Blue Ocean Strategy

Ph.Hussam Kassab

“How to create uncontested market space

"and make the competition irrelevant

“The only way to beat the competition is to stop trying to beat the competition!”

Value through Innovation

Equal emphasis on value and innovation

Successful value innovation:

• Drives down costs while driving up buyers value

• Uses a whole-system approach

• Follows reconstructionist view

Value through Innovation

In 2012, Boehringer Ingelheim achieved net sales of about 14.7 billion euro. R&D expenditure in the business area Prescription Medicines corresponds to 22.5% of its net

sales.

Three Tiers of NoncustomersThe first tier of customers minimally buy an industry’s offering out of necessity.

the second tier of noncustomers refuse to use your industries offerings.

The third tier are noncustomers who have never thought of your market’s offerings as an option.

Your Market

First Tier

Second Tier

Third Tier

Buyer Experience Cycle

Purchase Delivery Use

Supplements Maintenance Disposal

How long does it take to find the product you need?

How long does it take to get the product delivered?

How effective are the product’s features and functions?

Do you need other products and services to make this product work?

Does the product require external maintenance?

Does use of the product create waste items?

New Market Space

There is a fairly good understanding of how to compete in Red Oceans.

Blue Oceans are known to exist, however, there is little practical

guidance on how to create them.

focuses on the analytical frameworks necessary to create Blue Oceans and the managerial strategy

needed to sustain them.

Red oceans

• Industry boundaries defined and accepted

• Competitive rules of game known

• Companies try to outperform rivals; cutthroat competition

• As market space gets crowded, prospects for profit and growth reduced

• Products become commodities

• Red ocean strategy is a market-competing strategy

Blue oceans

• Undefined market space, demandcreation, opportunity for highly profitable growth.

• Most are created from withinred oceans by expanding existing industry boundaries.

• Rules of game waiting to be set.

• Competition irrelevant.

• Blue ocean strategy is a market-creating strategy.

Blue Ocean Strategy: Reconstruct Market Boundaries

Buyer GroupFocuses on better

serving the buyer group

Scope of

Product and

Service

Offerings

Focuses on maximizing

the value of product and

service offering

Time/Trends

Focuses on adapting to

external trends as they

occur

Redefines the buyer

group

Looks across to

complementary product

and service offerings

Participation in shaping

external trends over

time

Boundaries of

Competition

Head-to-Head

Competition

Creating

New Market Space

Main Reasons for Creating Blue Oceans

Supply often exceeds demand (business

downturns)

Increasing globalization

Accelerated commoditization of products & services

Increasing price wars

Shrinking profit margins

Brands (consumer & industrial) are becoming more

similar

Formulating Blue Ocean Strategy-The Six Principles

1. Reconstruct Market Boundaries.

2. Focus on the Big Picture, Not the Numbers.

3. Reach Beyond Existing Demand.

4. Get the Strategic Sequence Right.

5. Overcome Key Organizational Hurdles.

6. Build Execution into Strategy.

What factors

should be

eliminated

that the

industry has

taken for

granted?

Eliminate

What factors should be

reduced well below the

industry standard?

Reduce

What factors

should be

created that

the industry

has never

offered?

Create

What factors should be

raised well beyond the

industry standard?

Raise

Four Actions to create a Blue Ocean

Minimizing Risks and Maximizing Opportunities in Formulating Blue Ocean

Strategy

Formulation Risks

Search Risk

Planning Risk

Scale Risk

Business Model Risk

Organizational Risk

Management Risk

Formulation Principles

Reconstruct market boundaries

Reach beyond existing demand

Get the strategic sequence right

Focus on the big picture, not the numbers

Build execution into strategy

© Kim & Mauborgne 2006

• NN changed the buyer group for diabetes

• Doctors and pure product.

• Patients and easy administration.

• NovoPen—a pen with measured doses of insulin

• Innovo—using technology to better manage delivery times.

• From insulin provider to diabetes care company

• The trend in music was web-based delivery

• Napster, Kazaa, Limewire as pirates

• Apple teams with Sony, Universal, MBG, EMI, and Warner Brothers

• Legal downloads-$0.99

• Better sound quality

• Ease of browsing, downloading

• Blue Ocean means spotting a trend and getting there first