Conclusion: The Sustainability and Renewal of Blue Ocean Strategy
Conclusion: The Sustainability and Renewal of Blue Ocean StrategyTeam 1: Adrienne Collins, Jessica Drummond, Mark Beal, Mario Santos, Michael Sanchez, Spencer Thomas, Alec Wegmann, Chad HensleyMaintaining a healthy position Creating a blue ocean isnt an achievement, but a process.
Success brings imitatorsOnce a company proves a blue ocean successful, it is only a matter of time before others attempt to hop on the bandwagon.
It is only a matter of time.
Current ocean turning red?As the company and its early imitators succeed and expand the blue ocean, more companies will eventually jump in.
This raises the question:
When should a company reach out to create another blue ocean?
Barriers to ImitationSome can be operational, others cognitive.BOS will last 15-20 years without any real challenges.Southwest Airlines, Cirque du Soleil, Federal ExpressSome Imitation BarriersValue innovation just doesnt make sense to competition when using conventional logic.CNN 24 hrs vs. NBC/CBS/ABC being nightlyCalled Chicken Noodle News by the industryBrand image conflict can create a sense of invalidationThe Body Shop stayed away from beautiful models and the idea of eternal youth.
Imitation Barriers of Cracker BarrelOld fashioned, down home, 1930s styled theme cannot be copied by others.Country store idea doesnt make sense to others in the restaurant industry.Consumer can recreate the atmosphere at home with pancake batter and syrup sold at the country store.
Sustainability of Imitation Barriers cont.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.Barriers to ImitationNetwork ExternalitiesThink of Metcalfe's Law (mgt 3370) Robert Metcalfe said the usefulness of a network improves by the square of the number of nodes on the network. Translation: The Internet, like telephones, grows more valuable as more join in. This is how Ebay grew so profitable so fast.
Barriers to ImitationPoliticspolitics get in the way when imitating a BOS requires companies to make substantial changes to their business practicesex: SW Airlines created a service that offered the speed of air travel with the cost & flexibility of driving.imitating this strategy would call for major revisions in routing planes, pricing, marketing, staff training, and culture.Offering A Leap In ValueEarns brand buzzLoyal following in the marketplaceRarely overtaken by competitors large advertisingCracker BarrelLook to attract brand loyal travelersAlso offer retail store (Convenient)
12Microsoft Money vs. Quicken
Microsoft wanted to dislodge Intuits value innovationFor 10 years has not been able to despite large investmentReasons:Quicken is easier to navigate through than Money PlusMulti-level categorizationMicrosoft Money Discontinued
Value CurveA graphic depiction of a companys relative performance across its industrys competitionAlerts you to find new Blue OceansStops you from leaving a still profitable oceanFocusDivergenceSwim as far as possible in the blue oceanWhen to Value-Innovate AgainDistance yourself as far as possible in the Blue Ocean
As competitors value curves converge toward yours, you should begin innovation to create a new Blue OceanThe Body ShopOnce dominated its created blue ocean for a decade
Now in the middle of a red ocean
Focused too much on competitors and not enough on reaching out to another value innovation
Yellow TailSwimming in a clear blue ocean of new market space
Has made the competition irrelevant
Test of long run profitable growth will be its ability to value-innovate again when competitors compete aggressively and converge value curves
Six Principles of BOSPointers for every company thinking about its future strategy if it wants to thrive
Competition will not suddenly come to a halt but will remain as a present critical factor of the market reality
To obtain high performance in this overcrowded market, companies should go beyond competing for market share to creating blue oceans
Six Principles of BOS ContdReality demands that companies succeed in both blue and red oceans, and master the strategies for both
Companies need to learn how to make the competition irrelevant
Aims to help balance the scales so formulating blue ocean strategies comes as systematic as operating in red oceans