Blue OceansBlue Oceans and and

Other BIG Strategic IdeasOther BIG Strategic Ideas

What You Will LearnWhat You Will Learn• Become familiar with concepts behind Become familiar with concepts behind

Blue Ocean StrategyBlue Ocean Strategy• Learn what MPI has done to apply Blue Learn what MPI has done to apply Blue

Ocean concepts to your associationOcean concepts to your association• Learn about Learn about net creation and open net creation and open

innovationinnovation• Formulate ideas on how you might be able Formulate ideas on how you might be able

to apply these ideas to your own workto apply these ideas to your own work

RedRed OceansOceans represent all industries in existence represent all industries in existence today. today.

They have defined rules, competitors, and market They have defined rules, competitors, and market boundaries. boundaries.

Key words might include Key words might include competitioncompetition, , price warsprice wars, , market sharemarket share, , commoditization, benchmarking, commoditization, benchmarking,

strategic positioning, value addstrategic positioning, value add..

Blue OceansBlue Oceans represent all industries represent all industries NOT NOT

in existence today.in existence today.

This is undefined market space, otherwise known This is undefined market space, otherwise known as OPPORTUNITY.as OPPORTUNITY.

Key words might be Key words might be value innovation, focus, value innovation, focus, differentiation, creation of demand, new differentiation, creation of demand, new

marketplacemarketplace

Most Most blue oceansblue oceans are created from are created from red red oceanocean companies expanding industry companies expanding industry

boundaries.boundaries.

For example, Cirque du Soleil or [yellowtail]For example, Cirque du Soleil or [yellowtail](more on this in a bit)(more on this in a bit)

The phrase The phrase “Blue oceans”“Blue oceans” is new, but the is new, but the concept is not. Think of what industries concept is not. Think of what industries

existed in 1900.existed in 1900.

Take 3 minutes…Take 3 minutes…At your table, brainstorm a list of industries At your table, brainstorm a list of industries

that have emerged since then.that have emerged since then.

Some of them might be…Some of them might be…automotives, aviation, health care, plastics, automotives, aviation, health care, plastics,

DVDs, computers, personal entertainment DVDs, computers, personal entertainment devices (iPods, for example).devices (iPods, for example).

All of these industries created All of these industries created new market space.new market space.

The premise is simpleThe premise is simple::

To win in the future, companies must stop To win in the future, companies must stop competing with each other.competing with each other.

The only way to beat the competition is to stop The only way to beat the competition is to stop tryingtrying to beat the competition. to beat the competition.

The business environment in which most The business environment in which most business strategy and management has business strategy and management has been based on is changing, evolving or been based on is changing, evolving or

disappearing.disappearing.Some of this change is due to technology. Some of this change is due to technology.

Other reasons might be culture, Other reasons might be culture, globalization, speed of new information, or globalization, speed of new information, or the role of demographics in the workplace.the role of demographics in the workplace.

Value innovationValue innovation is the “new” strategic logic is the “new” strategic logic behind behind Blue OceanBlue Ocean Strategy. Strategy.

Instead of focussing on beating the competition, Instead of focussing on beating the competition, you focus on you focus on making it irrelevantmaking it irrelevant by creating a by creating a

leap in value for buyers and creating leap in value for buyers and creating uncontested market space.uncontested market space.

Value innovationValue innovation only occurs when only occurs when organizations have aligned innovation with organizations have aligned innovation with

utility, price and costs.utility, price and costs.

The market must be ready to accept the product, The market must be ready to accept the product, meaning that meaning that timingtiming is key. is key.

The focus is on both differentiation and low cost to The focus is on both differentiation and low cost to provide value to both customers and the provide value to both customers and the

organization.organization.

Graph of Value InnovationGraph of Value Innovation

Case study: Cirque du SoleilCase study: Cirque du Soleil

Other circuses focused on:Other circuses focused on:• Benchmarking the competitionBenchmarking the competition• High-profile “stars”, which increased costs High-profile “stars”, which increased costs

but who were largely unknown to the but who were largely unknown to the general publicgeneral public

• Traditional venueTraditional venue• Traditional audiencesTraditional audiences

Case study: Cirque du SoleilCase study: Cirque du SoleilCirque du Soleil focused on:Cirque du Soleil focused on: Creation of a hybrid between the circus and the Creation of a hybrid between the circus and the

theatretheatre Retention of the symbolic and glamorous Retention of the symbolic and glamorous

aspects of circus, such as the tent and the more aspects of circus, such as the tent and the more breathtaking aspects, such as acrobatsbreathtaking aspects, such as acrobats

Incorporation of more comfort, sophistication, Incorporation of more comfort, sophistication, elegance and theatrical plots; this brought not elegance and theatrical plots; this brought not only the richness of theatre but a whole new only the richness of theatre but a whole new demographic of customersdemographic of customers

It looked across market boundaries and created It looked across market boundaries and created new ones.new ones.

The Strategy CanvasThe Strategy Canvas• Captures the current state of play in the Captures the current state of play in the

market by detailing the factors players market by detailing the factors players compete on in product, service and compete on in product, service and deliverydelivery

• For example, the wine industry competes For example, the wine industry competes on price per bottle, refined image in on price per bottle, refined image in packaging, marketing strategies, aging packaging, marketing strategies, aging quality of wine, prestige of vineyard, quality of wine, prestige of vineyard, complexity of taste and diverse product complexity of taste and diverse product rangerange

Possible Wine Canvas

02468

1012

Price

Image

aging

com

plexit

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pres

tige

diver

se p

ortfo

lio

easy

to d

rink

acce

ssible

Fun

Competetive Factors

Ran

kin

g S

cale

Quails Gate

Mission Hill

Yellowtail

The Strategy CanvasThe Strategy Canvas• Each factor is plotted on the canvas, with Each factor is plotted on the canvas, with

a high score reflecting the level of a high score reflecting the level of investment a specific company makes in investment a specific company makes in that factor (for example a high score on that factor (for example a high score on price means that the price per bottle is price means that the price per bottle is high)high)

• When you plot all US wineries, they score When you plot all US wineries, they score remarkably similarlyremarkably similarly

Example of a Strategy CanvasExample of a Strategy Canvas

Blue Ocean Space

The Strategy CanvasThe Strategy Canvas• To differentiate yourself in the market To differentiate yourself in the market

place, you must focus on alternatives and place, you must focus on alternatives and non-customers to re-define the non-customers to re-define the marketplacemarketplace

• For example, Casella Wines looked at the For example, Casella Wines looked at the strategy canvas and redefined the strategy canvas and redefined the question: How do you make a fun and question: How do you make a fun and non traditional wine that is easy for non traditional wine that is easy for everyone to drink?everyone to drink?

Case Study: [yellowtail]Case Study: [yellowtail]

• Casella saw that most US consumers Casella saw that most US consumers preferred beer, spirits and pre-packaged preferred beer, spirits and pre-packaged cocktails to winecocktails to wine

• Consumers saw wine as a turn-off due toConsumers saw wine as a turn-off due to– It was pretentiousIt was pretentious– The taste was too complexThe taste was too complex– It could be intimidatingIt could be intimidating

Case Study: [yellowtail]Case Study: [yellowtail]• They created a wine that broke out of the They created a wine that broke out of the

red ocean by creating a wine that:red ocean by creating a wine that:– Appealed to beer and spirits drinkers by being Appealed to beer and spirits drinkers by being

fun and unpretentious as well as to wine fun and unpretentious as well as to wine drinkersdrinkers

– Had a less complex, sweeter and smooth Had a less complex, sweeter and smooth tastetaste

– Was easy to select as it did not focus on Was easy to select as it did not focus on prestige, aging, etc.prestige, aging, etc.

– They eliminated all factors that the wine They eliminated all factors that the wine industry had long competed onindustry had long competed on

Four Actions: Four Actions: Eliminate/Reduce/Raise/Create Eliminate/Reduce/Raise/Create

• Which of the factors that the industry takes Which of the factors that the industry takes for granted should be for granted should be eliminatedeliminated??

• Which should be Which should be reducedreduced??• Which should be Which should be raised raised well above well above

standard?standard?• Which factors should be Which factors should be createdcreated that have that have

not existed before?not existed before?

3 Characteristics of 3 Characteristics of a Good Strategya Good Strategy

• It is It is focusedfocused; it is not diffused across all ; it is not diffused across all potential aspects of the marketpotential aspects of the market

• The shape of the value curve The shape of the value curve divergesdiverges from any potential competitorsfrom any potential competitors

• It has a compelling It has a compelling taglinetagline

Your Strategy CanvasYour Strategy CanvasAt your table, choose an industry one (or At your table, choose an industry one (or

more) of you belong to.more) of you belong to.• What industry are you in?What industry are you in?• What factors does it traditionally compete What factors does it traditionally compete

on? (i.e. price, amenities, etc.)on? (i.e. price, amenities, etc.)• Are there any factors that set you apart?Are there any factors that set you apart?• Are there any factors that do not add any Are there any factors that do not add any

value and could be dropped?value and could be dropped?• What could be created to add value?What could be created to add value?

Creation Nets and Open InnovationCreation Nets and Open Innovation

• Open innovation is the concept that by Open innovation is the concept that by looking beyond your own boundaries, you looking beyond your own boundaries, you can gain access to better ideas, can gain access to better ideas, knowledge and technology than you could knowledge and technology than you could by relying on your own resourcesby relying on your own resources

• ““Networks of creation”, or Creation Nets Networks of creation”, or Creation Nets are an extension of this conceptare an extension of this concept

Creation NetsCreation Nets• Involve many – sometimes hundreds or Involve many – sometimes hundreds or

even thousands of people – from diverse even thousands of people – from diverse backgrounds coming together, often over backgrounds coming together, often over the internet, to create knowledge, learn the internet, to create knowledge, learn best practices, and build on each other’s best practices, and build on each other’s work.work.

““Nobody is as smart as everybody”Nobody is as smart as everybody”William C. Taylor, Founder of Fast CompanyWilliam C. Taylor, Founder of Fast Company

The Positive PressThe Positive Press• For companies, creation nets have many For companies, creation nets have many

advantages:advantages:– The rapid flow of change in today’s economy The rapid flow of change in today’s economy

makes new knowledge valuable, as opposed makes new knowledge valuable, as opposed to the past where a private knowledge base to the past where a private knowledge base could give value overlong periodscould give value overlong periods

– Greater access to intellectual resourcesGreater access to intellectual resources– Greater access to new and different Greater access to new and different

technologiestechnologies– Ability to tap into knowledge across traditional Ability to tap into knowledge across traditional

knowledge boundaries and industriesknowledge boundaries and industries– Creative breakthroughsCreative breakthroughs

The Negative PressThe Negative Press

• Trust can be hard to establishTrust can be hard to establish• Concerns about proprietary informationConcerns about proprietary information• Large groups of people working to innovate Large groups of people working to innovate

together can be hard to controltogether can be hard to control• Conflict among participants increases the more Conflict among participants increases the more

people involvedpeople involved• Different tolerances for costDifferent tolerances for cost• Uncertainty on how to create valueUncertainty on how to create value• Loss of confidence in own abilitiesLoss of confidence in own abilities

Net Creation at WorkNet Creation at Work• Development of iPod was stimulated Development of iPod was stimulated

through a creation net formed by a smaller through a creation net formed by a smaller player in the marketplace, PortalPlayerplayer in the marketplace, PortalPlayer

• The development of Linux, a computer The development of Linux, a computer operating system, was through net operating system, was through net creation and involved companies such as creation and involved companies such as IBM, Intel and Hewlett PackardIBM, Intel and Hewlett Packard

• The discovery of gold in an Ontario mine The discovery of gold in an Ontario mine at Goldcorp, today considered the world’s at Goldcorp, today considered the world’s richest minerichest mine

Net Creation at WorkNet Creation at Work• Development of the internet itselfDevelopment of the internet itself

““The world’s most important technology The world’s most important technology platform relies on ideas and computer platform relies on ideas and computer

code generated largely by a decentralized code generated largely by a decentralized corps of volunteer programmers, most of corps of volunteer programmers, most of

whom have never met each other and few whom have never met each other and few of whom work together in any formal of whom work together in any formal

setting”setting”William C. Taylor, Mavericks at WorkWilliam C. Taylor, Mavericks at Work

Net Creation SummaryNet Creation Summary

• Just because you are in charge doesn’t Just because you are in charge doesn’t mean you need to have all the answersmean you need to have all the answers

• Just because people don’t work for you Just because people don’t work for you doesn’t mean that they can’t work with doesn’t mean that they can’t work with you…but you have to invite themyou…but you have to invite them

• No one is as smart as everyoneNo one is as smart as everyone• It is about the “architecture of It is about the “architecture of

participation” (participation” (Tom O’Reilly, O’Reilly MediaTom O’Reilly, O’Reilly Media))

Personal Creation NetworksPersonal Creation Networks

Find a partner:Find a partner:• How can you utilize this concept either How can you utilize this concept either

personally or at work?personally or at work?• What technology exists that you can use?What technology exists that you can use?

At your table:At your table:• Share your ideas.Share your ideas.• Pick one that you can share with the roomPick one that you can share with the room