Blue Ocean Strategy

Book Review
Team 4:
Crystal Hill
Stephen Lechtenberg
Anand McGee
Allison Purtell
Jason Torres

Strategic Move
Correct unit of analysis for explaining
the creation of blue oceans and
sustained high performance, versus
the company or industry
Set of managerial actions and
decisions involved in making a major
market-created business offering

Red Ocean vs. Blue Ocean

Red Oceans Conventional Approach
Focus on beating the competition
Compete in existing market space
Build a defendable position within the existing
industry
Use competition as a benchmark
Exploit existing demand
Choice between differentiation and low cost
- Greater value for customers at a higher cost or a
reasonable value at a lower cost
Blue Oceans Value Innovation (to capture market)
Make competition irrelevant
Create a leap in value for buyers and the company
Create new a market space
Pursue both differentiation and low cost

The Strategy Canvas

Captures current state in known market
space
Fundamentally shift from focus on
competitors to alternatives and
customers to non customers
Enables companies to see the future in
the present
Tells you if youre drifting into a red
ocean
Time to value innovate

The Four Actions Framework

2. Reduce
Which factors should
be reduced well
below the industry
standard?
1. Eliminate
Which factors that the
industry takes for
granted should be
eliminated?

A New Value
Curve

3. Raise
Which factors should
be raised well above
the industry
standard?

4. Create
Which factors should
be created that the
industry has not
seen before?

Eliminate-Reduce-RaiseCreate Grid

The Case Of Starbucks

Eliminate

Raise

Underperforming Stores

Education of coffee with

employees

Reduce

Create

Amount of time employees

spend making individual
drinks

More loyalty rewards

A better everyday brew

Calories in certain specialty

drinks

Challenge Fundamental
Assumptions
Find Blue Oceans by looking at
the six paths of framework:
1.) Look across alternative industries
2.) Look across strategic groups within industries
3.) Look across the chain of buyers
4.) Look across complementary product service offerings
5.) Look across functional of emotional appeal to buyers
6.) Look across time

Think Outside the Box

Focus on the big picture instead of
numbers.

Potential blue oceans have focus,

divergence, and a compelling tagline.

Use Pioneer-Migrator-Settler Map

Pioneers- unprecedented value, profitable

Migrators- improved value but not
innovative
Settlers- conform to red oceans

Reaching beyond existing

demand
Looking to non customers
Finding what buyers value
3 tiers of non consumers

Soon to be customers
Refusing customers
Unexplored customers

Get the right strategic

sequence
Building a blue ocean through buyer:
Utility, price, cost and adoption

Testing for exceptional utility

Choosing the right strategic price
Target costing
Cost Adoption

Overcoming Key Organizational

Hurdles
Managers face four hurdles:
Cognitive: waking employees up to the
need for a strategic shift.
Limited Resources
Motivation
Politics

Tipping Point Leadership in

Action
Strategy allows you to overcome the four hurdles
Bill Bratton appointed police chief of New York
Murder, muggings, mafia hits, armed robberies at an
all time high, department morale at an all time low.
After two years:
Felony crime fell 39%
Murders 50%
Theft 30%
Public confidence in NYPD jumped from 37% to
73%

It was his 5th strategic reversal

Breaking Through the

Cognitive Hurdle
Ride the electric sewer (New York
Subway)

Showing the worst reality to superiors and

underlings can shift their mindset fast

Meet with disgruntled Customers

Bostons Police District 4
Determined there was a gap in
perceptions between residents and police.

Jump the Resource Hurdle

Hot Spots, Cold Spots, and Horse

Trading
Redistribute Resources to Your Hot
Spots
Redirect Resources from your Cold
Spots
Engage in Horse Trading

Jump the Motivational

Hurdle
kingpins, fishbowl management, and
atomization
Zoom in on all Kingpins
Place Kingpins in a Fishbowl
Atomize to Get the Organization to
change itself.

Knock Over the Political

Hurdle
Angels, Devils, and Consigliere
Secure a Consilgiere on your top

management team
Leverage your angels and silence
your devils
Challenge conventional wisdom

The Power of Fair Process

Imperative to strategy execution
Must reflect attitude and behavior

deep within the organization

Trepidation
Key variable in Blue Ocean Strategy
People concerned about the actual
process

The 3 Es of Fair Process

Expectation Clarity
Standards of Judgement

Explanation
Everyone should understand

Engagement
Encouraging involvement

Why Fair Process Matters

People at the front lines care
Intellectual and Emotional Recognition
Theory
Blue Oceans:

Intangible capital
Building strategy formulation with
execution
Trust and Trust