blue ocean strategy 2013 07 11
DESCRIPTION
TRANSCRIPT
You need ablue ocean
strategy
A’Ohlin Commercial Insights © 2013
How do you compete in overcrowded markets?
A’Ohlin Commercial Insights © 2013
Blue Ocean Strategies
- creating your own market space
A’Ohlin Commercial Insightswww.aohlininsights.com
authors: Rebecca Chong & Anna Searle
February 2013
A business in the midst of an increasingly competitive industry will find itself sinking to the bottom:• Profits shrink • Growth shrinks
This makes it all the more important to know what is happening in the market and to have the tools to know what will be there in the next five years.
Stuck in an overcrowded industry?
A’Ohlin Commercial Insights © 2013
A business stuck in an increasingly competitive industry is fighting in bloodied waters• also known as RED OCEANS
Red Ocean characteristics include:• existing industries• defined boundaries• highly competitive• driving competition out of the market• trying to gain greater market share• overcrowded market• products turn into commodities• shrinking profits
Overcrowded industries are RED OCEANS
A’Ohlin Commercial Insights © 2013
Blue oceans are:
Industries not yet in existence
Untainted by competition
Unknown market spaces
Where demand is created
Completely new industries OR altering existing boundaries
Opportunities for growth
The key to pushing out of the red oceans is to adopt a blue ocean strategy
A’Ohlin Commercial Insights © 2013
A’Ohlin Commercial Insights © 2013
Blue ocean strategies make the competition irrelevant and create new demand
Red Ocean Strategy Blue Ocean Strategy
Compete in an existing market space
Beat the competition
Exploit existing demand
Make the value-cost trade off
Align the whole system of the company’s activities strategically choosing
differentiation OR low cost
Create uncontested market spaces
Make the competition irrelevant
Create and capture new demand
No need for the value-cost trade off
Align the whole system of the company’s activities in pursuit of differentiation AND
low costs
source: Kim W and Mauborgne, ‘Blue Ocean Strategy’, Harvard Business Review, October 2004, p. 5
A’Ohlin Commercial Insights © 2013
Unheard of, or just emerging,100 years ago
• Automobiles• Music recording• Aviation• Petrochemicals• Health care• Management consulting
Look back 100 years and ask, how many of today's industries were then unknown? And 30 years ago? Even 10 years ago?
Unheard of, or just emerging,30 years ago
• Mutual funds• Mobile phones• Gas fired electricity plants• Biotechnology• Discount retail• Express package delivery• Snowboards• Coffee bars• Home videos
A’Ohlin Commercial Insights © 2013
What can be expected over the next decade?
Circus OR Theatre Circus + Theatre = Cirque
How many industries that are unknown today
will exist in 2023? ... Many
Companies have a huge capacity to create new industries and re-
create existing ones
Gaming: hand held consoles
Consumers: regular
gamers
Gaming: motion sensing controls, more user-orientedConsumers: regular gamers +
non-regular gamers
Mobile OR mp3 player OR PDA Smartphones
Shops Local shops, online shops, online auctions
Airlines: standard airlines Airlines: standard, budget, long-distance, short-distance
THE PAST THE PRESENT WHAT LIES AHEAD?
What’s it all about?
• Looking at the existing boundaries of competition and then ‘reordering and recombining’ to reconstruct the market boundaries
• Not necessarily technological increases – It’s about reordering and reconstructing
market realities and capturing new demand rather than pre-empting technological trends
• Looking at your current business model from a different perspective and remodelling how it operates
A’Ohlin Commercial Insights © 2013
By breaking the traditional boundaries between circus and theatre, Cirque du Soleil reinvented the circus and increased revenues by a factor of 22 over the last 10 years
A’Ohlin Commercial Insights © 2013
A’Ohlin Commercial Insights © 2013
Apple – iPod+ iTunes, iPhone, iPad what next?
late 2001
2010
Mid 2007
Confirmed by HTC’s latest profits• HTC reported an 80% drop in profits for the September quarter 2012
compared to the year ago quarter (Forbes, 2012)
A’Ohlin Commercial Insights © 2013
The smartphone market is now becoming a bloodbath ...
source: http://www.forbes.com/sites/greatspeculations/2012/10/08/htc-is-the-latest-smartphone-bloodbath-casualty
Weekly cost of the additional 4c a litre reduction
By January 2013, both retailers were offering discounts of at least 8c per litre
A’Ohlin Commercial Insights © 2013
Petrol discounting is another example of red ocean markets
…petrol discounts were a sign that the grocery market was becoming increasingly irrational as Coles and Woolworths vied for market share…
if the 8¢ a litre discounts are maintained all year they will cost each retailer an estimated $200 million
$1.8 million $2.3 million
Cost per WEEK
source: Citigroup analyst Craig Woolford , AFR 2 Feb 2013
A’Ohlin Commercial Insights © 2013
The 14% of businesses that invested in creating new markets and industries delivered 38% of total revenues and 61% of total profits
source: Kim W and Mauborgne R, ‘Blue Ocean Strategy’, Harvard Business Review, October 2004, p. 3
14%
86%
New Ventures
New markets or industries
Line extensions
38%
62%
Revenues
61%
39%
Profits
86% of (the) new ventures were line extensions, (and) while (they) did account for 62% of the total revenues, they delivered only 39% of total profits
Which phase of the business life cycle is your business in?
‘80% of new businesses fail in
the first five years; 52% fail due to management-
related problems’. Don’t fight it out in bloody waters and become another
casualty.
Don’trest on
yourlaurels – If
your offeringis nothing more than
an imitation or incremental improvement
over your competition, you’ll only be treading
water in a red ocean’
The clear blue ocean waters are becoming bloodied. ‘Sadly, most
firms lack a clearly defined, robust and well-communicated innovation strategy.
There is either no focus or they focus on the wrong arenas – on
mature markets, old technologies or tired
product categories that do not represent the
growth engines of tomorrow’.8 Wake up to the strategy – you
don’t want to drown in bloodied waters.
You’re on a downhill slide
but it’s not too late –
‘Every organization
can break free of the head-
to-head zero-sum
competition and open up blue oceans’.
A’Ohlin Commercial Insights © 2013
A’Ohlin Commercial Insights © 2013
A’Ohlin Commercial Insights can help you design your Blue Ocean Strategy
If you are competing in red oceans.If your business needs an adrenalin injection to get going.If you need to redefine your business focus and priorities.If you need to re-engage your Board, executives, senior management, staff or clients.
You need to engage a professional strategy consulting firm such asA’Ohlin Commercial Insights
The clock is ticking
Take action now
Call A’Ohlin Commercial Insights on 0414 453 913
Key sources:
• Kim W and Mauborgne, ‘Blue Ocean Strategy’, Harvard Business Review, October 2004
• Kim W and Mauborgne R, ‘Value innovation: a leap into the blue ocean’, Journal of Business
Strategy
• Misconceptions of blue ocean strategy
• Study by Inc. Magazine and the National Business University of Buffalo Office of Science,
Technology Transfer and Economic Outreach http://
www.professionalpractice.asme.org/Entrepreneurial/Incubators/Join_Incubator.cfm
• Burt G, ‘Swim Blue Ocean’, Leadership Excellence Volume 24 Issue 5 (May 2007)
• Cooper, R ‘Creating Bold Innovation in Mature Markets’, IESE Insight, Third Quarter 2012
Issue 14, p 31
• http://
www.forbes.com/sites/greatspeculations/2012/10/08/htc-is-the-latest-smartphone-bloodba
th-casualty
A’Ohlin Commercial Insights © 2013
Blue Ocean Strategies
- creating your own market space
A’Ohlin Commercial Insightswww.aohlininsights.com
authors: Rebecca Chong & Anna Searle
February 2013