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Blue Ocean StrategyTRANSCRIPT
Group/Presentation TitleAgilent Restricted
Date ##, 200X
Blue Ocean Strategy
How to Create Uncontested Market Space and Make the Competition Irrelevant
Facilitators : Yip Khai Biau ([email protected]) & Lieu Yoke Sun
All Rights Reserved – KB Yip/YS Lieu Page : 2
Blue Ocean Strategy (BOS)
Introduction to BOS
BOS Tools : Strategy Canvas & E.R.R.C.
Awakening : As-Is Strategy Canvas
Exploration : Reconstruct Market Boundaries
Strategizing : To-Be Strategy Canvas
Actualization : Identify actions to actualize the strategies
Conclusion
Facilitators : Yip Khai Biau ([email protected]) & Lieu Yoke Sun
All Rights Reserved – KB Yip/YS Lieu Page : 3
Objectives
Develop understanding of Blue Ocean Tool Sets and how to apply them effectively Strategy Canvas ERRC
Perform As-Is Analysis to Compare Current Strategy of XYZ vs Competitors
Explore Pathways to Breakaway from Market Boundaries to look for Bigger Playing Field
Brainstorm and Agree on the To-Be Strategy for XYZ
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Introduction to Blue Ocean StrategyIntroduction to Blue Ocean Strategy
History & Background
Defining Red & Blue Ocean
Six Principles of BOS
Reach Beyond Existing Demand
Value Innovation
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History & BackgroundHistory & Background• Authored by W. Chan Kim and Renee Mauborgne in
2005.
• Based on a study of 150 strategic moves spanning more than 100 years and 30 industries.
• BOS is the simultaneous pursuit of differentiation and low cost.
• The aim of BOS is not to out-perform the competition in the existing industry, but to create new market space or a blue ocean, thereby making the competition irrelevant.
• BOS offers systematic and reproducible methodologies and processes in pursuit of innovation by both new and existing firms.
• BOS frameworks and tools are designed to be visualin order to not only effectively build the collective wisdom of the company but also to effectively execute through easy communication.
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WhatWhat’’s s RedRed, What, What’’s s BlueBlue??
• Create uncontested market space
• Make the competition irrelevant
• Create & capture new demand
• Break the value- cost trade off
• Simultaneous pursuit strategy ofdifferentiation and low cost
• Create uncontested market space
• Make the competition irrelevant
• Create & capture new demand
• Break the value- cost trade off
• Simultaneous pursuit strategy ofdifferentiation and low cost
Blue Ocean StrategyBlue Ocean Strategy
• Compete in existing market space
• Beat the competition
• Exploit existing demand
• Make the value-cost trade off
• Align strategy choice of differentiation or low cost
• Compete in existing market space
• Beat the competition
• Exploit existing demand
• Make the value-cost trade off
• Align strategy choice of differentiation or low cost
Red Ocean StrategyRed Ocean Strategy
Defining Red and Blue OceanDefining Red and Blue Ocean
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Examples of Red and Blue Ocean
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Six Principles of Blue Ocean StrategySix Principles of Blue Ocean Strategy
1. Reach beyond existing demand
2. Reconstruct market boundaries
3. Focus on the big picture, not the numbers
4. Get the strategic sequence right
5. Overcome key organizational hurdles
6. Build execution into strategy
Formulation PrinciplesFormulation Principles Execution PrinciplesExecution Principles
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Reach Beyond Existing DemandReach Beyond Existing Demand
First Tier: “Soon-to-be” non-customers who are on the edge of your market, waiting to jump ship
Second Tier: “Refusing non-customers who consciously choose against your market.
Third Tier: “Unexplored” non customers who are in markets distant from yours.
FirstTier
SecondTier
ThirdTier
Your Market
Blue Ocean
Blue Ocean – Go for the Largest Catchment of Non-Customers
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Example Example –– [yellow tail][yellow tail]
Traditional Wine :
• An elite, refined image in packaging with heavy use of wine terminology.
• Aging quality.
• Prestige of a vineyard and its legacy.
• Complexity and sophistication of a wine’s taste, such as tannins and oak.
• A diverse range of wines to cover all varieties of grapes & consumer preferences
[yellow tail] :
• No jargon.Simple and nontraditional label.
• Aging is not important.
• Vibrant and fun.
• Sweeter and easier to drink.
• Only one Red (Shiraz) and one White (Chardonnay).
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FirstTier
SecondTier
ThirdTier
Your Market
Example Example –– [yellow tail][yellow tail]
Tier 1 – Wine drinker market
Tier 2 – “Easier to drink” market, eg., beer, cocktails, soft-drink
Tier 3 – Anyone that drinks water
[yellow tail] created a Blue Ocean by making its wine
more appealing to the bigger population
Your Market
[yellow tail] did not focus on the wine market only
FirstTier
SecondTier
ThirdTier
Red Wine
X
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Circus
TheaterPerformance
Entertainment
CircusX
Reach Beyond Existing DemandReach Beyond Existing Demand
Circus
TheaterPerformance
Entertainment
CircusX
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Other Males
GirlsEveryone
Else
YoungAntisocial
Males
Electronic Game Industry
Nintendo WiiNintendo created a Blue Ocean by reducing the complexity, add the
ease of use and fun!
Example Example –– [Nintendo][Nintendo]
Other Males
GirlsEveryone
Else
YoungAntisocial
Males
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Value Innovation – The Cornerstone of BOS
Cost
Buyer Value
Cost Saving – Eliminate & Reduce Competing Factors
Buyer Value Lifted – Raise & Create New Elements
Value innovation places equal emphasis on value and innovation.
Value innovation is a new way of thinking about and executing strategy that results in the creation of a blue ocean.
The creation of blue oceans is about driving costs down while simultaneously driving value up for buyers.
ValueInnovation
Back
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Strategy Canvas
Eliminate-Reduce-Raise-Create (ERRC) Grid
Blue Ocean Strategy ToolsBlue Ocean Strategy Tools
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What is Strategy Canvas?What is Strategy Canvas?
Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor 6 Factor 7 Factor 8
Competing Factors
Offe
ring
Leve
l
Your Company
Competitor 1
Competitor 2
High
Low
Mid
Degree of which each competitor offers/invests in each factor
Factors that the industry competes & invests, also potential areas where customer value could be created.
Graphical Representation of Strategy+
Big Picture View +
Landscape Scanning +
Relative Positioning vs. Competitors
Value Curves
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4 Actions Framework4 Actions Framework
ReduceWhich factors should be reduced well below the
industry's standard?
EliminateWhich of the factors that
the industry takes for granted should be
eliminated?
CreateWhich factors should be created that the industry
has never offered?
A NewValueCurve
A NewA NewValueValueCurveCurve
RaiseWhich factors should be
raised well above the industry's
Strategically Reduce Cost
Strategically Invest in
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CreateCreateReduceReduce
RaiseRaiseEliminateEliminate
EliminateEliminate--ReduceReduce--RaiseRaise--Create Create (ERRC) Grid(ERRC) Grid
Back
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Activity 1 (45 min)
• Split into 3 Groups
• Review As-Is Strategy Canvas (30 min)
• Presentation (5 min each, 15 min total)
Activity 2 (30 min)
• Agree to ONE As-Is Strategy Canvas
Activity 3 (90 min)
• Split into 3 Groups
• Use 6 Paths Framework, reconstruct market boundaries & identify Divergent Factors (60 min)
• Presentation (10 min each, 30 min total)
Activity 4 (30 min)
• Agree to Top 3-5 Divergent Factors
Activity 5 (90 min)
• Split into 3 Groups
• Use ERRC to construct the Desired Value Curve (60 mins)
• Presentation (10 min each, 30 mins total)
Activity 6 (30 min)
• Agree to ONE To-Be Strategy Canvas
Formulating Blue Ocean StrategyFormulating Blue Ocean Strategy
Awakening : As-Is Analysis
Exploration : Reconstruct Market
Boundaries
Strategizing : To-Be Strategy
Canvas
120 mins 120 mins75 mins
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Activity 1 & 2 : AsActivity 1 & 2 : As--Is AnalysisIs AnalysisReview XYZ AsReview XYZ As--Is Strategy CanvasIs Strategy Canvas
0
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1.5
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Fee C
ompe
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Institu
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ognit
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Indus
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nkage
Program
& C
areer
Path
Facilit
ators
Facilit
ies
Brandin
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Lifes
tyle/C
ulture
Competing Factors
Offe
ring
Leve
l
XYZCompetitors
High
Low
Mid
Back
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Reconstruct Market BoundariesReconstruct Market Boundaries
Across Alternate Industry
Across Strategic Groups
Across Buyer Groups
Across Complementary Scope of Products & Services
Across Functional Emotional Orientation
Across Time
There are 6 pathways to reconstruct the market boundaries
Red Ocean
Blue Ocean
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Across Alternative IndustriesAcross Alternative Industries
Commercial Airlines
Corporate Jet
50 hrs/yr Smaller Airplanes,
Airport,Less Staff
1/16 Ownership@ $375k
Alternatives include products or services that have different functions and forms but the same purpose.
Point-to-point, Faster, Less Hassle, Increase Productivity
CommercialAirline
CorporateJet
Good
Bad
• Pay per use
• No Maintenance
• Less Travel Time
• Less Hassle
• P2P
• Not P2P
• High Travel Time
• Security Concern
• High Cost
BOS Example –
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Price Need forcustomer's to
manage aircraft
Deadheadcosts
Speed of totaltravel time
Ease of travel Flexibility andreliability
In- f light serviceLow
High
Commercial Airlines
NetJets' Value Curve
Private Jet
CreateCreateReduceReduce
RaiseRaise
• Speed of travel time• Ease of travel• Flexibility and Reliability• In flight service
EliminateEliminate
• Price• Need for customers to
manage aircraft• Deadhead costs
Strategy Canvas Strategy Canvas -- NetJetsNetJets
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BOS Example –
Now Everyone Can Fly!Now Everyone Can Fly!
Price of Coach & Speed of Flight
P2P Direct Flight No Frill – User Pay Budget Travel
Package
Fast Expensive Better Services Flight Connections
Slow Cheap Point to Point
Conventional Airline Coach
Across Alternative IndustriesAcross Alternative Industries
Across Alternative Industries
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Strategy Canvas Strategy Canvas -- Air AsiaAir Asia
CreateCreate
• Web Registration• Express Boarding• Budget Hotel
ReduceReduce
RaiseRaise
• Quality of Safety• Point to Point Direct
Flight
EliminateEliminate
Price Competition Seat Selection Free Food & Beverages Air Ticket VIP Lounge Flight Connection
Air Fare Capital Stopover time Staffing (ground and
air)
Price
Price C
omp
Seat S
electn
Food Supply
Air Ticke
t
VIP Lounge
Flight C
on
Capital
Stopover T
ime
Staffin
gSafe
ty
P2P D
irectF
Web Reg
Xpress B
oardg
Budget Hotel
Offe
ring
Leve
l
Low
High
Other Local Airline
Air Asia
Land Transportation
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Reconstruct Market BoundariesReconstruct Market Boundaries
Across Alternate Industry
Across Strategic Groups
Across Buyer Groups
Across Complementary Scope of Products & Services
Across Functional Emotional Orientation
Across Time
There are 6 pathways to reconstruct the market boundaries
Red Ocean
Blue Ocean
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Across Strategic GroupsAcross Strategic Groups
Strategic Groups –Groups of companies within an industry that pursue a similar strategy.
E.g., Automobiles – Luxury (Mercedes, BMW), Economical (Toyota, Proton).
Traditional Health Club
Home Exercise
WomanlyFun
Easy to UseMachine
PeerSupport
TraditionalHealth Club
Home Exercise
Good
Bad
• Full range exercise and sporting options
• Low Cost
• Privacy
• Expensive.
• Not easily accessible.
• Complicated.
• Lack of Privacy
• Low motivation
Affordable
>10k Outlets &
> 4M members
(as of Oct,
2006)
BOS Example –
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CreateCreate
• Womanly fun atmosphere
ReduceReduce
RaiseRaise
• Non threatening same sex environment
EliminateEliminate
Price Amenities Workout equipment Availability of Instructors
Price Amenit ies WorkoutEquipment
Workout Time Availabilt y ofinstructors
Environmentencouraging
discipline andmotivation in
exercise
Nonthreateningsame- sex
environment
Convenience Womenly funatmosphere
Low
High
Home Exercise Program
Curves
Traditional Health Clubs
Strategy Canvas Strategy Canvas -- CurvesCurves
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Economical Less Hygienic Less Appealing Environment
Expensive Hygienic Good Ambience &
Relaxing Environment
Rightly Priced Hygienic Better Environment Emotional Appeal
Across Strategic GroupsAcross Strategic GroupsBOS Example – OldTown
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No Frill Cheap - Pay For What You Use! Optional Add-ons:
Limited service, basic Low on price, high on personality Walk in
Luxury Expensive Service Facilities
Nice Sleep!Nice Sleep!Hot Shower!Hot Shower!
4/5 Stars Hotels
Across Strategic GroupsAcross Strategic GroupsBOS Example – Tune Hotel
Backpacker Hostels
Cheap Sleep & Go
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Reconstruct Market BoundariesReconstruct Market Boundaries
Across Alternate Industry
Across Strategic Groups
Across Buyer Groups
Across Complementary Scope of Products & Services
Across Functional Emotional Orientation
Across Time
There are 6 pathways to reconstruct the market boundaries
Red Ocean
Blue Ocean
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Across Chain of BuyersAcross Chain of Buyers
Corporate Jet
There is a chain of ‘buyers’ who are directly or indirectly involved in the buying decision.
Purchasers – pay for the product or service Users – use the product or serviceInfluencers – influence the decision in the purchase
Easy To Use
No Unpleasant
Feeling
Now
Request
Insulin Industry
Better Pricing
Better Medicine
Traditionally
Prescribe
Example : Novo Nordick - from insulin producer to a diabetes care company
BOS Example –
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Everyone is a gamer!Everyone is a gamer!
Reduced Graphics
Wii Fit
Everyone can play!
Increased motion control
Nintendo outsold Sony and Microsoft 6:1. Can’t keep product on shelves!
Across Chain of BuyersAcross Chain of Buyers
Family Fun
BOS Example – Nintendo Wii
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Strategy Canvas : Nintendo WiiStrategy Canvas : Nintendo Wii
CreateCreateReduceReduce
RaiseRaiseEliminateEliminate
Price Graphics Physics Online Pay
Price
Graphic
s
Physic
s
Online
Pay
Comple
xity
Movie
Game L
ibrary
Ease o
f Use
Intera
ction
/Grou
p Fun
Magic
Wan
dLow
HighNintendo Wii
Game Industry
• Complexity• Movie
• Interaction/Group Fun• Magic Wand
• Game Library• Ease of Use
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Reconstruct Market BoundariesReconstruct Market Boundaries
Across Alternate Industry
Across Strategic Groups
Across Buyer Groups
Across Complementary Scope of Products & Services
Across Functional Emotional Orientation
Across Time
There are 6 pathways to reconstruct the market boundaries
Red Ocean
Blue Ocean
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Across Complementary Products & ServicesAcross Complementary Products & Services
Corporate Jet
Define the total solution buyers seek when they choose a product or service.
Think about what happens before, during, and after your product is used.
PurchasePurchase DeliveryDelivery SupplementaSupplementaryry
MaintenancMaintenanceeUseUse DisposalDisposal
Example :
Traditional : Buses made from Steel
• Low Initial Price• Less Space• More Fuel • High •High
NABI : Buses made from Fibre Glass
• High Initial Price • More Space• Less Fuel
• Low • Low
BOS Example – NABI
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Strategy Canvas Strategy Canvas -- NABINABI
CreateCreate
• Aesthetic design• Customer friendliness
ReduceReduce
RaiseRaise
• Environmental friendliness
EliminateEliminate
Corrosion Maintenance cost Fuel consumption
Initial purchaseprice
Corrosion Maintenancecost
Fuelconsumption
Environmentalfriendliness
Aestheticdesign
Customerfriendliness
Low
High
NABI
Average U.S Transit Bus
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Across Complementary Products and ServicesAcross Complementary Products and Services
Before During After
PurchasingProcess
Book Selection Sit Down Browse Through
Selection Attend an event
Go to Coffee Shop Read the Book Book Signing Buy DVD, Games, Gift
Carrying bag
DVD & GamesEvent : Story Telling for Kids Book Signing
Book Selection
Customer Enquiry Paying
Immediate Enjoyment!
BOS Example: Operated 798 stores in all 50 U.S. statesand the District of Columbia, as well as stores in Australia and Canada
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Across Complementary Products and ServicesAcross Complementary Products and ServicesBOS Example -
• Largest EMS (Electronics Manufacturing Services) in the World.
• Ranked 132 at Fortune Global with $51B revenue, higher than Intel (188), Motorola (200), Flextronics (292).
• Employs 550,000 employees worldwide with design centers/factories at >10 countries.
• Make Apple Mac/iPod/iPhone, Intel motherboards, Dell, HP, Sony PlayStation, Nintendo Wii, Microsoft Xbox, cell phones for Nokia/Samsung/Motorola/LG/Sony-Ericsson.
• Shenzhen facility at Longhua
• Covers about a square mile.
• Has its own fire brigade, hospital, swimming pool, restaurants, banks, supermarkets, internet cafe.
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BOS Example BOS Example -- FoxconnFoxconn
Logistics & Distribution
Design
Prototyping
VI Part Sourcing & Production
Mass Production
Vertical Integration (VI) Model
Repair & Servicing
Sourcing
InventoryControl
Logistics
Design
Prototyping
Mass Production
Distribution
Repair & Servicing
Conventional EMS
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Strategy Canvas Strategy Canvas -- FoxconnFoxconn
Cost Competiti
veness
Technology
Process
Delivery
Quality
Vertical In
tegration
Low
High
Foxconn
Other EMSes
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Reconstruct Market BoundariesReconstruct Market Boundaries
Across Alternate Industry
Across Strategic Groups
Across Buyer Groups
Across Complementary Scope of Products & Services
Across Functional Emotional Orientation
Across Time
There are 6 pathways to reconstruct the market boundaries
Red Ocean
Blue Ocean
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Across Functional or Emotional AppealAcross Functional or Emotional Appeal
Some industries compete principally on price and function - their appeal is rational.
Other industries compete largely on feelings - their appeal is emotional.
• Pricey• Extras• Feelings
• Simple• Low Cost• Low Price
QB House• Emotional Service -> None• Hair Wash -> Air Wash• $9
Traditional Hair Saloon
• Hot Towels• Message• Tea/Coffee• Special Hair /Skin
Treatments• $27 - $45
1996 2003
Rev
Functional Emotional
BOS Example – QB House
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Low Fee
Low Recognition of Education Quality
Conventional Education System
Many Environmental Constraints
Local Market
High Fee
WW Recognized Certification Branches in UK, Africa
& China Collaboration w other
Universities
Open Education System
Free & Creative Environment
Diverse Student Base
Fun Learning
Exposure Global Classroom
6000 students from 90 countries Vibrant, multicultural and international
Academic Exchange
Encourage Entrepreneurship
Across Multiple Pathways
Strategic Group
• Functional -> Emotional
Institute / College
Across Functional or Emotional AppealAcross Functional or Emotional AppealBOS Example –
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Fees
Foreign
Cert S
uperi
ority
Enviro
nmen
tal C
onstra
intsFee
Com
petiti
on
Student
Constr
aints
Globali
zatio
n Com
petiti
onAsia
n Cult
ureCrea
tive T
hinkin
gFlex
ibility
Cult
ureExp
osure
Entrep
reneurs
hip
Uncon
ventio
nal T
each
ing M
ethod
Ecosy
stem
Low
High
Lim Kok Weng
Private Colleges
CreateCreate
Unconventional Teaching Method
Ecosystem
ReduceReduce
RaiseRaise
• Globalization Competition
• Asian Culture• Creative Thinking• Flexibility Culture• Exposure• Entrepreneurship
EliminateEliminate
Foreign Cert Superiority
Environmental Constraints
Student Constraints
Fee Competition
Strategy Canvas Strategy Canvas -- LimKokWengLimKokWeng
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Reconstruct Market BoundariesReconstruct Market Boundaries
Across Alternate Industry
Across Strategic Groups
Across Buyer Groups
Across Complementary Scope of Products & Services
Across Functional Emotional Orientation
Across Time
There are 6 pathways to reconstruct the market boundaries
Red Ocean
Blue Ocean
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Across TimeAcross TimeBOS Example – iTune
1999
Napster started online music file sharing service
2003
> 2 billion illegally music flies were being traded every month
Apple launched iTunes online music store
iTunes had sold > 4 billion songs 20 million songs
on Dec 25, 2007
2008
Apple teamed up with major Music & Picture Companies
Sell Individual song / entire album
30 sec free listening Strategically price
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Across TimeBOS Example ::
A video sharing website for upload, view and share video clips
User can post video 'responses' and subscribe to content feeds
Created in mid-February 2005 by three former PayPal employees
Uses Adobe Flash technology to display a wide variety of user-generated video content
Acquired by Google in Nov 2006 for $1.6B
As of Apr 2008, hosting 83.4 million videos and 3.75 million user channels> 100 million videos were being watched every day
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Strategy Canvas Strategy Canvas -- YouTubeYouTube
Need f
or HTML k
now-ho
wHas
sleFee
s
Upload
/downlo
ad tim
e
Webspa
ce al
locatt
ed pe
r use
r
Eas-of
-use t
echno
logy
Ready
-mad
e web
site
FLV te
chno
logy
Social N
etwork
ing
Videa t
ags &
searc
h
Low
High
YouTube
Ordinary Webhosting
CreateCreate
• Ease of Use technology
• FLV technology• Ready-made website • Social networking• Video tags & Search
ReduceReduce
RaiseRaise
• Web space allotted per user
EliminateEliminate
• Need for HTML know-how
• Hassle of undergoing numerous steps
• Fees
Uploading / downloading time
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Look across TimeLook across Time
Climate Change
Weird Science
Future of the Individual
InnovationEconomy
Next Workforce
LongevityMedicine
Fueling the Future
Globalization
US- China Future
Securing the Future
Ten Trends of
the ExtremeFuture
From the Book “Extreme Future”
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From HeadFrom Head--toto--Head Competition to Blue Ocean CreationHead Competition to Blue Ocean Creation
Participates in shaping external trends over time
Focuses on adapting to external trendsas they occurTimeTime
Rethinks the functional-emotional orientation of its industry
Focuses on improving price performance within the functional -emotional orientation of its industry
FunctionalFunctional--Emotional Emotional OrientationOrientation
Looks across to complementary and service offerings
Focuses on maximizing the value of product and service offerings within the bounds of its industry
Scope of Product or Scope of Product or Service OfferingService Offering
Redefines the industry buyer group
Focuses on better serving the buyer groupBuyer GroupBuyer Group
Looks across strategic groups within industries
Focuses on competitive position within strategic groupStrategic GroupStrategic Group
Looks across alternative industriesFocuses on rivals within its industryIndustryIndustry
Blue Ocean CreationHead-To-Head Competition
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Traditional Graveyard NV Multi Corporation
BOS Example – NV Multi Corporation
Total Peace of MindTotal Peace of Mind
Economical Unpleasant Environment Pollution No Maintenance
Expensive Pleasant Environment 1 Stop Service After Sales Service
Across Multiple PathwaysAcross Multiple Pathways
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Across Across Alternative Alternative IndustriesIndustries
Across BuyerAcross BuyerGroupsGroups
ComplementaryComplementaryProducts & ServicesProducts & Services
Functional Functional to Emotionalto Emotional
White LadiesA Service Respect For Woman
Prayer Service
Professional Band
Service Team
• Notifying Friend & Relatives
• Thank You Cards• Memory Lane• Video & Slideshow
• Bereavement Product
• Insurance Protection• Capital Gain
• Buyer -> User & User -> Buyer• Pet Memorial Garden• VIP Memorial Garden
BOS Example – NV Multi Corporation Across Multiple PathwaysAcross Multiple Pathways
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Strategy Canvas Strategy Canvas -- NV Multi CorporationNV Multi Corporation
Price
Price C
ompeti
tion
Fear
Taboo
s
Sophis
ticate
d Proc
ess
Pollut i
on
Well Lay
out C
emete
rySta ff A
ppea
rance
Pre-arr
ange
d
One Stop
Funera
l Serv
ices
White A
ngels
Luxu
ry Cem
etery
Custom
izable
Burial
Plots
Care pl
an
Low
High
NV Multi
Private Cemetary
Public Cemetery
CreateCreate
• White Angels• Luxury Cemetery• Customizable
Burial Plots• Care Plan
ReduceReduce
RaiseRaise
• Well Layout Cemetery
• Staff Appearance• Pre-arranged• One Stop Funeral
Services
EliminateEliminate
• Price Competition• Fear• Taboos
Sophisticated Process
Pollution
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0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Fee C
ompe
titive
ness
Institu
tiona
l Rec
ognit
ionInd
ustry
Link
age
Program
& C
areer
PathFac
ilitato
rsFac
ilities
Brandin
gLif
estyl
e/Cultu
reFac
tor 9Fac
tor 10
Factor 1
1
Competing Factors
Offe
ring
Leve
l
XYZ
CompetitorsHigh
Low
Mid
Identify the Divergent Factors
that Differentiate XYZ from Competitors
Activity 3 & 4 : Reconstruct Market BoundariesActivity 3 & 4 : Reconstruct Market BoundariesIdentify Divergent Factors
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Activity 3 & 4 : Reconstruct Market BoundariesActivity 3 & 4 : Reconstruct Market BoundariesIdentify Divergent Factors
DescriptionDivergent Factor
Sub-Group :
Note : Each sub-group must determine at least ONE Divergent Factor.
Back
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Eliminate Create
Reduce Raise
Divergent Factors X = Y =Z =
Activity 5 & 6 : ToActivity 5 & 6 : To--Be Strategy CanvasBe Strategy CanvasConstruct Desired Value Curve for XYZ
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Mid
FeeCompetencies
IndustrialLinkage
Program& Career Path
FacilitatorsInstitutionalRecognition
High
Low
Mid
High
Low
Facilities
Activity 5 & 6 : ToActivity 5 & 6 : To--Be Strategy CanvasBe Strategy CanvasConstruct Desired Value Curve for XYZ
Create
Divergent Factors X = Y =Z =
Raise
Quality
Talent
Reduce
TechnologyProcess
Eliminate
Competencies
X Y Z
Existing Value Curve
New Value Curve
Lifestyle/Culture
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Three Characteristics of a Good StrategyThree Characteristics of a Good Strategy
1. Focus
2. Divergence
3. Compelling TaglineNow Everyone Can Fly!Now Everyone Can Fly!
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Barriers to ImitationBarriers to Imitation
Does not Make Sense based on Conventional
Strategic LogicNBC, CBS and ABC rediculedthe idea of 24x7 real time news
without star broadcasters
Brand Image ConflictsChanel, CD, etc could not imitate Body Shop as it would signal an
invalidation of their current business models
Economies of ScaleHigh volume generated by a
value innovation leads to rapid cost advantages
Political, Operational and Cultural Changes
Major revisions in routing planes, retraining, changing
marketing/pricing/culture. Took MAS 6 years to come up Firefly
1st to MarketWhen a company offers a leap in value, it rapidly earns brand buzz
and a loyal following in the marketplace
Natural MonopolySize of market does not make
sense to support another player
Back
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Conclusion: Conclusion: Focus on the Big Picture, not the NumbersFocus on the Big Picture, not the Numbers
Awakening Exploration Strategy Fair Communication
Compare your business with your
competitors' by drawing your As Is Strategy Canvas
See where your strategy needs to
change
Go into the field to explore the six
paths to creating blue oceans
Observe the distinctive
advantages of alternative
products and services
Draw your To Be Strategy Canvasbased on insights
from field observations
Get feedback on alternative strategy
canvases from customers, competitors’
customers and non customers
Distribute your before- and-after
strategic profiles on one page for easy
comparison
Support only those projects and
operational moves that allow your
company close the gaps to actualize the new strategy
Use feedback to build the best 'to be'
future strategy
See which factors you should
eliminate, create or change Back
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Get the Strategic Sequence RightGet the Strategic Sequence Right
BuyerUtility Price Cost Adoption
HurdlesCommercially Commercially
Viable Viable Blue Ocean IdeaBlue Ocean Idea
Is there exceptional buyer
utility in your business idea?
Is your price easily accessible
to the mass of buyers?
Can you attain your cost target to
profit at your strategic price?
What are adoption hurdles
in actualizing your business idea? Are you
addressing them up front?
Cost Price Utility AdoptionRed Ocean Sequence
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Buyer Utility MapBuyer Utility Map
Customer
Productivity
Environmental Friendliness
Fun and Image
Risk
Convenience
Simplicity
6
Disposal
5
Maintenance
4
Supplement
3
Use
2
Delivery
1
Purchase
The
Six
Util
ity L
evel
s
The Six Stages of the Buyer Experience Cycle
How long to find the product you
need?
Is place of purchase
attractive & accessible?
How secure is the transaction environment?
How rapidly can you make a purchase?
How long to get the product delivered?
How difficult to install the new
product?
Do buyers have to arrange delivery
themselves?
Training or expertise
assistance required?
Easy to store when not in
used?
How effective are features
and functions?
Overcharged with bell and
whistles?
Need other products to
make it work?
How much time do they take?
How much pain do they
cause?
How easy are they to obtain?
Require external maintenance?
How easy to maintain and
upgrade?
How costly?
Create waste items?
Legal or environmental
issue of the product
disposal?
Create waste items?
How easy to dispose?
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Buyer Utility Map Buyer Utility Map –– XYZXYZ’’ss ToTo--DoDo
Customer
Productivity
Environmental Friendliness
Fun and Image
Risk
Convenience
Simplicity
6
Disposal
5
Maintenance
4
Supplement
3
Use
2
Delivery
1
Purchase
The
Six
Util
ity L
evel
s
The Six Stages of the Buyer Experience Cycle
HR V.I.
Insourcing
Global Guru
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Strategic PricingStrategic Pricing
• Conventional – Test water with price insensitive customers. Drop price over time to attract mainstream buyers.
• BOS Strategic Pricing – Start with Pricing to capture Mass Market.
• Why ?• Volume gives Economy of Scale. E.g., Microsoft Windows XP.• All or Nothing. E.g., eBay.• Lack of Excludability would give rise to Free-Riding. E.g., Air Asia, OldTown.
• An offering’s reputation must be earned from Day One => Buyers can’t refuse.
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Price Corridor of the MassPrice Corridor of the Mass
1. Identify the Price Corridor of the mass
2. Specify a Price Level within the Price Corridor
Three alternative product/service types:
Size of circle is proportion to number of buyers that product/service attracts
Different Form and Function, Same Objective
Different Form
Same FunctionSame Form
Upper-level pricing
Mid-level pricing
Low-level pricing
Price Corridor of the Mass
High degree of legal and resource protection Difficult to Imitate
(E.g., Dyson)
Some degree of legal and resource protection
Low degree of legal protectionEasy to Imitate(E.g., Air Asia)
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Mid to Lower Strategic PricingMid to Lower Strategic Pricing
Suitable for companies with no patent and asset protection (e.g., expensive production factory).
• Their Blue Ocean offering has high fixed costs and marginal variable costs.
• Their attractiveness depends heavily on network externalities (all-or-nothing proposition such as eBay).
• Their cost structure benefits from steep economies of scale and scope. Volume brings with it significant cost advantages.
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Profit Model of BOSProfit Model of BOS
The Target Profit
The Strategic Price
The Target Cost
Pricing Innovation
Streamlining and Cost Innovative Partnering
• Metal/leather -> plastic
• 150 -> 51 parts
• Cheaper assembly
• 1500 partners over 50 countries
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Overcome Key Organizational HurdlesOvercome Key Organizational Hurdles
Cognitive Cognitive HurdleHurdle
MotivationalMotivationalHurdleHurdle
ResourceResourceHurdleHurdle
Political Political HurdleHurdle
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Political
Leveraging angels- Angels = those who have the most to gain
from the strategic shift
Silencing devils- Devils = those who have the most to lose from it
Getting a consigliere on their top management team- Consigliere = politically adept but highly respected insider who knows in advance all the land mines, including who will fight you and who will support you
Motivational
Focus on ‘kingpins’ – the key influencers
Fishbowl management of kingpins- Kingpins’ actions and inactions are made as transparent to others as are fish in a bowl of water
Atomization- Break down overall strategic objective into bite sized chunks; different levels understand their goal
Cognitive
Ride the electric sewer- Experience first hand the ‘real situation on the ground’
Meet with Disgruntled Customers- ‘You can’t outsource your eyes’- Get feedback from biggest critics
Resource
Hot spots- Low resources input but high potential performance gains
Cold spots- Activities that have high resource input but low performance impact- Redistribute resources to hot spots from cold spots
Horse trading- Swap resources around to where it is needed
Toppling the 4 Hurdles to ActionsToppling the 4 Hurdles to Actions
Sewer – Underground pipe carrying drainage water or waste
Bring those in denial to feel the pain and meet the customers
Where are XYZ’s Hot spots and Cold spots ?
Revenue vs Resource ?
Beside headcounts, what other resources can you trade ? Meeting room ?
Who are your kingpings ?
What review/metrics do you use ?
How do we breakdown the 3 differentiators into sizeable chunks?
Who will align the most with XYZ ? Who will fight with XYZ ?
What can you lobby to become your Godfather ?
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Build Execution into StrategyBuild Execution into Strategy
Fair ProcessEngagementExplanation
Expectation clarity
Trust &Commitment“I feel my opinion counts.”
VolunteerCooperation“I’ll go beyond
the call of duty.”
Exceeds ExpectationSelf-Initiated
Strategy Formulation Process
Attitude
Behavior
Strategy Execution
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Barriers to ImitationBarriers to Imitation
Does not Make Sense based on Conventional
Strategic LogicNBC, CBS and ABC rediculedthe idea of 24x7 real time news
without star broadcasters
Brand Image ConflictsChanel, CD, etc could not imitate Body Shop as it would signal an
invalidation of their current business models
Economies of ScaleHigh volume generated by a
value innovation leads to rapid cost advantages
Political, Operational and Cultural Changes
Major revisions in routing planes, retraining, changing
marketing/pricing/culture. Took MAS 6 years to come up Firefly
1st to MarketWhen a company offers a leap in value, it rapidly earns brand buzz
and a loyal following in the marketplace
Natural MonopolySize of market does not make
sense to support another player
Back
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AcknowledgementAcknowledgement
Professor Kim and Mauborgne for enlightening us with such a great book.
You All, for being such a wonderful audience !
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Back UpBack Up
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So, are Red Ocean Strategies Worthless?So, are Red Ocean Strategies Worthless?NO!NO!
1. A company must master its traditional markets using conventional strategic planning tools.
- ‘It will always be important to swim successfully in the red ocean by out competing rivals. Red oceans will always matter and will always be a fact of business life’.
- But ‘to focus on the red ocean is therefore to accept the key constraining factors of war- limited terrain and the need to beat an enemy to succeed – and to deny the distinctive strength of the business world: the capacity to create new market space that is uncontested.’
2. But to sustain high performance, companies must create their own blue oceans, and make the competition irrelevant!
- But blue oceans are largely uncharteda) no analytic fireworks to guide its creation and implementation,b) no principles to effectively manage risk,c) therefore too risky for managers to pursue.
The book provides practical examples and guides to create blue oceans.
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Mapping the blue ocean strategiesFrom a strategic point of view, the 16th edition of Witsa's World Congress on Information Technology (Witsa's WCIT 2008) is conceived using the "blue ocean" strategy methodology. WCIT 2008 is constructed from the ground up to be similar to previous editions, primarily from the point of view of its focus on the global impact of ICT. Yet it is significantly different because of the collection of multiple events that are held concurrently. The former gives it continuity while the latter brings additional depth to an outstanding series that started with the first World Congress in 1978. Creating "blue oceans" is a dynamic process of strategising and execution. It is also about doing the right thing at the right time. At first, the organising committee needs to establish the ultimate goals, which must be achieved within a realistic time frame. Overall, there are threephases of development, which span two years. The phases include fundraising, programme formulation and production. At each phase, there are specific strategies being worked out and execution plans being carried out based on the "eliminate-reduce-raise-create" grid. This "E-R-R-C" grid mapped out the ultimate "blue ocean" framework for organising the WCIT 2008. With this framework, the organisingcommittee managed to work out a unique WCIT 2008 strategy canvas for achievements. The strategy set out action plans to eliminate whatever that is redundant, outdated and trivial to the overall organisation of the event. It also eliminated many challenges to minimiseoperating cost and, at the same time, raise overall quality and create unique value propositions.
World Congress on Information Technology (WCIT) 2008
• A premier global ICT forum that brings together global leaders in business, government and academia.
• Held at the Kuala Lumpur Convention Centre on May 18 – 22, 2008, 5 days-event.
• Themed “The Global Impact of Information and Communications Technology: Enable Businesses, Empower Societies, Enrich Economies”,
• Very successful event, drew more than 2,500 delegates from over 80 countries!
Successful Application of BOSSuccessful Application of BOS
Source : The Edge DailyTitle : 19 May 2008 CEO's Laptop: All set for a most prestigious event by David WongDavid Wong - Pikom chairman and group CEO of SnT Global Sdn Bhd
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Successful Application of BOSSuccessful Application of BOSNintendo WiiNintendo Wii