Blue Ocean Strategy:

Innovating in a Down Economy

Source: Blue Ocean Strategy

by W. Chan Kim & Renée Mauborgne ©2005
 What Is A Blue Ocean?
Red Ocean Blue Ocean

• Existing market space • New market space

• Industry boundaries are defined • Companies expand or go
and accepted across industry boundaries
• Cutthroat competition means • Competition is irrelevant in
the water is bloody red the blue uncharted water
• Growth and profits are • Significant opportunity for
restricted profitable growth
Source: Blue Ocean Strategy by W. Chan Kim & Renée Mauborgne ©2005
 Core Concept
• Cost Structure Is
lowered through
eliminating and reducing
factors the industry
The competes on but buyers
Simultaneous do not value highly
Pursuit of
Differentiation • High sales volume creates
(Superior scale economies and further
Buyer Value) cost reduction
and Low Cost
• Buyer value is increased
by raising and creating
elements the industry
has never offered.

Source: Blue Ocean Strategy by W. Chan Kim & Renée Mauborgne ©2005
Key Principle: Reach Beyond Existing Demand
Engage the Three Tiers of Non-Customers
Tier 2 Tier 3
• Are aware of • Have never
but don’t use thought of your
your industry’s market’s offerings
offerings. as an option.
• “Unexplored”
Tier 1 customers who
have not been
• Soon-to-be targeted or
non-customers. thought of as
• In search of potential
better solutions. customers by any
player in the
industry.
Source: Blue Ocean Strategy by W. Chan Kim & Renée Mauborgne ©2005
When Should Blue Ocean Strategy
(BOS) Be Used?
 Best Situations
 Leadership is committed to investing in innovation for profitable
growth and significant cost structure reduction
 Core business or organization is performing well
 Strategic, future-focused opportunities are not sacrificed to short-
term priorities
 Leadership embraces new approaches and non-incremental
thinking
 Leadership believes in the need for a well balanced portfolio of
offerings/businesses tied to different growth strategies including
Pioneers, not just Settlers and Migrators

 Will BOS be of value to your clients?

 Frontier Strategy takes clients through an initial audit/
questionnaire
 Four-Step Blue Ocean Strategy Process
1. Visual
Awakening
• Compare your
business with your
competitors’ by
drawing your “as is”
strategy canvas
• See where your
strategy needs to
change
Source: Blue Ocean Strategy by W. Chan Kim & Renée Mauborgne ©2005
2. Visual 3. Visual 4. Visual
Exploration Strategy Fair Communication
• Go into the field to • Draw your “to be” • Distribute your before-
explore the six paths strategy canvas based and-after strategic profiles
to creating blue on insights from field on one page for easy
oceans observations comparison
• Observe the • Get feedback on EXPLANATION
distinctive advantages alternative strategy
of alternative products canvases from • Support only those
and services customers, non- projects and operational
customers, and moves that allow your
• See which factors you competitors’ company to close the
should eliminate, customers gaps to actualize the new
create, or change strategy.
• Use feedback to build
the best “to be” future
strategy
EXPECTATION
CLARITY
ENGAGEMENT
 Four Actions for Creating New Value Curves

Source: Blue Ocean Strategy by W. Chan Kim & Renée Mauborgne ©2005
 Example 1: Southwest
High

Average
Airlines
Relative Offering Level

e.g. US Airways Southwest

Tagline:
“The speed of a
plane at the
price of a car –
whenever you
need it.”

Car
Low
Price Meals Lounges Seating Hub Friendly Speed Frequent
Class Connectivity Service Point-to-
Choices Point
Key Elements of Product, Service and Delivery Departures

Southwest’s Value Curve Shows Its Blue Ocean Strategy Characteristics

of Focus, Divergence and a Compelling Tagline.
Source: Blue Ocean Strategy by W. Chan Kim & Renée Mauborgne ©2005
 Example 2: NetJets
High “The convenience of a private jet at the Private Jet
price of a commercial airline ticket.” (Corporate Travel)
Relative Offering Level

NetJets

Commercial Airlines
(First & Business Class)

Low
Price (fixed Need for Deadhead Speed of East of travel Flexibility and In-flight
purchase customers to costs total travel (incl. check-in, Reliability service
plus variable manage aircraft time customs, etc.)
(aircraft mgmt.
price per
and admin.) Key Elements of Product, Service and Delivery
flight)

Focus on the key factors that lead buyers to trade across industries and eliminate
or reduce everything else.
Source: Blue Ocean Strategy by W. Chan Kim & Renée Mauborgne ©2005
Cont…
 Blue Ocean Strategy - This strategy says that it is the best to make a product or deliver a
service that has no existing competition. Even if there are some players, there presence
doesn’t account much in terms of market share or revenue.

Almost all the successful startups in India are perfect examples of Blue Ocean Strategy.
For example -
 Swiggy : Making the life of millions of Indians by enabling food delivery at doorstep in
no time.
 Nykaa : Selling cosmetics of countless brands online. Nykaa now is clearly the market
leader in online beauty space.
 Myntra : Among the first to start selling apparels online.

Red Ocean Strategy on the other hand would mean entering spaces where there is a lot
of competition and survival is not enough. For example, if you open up a restaurant in
an area which is swarming with food outlets, that won’t be a smart business move.
Thank You