blueoceanstrategy-100403005918-phpapp02

Group/Presentation TitleAgilent Restricted

Date ##, 200X

Blue Ocean Strategy

How to Create Uncontested Market Space and Make the Competition Irrelevant

Facilitators : Yip Khai Biau ([email protected]) & Lieu Yoke Sun

All Rights Reserved – KB Yip/YS Lieu Page : 2

Blue Ocean Strategy (BOS)

Introduction to BOS

BOS Tools : Strategy Canvas & E.R.R.C.

Awakening : As-Is Strategy Canvas

Exploration : Reconstruct Market Boundaries

Strategizing : To-Be Strategy Canvas

Actualization : Identify actions to actualize the strategies

Conclusion

Facilitators : Yip Khai Biau ([email protected]) & Lieu Yoke Sun


Objectives

Develop understanding of Blue Ocean Tool Sets and how to apply them effectively Strategy Canvas ERRC

Perform As-Is Analysis to Compare Current Strategy of XYZ vs Competitors

Explore Pathways to Breakaway from Market Boundaries to look for Bigger Playing Field

Brainstorm and Agree on the To-Be Strategy for XYZ


Introduction to Blue Ocean StrategyIntroduction to Blue Ocean Strategy

History & Background

Defining Red & Blue Ocean

Six Principles of BOS

Reach Beyond Existing Demand

Value Innovation


History & BackgroundHistory & Background• Authored by W. Chan Kim and Renee Mauborgne in

2005.

• Based on a study of 150 strategic moves spanning more than 100 years and 30 industries.

• BOS is the simultaneous pursuit of differentiation and low cost.

• The aim of BOS is not to out-perform the competition in the existing industry, but to create new market space or a blue ocean, thereby making the competition irrelevant.

• BOS offers systematic and reproducible methodologies and processes in pursuit of innovation by both new and existing firms.

• BOS frameworks and tools are designed to be visualin order to not only effectively build the collective wisdom of the company but also to effectively execute through easy communication.


WhatWhat’’s s RedRed, What, What’’s s BlueBlue??

• Create uncontested market space

• Make the competition irrelevant

• Create & capture new demand

• Break the value- cost trade off

• Simultaneous pursuit strategy ofdifferentiation and low cost

• Create uncontested market space

• Make the competition irrelevant

• Create & capture new demand

• Break the value- cost trade off

• Simultaneous pursuit strategy ofdifferentiation and low cost

Blue Ocean StrategyBlue Ocean Strategy

• Compete in existing market space

• Beat the competition

• Exploit existing demand

• Make the value-cost trade off

• Align strategy choice of differentiation or low cost

• Compete in existing market space

• Beat the competition

• Exploit existing demand

• Make the value-cost trade off

• Align strategy choice of differentiation or low cost

Red Ocean StrategyRed Ocean Strategy

Defining Red and Blue OceanDefining Red and Blue Ocean


Examples of Red and Blue Ocean


Six Principles of Blue Ocean StrategySix Principles of Blue Ocean Strategy

1. Reach beyond existing demand

2. Reconstruct market boundaries

3. Focus on the big picture, not the numbers

4. Get the strategic sequence right

5. Overcome key organizational hurdles

6. Build execution into strategy

Formulation PrinciplesFormulation Principles Execution PrinciplesExecution Principles


Reach Beyond Existing DemandReach Beyond Existing Demand

First Tier: “Soon-to-be” non-customers who are on the edge of your market, waiting to jump ship

Second Tier: “Refusing non-customers who consciously choose against your market.

Third Tier: “Unexplored” non customers who are in markets distant from yours.

FirstTier

SecondTier

ThirdTier

Your Market

Blue Ocean

Blue Ocean – Go for the Largest Catchment of Non-Customers


Example Example –– [yellow tail][yellow tail]

Traditional Wine :

• An elite, refined image in packaging with heavy use of wine terminology.

• Aging quality.

• Prestige of a vineyard and its legacy.

• Complexity and sophistication of a wine’s taste, such as tannins and oak.

• A diverse range of wines to cover all varieties of grapes & consumer preferences

[yellow tail] :

• No jargon.Simple and nontraditional label.

• Aging is not important.

• Vibrant and fun.

• Sweeter and easier to drink.

• Only one Red (Shiraz) and one White (Chardonnay).


FirstTier

SecondTier

ThirdTier

Your Market

Example Example –– [yellow tail][yellow tail]

Tier 1 – Wine drinker market

Tier 2 – “Easier to drink” market, eg., beer, cocktails, soft-drink

Tier 3 – Anyone that drinks water

[yellow tail] created a Blue Ocean by making its wine

more appealing to the bigger population

Your Market

[yellow tail] did not focus on the wine market only

FirstTier

SecondTier

ThirdTier

Red Wine

X


Circus

TheaterPerformance

Entertainment

CircusX

Reach Beyond Existing DemandReach Beyond Existing Demand

Circus

TheaterPerformance

Entertainment

CircusX


Other Males

GirlsEveryone

Else

YoungAntisocial

Males

Electronic Game Industry

Nintendo WiiNintendo created a Blue Ocean by reducing the complexity, add the

ease of use and fun!

Example Example –– [Nintendo][Nintendo]

Other Males

GirlsEveryone

Else

YoungAntisocial

Males


Value Innovation – The Cornerstone of BOS

Cost

Buyer Value

Cost Saving – Eliminate & Reduce Competing Factors

Buyer Value Lifted – Raise & Create New Elements

Value innovation places equal emphasis on value and innovation.

Value innovation is a new way of thinking about and executing strategy that results in the creation of a blue ocean.

The creation of blue oceans is about driving costs down while simultaneously driving value up for buyers.

ValueInnovation

Back


Strategy Canvas

Eliminate-Reduce-Raise-Create (ERRC) Grid

Blue Ocean Strategy ToolsBlue Ocean Strategy Tools


What is Strategy Canvas?What is Strategy Canvas?

Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor 6 Factor 7 Factor 8

Competing Factors

Offe

ring

Leve

l

Your Company

Competitor 1

Competitor 2

High

Low

Mid

Degree of which each competitor offers/invests in each factor

Factors that the industry competes & invests, also potential areas where customer value could be created.

Graphical Representation of Strategy+

Big Picture View +

Landscape Scanning +

Relative Positioning vs. Competitors

Value Curves


4 Actions Framework4 Actions Framework

ReduceWhich factors should be reduced well below the

industry's standard?

EliminateWhich of the factors that

the industry takes for granted should be

eliminated?

CreateWhich factors should be created that the industry

has never offered?

A NewValueCurve

A NewA NewValueValueCurveCurve

RaiseWhich factors should be

raised well above the industry's

Strategically Reduce Cost

Strategically Invest in


CreateCreateReduceReduce

RaiseRaiseEliminateEliminate

EliminateEliminate--ReduceReduce--RaiseRaise--Create Create (ERRC) Grid(ERRC) Grid

Back


Activity 1 (45 min)

• Split into 3 Groups

• Review As-Is Strategy Canvas (30 min)

• Presentation (5 min each, 15 min total)

Activity 2 (30 min)

• Agree to ONE As-Is Strategy Canvas

Activity 3 (90 min)


• Use 6 Paths Framework, reconstruct market boundaries & identify Divergent Factors (60 min)

• Presentation (10 min each, 30 min total)

Activity 4 (30 min)

• Agree to Top 3-5 Divergent Factors

Activity 5 (90 min)


• Use ERRC to construct the Desired Value Curve (60 mins)

• Presentation (10 min each, 30 mins total)

Activity 6 (30 min)

• Agree to ONE To-Be Strategy Canvas

Formulating Blue Ocean StrategyFormulating Blue Ocean Strategy

Awakening : As-Is Analysis

Exploration : Reconstruct Market

Boundaries

Strategizing : To-Be Strategy

Canvas

120 mins 120 mins75 mins


Activity 1 & 2 : AsActivity 1 & 2 : As--Is AnalysisIs AnalysisReview XYZ AsReview XYZ As--Is Strategy CanvasIs Strategy Canvas

0

0.5

1

1.5

2

2.5

3

3.5

4

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Brandin

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Lifes

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ulture

Competing Factors

Offe

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Leve

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XYZCompetitors

High

Low

Mid

Back


Reconstruct Market BoundariesReconstruct Market Boundaries

Across Alternate Industry

Across Strategic Groups

Across Buyer Groups

Across Complementary Scope of Products & Services

Across Functional Emotional Orientation

Across Time

There are 6 pathways to reconstruct the market boundaries

Red Ocean

Blue Ocean


Across Alternative IndustriesAcross Alternative Industries

Commercial Airlines

Corporate Jet

50 hrs/yr Smaller Airplanes,

Airport,Less Staff

1/16 Ownership@ $375k

Alternatives include products or services that have different functions and forms but the same purpose.

Point-to-point, Faster, Less Hassle, Increase Productivity

CommercialAirline

CorporateJet

Good

Bad

• Pay per use

• No Maintenance

• Less Travel Time

• Less Hassle

• P2P

• Not P2P

• High Travel Time

• Security Concern

• High Cost

BOS Example –


Price Need forcustomer's to

manage aircraft

Deadheadcosts

Speed of totaltravel time

Ease of travel Flexibility andreliability

In- f light serviceLow

High

Commercial Airlines

NetJets' Value Curve

Private Jet


RaiseRaise

• Speed of travel time• Ease of travel• Flexibility and Reliability• In flight service

EliminateEliminate

• Price• Need for customers to

manage aircraft• Deadhead costs

Strategy Canvas Strategy Canvas -- NetJetsNetJets


BOS Example –

Now Everyone Can Fly!Now Everyone Can Fly!

Price of Coach & Speed of Flight

P2P Direct Flight No Frill – User Pay Budget Travel

Package

Fast Expensive Better Services Flight Connections

Slow Cheap Point to Point

Conventional Airline Coach

Across Alternative IndustriesAcross Alternative Industries

Across Alternative Industries


Strategy Canvas Strategy Canvas -- Air AsiaAir Asia

CreateCreate

• Web Registration• Express Boarding• Budget Hotel

ReduceReduce

RaiseRaise

• Quality of Safety• Point to Point Direct

Flight

EliminateEliminate

Price Competition Seat Selection Free Food & Beverages Air Ticket VIP Lounge Flight Connection

Air Fare Capital Stopover time Staffing (ground and

air)

Price

Price C

omp

Seat S

electn

Food Supply

Air Ticke

t

VIP Lounge

Flight C

on

Capital

Stopover T

ime

Staffin

gSafe

ty

P2P D

irectF

Web Reg

Xpress B

oardg

Budget Hotel

Offe

ring

Leve

l

Low

High

Other Local Airline

Air Asia

Land Transportation





Across Buyer Groups



Across Time


Red Ocean

Blue Ocean


Across Strategic GroupsAcross Strategic Groups

Strategic Groups –Groups of companies within an industry that pursue a similar strategy.

E.g., Automobiles – Luxury (Mercedes, BMW), Economical (Toyota, Proton).

Traditional Health Club

Home Exercise

WomanlyFun

Easy to UseMachine

PeerSupport

TraditionalHealth Club

Home Exercise

Good

Bad

• Full range exercise and sporting options

• Low Cost

• Privacy

• Expensive.

• Not easily accessible.

• Complicated.

• Lack of Privacy

• Low motivation

Affordable

>10k Outlets &

> 4M members

(as of Oct,

2006)

BOS Example –


CreateCreate

• Womanly fun atmosphere

ReduceReduce

RaiseRaise

• Non threatening same sex environment

EliminateEliminate

Price Amenities Workout equipment Availability of Instructors

Price Amenit ies WorkoutEquipment

Workout Time Availabilt y ofinstructors

Environmentencouraging

discipline andmotivation in

exercise

Nonthreateningsame- sex

environment

Convenience Womenly funatmosphere

Low

High

Home Exercise Program

Curves

Traditional Health Clubs

Strategy Canvas Strategy Canvas -- CurvesCurves


Economical Less Hygienic Less Appealing Environment

Expensive Hygienic Good Ambience &

Relaxing Environment

Rightly Priced Hygienic Better Environment Emotional Appeal

Across Strategic GroupsAcross Strategic GroupsBOS Example – OldTown


No Frill Cheap - Pay For What You Use! Optional Add-ons:

Limited service, basic Low on price, high on personality Walk in

Luxury Expensive Service Facilities

Nice Sleep!Nice Sleep!Hot Shower!Hot Shower!

4/5 Stars Hotels

Across Strategic GroupsAcross Strategic GroupsBOS Example – Tune Hotel

Backpacker Hostels

Cheap Sleep & Go





Across Buyer Groups



Across Time


Red Ocean

Blue Ocean


Across Chain of BuyersAcross Chain of Buyers

Corporate Jet

There is a chain of ‘buyers’ who are directly or indirectly involved in the buying decision.

Purchasers – pay for the product or service Users – use the product or serviceInfluencers – influence the decision in the purchase

Easy To Use

No Unpleasant

Feeling

Now

Request

Insulin Industry

Better Pricing

Better Medicine

Traditionally

Prescribe

Example : Novo Nordick - from insulin producer to a diabetes care company

BOS Example –


Everyone is a gamer!Everyone is a gamer!

Reduced Graphics

Wii Fit

Everyone can play!

Increased motion control

Nintendo outsold Sony and Microsoft 6:1. Can’t keep product on shelves!

Across Chain of BuyersAcross Chain of Buyers

Family Fun

BOS Example – Nintendo Wii


Strategy Canvas : Nintendo WiiStrategy Canvas : Nintendo Wii


RaiseRaiseEliminateEliminate

Price Graphics Physics Online Pay

Price

Graphic

s

Physic

s

Online

Pay

Comple

xity

Movie

Game L

ibrary

Ease o

f Use

Intera

ction

/Grou

p Fun

Magic

Wan

dLow

HighNintendo Wii

Game Industry

• Complexity• Movie

• Interaction/Group Fun• Magic Wand

• Game Library• Ease of Use





Across Buyer Groups



Across Time


Red Ocean

Blue Ocean


Across Complementary Products & ServicesAcross Complementary Products & Services

Corporate Jet

Define the total solution buyers seek when they choose a product or service.

Think about what happens before, during, and after your product is used.

PurchasePurchase DeliveryDelivery SupplementaSupplementaryry

MaintenancMaintenanceeUseUse DisposalDisposal

Example :

Traditional : Buses made from Steel

• Low Initial Price• Less Space• More Fuel • High •High

NABI : Buses made from Fibre Glass

• High Initial Price • More Space• Less Fuel

• Low • Low

BOS Example – NABI


Strategy Canvas Strategy Canvas -- NABINABI

CreateCreate

• Aesthetic design• Customer friendliness

ReduceReduce

RaiseRaise

• Environmental friendliness

EliminateEliminate

Corrosion Maintenance cost Fuel consumption

Initial purchaseprice

Corrosion Maintenancecost

Fuelconsumption

Environmentalfriendliness

Aestheticdesign

Customerfriendliness

Low

High

NABI

Average U.S Transit Bus


Across Complementary Products and ServicesAcross Complementary Products and Services

Before During After

PurchasingProcess

Book Selection Sit Down Browse Through

Selection Attend an event

Go to Coffee Shop Read the Book Book Signing Buy DVD, Games, Gift

Carrying bag

DVD & GamesEvent : Story Telling for Kids Book Signing

Book Selection

Customer Enquiry Paying

Immediate Enjoyment!

BOS Example: Operated 798 stores in all 50 U.S. statesand the District of Columbia, as well as stores in Australia and Canada


Across Complementary Products and ServicesAcross Complementary Products and ServicesBOS Example -

• Largest EMS (Electronics Manufacturing Services) in the World.

• Ranked 132 at Fortune Global with $51B revenue, higher than Intel (188), Motorola (200), Flextronics (292).

• Employs 550,000 employees worldwide with design centers/factories at >10 countries.

• Make Apple Mac/iPod/iPhone, Intel motherboards, Dell, HP, Sony PlayStation, Nintendo Wii, Microsoft Xbox, cell phones for Nokia/Samsung/Motorola/LG/Sony-Ericsson.

• Shenzhen facility at Longhua

• Covers about a square mile.

• Has its own fire brigade, hospital, swimming pool, restaurants, banks, supermarkets, internet cafe.


BOS Example BOS Example -- FoxconnFoxconn

Logistics & Distribution

Design

Prototyping

VI Part Sourcing & Production

Mass Production

Vertical Integration (VI) Model

Repair & Servicing

Sourcing

InventoryControl

Logistics

Design

Prototyping

Mass Production

Distribution

Repair & Servicing

Conventional EMS


Strategy Canvas Strategy Canvas -- FoxconnFoxconn

Cost Competiti

veness

Technology

Process

Delivery

Quality

Vertical In

tegration

Low

High

Foxconn

Other EMSes





Across Buyer Groups



Across Time


Red Ocean

Blue Ocean


Across Functional or Emotional AppealAcross Functional or Emotional Appeal

Some industries compete principally on price and function - their appeal is rational.

Other industries compete largely on feelings - their appeal is emotional.

• Pricey• Extras• Feelings

• Simple• Low Cost• Low Price

QB House• Emotional Service -> None• Hair Wash -> Air Wash• $9

Traditional Hair Saloon

• Hot Towels• Message• Tea/Coffee• Special Hair /Skin

Treatments• $27 - $45

1996 2003

Rev

Functional Emotional

BOS Example – QB House


Low Fee

Low Recognition of Education Quality

Conventional Education System

Many Environmental Constraints

Local Market

High Fee

WW Recognized Certification Branches in UK, Africa

& China Collaboration w other

Universities

Open Education System

Free & Creative Environment

Diverse Student Base

Fun Learning

Exposure Global Classroom

6000 students from 90 countries Vibrant, multicultural and international

Academic Exchange

Encourage Entrepreneurship

Across Multiple Pathways

Strategic Group

• Functional -> Emotional

Institute / College

Across Functional or Emotional AppealAcross Functional or Emotional AppealBOS Example –


Fees

Foreign

Cert S

uperi

ority

Enviro

nmen

tal C

onstra

intsFee

Com

petiti

on

Student

Constr

aints

Globali

zatio

n Com

petiti

onAsia

n Cult

ureCrea

tive T

hinkin

gFlex

ibility

Cult

ureExp

osure

Entrep

reneurs

hip

Uncon

ventio

nal T

each

ing M

ethod

Ecosy

stem

Low

High

Lim Kok Weng

Private Colleges

CreateCreate

Unconventional Teaching Method

Ecosystem

ReduceReduce

RaiseRaise

• Globalization Competition

• Asian Culture• Creative Thinking• Flexibility Culture• Exposure• Entrepreneurship

EliminateEliminate

Foreign Cert Superiority

Environmental Constraints

Student Constraints

Fee Competition

Strategy Canvas Strategy Canvas -- LimKokWengLimKokWeng





Across Buyer Groups



Across Time


Red Ocean

Blue Ocean


Across TimeAcross TimeBOS Example – iTune

1999

Napster started online music file sharing service

2003

> 2 billion illegally music flies were being traded every month

Apple launched iTunes online music store

iTunes had sold > 4 billion songs 20 million songs

on Dec 25, 2007

2008

Apple teamed up with major Music & Picture Companies

Sell Individual song / entire album

30 sec free listening Strategically price


Across TimeBOS Example ::

A video sharing website for upload, view and share video clips

User can post video 'responses' and subscribe to content feeds

Created in mid-February 2005 by three former PayPal employees

Uses Adobe Flash technology to display a wide variety of user-generated video content

Acquired by Google in Nov 2006 for $1.6B

As of Apr 2008, hosting 83.4 million videos and 3.75 million user channels> 100 million videos were being watched every day


Strategy Canvas Strategy Canvas -- YouTubeYouTube

Need f

or HTML k

now-ho

wHas

sleFee

s

Upload

/downlo

ad tim

e

Webspa

ce al

locatt

ed pe

r use

r

Eas-of

-use t

echno

logy

Ready

-mad

e web

site

FLV te

chno

logy

Social N

etwork

ing

Videa t

ags &

searc

h

Low

High

YouTube

Ordinary Webhosting

CreateCreate

• Ease of Use technology

• FLV technology• Ready-made website • Social networking• Video tags & Search

ReduceReduce

RaiseRaise

• Web space allotted per user

EliminateEliminate

• Need for HTML know-how

• Hassle of undergoing numerous steps

• Fees

Uploading / downloading time


Look across TimeLook across Time

Climate Change

Weird Science

Future of the Individual

InnovationEconomy

Next Workforce

LongevityMedicine

Fueling the Future

Globalization

US- China Future

Securing the Future

Ten Trends of

the ExtremeFuture

From the Book “Extreme Future”


From HeadFrom Head--toto--Head Competition to Blue Ocean CreationHead Competition to Blue Ocean Creation

Participates in shaping external trends over time

Focuses on adapting to external trendsas they occurTimeTime

Rethinks the functional-emotional orientation of its industry

Focuses on improving price performance within the functional -emotional orientation of its industry

FunctionalFunctional--Emotional Emotional OrientationOrientation

Looks across to complementary and service offerings

Focuses on maximizing the value of product and service offerings within the bounds of its industry

Scope of Product or Scope of Product or Service OfferingService Offering

Redefines the industry buyer group

Focuses on better serving the buyer groupBuyer GroupBuyer Group

Looks across strategic groups within industries

Focuses on competitive position within strategic groupStrategic GroupStrategic Group

Looks across alternative industriesFocuses on rivals within its industryIndustryIndustry

Blue Ocean CreationHead-To-Head Competition


Traditional Graveyard NV Multi Corporation

BOS Example – NV Multi Corporation

Total Peace of MindTotal Peace of Mind

Economical Unpleasant Environment Pollution No Maintenance

Expensive Pleasant Environment 1 Stop Service After Sales Service

Across Multiple PathwaysAcross Multiple Pathways


Across Across Alternative Alternative IndustriesIndustries

Across BuyerAcross BuyerGroupsGroups

ComplementaryComplementaryProducts & ServicesProducts & Services

Functional Functional to Emotionalto Emotional

White LadiesA Service Respect For Woman

Prayer Service

Professional Band

Service Team

• Notifying Friend & Relatives

• Thank You Cards• Memory Lane• Video & Slideshow

• Bereavement Product

• Insurance Protection• Capital Gain

• Buyer -> User & User -> Buyer• Pet Memorial Garden• VIP Memorial Garden

BOS Example – NV Multi Corporation Across Multiple PathwaysAcross Multiple Pathways


Strategy Canvas Strategy Canvas -- NV Multi CorporationNV Multi Corporation

Price

Price C

ompeti

tion

Fear

Taboo

s

Sophis

ticate

d Proc

ess

Pollut i

on

Well Lay

out C

emete

rySta ff A

ppea

rance

Pre-arr

ange

d

One Stop

Funera

l Serv

ices

White A

ngels

Luxu

ry Cem

etery

Custom

izable

Burial

Plots

Care pl

an

Low

High

NV Multi

Private Cemetary

Public Cemetery

CreateCreate

• White Angels• Luxury Cemetery• Customizable

Burial Plots• Care Plan

ReduceReduce

RaiseRaise

• Well Layout Cemetery

• Staff Appearance• Pre-arranged• One Stop Funeral

Services

EliminateEliminate

• Price Competition• Fear• Taboos

Sophisticated Process

Pollution


0

0.5

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1.5

2

2.5

3

3.5

4

4.5

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Link

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Program

& C

areer

PathFac

ilitato

rsFac

ilities

Brandin

gLif

estyl

e/Cultu

reFac

tor 9Fac

tor 10

Factor 1

1

Competing Factors

Offe

ring

Leve

l

XYZ

CompetitorsHigh

Low

Mid

Identify the Divergent Factors

that Differentiate XYZ from Competitors

Activity 3 & 4 : Reconstruct Market BoundariesActivity 3 & 4 : Reconstruct Market BoundariesIdentify Divergent Factors


Activity 3 & 4 : Reconstruct Market BoundariesActivity 3 & 4 : Reconstruct Market BoundariesIdentify Divergent Factors

DescriptionDivergent Factor

Sub-Group :

Note : Each sub-group must determine at least ONE Divergent Factor.

Back


Eliminate Create

Reduce Raise

Divergent Factors X = Y =Z =

Activity 5 & 6 : ToActivity 5 & 6 : To--Be Strategy CanvasBe Strategy CanvasConstruct Desired Value Curve for XYZ


Mid

FeeCompetencies

IndustrialLinkage

Program& Career Path

FacilitatorsInstitutionalRecognition

High

Low

Mid

High

Low

Facilities

Activity 5 & 6 : ToActivity 5 & 6 : To--Be Strategy CanvasBe Strategy CanvasConstruct Desired Value Curve for XYZ

Create

Divergent Factors X = Y =Z =

Raise

Quality

Talent

Reduce

TechnologyProcess

Eliminate

Competencies

X Y Z

Existing Value Curve

New Value Curve

Lifestyle/Culture


Three Characteristics of a Good StrategyThree Characteristics of a Good Strategy

1. Focus

2. Divergence

3. Compelling TaglineNow Everyone Can Fly!Now Everyone Can Fly!


Barriers to ImitationBarriers to Imitation

Does not Make Sense based on Conventional

Strategic LogicNBC, CBS and ABC rediculedthe idea of 24x7 real time news

without star broadcasters

Brand Image ConflictsChanel, CD, etc could not imitate Body Shop as it would signal an

invalidation of their current business models

Economies of ScaleHigh volume generated by a

value innovation leads to rapid cost advantages

Political, Operational and Cultural Changes

Major revisions in routing planes, retraining, changing

marketing/pricing/culture. Took MAS 6 years to come up Firefly

1st to MarketWhen a company offers a leap in value, it rapidly earns brand buzz

and a loyal following in the marketplace

Natural MonopolySize of market does not make

sense to support another player

Back


Conclusion: Conclusion: Focus on the Big Picture, not the NumbersFocus on the Big Picture, not the Numbers

Awakening Exploration Strategy Fair Communication

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

Draw your To Be Strategy Canvasbased on insights

from field observations

Get feedback on alternative strategy

canvases from customers, competitors’

customers and non customers

Distribute your before- and-after

strategic profiles on one page for easy

comparison

Support only those projects and

operational moves that allow your

company close the gaps to actualize the new strategy

Use feedback to build the best 'to be'

future strategy

See which factors you should

eliminate, create or change Back


Get the Strategic Sequence RightGet the Strategic Sequence Right

BuyerUtility Price Cost Adoption

HurdlesCommercially Commercially

Viable Viable Blue Ocean IdeaBlue Ocean Idea

Is there exceptional buyer

utility in your business idea?

Is your price easily accessible

to the mass of buyers?

Can you attain your cost target to

profit at your strategic price?

What are adoption hurdles

in actualizing your business idea? Are you

addressing them up front?

Cost Price Utility AdoptionRed Ocean Sequence


Buyer Utility MapBuyer Utility Map

Customer

Productivity

Environmental Friendliness

Fun and Image

Risk

Convenience

Simplicity

6

Disposal

5

Maintenance

4

Supplement

3

Use

2

Delivery

1

Purchase

The

Six

Util

ity L

evel

s

The Six Stages of the Buyer Experience Cycle

How long to find the product you

need?

Is place of purchase

attractive & accessible?

How secure is the transaction environment?

How rapidly can you make a purchase?

How long to get the product delivered?

How difficult to install the new

product?

Do buyers have to arrange delivery

themselves?

Training or expertise

assistance required?

Easy to store when not in

used?

How effective are features

and functions?

Overcharged with bell and

whistles?

Need other products to

make it work?

How much time do they take?

How much pain do they

cause?

How easy are they to obtain?

Require external maintenance?

How easy to maintain and

upgrade?

How costly?

Create waste items?

Legal or environmental

issue of the product

disposal?

Create waste items?

How easy to dispose?


Buyer Utility Map Buyer Utility Map –– XYZXYZ’’ss ToTo--DoDo

Customer

Productivity

Environmental Friendliness

Fun and Image

Risk

Convenience

Simplicity

6

Disposal

5

Maintenance

4

Supplement

3

Use

2

Delivery

1

Purchase

The

Six

Util

ity L

evel

s

The Six Stages of the Buyer Experience Cycle

HR V.I.

Insourcing

Global Guru


Strategic PricingStrategic Pricing

• Conventional – Test water with price insensitive customers. Drop price over time to attract mainstream buyers.

• BOS Strategic Pricing – Start with Pricing to capture Mass Market.

• Why ?• Volume gives Economy of Scale. E.g., Microsoft Windows XP.• All or Nothing. E.g., eBay.• Lack of Excludability would give rise to Free-Riding. E.g., Air Asia, OldTown.

• An offering’s reputation must be earned from Day One => Buyers can’t refuse.


Price Corridor of the MassPrice Corridor of the Mass

1. Identify the Price Corridor of the mass

2. Specify a Price Level within the Price Corridor

Three alternative product/service types:

Size of circle is proportion to number of buyers that product/service attracts

Different Form and Function, Same Objective

Different Form

Same FunctionSame Form

Upper-level pricing

Mid-level pricing

Low-level pricing

Price Corridor of the Mass

High degree of legal and resource protection Difficult to Imitate

(E.g., Dyson)

Some degree of legal and resource protection

Low degree of legal protectionEasy to Imitate(E.g., Air Asia)


Mid to Lower Strategic PricingMid to Lower Strategic Pricing

Suitable for companies with no patent and asset protection (e.g., expensive production factory).

• Their Blue Ocean offering has high fixed costs and marginal variable costs.

• Their attractiveness depends heavily on network externalities (all-or-nothing proposition such as eBay).

• Their cost structure benefits from steep economies of scale and scope. Volume brings with it significant cost advantages.


Profit Model of BOSProfit Model of BOS

The Target Profit

The Strategic Price

The Target Cost

Pricing Innovation

Streamlining and Cost Innovative Partnering

• Metal/leather -> plastic

• 150 -> 51 parts

• Cheaper assembly

• 1500 partners over 50 countries


Overcome Key Organizational HurdlesOvercome Key Organizational Hurdles

Cognitive Cognitive HurdleHurdle

MotivationalMotivationalHurdleHurdle

ResourceResourceHurdleHurdle

Political Political HurdleHurdle


Political

Leveraging angels- Angels = those who have the most to gain

from the strategic shift

Silencing devils- Devils = those who have the most to lose from it

Getting a consigliere on their top management team- Consigliere = politically adept but highly respected insider who knows in advance all the land mines, including who will fight you and who will support you

Motivational

Focus on ‘kingpins’ – the key influencers

Fishbowl management of kingpins- Kingpins’ actions and inactions are made as transparent to others as are fish in a bowl of water

Atomization- Break down overall strategic objective into bite sized chunks; different levels understand their goal

Cognitive

Ride the electric sewer- Experience first hand the ‘real situation on the ground’

Meet with Disgruntled Customers- ‘You can’t outsource your eyes’- Get feedback from biggest critics

Resource

Hot spots- Low resources input but high potential performance gains

Cold spots- Activities that have high resource input but low performance impact- Redistribute resources to hot spots from cold spots

Horse trading- Swap resources around to where it is needed

Toppling the 4 Hurdles to ActionsToppling the 4 Hurdles to Actions

Sewer – Underground pipe carrying drainage water or waste

Bring those in denial to feel the pain and meet the customers

Where are XYZ’s Hot spots and Cold spots ?

Revenue vs Resource ?

Beside headcounts, what other resources can you trade ? Meeting room ?

Who are your kingpings ?

What review/metrics do you use ?

How do we breakdown the 3 differentiators into sizeable chunks?

Who will align the most with XYZ ? Who will fight with XYZ ?

What can you lobby to become your Godfather ?


Build Execution into StrategyBuild Execution into Strategy

Fair ProcessEngagementExplanation

Expectation clarity

Trust &Commitment“I feel my opinion counts.”

VolunteerCooperation“I’ll go beyond

the call of duty.”

Exceeds ExpectationSelf-Initiated

Strategy Formulation Process

Attitude

Behavior

Strategy Execution


Barriers to ImitationBarriers to Imitation

Does not Make Sense based on Conventional

Strategic LogicNBC, CBS and ABC rediculedthe idea of 24x7 real time news

without star broadcasters

Brand Image ConflictsChanel, CD, etc could not imitate Body Shop as it would signal an

invalidation of their current business models

Economies of ScaleHigh volume generated by a

value innovation leads to rapid cost advantages

Political, Operational and Cultural Changes

Major revisions in routing planes, retraining, changing

marketing/pricing/culture. Took MAS 6 years to come up Firefly

1st to MarketWhen a company offers a leap in value, it rapidly earns brand buzz

and a loyal following in the marketplace

Natural MonopolySize of market does not make

sense to support another player

Back


AcknowledgementAcknowledgement

Professor Kim and Mauborgne for enlightening us with such a great book.

You All, for being such a wonderful audience !


Back UpBack Up



So, are Red Ocean Strategies Worthless?So, are Red Ocean Strategies Worthless?NO!NO!

1. A company must master its traditional markets using conventional strategic planning tools.

- ‘It will always be important to swim successfully in the red ocean by out competing rivals. Red oceans will always matter and will always be a fact of business life’.

- But ‘to focus on the red ocean is therefore to accept the key constraining factors of war- limited terrain and the need to beat an enemy to succeed – and to deny the distinctive strength of the business world: the capacity to create new market space that is uncontested.’

2. But to sustain high performance, companies must create their own blue oceans, and make the competition irrelevant!

- But blue oceans are largely uncharteda) no analytic fireworks to guide its creation and implementation,b) no principles to effectively manage risk,c) therefore too risky for managers to pursue.

The book provides practical examples and guides to create blue oceans.


Mapping the blue ocean strategiesFrom a strategic point of view, the 16th edition of Witsa's World Congress on Information Technology (Witsa's WCIT 2008) is conceived using the "blue ocean" strategy methodology. WCIT 2008 is constructed from the ground up to be similar to previous editions, primarily from the point of view of its focus on the global impact of ICT. Yet it is significantly different because of the collection of multiple events that are held concurrently. The former gives it continuity while the latter brings additional depth to an outstanding series that started with the first World Congress in 1978. Creating "blue oceans" is a dynamic process of strategising and execution. It is also about doing the right thing at the right time. At first, the organising committee needs to establish the ultimate goals, which must be achieved within a realistic time frame. Overall, there are threephases of development, which span two years. The phases include fundraising, programme formulation and production. At each phase, there are specific strategies being worked out and execution plans being carried out based on the "eliminate-reduce-raise-create" grid. This "E-R-R-C" grid mapped out the ultimate "blue ocean" framework for organising the WCIT 2008. With this framework, the organisingcommittee managed to work out a unique WCIT 2008 strategy canvas for achievements. The strategy set out action plans to eliminate whatever that is redundant, outdated and trivial to the overall organisation of the event. It also eliminated many challenges to minimiseoperating cost and, at the same time, raise overall quality and create unique value propositions.

World Congress on Information Technology (WCIT) 2008

• A premier global ICT forum that brings together global leaders in business, government and academia.

• Held at the Kuala Lumpur Convention Centre on May 18 – 22, 2008, 5 days-event.

• Themed “The Global Impact of Information and Communications Technology: Enable Businesses, Empower Societies, Enrich Economies”,

• Very successful event, drew more than 2,500 delegates from over 80 countries!

Successful Application of BOSSuccessful Application of BOS

Source : The Edge DailyTitle : 19 May 2008 CEO's Laptop: All set for a most prestigious event by David WongDavid Wong - Pikom chairman and group CEO of SnT Global Sdn Bhd


Successful Application of BOSSuccessful Application of BOSNintendo WiiNintendo Wii

Documents

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