Reconstructing Market Reconstructing Market BoundariesBoundaries
Michael SeymourMichael Seymour
Matt AndersonMatt Anderson
ReconstructReconstruct Market Boundaries Market Boundaries
The First Principle of Blue Ocean The First Principle of Blue Ocean StrategyStrategy
Approaches to ReconstructionApproaches to Reconstruction There are six basic approaches to There are six basic approaches to
reconstructing market boundaries:reconstructing market boundaries:1.1. Define Industry & Strive to be the best within Define Industry & Strive to be the best within
itit2.2. Look at Industry through lens of strategic Look at Industry through lens of strategic
groupgroup3.3. Focus on Same buyer groupFocus on Same buyer group4.4. Define scope of Products/Services OfferedDefine scope of Products/Services Offered5.5. Accept Industry’s Functional/Emotional Accept Industry’s Functional/Emotional
OrientationOrientation6.6. Focus on the same point in time when Focus on the same point in time when
formulating strategyformulating strategy
Path 1: Look Across Alternative Path 1: Look Across Alternative IndustriesIndustries
Alternatives: Alternatives: Have different form & Have different form & function but same purpose function but same purpose (“Substitutes”)(“Substitutes”)
Buyers weigh alternatives (often Buyers weigh alternatives (often unconsciously) in EVERY purchase unconsciously) in EVERY purchase decisiondecision
Path 2: Look Across Strategic Path 2: Look Across Strategic GroupsGroups
Strategic Group:Strategic Group: Group of Companies Group of Companies within an industry that pursue a similar within an industry that pursue a similar strategystrategy
Can be generally ranked by 2 dimensions:Can be generally ranked by 2 dimensions:• PricePrice• PerformancePerformance
Path 3: Look Across the Chain of Path 3: Look Across the Chain of BuyersBuyers
There is a chain of 3 buyers Directly or Indirectly There is a chain of 3 buyers Directly or Indirectly involved in EVERY buying decisioninvolved in EVERY buying decision
Purchaser:Purchaser: Pays for product/service Pays for product/service User:User: Consumes product/service (Often different Consumes product/service (Often different
from purchaser)from purchaser) Influencer:Influencer: Sway users and purchasers Sway users and purchasers
Path 4: Look Across Path 4: Look Across Complementary Product/Service Complementary Product/Service
OfferingsOfferings
Complement: Complement: Product or Service that adds value Product or Service that adds value to another (ex: Movie theater with a day care for to another (ex: Movie theater with a day care for kids)kids)
EX: Airport, Movies, Philips, Barnes & NobleEX: Airport, Movies, Philips, Barnes & Noble
Strategy Canvas of the US Municipal Bus Strategy Canvas of the US Municipal Bus IndustryIndustry
High
NABI
Path 5: Look Across Path 5: Look Across Functional/Emotional Appeal to Functional/Emotional Appeal to
BuyersBuyers
2 Basic types of appeal2 Basic types of appeal• Rational (Price & Function)Rational (Price & Function)• Emotional (Feelings)Emotional (Feelings)
Appeal of MOST products/services is often a mix Appeal of MOST products/services is often a mix of bothof both
Companies can often find new market space by Companies can often find new market space by challenging the orientation of their industrychallenging the orientation of their industry
EX: QB House, Cemex, StarbucksEX: QB House, Cemex, Starbucks
Path 6: Look Across TimePath 6: Look Across Time
All industries are subject to External Trends All industries are subject to External Trends Analyzing these trends with the right perspective Analyzing these trends with the right perspective
can help create Blue Ocean opportunitiescan help create Blue Ocean opportunities Work back from vision of B.O.S.Work back from vision of B.O.S.
EX: Apple’s IPOD & I-Tunes, CNNEX: Apple’s IPOD & I-Tunes, CNN
From Head-to-Head Competition From Head-to-Head Competition to Blue Ocean Strategyto Blue Ocean Strategy
Head-to-Head Competition
Blue Ocean Strategy
Industry Focuses on rivals within its industry
Looks across alternative industries
Strategic Group Focuses on competitive position within strategic group
Looks across strategic groups within industry
Buyer group Focuses on better serving the buyer group
Redefines the industry buyer group
Scope of product or service offering
Focuses on maximizing the value of product and service offerings within the bounds of its industry
Looks across to complementary product and service offerings
Functional-emotional orientation
Focuses on improving price performance within the functional-emotional orientation of its industry
Rethinks the functional-emotional orientation of its industry
Time Focuses on adapting to external trends as they occur
Participates in shaping external trends over time
To Sum it Up…To Sum it Up…
Think across conventional Think across conventional boundaries of competitionboundaries of competition
Managers are engaged in a structural Managers are engaged in a structural process of reordering market process of reordering market realities in a new wayrealities in a new way
Tomorrow’s chapter: focuses on ‘The Tomorrow’s chapter: focuses on ‘The Big Picture, Not the Numbers’Big Picture, Not the Numbers’