com 459 hw blue ocean strategy

Red Ocean Blue Ocean

Opening up a business in an already competitive market space.

Creating a business in an untouched market space.

Competing and trying desperately to

eliminate the competition.

Competition is irrelevant.

Exploit customers or the markets current demands.

Create and capture new demands through innovation and change.

Make the value to cost trade off. Break the value to cost trade off.

Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost.

Align the whole system of a firm’s activities in pursuit of differentiation an low cost.

Red Ocean vs. Blue Ocean

Ingredients1. An open mind2. Untouched Market (Blue Ocean)3. Risk Takers4. TALENT

DescriptionBlue Ocean refers to the meaning of opening up a marketthat has not been touched upon yet. This technique is heavily influenced by innovation and is aimed at makingcompetition irrelevant. Red Ocean describes the meaning of opening up a marketthat is just the same as all the rest, therefore engaging in fierce and unnecessary competition.

Mark Lalic Com 459 source: Kim, W.C., Mauborgne, R. (2005). Blue Ocean Strategy. Boston, Ma: Harvard Business School Press

The Six Principles of Blue Ocean Strategy

Formulation Principle

Reconstruct market boundaries

Focus on the big picture, not the numbers

Reach beyond the existing demand

Get the strategic sequence right

Execution Principle

Overcome key organizational hurdles

Build execution into strategy

Risk factor each principle attenuates

Search risk

Planning risk

Scale risk

Business model risk

Risk factor each principle attenuates

Organizational risk

Management risk

All LOW risk

All LOW risk

Why all the low risks?Because it is a Blue Oceanof unmarked market places


A new Value Curve

Companies should eliminate factors that cut into value or cut into profit.

Reduce

Reduce factors that aretoo high above the industries standard.

Eliminate

Examples could be factors that Industries constantly compete onsuch as constant new product development.

Some industry standardsthat cut into company productivityand can be reduced is customerservice standards.

Create

What type of products orservices can be created that is not offered within theindustry.

For example grocery stores can focus on providing an effective home delivery service.

Raise

What factors can be raisedabove the industries standards.

Companies should focus on ways they canchange the sources of value for buyers.

IngredientsA smooth flow of communication throughout the companyWillingness to change.The ability to use effective rational and critical thinking.

The Four Actions Framework


The Eliminate-Reduce-Raise-Create Grid

Eliminate

Over achieving customer

service.

Worker abuse

Store Manager

Raise

Worker Pay

Store Morale

More workers for certain shifts

Reduce

Store Shrink

Customer Complaints

Worker Complaints

Create

Better work environment

More dairy product selection

Communication between management and

Employees.

Example:Safeway

Description:It helps companies have a clear and better drive to creating Blue Oceans. The grid helps companieswith four immediate benefits.1. It pushes them to push for differentiation to break the value-cost trade-off.2. Stops companies from over engineering products.3 Easy to understand by managers4. Because it is a difficult it drives companies to scrutinize every factor in the industry.


The Four Steps of Visualizing Strategy

Visual awakening

Organize a team and draw up your companies value curve using the strategy canvas.

Visualizing the changes needed will bring executives to act on it.

Managers should go out into the field and explore the six different fields of creating blue oceans.

As how painters never let someone else paint for them, managers should never out source their eyes.

Allow all your teams to gather together and share their illustrations of the canvas strategies that they created.

Nothing will bring change more than visual realization.

Visual Exploration Visual Strategy Fair Visual Communication

After the visual strategy is realized communicate it effectively and easily to your


The Three Tiers of Noncustomers

Your Market

First TierThese customers arealways searchingfor something better.

Second TierAlso known as refusing noncustomesthey find the offerings of markets Unacceptable or beyond their means.

Customers are on the edge ready to

jump ship if a better market arrives.

An Ocean of untapped demand waiting

to be released.

Third TierFarthest away from anIndustries existing customers.Their needs are always assumedto belong to other markets.

Unlim

ited potential if needs are met


The Buyer Utility Map

Description and FunctionHelps managers look at the issue from the right perspective.Outlines all the levers companies can pull to deliver exceptionalutility to buyers.

1. Purchase 2. Delivery 3. Use 4. Supplements

5. Maintenance

6. Disposal

Customer Productivity

Simplicity

Convenience

Risk

Fun and image

Environment

Friendly


The Buyers Experience Cycle

PurchasePrice, how long does it take

to find ,how secure is it.

DeliveryHow long does it take,

how easy is it, is it difficultto unpack.

UseIs it easy to use, does

It require training, does itdeliver far more power than

the average product.

SupplementsDo you need other

products, is it costly, howeasy is it to obtain.

MaintenanceHow easy is it to

upgrade and maintainthe product. Is it costly

DisposalDoes the product

create waste items, are there environmental issues,

is disposal costly.


Price Corridor of The Mass

High Level pricing – high degree of legal and resource protection. Difficultto imitate.

Mid Level pricing – Some degree of legal and resource protection.

Low Level pricing – Low degree of legal and resource protection. Easy to imitate.

The Price Corridor of the Mass

Description:The table is used to help managers find the right price for an irresistible offer. The irresistible offer may not always be the lowest price.

Step 1: Identify the price corridor of the mass.

Step 2: Specify a price level within the pricecorridor.

Same Different Form Different Form and function Form Same Function Same Objective


The Profit Model of Blue Ocean Strategy

The Strategic Price

The Target Profit

The Target Cost

Streamlining andCost Innovations

Pricing Innovation

Partnering

Key LeverKey Lever

Key Lever

To hit the target cost that supports the profit companieshave two key levers.

Companies turn to the third leverWhen all else fails and target costcannot be met.


Blue Ocean Idea (BOE) Index

DescriptionCompanies should build their Blue Ocean based on the sequence of utility, price, cost, and adoption. The BOI provides a simple test or checklist to help ensure commercialsuccess.

Philips CD-i Motorola

Iridium

DoCoMo

I-mode japan

Utility Is there exceptional utility? Are there compelling

reasons to buy your offering? - - +Price Is your price easily accessible to the mass buyers?

- - +Cost Does you cost structure meet the target cost?

- - +Adoption Have you addressed adoption hurdles up front?

- +/- +
