The concepts behind Blue Ocean Strategy are tangible and well documented. They are relatively easy to understand and apply to innovation processes and business development.
Uneak White's Personal Brand Exploration Presentation
Blue Ocean Strategy
1. Blue Ocean Strategy
How to Create
Uncontested Market Space
and Make the Competition Irrelevant
[ W. Chan Kim & Renée Mauborgne ]
2. ”Competition in steady markets can be cutthroat
People involved in this competition generally
dislike it and want to break free from the pack
but they simply don’t know where to begin”
Kim and Mauborgne, Harvard Business Review, # 99105
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4. Creating New Market Space
• Create products or services for which there
are no direct competitors
• Break free from ”how we compete in our
industry or in our strategic group” thinking
• Look at familiar data from a new perspective
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5. Look across conventional boundaries..
Substitute industries
Strategic groups within an industry
Buyer groups
Complimentary product and service offerings
Functional/emotional orientation of industry
Even time
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8. ELIMINATE
• What factors should be
eliminated that the
industry has taken for
granted?
RAISE
• What factors should be
raised well beyond the
industry standard?
REDUCE
• What factors should be
reduced well below the
industry standard?
CREATE
• What factorys should be
created that the industry
has never offered?
Or The ERCC grid
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9. Value innovation
Basic premise
behind Blue
Ocean Strategy
Pushing for a
quantum leap
in buyer value
while pushing
for a sharp drop
in the industry
cost structure
Buyer Value
Costs
Value
Innovation
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10. Red Ocean versus Blue Ocean Strategy
Red Ocean Strategy
Compete in existing market space
Beat the competition
Exploit existing demand
Make the value-cost trade-off
Align the whole system of a firm’s
activities with its strategic choice of
differentiation OR low cost
Blue Ocean Strategy
Create uncontested market space
Make the competition irrelevant
Create and capture new demand
Break the value-code trade-off
Align the whole system of a firm’s
activities in pursuit of differentiation
AND low cost
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11. The 6 Principles of Blue Ocean Strategy
Formulation principles Risk factor each principle attenuates
Reconstruct market boundaries Search risk
Focus on the big picture, not the numbers Planning risk
Reach beyond existing demand Scale risk
Get the strategic sequence right Business model risk
Execution principles Risk factor each principle attenuates
Overcome key organizational hurdles Organizational risk
Build execution into strategy Management risk
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13. Strategy canvas of US wine industryRelativelevel
Key Elements of Product, Service, and Delivery
Premium Wines
Budget Wines
High
Low
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14. How do you get this guy to drink wine?
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15. ERRC grid by [yellow tail]
Eliminate
• Enological terminology
and distinctions
• Aging qualities
• Above-the-line-marketing
Raise
• Price versus budget wines
• Retail store involvement
Reduce
• Wine complexity
• Wine range
• Vineyeard prestige
Create
• Easy drinking
• Ease of selection
• Fun and adventure
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16. Strategy canvas by [yellow tail]Relativelevel
Key Elements of Product, Service, and Delivery
Premium Wines
Budget Wines
[yellow tail]
High
Low
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21. Your choices before..
Contactors
• Expensive
• Invade your home
• Somewhat careless
• Take day off from work
• They have know-how!
Hardware store
• Local, often small
• Lack of hands-on support
• Costly overhead
• No materials, appliances, ...
• Nice display shelves
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22. Identify value, reduce everything else
• Bolster confidence in average home owner
• Train competent people to coach customers
• Eliminate costly location and features
• Sponsor in-store training facilities
• Provide an all-you-need experience
• Revolutionize do-it-yourself market
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23. Your choices before..
Financial software The pen
• Very simple
• Low price
• Inaccuate
• Highly accurate
• Complex
• Expensive
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24. Identify value, reduce everything else
Intuit Quicken
• Released in 1984
• 42 competing products
• Cheap ($29 vs. $299)
• Easy (no accounting jargon)
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25. Industry value curve
Price Ease of use Optional
features
Speed Accuracy
Relativelevel
Key Elements of Product, Service, and Delivery
The pencil
Personal financial
software
High
Low
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26. Quicken value curve
Price Ease of use Optional
features
Speed Accuracy
Relativelevel
Key Elements of Product, Service, and Delivery
The pencil
Personal financial
software
Quicken
High
Low
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28. Strategic groups
• A group of companies
within an industry that
pursue same strategy
• In most industries,
the fundamental
strategic differences
are captured by a
small number of
strategic groups
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31. Case: Curves
• Texas-based womens
fitness club franchise
• Entered a perceived
mature market but
unlocked a huge,
untapped strategic group
• The best from high-end
health clubs and low-end
home exercise and
reduced everything else
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32. ERRC grid by Curves
Eliminate
• Locker rooms, juice bars,
saunas, pools, etc
• Male athletes, mirrors,
everything unfriendly
• Technical/adjustable machines
Raise
• Social, non-threatening and
engaging atmosphere
• Quick-Fit program
• Self-adjustable machines
Reduce
• High initial costs
• Member fee cost
• Time spend on workout
Create
• Fun womenly atmosphere
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34. Curves numbers
• Investment down from $500K - 1M to $50K
• Monthly user fee down from $100 to $30
• Franchises profitable w. 3 months/100 users
• 7.000 franchises in 90 countries since 1995
• $20K for a franchise
• Established franchises sell for $100 - 150K
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36. Buyer groups
Industries typically converge on a single
buyer group, for example:
Pharmaceutical
Influencers, i.e.
Doctors
Office equipment
Corporate
purchasers
Clothing
End users
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37. The usual suspect..
Buyer groups
Executive value:
Preference for
own customers
Buyer value:
Competitive
pricing and
speedy delivery
User value:
Ease-of-use
Technical value:
Compatibility
and handling
Finance value:
Credit rating,
financing and
payment terms
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39. The insulin industry
Focus on influencers
• Historic focus on the
doctors as customers
• Focus on purer insulin until
”human monocomponent”
was reached by early 1980’s
• Competitive convergence
among the major players
was rapidly occurring
Vials and syringes
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40. ERRC grid by Novo Nordisk
Eliminate
• Vials and syringes
• Social stigmatism
Raise
• User friendliness
• Convenience
Reduce
• Hazzle in medicine
administration
• Risk of incorrect medical
treatment
Create
• Automatic dosis control
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41. Novo Nordisk value curveRelativelevel
Key Elements of Product, Service, and Delivery
Industry
Novo Nordisk
High
Low
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44. Complimentary offerings
What happens
before?
What happens
during?
What happens
after?
• Untapped value is often hidden in complementary
products and services
• The key is to define the total solution buyers seek
when they choose a product or service
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45. What happens...
Before
• Babysitting
• Car parking
• Dining
• Like/check in
During
• Wardrobe
• Program
• Drinks
• Bar/pause
After
• Merchandise
• Books/mags
• Late night
transport
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46. What happens...
Before
• Ground
transportation
• Tax free
shopping
During
• In-flight services
• Entertainment
• Air shop
After
• Ground
transportation
• Accommodation
• Airmile benefits
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47. Before Barnes & Noble (and Borders),
people came, bought a book and left..
Before
• Recommendations
• Searching
During
• Evaluating
alternatives
• Sampling
After
• Consumption
• Learning
• Sharing
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48. ERRC grid by Barnes & Noble
Eliminate
• The risk of buying ”the
wrong” book
• Vain book search
Raise
• Selection
• Support and sparring
• Joy of reading
Reduce
• Inefficiencies
• Inconveniences and
frustrations of selection
• Stock clerks/cashiers
Create
• Ambience (even compete
with reading at home)
• Sampling opportunity
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49. Barnes & Noble value curveRelativelevel
Key Elements of Product, Service, and Delivery
Mall bookstores
Independent bookstores
Barnes & Noble
High
Low
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50. Barnes & Noble
Redefine the scope of service
Turning the book as a product
into the pleasure of reading
and intellectual exploration
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52. Appeal to buyers
Functional, competition on
price/fuction and utility
Emotional, competition on
feelings
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53. Challenge historical thinking
Industries competition converge to
functional or emotional appeal
”Industry thinking” leads
to customer thinking
Reinforcement – customers just
want more of the same for less
Challenge historical thinking
and find new market space
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54. From Functional
• Keep track of time
• Add functionality
• Improve accuracy
• Digitalize
• Citizen & Seiko
To Emotional
• Fashion statement
• Design
• Image
• Emotion
• Repeat purchase
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55. QB House
From Emotional
• Ritual
• Numerous hot towels
• Massage
• Coffee or tea
• Skin treatments
• Blow drying
• Shaving
• Long queues
• 3.000 to 5.000 Yen
To Functional
• Basic cuts
• Eliminate wash and dry
• Air wash
• Traffic light system
• Eliminate waiting time
• Eliminate reservation desk
• Improved hygiene
• ”one use” policy (combs,..)
• Price 1.000 Yen
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56. ERRC grid by QB House
Eliminate
• Rituals
• Reservation desk
• Cash and change
Raise
• Hygiene
• Value for money
Reduce
• Waiting time
• Styles/treatment
• Price
Create
• Sanitation system
• Air wash system
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57. QB House value curveRelativelevel
Key Elements of Product, Service, and Delivery
Barber Shop
QB House
High
Low
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61. Look across time
Most companies
• adapt trends incrementally
• focus on the trend itself (tech, legislation, etc.)
• project the trend itself (direction, adoption, ..)
Instead, companies should
• project how it will change value to customers!
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62. Trends must..
• Be decisive to your business
• Be Irreversible
• Have a clear trajectory
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63. Future trend value curveRelativelevel
Key Elements of Product, Service, and Delivery
Now
Trend
High
Low
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64. Trends must..
• Be decisive to your business
• Be Irreversible
• Have a clear trajectory
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66. Blue Ocean Strategy
• W. Chan Kim & Renée Mauborgne
– Almost a decade of research
• Blue Ocean Strategy
HBS Press, ISBN
• Blue Ocean Strategy
HBR
• Blue Ocean Strategy
Harvard Business Review
• www.BlueOceanStrategy.com
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