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BLUE OCEAN STRATEGY

Authors: W. Chan Kim Renee Mauborgne

How to Create Uncontested Market Space and Make the Competition Irrelevant

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I. THE STRATEGY

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New Market Space

known market space

RED OCEAN Represent all the industries in existence today BLUE OCEAN Denote all the industries not in existence today space
Circus Industry Traditional Circus: Target Market : Children Dependent to : Star performance, animal shows High fun & humor High Thrills & dangers

unknown market

Cirque du Soleil: Target Market : Adults Not Dependent to Star performance & animal shows Reduce fun & humor Reduce Thrills & dangers Unique Venue Theme & Theater
Low Cost, High Price

High Cost, Low Price

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The Cornerstone of Blue Ocean Strategy

Value innovation is created in the region where a companys actions favorably affect both its cost structure and its value proportion to buyers Cost savings are made by eliminating and reducing the factors an industry competes on Buyer values is lifted by raising & creating elements the industry has never offered Over time, costs are reduced further as scale economies kick in due to the high sales volumes that superior value generates

The Simultaneous Pursuit of Differentiation and Low Cost

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Red Ocean vs Blue Ocean

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The Six Principles of Blue Ocean Strategy

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Four Actions Framework

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The Case of Cirque du Soleil

Raise Unique venue

Eliminate Star Performers Animal Shows Aisle concession sales Multiple show arenas Reduce Fun and humor Thrill and danger

Create Theme Refined environment Multiple productions Artistic music and dance

The Strategy Canvas of Cirque du Soleil

High

Low
ho w s co nc M es ul sio tip ns le sh ow ar en as Fu na & hu m or Th r il l& da ng er Un iq ue ve nu e e wa tc hi M ng ul tip en le vi pr Ar od t is uc t ic t io m ns us ic & da nc e Pr ice an ce rm Pe r fo An im al s Th em

St ar

sle

Ringling Bros

Smaller Reg Circuses

Re fin ed

Ai

Cirque du Soleil

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II. FORMULATING BLUE OCEAN STRATEGY

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Six Path to Blue Ocean Strategy

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Net Jets Case Study 1: 16 Ownership Aircraft

The Strategy Canvas of NetJets

Price

Need for customers to manage aircraft

Deadhead costs

Speed of travel Ease of travel time

Flexibility & reability

in-flight service

Private Jet

Commercial Airlines

NetJets

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Curves Case Study

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Collective Exercise method

The Strategy Canvas of Curves

Co nv en ie nc e
Curves

ng

en itie W s or ko ut eq ui pm en t W or ko ut t im e

No nt hr ea te ni

In st ru

M ot iv

Am

&

cip l in e

Traditional Health Club

Home Exercise

W om an ly

Di s

fu n

at m

os ph er e

Pr ice

ct or s

at io

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Novo Nordisk Case Study

Insulin Producer

Focus on Doctors

Diabetes Care Company By producing NovoPen

Direct to Patients

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NABI Case Study Fiberglass BUS

The Strategy Canvas of NABI

Initial Price

Corrotion

Maintanance Cost

Fuel Consumpsion

Environment Friendly NABI

Aesthetic design

Customer friendly

Ordinary Transit Bus

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QB House Case Study Speedy Barbershop

The Strategy Canvas of QB

Price

Reservation Desk

Extra Services

Range of Hair treatments

Hygiene

Time Savings on waiting

Time savings on haircut

"air wash" system

Ave. Jap Barbershop

QB House

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From the value a market delivers today to the value it might deliver tomorrow CISCO Growing demand for high speed data exchange focus on high speed data technology CNN the rising tide of globalization first real time 24hours global network the

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III. VISUALIZING STRATEGY

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Four Steps of Visualizing Strategy

Visual Awakening

Visual Exploration

Visual Strategy Fair

Visual Communication

Compare your business with your competitors by drawing your as is strategy canvas. See where your strategy needs to change

Distribute your before Draw your to be Go into the field to and-after strategic strategy canvas based explore the six paths profiles on one page on insights from field to creating blue for easy comparison observations oceans Support only those Observe the distinctive Get feedback on projects and alternative strategy advantages of operational moves that canvases from alternative products or allow your company to customers, services close the gaps to competitors See which factors you actualize the new customers, and should eliminate, strategy noncustomers create or change Use feedback to build the best to be future strategy

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The Three Tiers of Noncustomers

Third Tier Second Tier First Tier Your Market

First Tier: Soon-to-be noncustomers who are on the edge of your market, waiting to jump ship Second Tier: Refusing noncustomers who consciously choose against your market Third Tier: Unexplored noncustomers who are in markets distant from yours

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The Sequence of Blue Ocean Strategy

Buyer Utility Is there exceptional buyer utility in your business idea? Yes Price Is your price easily accessible to the mass of buyers? Yes Cost Can you attain your cost target to profit at your strategic price? Yes Adoption What are the adoption hurdles in actualizing your business idea? Are you addressing them up front? Yes A Commercially Viable Blue Ocean Idea No - Rethink

No - Rethink

No - Rethink

No - Rethink

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IV. EXECUTING BLUE OCEAN STRATEGY

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The Four Organizational Hurdles to Strategy Execution

Cognitive Hurdle An Organization wedded to the status quo Resource Hurdle Limited Resource Political Hurdle Opposition from powerful vested interests Motivational Hurdle Unmotivated staff

Visi Pramudia Break through the Cognitive Hurdle Ride the Electric Sewer Meet the Disgruntled Customers Jump the Resource Hurdle

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face to face with worst operational problem

Strategic shift with fewer resources

Low resources input but Redistribute Resources to the Hot Spots high potential gains Redirect Resources from the Cold Spots Trading your units excess resources in one area Engage in Horse Trading

for another units excess resources to fill remaining resources gap

Jump the Motivational Hurdle

Motivate employees fast & low cost

Influencer in Organization Zoom in on Kingpins Transparency, inclusion & fair process Place Kingpins in a Fishbowl Atomize to Get the Organization to Change itself Framing the strategic challenge, actionable to all levels

Visi Pramudia Knock Over the Political Hurdle

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overcome political forces Who the most to gain from

Leveraging Angles the strategic shift Silencing Devils Getting a consigliore on the top management team
Who knows in advance all the land mines will fight you, who will support you who

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V. CONCLUSION: Blue Ocean Sustainability

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Imitation Barriers to Blue Ocean Strategy

Value innovation does not make sense to a companys conventional logic Blue ocean strategy may conflict with other companies brand image Natural monopoly: The market often cannot support a second player Patents or legal permits block imitation High volume leads to rapid cost advantage for the value innovator, discouraging followers from entering the market Network externalities discourage imitation Imitation often requires significant political, operational and cultural changes Companies that value-innovate earn brand buzz and a loyal customer following that tend to avoid imitators

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The END - THANKS