blue ocean and co creation conference english

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Patricio Guitart Professor, Management and Control Systems

IAE Business School

Blue Ocean Strategy The New Paradigm in Innova2on

January 2012, Barcelona, Spain

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What’s Going On?


The Economic Crisis Created a New Consumer

Unemployed or Overqualified

Educated

Owner of Goods

His/Her purchasing power decreased but not his/her aspirations

Adapted: AcHng in control. Saving in expenses such as vacaHons,

clothing and entertainment but do not sacrifice in terms of food,

hygiene and personal care. Brands are now funcHonal.

Melancholic: Behaving erraHcally and dispersed. They want to

maintain their previous consumpHon paNerns. They do not sacrifice any

category but start cuOng off different products randomly. They hold onto the brand with a sense of

idenHty


Changes in Post-‐Crisis ConsumpDon

SituaDon

•  Consumers “walk more”. Convenience now is a lower price

•  More raHonal. Try more. Verified quality over perceived quality

•  ANempHng to maintain consumpHon on selected products

•  AppreciaHon for brands supporHng them in the crisis

Consequences

•  Greater channel compeHHon

•  More promoHonal acHvity

•  Small quality manufacturers and second brands had their chance

•  Small capacity containers, returnable and cheaper.

•  Brands that adapted kept their sales levels and grew exponenHally aVer the crisis

The World Moves Beyond the Crisis


The ExpectaHon Economy


•  The ExpectaHon Economy is an economy inhabited by experimented and well informed consumers, with a long list of high expectaDons that they apply to every product, service or experience offered to them.

•  Their expectaHons are based in many years of “self-‐training” under the hyper consumerism years and in all the available informaHon sources that help them to know and expect not only the basic quality standards, but the “best of the best”

The ExpectaDon Economy

What are the consequences?


Indifference DissaHsfacHon

Decreasing MarkeHng ROI Customer saHsfacHon declines in many Industries

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CommodiDzaDon


CompeDon without Boundaries


Informed and connected consumers. Creators of their own markets


What is the Blue Ocean Strategy?


Source : Michael E. Porter, “What’s Strategy?” Harvard Business Review, Nov–Dec 1996

Before that, what is strategy?

According to Michael Porter, strategy is: – Means to realize your vision and mission – A unique compeHHve posiHon as a company

– OpHons and alternaHves in front of the compeHHon

– Strategy tells you what you should and shouldn’t do

Strategy describes the way the organizaHon will CREATE VALUE


ü  Wal-‐Mart ü  Dell ü  McDonalds

ü  Apple ü  Mercedes ü  Intel

ü  IBM ü Goldman Sachs ü  Mobil

ü  MicrosoR ü  eBay ü  Mastercard

Strategic PosiDoning … Generic…


What do innovaDve companies do differently?


Source: Kim & Mauborgne

Industry A

Industry B Industry C

They discover new unexplored market spaces

? ?


How do you discover a new value curve?

New Value Curve

Which aNributes that the industry is not appreciaHng can be

eliminated?

Eliminate

Which aNributes could be increased over the industry standard?

Increase

Which aNributes could be created that the industry

has never offered?

Create

Which aNributes could be decreased below the industry standard?

Reduce


Advantages due to large volumes

copyright Kim & Mauborgne

Costs savings through Eliminate and Reduce

Superior value from Create and Increase

The Concept of Value InnovaDon

Costs

Value InnovaHon

Shopper Value


Yellow Tail


The Australian Yellow Tail Wines in the American Market

High

Low

Leve

l of O

ffer

Easy drinking

Vineyard prestige and

legacy

2

1

3

4

5

Budget Wines

Yellow Tail

Price Aging quality

Consumer view

Image Use of enological terminology and distinctions in

wine communication

Wine complexity

Ease of selection

Fun and adventure

Wine range

Premium Wines

Attributes of product, service and delivery


•  Enological terminology and disHncHons •  Aging qualiHes •  Above-‐the-‐line markeHng

Eliminate-‐Reduce-‐Raise-‐Create Matrix

ELIMINAR

La industria tradicional hacía foco en dos cualidades que inHmidaban al consumidor novel: -‐  Años de la cosecha y de guarda -‐  Taninos

INCREMENTAR

La diversión y el humor El suspenso y el peligro

REDUCIR

Un solo escenario

CREAR

Un tema Un ambiente refinado MúlHples producciones Música y danza arlsHca

•  Wine complexity •  Wine range •  Vineyard presHge

ELIMINATE

REDUCE

•  Price versus budget wines •  Retail store involment

•  Easy drinking

•  Ease of selecHon •  Fun and adventure

RAISE

CREATE


Analyzing six paths as innovaDon sources

1. Through subsHtute industries

2. From strategic groups

3. From the shopper chain

4. Through complementary

offerings

5. By funcHonal and emoHonal connecHons

6. Trends over Hme

copyright Kim & Mauborgne


INCA Paints Case

•  Leader in market share and yop of mind in the wall paints sector in Uruguay.

•  Part of a mulHnaHonal company that enables best pracHces in innovaHon, operaHons and management.

•  Well developed capabiliHes in product innovaHon on a regional basis.

•  There challenge was to innovate in a mature and impoverished market with increasing compe22on


SubsDtutes Paper Smooth Cement

Clean PracDcal


Strategic Groups

“Wedding Planner”

Comprehensive Guidance


Design Advice The Painter’s Happiness Pill

Shoppers Value Chain


Complementary Offering

The “Dust Sucker”


FuncDonal -‐ EmoDonal


Time / Trends


Final Value Curve for INCA Paints NUEVA CURVA DE VALOR INCA

INCA Hoy

INCA New

0,0

0,5

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InnovaDon IniDaDves Before

ARer “We work with all Firm XYZ por<olio: interior, exterior, decoraAves, water repelents, enamels and more.

We have a colorful space designed thinking of your comfort where you can select from our paleFe (XYZ Color Service) to

decorate your home.

Besides, if you bring a digital picture of the room or rooms that plan to paint, we can advice you on color selecAon thorugh the ROOM COLOR SIMULATOR of XYZ COLOR

SERVICE.

Specialized staff trained by XYZ will be with you along the way.”

Space at the Point of Sale


Results

•  Closer understanding by non-‐commercial areas of the company to customers, distributors and final shoppers

•  Discovering the gap between internal percepHons and market realiHes related to consumer preferences

•  New paradigm for the company from being product oriented to improving customer experiences

•  AddiHon of new aNributes and innovaHve aNributes to INCA paints value proposiHon

•  Renewed sense of urgency to change current markeHng and communicaHon strategy

They were focused on innova2ng on new paints when the consumer wanted solu2ons to improve the before-‐

and-‐aFer the pain2ng process


What is Value Co-‐CreaDon?


Product & Service Offerings

TheFirm

Suppliers MarketingChannels

Customer Firm

SCM

ERP

CRM

Today, customers are very acDve, informed and connected


Co-‐CreaDon of Experiences with Customers and Consumers

Experience Environment

Differentiated Experience to

Customers

Lower Cost to Customer

Lower Cost to Firm

Greater Value to Firm

Customer/ Consumer Firm

EXPERIENCE


Principles of Experience Co-‐CreaDon

Access

Risk Management

Dialog

Transparency

How can we grant access to all required information?

How can we engage individuals in significant conversations?

How can we reduce the opacity of the current

process?

How can we reduce risk for both parties?


Nike Case

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The tradiDonal shoe maker considers that value is generated along the whole value chain

Processes of a traditional shoe manufacturer

Shoe Shopper (passive)

Shoe Design

Supply

Manufacturing

Marketing

Store Sales

Store Distribution

Shoe Manufacturer


But runners have their own value chain

Runner Processes

Runner (customer)

Exchanging advice with colleagues

Running in groups

Setting improvement

goals

Recording distances and times

Define own

routes Listening

music Running

alone Buying outfits

Looking for outfits


Customers and NIKE have few overlapping processes


Co-‐CreaDng Outside-‐In

How can we create corporate

processes that impact customers’

processes?


NIKE let runners co-‐create their own experience from the “outside in”

43


Record of Runs

44

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[email protected]

Challenge others

45


Map and share routes

46


Co-‐CreaDng Inside-‐Out

How can we make corporate processes

transparent to our customers?


Nike iD – Personalized Running Shoes

48


Establish the customizaDon process

49


Save Individual Designs

50


Toilet Paper Case

Shopper Value Chain

SubsDtutes


Time / Trends

GeneraDon

Z


What do we need to innovate?

Capabilities to execute

Employees with innovation tools

Employees motivated to innovate


Features of a Good Blue Ocean Strategy

FOCUSED

ORIGINAL

SIMPLE MESSAGE


Welcome to the Blue Ocean World


Blue Ocean Strategy References

Renée Mauborgne is one of the world’s preeminent experts on business strategy, innovaHon and wealth creaHon in the knowledge economy. Renée is a very impressive presenter—engaging, energeHc and intelligent, with substanHve material that can significantly impact your organizaHon’s performance. She is the highest placed woman on Thinkers 50, the global ranking of business gurus. In 2007, 2009 and again in 2011, Thinkers 50 placed Mauborgne among the top ten most influenHal business thinkers in the world. Her book, Blue Ocean Strategy: How to Create Uncontested Market Space and Make the CompeHHon Irrelevant (Chan Kim, coauthor), is an internaHonal bestseller. Blue Ocean Strategy has sold over two million copies and is being published in 41 languages, breaking Harvard Business Press’s historical record of most foreign language translaHons ever achieved. Blue Ocean Strategy won the Best Business Book of 2005 Prize at the Frankfurt Book Fair and was selected as the number one Strategy Gook of 2005 by Strategy + Business and as a Top Ten Business Book of 2005 by Amazon.com. With Blue Ocean Strategy, Renée brings business audiences a genuinely important breakthrough in strategic business thinking, which is changing the business lexicon across the globe. Renée Mauborgne is The DisHnguished Fellow and a professor of Strategy and Management at INSEAD in Fontainebleau, France, the world's second largest business school. She is Co-‐Founder and Co-‐Director of the INSEAD Blue Ocean Strategy InsHtute and is a Fellow of the World Economic Forum. Her Harvard Business Review arHcles, coauthored with W. Chan Kim, are worldwide bestsellers and have sold more than half a million reprints. Their "Value InnovaHon" and "Fair Process" arHcles were selected as among the best classic arHcles ever published in HBR. She has published numerous arHcles on strategy and managing the mulHnaHonal corporaHon in a host of other first-‐Her business journals. Mauborgne has received a number of presHgious awards for her contribuHons to business thought leadership and has been widely praised in the internaHonal business media.


Value Co-‐CreaDon References

Francis Gouillart is President and one of the two founders of the Experience Co-‐CreaHon Partnership (ECC Partnership), a consulHng firm built to implement co-‐creaHve management processes and organizaHonal capabiliHes with corporate clients around the world. Francis is co-‐author, with Venkat Ramaswamy, of the newly published book The Power of Co-‐CreaHon: Build It with Them to Boost Growth, ProducHvity, and Profits (Simon & Schuster Free Press, October 2010) and the Harvard Business Review arHcle “Building the Co-‐CreaHve Enterprise” (October 2010). He previously co-‐authored (with James Kelly) the book Transforming the OrganizaHon (McGraw-‐Hill), which reached the top of BusinessWeek’s best-‐seller list in 1995. He is also co-‐author (with Frederick Sturdivant) of the arHcle “Spend a Day in the Life of Your Customers,“ published by Harvard Business Review (January-‐February 1994). He also authored Stratégie pour une Entreprise CompéHHve (EdiHons Economica, Paris), which was named “Best Strategy Book of the Year” by the French AssociaHon of Strategic Planners (AFPLANE) in 1989. Francis is considered a leading authority on the topics of strategy, innovaHon, transformaHon, and capabiliHes-‐building and is a recognized speaker, lecturer, and advisor on Experience Co-‐CreaHon, Blue Ocean Strategy, and OrganizaHonal TransformaHon. He works across the United States, Europe, and Asia, and has experience in most industries. Francis has been quoted in the Wall Street Journal, BusinessWeek, and Fortune, among other publicaHons, and has been featured on CNBC. He is currently working with global management consulHng firm PRTM to use co-‐creaHon concepts and methods to transform enterprise operaHons and business models across industries globally. Francis received his MBA from the University of Chicago’s Graduate School of Business, and resides in Concord, MassachuseNs.