The Blue Ocean Strategy

Presented by: Stephene Roy Cardines Condino

Outline of the Report

Blue Ocean and the Red ocean Value Innovation Three Compelling Taglines for a Blue Ocean Strategy The Four Grids Visualizing Strategies in 4 Steps Sequence of Blue Ocean Strategies

Buyer Experience
Profit Model of Blue Ocean Strategy Blue Ocean Idea Index

Avoiding imitations of Blue Ocean Strategy

Blue Ocean and the Red Ocean

Red Ocean Strategy
Competition exist in the Market Place

Blue Ocean Strategy

Making an uncontested market space.

Players tries to beat and compete with each other

Exploit existing demand.

Make the competition irrelevant.

Create and capture new demand.

Make the value-cost trade-off.

Break the value-cost trade-off.

Align the whole system of a firms activities with its strategic choice of differentiation or low cost.

Align the whole system of a firms activities in pursuit of differentiation and low cost.

Value Innovation
For an organization to discover the Blue Ocean and leave the Bloody red Ocean, An Organization should have the so called Value Innovation Value Innovation is the cornerstone of the Blue Ocean Strategy by making competition irrelevant and opening an uncontested market space. Value is referred as the Value for both the Buyer and Consumer Innovation (Product, service or delivery) that creates value for the market Value Innovation is not the same as technology Innovation and Market Pioneering

Non Existent of Value and Innovation

Value without innovation tends to focus on Value Creation Alone Innovation without Value tends to be technology driven, market pioneering and even futuristic

Three Compelling Tagline for a Blue Ocean Strategy

Focused Divergent Compelling Tagline

Eliminate/Reduce/Raise/Create the Grid

Reduce

Which factors should be reduced well below industry standards?

Which of the factors that the industry takes for granted should be eliminated?

Eliminate

Create A New Value Curve Raise

Which factors should be created that the industry has never offered?

Which factors should be raised well above the industrys standard?

The four actions framework offers an technique that breaks the trade-off between differentiation and low cost and to create a new value curve. It answers the four key questions of what industry takes for granted and needs to be eliminated; what factors need to be reduced below industry standards; what factors need to be raised above industry standards; and what should be created that the industry has never offered.

Eliminate/Reduce/Raise/Create the Grid

Eliminate Enological terminology and distinctions
Aging qualities Above-the-line marketing Reduce Wine complexity Wine range Vineyard prestige Create Easy drinking Ease of selection Fun and adventure

Raise Price versus budget wines

Retail Store involvement

The eliminate-reduce-raise-create grid pushes companies not only to ask all four questions in the four actions framework but also to act on all four to create a new value curve. By driving companies to fill in the grid with the actions of eliminating, reducing, raising, and creating, the grid provides four immediate benefits: it pushes them to simultaneously pursue differentiation and low costs; identifies companies who are only raising and creating thereby raising costs; makes it easier for managers to understand and comply; and it drives companies to scrutinize every factor the industry competes on.

Visualizing Strategy in Four Steps

The four steps include visual awakening, visual exploration, visual strategy fair, and visual communication. 1. Visual Awakening 2. Visual Exploration 3. Visual Strategy Fair 4. Visual Communicatio n

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

Go into the field to explore the six paths to creating blue oceans. Observe the distinctive advantages of alternative products and services. See which factors you should eliminate, create, or change.

Draw your to be strategy canvas based on insights from field observations. Get feedback on alternative strategy canvases from customers, competitors customers, and noncustomers. Use feedback to build the best to be future strategy.

Distribute your beforeand-after strategic profiles on one page for easy comparison. Support only those projects and operational moves that allow your company to close the gaps to actualize the new strategy.

Sequence of Blue Ocean Strategy

Buyer utility
Is there exceptional buyer utility in your business idea? No-- Rethink

An important part of blue ocean strategy is to get the strategic sequence right. This sequence fleshes out and validates blue ocean ideas to ensure their commercial viability. This can then reduce business model risk. In this model, potential blue ocean ideas must pass through a sequence of buyer utility, price, cost, and adoption. At each step there are only two options: a yes answer, in which case the idea may pass to the next step, or no. If an idea receives a no at any point, the company can either park the idea or rethink it until you get a yes.

Yes

Price
Is your price easily accessible to the mass of buyers? No-- Rethink Yes

Cost
Can you attain your cost target to profit at your strategic price? Yes No-- Rethink

Adoption
What are the adoption hurdles in actualizing your business idea? Are you addressing them up front? Yes

No-- Rethink

A Commercially Viable Blue Ocean Idea

Buyer Experience
Six Stages of Buyers experience. The six stages of Buyer experience is running more or less sequentially from purchase to disposal. Each stage encompasses a wide variety of specific experiences. At each stage, managers can ask a set of questions to gauge the quality of buyers experience.
Purchase How long does it take to find the product you need? Is the place of purchase attractive and accessible? Delivery How long does it take to get the product delivered? How difficult is it to unpack and install the new product? Use Does the product require training or expert assistance? Is the product easy to store when not in use? How effective are the products features and functions? Does the product or service deliver far more power or options than required by the average user? Is in overcharged with bells and whistles? Supplements Do you need other products and services to make this product work? If so, how costly are they? How much time do they take? How easy are they to obtain? Maintenance Does the product require external maintenance? Disposal Does use of the product create waste items?

How easy is it to How easy is it to maintain and upgrade dispose of the the product? product? How costly is maintenance? Are there legal or environmental issues in disposing of the product safely? How costly is disposal?

How secure is the transaction environment?

How rapidly can you make a purchase?

Do buyers have to arrange delivery themselves? If yes, how costly and difficult is this?

Blue Ocean Idea Index

Utility

Is there exceptional utility? Are there compelling reasons to buy your offering? Is your price easily accessible to the mass of buyers?

Price

Cost

Does your cost structure meet the target cost?

Have you addressed adoption hurdles up front?

Adoption

Profit Model of Blue Ocean Strategy

The profit model of blue ocean strategy shows how value innovation typically maximizes profit by using the three levers of strategic price, target cost, and pricing innovation.
The Strategic Price

The Target Profit

The Target Cost

Streamlining and Cost Innovations

Partnering

Pricing Innovation

Avoiding Imitations
A Value Innovation move does not make sense based on conventional strategic logic Brand Image conflict prevents companies from imitating a blue ocean strategy Natural monopoly blocks imitation when the size of a market cannot support another player Patents or legal permits block imitation The high volume generated by a value innovation leads to rapid cost advantages, placing potential imitators at an ongoing cost disadvantage Network externalities discourage imitation Imitation often requires significant political, operational and cultural changes

References
Retrieved November 8, 2011 www.slideshare.net/jessestarmer/blue-oceanstrategy-summary-61974 Retrieved November 8, 2011 from www.ribbonfarm.com/2007/08/06/book-review-blueocean-strategy/