Session 8

STRATEGIC VISION
&
BLUE OCEAN STRATEGY

How do we currently view the

future?
Through the
Rear View Mirror
of
historic data?
Or with a
Fortune Teller?

The main problem is that

people dont know what they
dont know
and
dont know that they dont
know

How can we help firms

anticipate the future?
Innovation Life Cycle
Innovator/
Entrepreneur
creates a new
concept /
product /
process

Evidence
of use by
leaders

Major Trend
A consistent
pattern of events
- all firms
invest in critical
success factors

A pattern
is
emerging

Introduction
of new CMs
Fad

CM = Competitive Method

Innovation

Major Trend

Fact of Life

How can we help firms

anticipate the future?

Co-alignment Principle
Macro-economic
environmental forces

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Potential impacts
Emerging trends
Strategic choices
Firm structure
Focused innovation & NPD
Competitive advantage

The PESTLE analysis

The PESTLE analysis is a tool to think about an industrys
external environment (whats in the news) that will be a force for
change in the industry, and takes in the:
Political environment
such as structures and processes of government
Economic environment
including types of business activities and companies;
also includes the financial environment
Social environment
including cultural factors
Technological environment
including innovation levels and protection of intellectual
property Legal environment
pro or anti-business laws
Ecological environment

includes environmental protection and climate

change

Visioning the future

http://www.nowandnext.com/
http://www.wfs.org/futurist
http://www.blueoceanstrategy.com/
http://vimeo.com/21191249

Blue Ocean

W. Chan Kim
The Boston Consulting Group

Rene Mauborgne
INSEAD

What have the following

got in common?

Answer
All examples of business that
were Blue OceansNovel
Reframed or created demand
Launched amidst little or no
competition
Created or co-created industries.
An antidote to Porter?

Red Oceans and

Blue Oceans
Crowded, existing markets

NEW
STRATEGIC
SPACE,
UNCHARTERED

Creating Blue Oceans

Red Oceans
All industries in existence today
(known market space)

Blue Oceans
All industries not in existence today
(unknown market space)

New Market Space

Red Oceans
Fairly good understanding of how to
compete in Red Oceans e.g. 5F, Pestel
etc.

Blue Oceans
Little academic guidance on how to
create them

Comparison
Red Oceans
Compete in existing market space
Beat competition
Meet existing demand
Make the value-cost trade-off.
Aim for differentiation or cost lead

Blue Oceans
Create and locate new market space.
Make the competition irrelevant.
Create, capture and point out new demand.
Break the value-cost trade-off.
Align the whole system of firm's operations towards
differentiation and low cost.

The Impact of
Creating Blue Oceans

In the Kim and Mauborgne study of the

launches of 108 companies

However, these only accounted for

86% = line extensions (or Red Oceans)

62% of total revenues and 39% of total profits

The other 14% of launches were aimed at

creating Blue Oceans

accounted for 38% of revenue and 61% of total

profit

Move to an emphasis on
strategy
The company

not the correct starting point for Blue Oceans.

Blue Oceans

focus on the strategic initiatives rather than

company or industry tradition.

The book

focuses on 150 strategic moves made from 1880

to 2000 in various industries.

Blue Oceans found in:

new and existing firms

attractive and unattractive industries
private and public sector.

Value Innovation:
Key to Blue Ocean Strategy

Value creation improves value to customer but

does not make firm stand out.
Innovation alone does not create demand
Value innovation occurs only when companies
align innovation with utility, price, and cost
positions

Value innovation:
Makes the competition irrelevant
Creates a step-change in value over competition and
for customers
Opens up new and uncontested market space and
segments

Three Levels of Customers

There is a universe of noncustomers which can be
made into customers via
blue oceaning.

3rd
3rd

1st tier: Soon-to-be

non-customers
2nd tier: Refusing
non-customers
3rd tier: Unexplored
non-customers i.e. new
segments

2nd

1st

Four Actions Framework

Strategy Canvas

Source: http://www.ivoryresearch.com/writers/emily-parker-ivory-researchwriter/

Cirque du Soleil
Cirque du Soleil achieved rapid growth
in a declining industry
Cirque du Soleil created uncontested
new market space that made the
competition irrelevant

Cirque du Soleil
Cirque du Soleil provide both the fun
and thrill of a circus and the intellectual
sophistication of a show.
Because of this, Cirque du Soleil
appealed to both circus customers and
noncustomers (theatre-goers).

Cirque du Soleil
Each show, like a theatre show
has a theme and tale.
This caused customers to return
to the show.
They also cut costs/no frills
approach.