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Slides used for understanding Blue Ocean Strategy (2005) and Value Innovation. Grasping how to beat the Value/Cost Trade off
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value creation and
blue ocean strategy in the WAM
Value Innovation
Blue Oceans vs Red Oceans
Building Your Value Factors & Four Actions Framework
TAKE OUTS
•BRAIN GYM
•THE CONCEPT OF VALUE INNOVATION
•UNDERSTANDING BLUE OCEAN STRATEGY
•FOUR ACTIONS FRAMEWORK
•BUILDING YOUR VALUE FACTORS
BODY HACK
Thinking Partnership
• Tell someone about a recent purchase you have been extremely happy with and one which you think added a lot of value to you. Why? What was the value it added?
Value is Multiple
VALUE INNOVATION
PERCEIVED VALUE
PRICE
COST
Moving away from Strategy as the territory of War
Red and Blue Ocean Strategy
Red Ocean Strategy
Compete in existing market spaceBeat the competitionExploit existing demandMake the Value/Cost trade-offAlign the whole system of a company’s activities with its strategic choice of quality differentiation or low cost
Blue Ocean StrategyCreate uncontested market spaceMake competition irrelevantCreate & capture new demandBreak the Value/Cost trade-offAlign the whole system of a company’s activities with its strategic choice of quality differentiation and low cost
Value Innovation for [Yellowtail]
0
1
2
3
4
5
Price
Use o
f enolo
gical
term
inolo
gy
Above-th
e-lin
e m
arke
ting
Aging q
uality
Viney
ard p
rest
ige
Win
e co
mple
xity
Win
e ra
nge
Easy
drinki
ng
Easy
sele
ctio
n
Fun & A
dventu
re
Premium Wines Budget Wines Yellow Tail
“The most powerful family owned wine brand in Australia”
Intangible Business (2009)
“Fifth most powerful wine brand in the world”
Food Week (2008)
Value Innovation For Cirque De Soleil
http://pds4.egloos.com/pds/200708/04/00/d0028500_05080812.jpg
Price
Star P
erfo
rmer
sAnim
al Sho
ws
Aisle
Conce
ssion
s
Mult
iple
Show A
rena
sFun
and
Hum
or
Thrills
and
Dan
ger
Unique
Ven
ue
Them
e
Refine
d W
atch
ing E
nviro
nmen
t
Mult
iple
Produ
ction
s
Artisti
c Mus
ic an
d Dan
ce
HIGH
LOW
Ringling Bros. and Barnum Bailey Value Curve
Cirque De Soleil Value CurveSmaller
Regional Circuses
Strategy Canvas• Plot value factors against level of value offered
Level of
value
Value factors
high
low
e.g. pric
e
Four Actions Framework
ELIMINATE RAISE
REDUCE CREATE
(Kim & Mauborgne, 2005)
Four Actions Framework
Cost Structure ReductionELIMINATE
What costs a lot and does not seem to add much more value?
REDUCEWhere can you decrease emphasis?
Buyer ValueRAISE
Which current value offering should you increase, or add to? What can you increase that does not cost much, but raises the
perceived value of what you sell considerably?
CREATEWhat would your customer really appreciate that is not being offered in your industry at the moment? Is there any other
value “factor” you could add or create which would make you stand out from everybody else who does what you do?
Value Innovation
• Are you seeing the whole picture? Ladder of Inference
• Value Factors – What are you assuming to be true which is not necessarily so?
VALUE INNOVATION
How do you build VALUE?
Perceived Benefit – Cost = Value Innovation
Value Innovation
BUYER VALUE
COSTS
VALUE INNOVATION
Six Paths FrameworkTo reconstruct market boundaries, look
across:-1. Alternatives: Ch/air/bag, Art, Second
hand stores, online etc2. Strategic groups – what does the
premium market offer which would cost little to add
3. Chain of buyers incl. strategic network
4. Complementary products & services – coffee shop, meal coupons
5. Functional or emotional appeal to buyers
6. Time (Kim & Mauborgne, 2005)
INSIGHT USE UNCLEARINSIGHT USE