alternative strategy canvases from: customers, competitors’ customers, noncustomers, end users
Use feedback to build the best “to be” future strategy.
Distribute your before-and-after strategic profiles on one page for easy comparisons.
Support only those projects, and operational moves that allow your company to close the gaps to execute the new strategy.
KEY SLIDEKEY
SLIDE
Ziya G. Boyacigiller (c) 2007 50
Challenges of Innovation A new product has to:
1. offer customers exceptional utility 2. at an attractive price, and 3. the company must be able to deliver it at a
tidy profit.
However uncertainties surrounding innovation are so great even seasoned and insightful managers have a hard time being accurate.
Innovation = Creativity + Monetization
Ziya G. Boyacigiller (c) 2007 51
Doggone… She had an alarm installed…
difference between Innovation and Invention“In business, innovation can be easily distinguished from
invention.
Invention is the conversion of cash into ideas. Innovation is the conversion of ideas into cash.
This is best described by comparing Thomas Edison with Nikolai Tesla. Thomas Edison was an innovator because he made money from his ideas. Nikolai Tesla was an inventor. Tesla spent money to create his inventions but was unable to monetize them. Innovators produce, market and profit from their innovations. Inventors may or may not profit from their work.”
http://en.wikipedia.org/wiki/Innovation#Distinguishing_from_invention
Ziya G. Boyacigiller (c) 2007 52
It takes creative focus to “find a way” to monetize a creative idea.
Entrepreneurs not only need to create a differentiated product or service, but they may also need to create a new business model.
Examples: Apple iTunes 99 cents songs,iPhone Apps
Ziya G. Boyacigiller (c) 2007 53
Ziya G. Boyacigiller (c) 2007 54
Uncovering the Buyer Experience Cycle
DisposalMaintenanceSupplementsUseDeliveryPurchase
•How long does it take to find the product you need?
•Is the place of purchase attractive & accessible?
•How secure is the transaction environment?
•How rapidly can you make a purchase?
•How long does it take to get the product delivered?
•How difficult is it to unpack and deliver the product?
•Does the product require training or expert assistance?
•Is the product easy to store when not in use?
•How effective are the product’s features and functions?
•Do you need other products and/or services to make this product work?
•If so, how costly and difficult to obtain are they?
•Does the product require external maintenance?
•How easy is it to maintain and upgrade the product?
•Does use of the product create waste items?
•How easy is it to dispose of the product and waste items?
Ziya G. Boyacigiller (c) 2007 56
The Buyer Utility MapBy locating a new product on one or more of the 36 spaces shown here, one can see how the new idea creates a different utility proposition for existing products.
Six Stages of User Experience CyclePurchase Delivery Use Supplements Maintenance Disposal
Six
Uti
lity
Levers
Environmental
Friendliness
Fun & image
Risks
Convenience
Simplicity
Customer
ProductivityIn which stage are the biggest blocks to customer productivity?
In which stage are the biggest blocks to simplicity?
In which stage are the biggest blocks to convenience?
In which stage are the biggest blocks to reducing risks?
In which stage are the biggest blocks to fun & image?
In which stage are the biggest blocks to environmental friendliness?
KEY SLIDEKEY
SLIDE
page 57 15/04/23Thanks to Sahin Tulga / HP Turkiye for sharing this slide... I
h
Examples of InnovationBusiness (monetizer) and Utility (invention) created
Norwich Insurance, Pricing depending on usage time of the rental car– “USE” stage “Tasarruf”
Progressive Insurance, Offering the same prices as competition offers– “PRE-PURCHASE” stage “Productivity”
Cappy Sun, Triangular pyramidal beverage box– “DISCARD” stage “Fun”
Starbucks, Coffee in a comfortable & nice environment– “USE” stage “Fun” and “Image”
DHL, Following up your package through the Internet– “FOLLOW-UP” stage “Ease” and “Security”
HP, Alert to warn that the ink supply is running low– “USE” stage “Productivity”
Maxim, Power Supply Design Software– “PRE-PURCHASE” stage “Productivity”
Ziya G. Boyacigiller (c) 2007 58
Sequence of Blue Ocean Thinking
Buyer Utility
Is there exceptional buyer utility in your idea?
Price
Is your price easily accessible to the masses of buyers?
Cost
Can you attain your cost target to profit at your strategic price?
Adoption
What are the adoption hurdles? Are you addressing them up front?
YES
YES
YES
YES
NORETHINK
COMMERCIALLY VIABLE BLUE OCEAN IDEA
NORETHINK
NORETHINK
NORETHINK
KEY SLIDEKEY
SLIDE
Your 4th assignment is:
Improve your utility for the wallet (create new KFCs) by using Utility Matrix.
Ziya G. Boyacigiller (c) 2007 59
In Class Exercise:
You Start Work in a Design House…
Ziya G. Boyacigiller (c) 2007 60
Conventional Strategic Logic
Value Innovation Strategic Logic
1. Industry Assumptions
Industry conditions are given
Industry conditions can be shaped. (Don’t accept the status quo)
2. Strategic Focus A company should build competitive advantages. The aim is to beat competition.
Competition is not the “benchmark”. A company should pursue a quantum leap in value to dominate the market.
3. Customers A company should retain and expand its customer base through further segmentation and customization, focusing on what customers value.
A value innovator targets the mass of buyers and willingly lets some existing customers go. It focuses on the key commonalities in what customers value.
4. Assets and Capabilities
A company should leverage its existing assets and capabilities.
A company must not be constrained by what it already has. It must ask:”What would we do if we were starting anew?”
5. Product and service offerings
An industry’s traditional boundaries determine the products and services a company offers. The goal is to maximize the value of those offerings.
A value innovator thinks in terms of the total solution customers seek, even if that takes the company beyond its industry’s traditional offerings.
Five Dimensions of Strategy KEY SLIDEKEY
SLIDE
Ziya G. Boyacigiller © 2005
High Growth in Revenues & Profits
Ref: C. Kim/R. Mauborgne
Five Dimensions of Blue-Ocean Strategy
KEY SLIDEKEY
SLIDE
Kinepolis Strategy Map resulting from its
Value InnovationM
on
eti
zati
on
diff
ere
ntia
tion
Ziya G. Boyacigiller (c) 2007 62
Over time, competition forces the value curves in an industry to converge.
“We will have to create faster than they can copy us!”
Ziya G. Boyacigiller (c) 2007 65
Walt Disney, when his people rush to him in panic when they find out that others are copying Disney Studios’ film animation innovations…