Tse blue ocean_strategy_modified2014

Business Model

Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur

Blue Oceans = value innovation(a new market space within mature industry)

• Compete in existing market space

• Beat the competition head-on

• Exploit existing demand

• Make the value/cost trade off

• Create uncontested market space

• Make competition irrelevant

• Create and capture new demand

• Break the value/cost trade off

Red Oceans (most businesses)


62% 38%

Revenue Impact

39% 61%

Profit Impact

86% 14%

Business Launches

Pioneer, Innovation in Customer Value

Me-too & Value Improvement

• Why seek Value Innovation?

14% of firms in a ‘Blue Ocean’ space 61% of overall profits (Kim’s & Mauborgne’s observation of 108 companies over a 100-year period)


Tools to find Blue Oceans

A The Strategy Canvas:

captures the current state of play in the known market space; reorients focus from competitors to alternatives and from customes to non customers

the range of factors the industry competes on and invests in

the offering level that buyers receive across all of these key competing factors.


B Four actions framework (observations):

Factors that no longer are valuable to potential customers are avoidable costs


B Eliminate-reduce-raise-create grid


Value innovation example: [yellow tail]

Australian vineyard Casella Wines

sought a way to increase US sales in a

hugely crowded and competitive industry

space with falling margins

The US Wine market –

hardly attractive


Casella Wines’ value innovation

1. What did the US wine industry strategy canvas look like (on what factors were producers competing)?


US wine industry - Factor 1: price


US wine industry - Factor 2: labelling for connoisseurs


US wine industry - Factor 3: mass media advertising


US wine industry - Factor 4: aging quality – age=better


US wine industry - Factor 5: heritage = prestige


US wine industry - Factor 6: complex bouquet = desirable product


US wine industry - Factor 7: wide product range = better label


The US Wine Industry – strategy canvas


[yellow tail] – 1 and 2

1. Industry Strategy Canvas• Price, packaging, above the line marketing, aging quality, prestige of the

vineyard, complexity of taste, diverse range of wines

2. Four actions framework - observations• Wine was only accessible to a limited number of people + takes years to

appreciate wine• French and worldwide producers were all competing on the factors on

the strategy canvas, bringing down margins• Blue Ocean: not competing on wine market, but on the alternative

market for beers, spirits and cocktails>> Create a new market of new wine drinkers


http://www.yellowtailwine.com.au/contents.asp?b=2

[yellow tail] - 3

3. The eliminate-reduce-raise-create grid• Eliminated

» Enological terms on wine packaging, » above the line marketing – (replace with in-store merchandising)» aging quality » => costs and working capital declined

• Reduced» Vineyard prestige, » complexity of taste and range (2 products: Chardonnay and Shiraz)

• Raised» Price versus budget wines, » retail store involvement (display stands, merchandised clothing for staff)

• Created » 3 new factors: easy drinking, easy to select, and ‘fun and adventure’ image of

AustraliaCopyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur

Smaller product range, simpler labelling


In-store merchandising

Retail store

involvement

Wal-Mart displays


[yellow tail] value line vs US wine industry


[yellow tail] - Results


Further Reading

Kim, W.C. and Mauborgne, R., 2005. Blue Ocean Strategy: How to Create uncontested Market Space and Make the Competition Irrelevant. Boston: Harvard Business School Press.


Tse blue ocean_strategy_modified2014

Economy & Finance

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