Blue OceansBlue Oceans and and

Other BIG Strategic IdeasOther BIG Strategic Ideas

What You Will LearnWhat You Will Learn

• Become familiar with concepts behind Become familiar with concepts behind Blue Ocean StrategyBlue Ocean Strategy

• Learn what MPI has done to apply Blue Learn what MPI has done to apply Blue Ocean concepts to your associationOcean concepts to your association

• Learn about Learn about net creation and open net creation and open innovationinnovation

• Formulate ideas on how you might be Formulate ideas on how you might be able to apply these ideas to your own able to apply these ideas to your own workwork

RedRed OceansOceans represent all industries in represent all industries in existence today. existence today.

They have defined rules, competitors, and They have defined rules, competitors, and market boundaries. market boundaries.

Key words might include Key words might include competitioncompetition, , price price warswars, , market sharemarket share, , commoditization, commoditization,

benchmarking, strategic positioning, value benchmarking, strategic positioning, value addadd..

Blue OceansBlue Oceans represent all industries represent all industries NOT NOT

in existence today.in existence today.

This is undefined market space, otherwise This is undefined market space, otherwise known as OPPORTUNITY.known as OPPORTUNITY.

Key words might be Key words might be value innovation, focus, value innovation, focus, differentiation, creation of demand, new differentiation, creation of demand, new

marketplacemarketplace

Most Most blue oceansblue oceans are created from are created from red red oceanocean companies expanding industry companies expanding industry

boundaries.boundaries.

For example, Cirque du Soleil or For example, Cirque du Soleil or [yellowtail][yellowtail]

(more on this in a bit)(more on this in a bit)

The phrase The phrase “Blue oceans”“Blue oceans” is new, but is new, but the concept is not. Think of what the concept is not. Think of what

industries existed in 1900.industries existed in 1900.

Take 3 minutes…Take 3 minutes…

At your table, brainstorm a list of At your table, brainstorm a list of industries that have emerged since industries that have emerged since

then.then.

Some of them might be…Some of them might be…

automotives, aviation, health care, automotives, aviation, health care, plastics, DVDs, computers, personal plastics, DVDs, computers, personal

entertainment devices (iPods, for entertainment devices (iPods, for example).example).

All of these industries created All of these industries created

new market space.new market space.

The premise is simpleThe premise is simple::

To win in the future, companies must To win in the future, companies must stop competing with each other.stop competing with each other.

The only way to beat the competition is The only way to beat the competition is to stop to stop tryingtrying to beat the competition. to beat the competition.

The business environment in which The business environment in which most business strategy and most business strategy and

management has been based on is management has been based on is changing, evolving or disappearing.changing, evolving or disappearing.

Some of this change is due to Some of this change is due to technology. Other reasons might be technology. Other reasons might be culture, globalization, speed of new culture, globalization, speed of new

information, or the role of information, or the role of demographics in the workplace.demographics in the workplace.

Value innovationValue innovation is the “new” strategic is the “new” strategic logic behind logic behind Blue OceanBlue Ocean Strategy. Strategy.

Instead of focussing on beating the Instead of focussing on beating the competition, you focus on competition, you focus on making it making it

irrelevantirrelevant by creating a leap in value for by creating a leap in value for buyers and creating uncontested market buyers and creating uncontested market

space.space.

Value innovationValue innovation only occurs when only occurs when organizations have aligned innovation with organizations have aligned innovation with

utility, price and costs.utility, price and costs.

The market must be ready to accept the The market must be ready to accept the product, meaning that product, meaning that timingtiming is key. is key.

The focus is on both differentiation and low The focus is on both differentiation and low cost to provide value to both customers cost to provide value to both customers

and the organization.and the organization.

Graph of Value InnovationGraph of Value Innovation

Case study: Cirque du SoleilCase study: Cirque du Soleil

Other circuses focused on:Other circuses focused on:

• Benchmarking the competitionBenchmarking the competition

• High-profile “stars”, which increased High-profile “stars”, which increased costs but who were largely unknown costs but who were largely unknown to the general publicto the general public

• Traditional venueTraditional venue

• Traditional audiencesTraditional audiences

Case study: Cirque du SoleilCase study: Cirque du SoleilCirque du Soleil focused on:Cirque du Soleil focused on: Creation of a hybrid between the circus and Creation of a hybrid between the circus and

the theatrethe theatre Retention of the symbolic and glamorous Retention of the symbolic and glamorous

aspects of circus, such as the tent and the aspects of circus, such as the tent and the more breathtaking aspects, such as acrobatsmore breathtaking aspects, such as acrobats

Incorporation of more comfort, sophistication, Incorporation of more comfort, sophistication, elegance and theatrical plots; this brought elegance and theatrical plots; this brought not only the richness of theatre but a whole not only the richness of theatre but a whole new demographic of customersnew demographic of customers

It looked across market boundaries and It looked across market boundaries and created new ones.created new ones.

The Strategy CanvasThe Strategy Canvas• Captures the current state of play in Captures the current state of play in

the market by detailing the factors the market by detailing the factors players compete on in product, players compete on in product, service and deliveryservice and delivery

• For example, the wine industry For example, the wine industry competes on price per bottle, refined competes on price per bottle, refined image in packaging, marketing image in packaging, marketing strategies, aging quality of wine, strategies, aging quality of wine, prestige of vineyard, complexity of prestige of vineyard, complexity of taste and diverse product rangetaste and diverse product range

Possible Wine Canvas

02468

1012

Price

Image

aging

com

plexit

y

pres

tige

diver

se p

ortfo

lio

easy

to d

rink

acce

ssible

Fun

Competetive Factors

Ran

kin

g S

cale

Quails Gate

Mission Hill

Yellowtail

The Strategy CanvasThe Strategy Canvas• Each factor is plotted on the canvas, Each factor is plotted on the canvas,

with a high score reflecting the level with a high score reflecting the level of investment a specific company of investment a specific company makes in that factor (for example a makes in that factor (for example a high score on price means that the high score on price means that the price per bottle is high)price per bottle is high)

• When you plot all US wineries, they When you plot all US wineries, they score remarkably similarlyscore remarkably similarly

Example of a Strategy Example of a Strategy CanvasCanvas

Blue Ocean Space

The Strategy CanvasThe Strategy Canvas• To differentiate yourself in the To differentiate yourself in the

market place, you must focus on market place, you must focus on alternatives and non-customers to alternatives and non-customers to re-define the marketplacere-define the marketplace

• For example, Casella Wines looked at For example, Casella Wines looked at the strategy canvas and redefined the strategy canvas and redefined the question: How do you make a the question: How do you make a fun and non traditional wine that is fun and non traditional wine that is easy for everyone to drink?easy for everyone to drink?

Case Study: [yellowtail]Case Study: [yellowtail]

• Casella saw that most US consumers Casella saw that most US consumers preferred beer, spirits and pre-preferred beer, spirits and pre-packaged cocktails to winepackaged cocktails to wine

• Consumers saw wine as a turn-off Consumers saw wine as a turn-off due todue to– It was pretentiousIt was pretentious– The taste was too complexThe taste was too complex– It could be intimidatingIt could be intimidating

Case Study: [yellowtail]Case Study: [yellowtail]• They created a wine that broke out of They created a wine that broke out of

the red ocean by creating a wine that:the red ocean by creating a wine that:– Appealed to beer and spirits drinkers by Appealed to beer and spirits drinkers by

being fun and unpretentious as well as to being fun and unpretentious as well as to wine drinkerswine drinkers

– Had a less complex, sweeter and smooth Had a less complex, sweeter and smooth tastetaste

– Was easy to select as it did not focus on Was easy to select as it did not focus on prestige, aging, etc.prestige, aging, etc.

– They eliminated all factors that the wine They eliminated all factors that the wine industry had long competed onindustry had long competed on

Four Actions: Four Actions: Eliminate/Reduce/Raise/Create Eliminate/Reduce/Raise/Create

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

• Which should be Which should be reducedreduced??

• Which should be Which should be raised raised well above well above standard?standard?

• Which factors should be Which factors should be createdcreated that that have not existed before?have not existed before?

3 Characteristics of 3 Characteristics of a Good Strategya Good Strategy

• It is It is focusedfocused; it is not diffused across ; it is not diffused across all potential aspects of the marketall potential aspects of the market

• The shape of the value curve The shape of the value curve divergesdiverges from any potential from any potential competitorscompetitors

• It has a compelling It has a compelling taglinetagline

Your Strategy CanvasYour Strategy CanvasAt your table, choose an industry one (or At your table, choose an industry one (or

more) of you belong to.more) of you belong to.• What industry are you in?What industry are you in?• What factors does it traditionally What factors does it traditionally

compete on? (i.e. price, amenities, etc.)compete on? (i.e. price, amenities, etc.)• Are there any factors that set you apart?Are there any factors that set you apart?• Are there any factors that do not add Are there any factors that do not add

any value and could be dropped?any value and could be dropped?• What could be created to add value?What could be created to add value?

Creation Nets and Open Creation Nets and Open InnovationInnovation

• Open innovation is the concept that Open innovation is the concept that by looking beyond your own by looking beyond your own boundaries, you can gain access to boundaries, you can gain access to better ideas, knowledge and better ideas, knowledge and technology than you could by relying technology than you could by relying on your own resourceson your own resources

• ““Networks of creation”, or Creation Networks of creation”, or Creation Nets are an extension of this conceptNets are an extension of this concept

Creation NetsCreation Nets• Involve many – sometimes hundreds Involve many – sometimes hundreds

or even thousands of people – from or even thousands of people – from diverse backgrounds coming diverse backgrounds coming together, often over the internet, to together, often over the internet, to create knowledge, learn best create knowledge, learn best practices, and build on each other’s practices, and build on each other’s work.work.

““Nobody is as smart as everybody”Nobody is as smart as everybody”William C. Taylor, Founder of Fast CompanyWilliam C. Taylor, Founder of Fast Company

The Positive PressThe Positive Press• For companies, creation nets have For companies, creation nets have

many advantages:many advantages:– The rapid flow of change in today’s The rapid flow of change in today’s

economy makes new knowledge valuable, economy makes new knowledge valuable, as opposed to the past where a private as opposed to the past where a private knowledge base could give value overlong knowledge base could give value overlong periodsperiods

– Greater access to intellectual resourcesGreater access to intellectual resources– Greater access to new and different Greater access to new and different

technologiestechnologies– Ability to tap into knowledge across Ability to tap into knowledge across

traditional knowledge boundaries and traditional knowledge boundaries and industriesindustries

– Creative breakthroughsCreative breakthroughs

The Negative PressThe Negative Press

• Trust can be hard to establishTrust can be hard to establish

• Concerns about proprietary informationConcerns about proprietary information

• Large groups of people working to Large groups of people working to innovate together can be hard to controlinnovate together can be hard to control

• Conflict among participants increases the Conflict among participants increases the more people involvedmore people involved

• Different tolerances for costDifferent tolerances for cost

• Uncertainty on how to create valueUncertainty on how to create value

• Loss of confidence in own abilitiesLoss of confidence in own abilities

Net Creation at WorkNet Creation at Work• Development of iPod was stimulated Development of iPod was stimulated

through a creation net formed by a through a creation net formed by a smaller player in the marketplace, smaller player in the marketplace, PortalPlayerPortalPlayer

• The development of Linux, a The development of Linux, a computer operating system, was computer operating system, was through net creation and involved through net creation and involved companies such as IBM, Intel and companies such as IBM, Intel and Hewlett PackardHewlett Packard

• The discovery of gold in an Ontario The discovery of gold in an Ontario mine at Goldcorp, today considered mine at Goldcorp, today considered the world’s richest minethe world’s richest mine

Net Creation at WorkNet Creation at Work

• Development of the internet itselfDevelopment of the internet itself

““The world’s most important technology The world’s most important technology platform relies on ideas and computer platform relies on ideas and computer

code generated largely by a code generated largely by a decentralized corps of volunteer decentralized corps of volunteer

programmers, most of whom have programmers, most of whom have never met each other and few of never met each other and few of

whom work together in any formal whom work together in any formal setting”setting”

William C. Taylor, Mavericks at WorkWilliam C. Taylor, Mavericks at Work

Net Creation SummaryNet Creation Summary

• Just because you are in charge doesn’t Just because you are in charge doesn’t mean you need to have all the answersmean you need to have all the answers

• Just because people don’t work for you Just because people don’t work for you doesn’t mean that they can’t work with doesn’t mean that they can’t work with you…but you have to invite themyou…but you have to invite them

• No one is as smart as everyoneNo one is as smart as everyone• It is about the “architecture of It is about the “architecture of

participation” (participation” (Tom O’Reilly, O’Reilly MediaTom O’Reilly, O’Reilly Media))

Personal Creation NetworksPersonal Creation Networks

Find a partner:Find a partner:

• How can you utilize this concept either How can you utilize this concept either personally or at work?personally or at work?

• What technology exists that you can What technology exists that you can use?use?

At your table:At your table:

• Share your ideas.Share your ideas.

• Pick one that you can share with the Pick one that you can share with the roomroom