A BOOK REVIEW ON

objectiveTo distinguish between Blue Ocean & Red Ocean

strategy.

Implementation of this strategy.

Focuses on construction rather than competition.

Search for new market space.

Khushi

3

ACCOLADES

2.Translated into over 41 foreign languages – a world record.

3.Taught as the major theory of strategy at leading business schools.

4.Gives insights to CEOs, Executives, Heads of State & Prime Ministers.

khushi

1. Over 2 million copies sold.

Prof. Chan Kim Prof Renee Mauborgne

Impact of Creating Blue OceansImpact of Creating Blue Oceans

Red oceans vs blue oceans strategy.

The dead red oceans The blessing blue oceans

Compete in existing market space. Create uncontested market space.

Beat the competition. Make the competition irrelevant.

Exploit existing demand. Create & capture new demand.

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

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

Align the whole system of a firm’s activities in pursuit of differentiation or low costs.

Value innovation-the cornerstone.

1.Cost-savings are made by eliminating & reducing the factors an industry competes on.

2.Buyer value is lifted by raising & creating elements the industry has never offered.

3.Scale of economies kick in due to high sales volume that superior value generates.

A spice of value.A spice of value.

What is strategy canvas?

It is a diagnostic tool for building a compelling blue ocean strategy.It allows us to understand :

• where the competition is currently investing.

• the factors the industry currently competes on(Eg:-product,services,etc).

• what customers receive from existing competitive offerings in the market.

FOUR FUNDAS TO FLY HIGH

FOUR ACTIONS FRAMEWORK

SIX PRINCIPLES OF BLUE OCEANS STRATEGY.

a) FORMULATION PRINCIPLES.

b) EXECUTION PRINCIPLES.

1.Reconstruct market boundaries.

2.Focus on big picture, and not the numbers.

3.Reach beyond existing demand.

4.Get the strategic sequence right.

1.Overcome key organizational hurdles.

2.Build execution into strategy.

Formulating blue ocean strategy.

1.Reconstruct market boundaries

From Competi

ng Within

Industry

Strategic group

Buyer group

Scope of product & service offerings

Functional emotional orientation of an industry

Time

Look Across Functional or Emotional Appeal to Buyers

When companies are willing to challenge the functional-emotional orientation of their industry, they often find new market space. 2 common patterns are observed-

Emotionally oriented industries offer many extras that add price without enhancing functionality. Stripping away those extras may create a fundamentally simpler, lower priced, lower-cost business model that customers would welcome. Eg:-BODY-SHOP.

Conversely, functionally oriented industries can often infuse commodity products with new life by adding a dose of emotion and, in so doing, can stimulate new demand. Eg:-SWATCH.

Look Across Complementary Products and Service Offerings

Few products and services are used in a vacuum. In most cases, other products & services affect their value. But in most industries, rivals converge within the bounds of their industry’s product and service offerings.

Untapped value is often hidden in complementary products and services. The key is to define the total solution buyers seek when they choose a product or service. A simple way to do so is to think about what happens before, during, and after your product is used.

Eg:- movie theaters. The ease and cost of getting a babysitter and parking the car affect the perceived value of going to the movies. Yet these complementary services are beyond the bounds of the movie theater industry as it has been traditionally defined.

look Across the Chain of Buyers

Individual companies in an industry often target different customer segments.

For example, large versus small customers. But an industry typically converges on a single buyer groups.

By looking across buyer groups, companies can gain new insights into how to redesign their value curves to focus on a previously overlooked set of buyers.Eg:- Novo Nordis.

Customer identification

Look Across Strategic Groups within Industries

The key to creating a blue ocean across existing strategic groups is to break out of this narrow tunnel vision by understanding which factors determine customers’ decisions to trade up or down from one group to another.

Eg:-the Texas-based women’s fitness company.

Look Across Alternative Industries

In making every purchase decision, buyers implicitly weigh alternatives, often unconsciously.

For some reason, we often abandon this intuitive thinking when we become sellers.

Rarely do sellers think consciously about how their customers make trade-offs across alternative industries.

A shift in price, a change in model, even a new ad campaign can elicit a tremendous response from rivals within an industry, but the same actions in an alternative industry usually go unnoticed.

Eg:-NETJETS.

2.FOCUS ON BIG PICTURE & NOT THE NUMBERS.

ARCHANA TIWARI

3.Reach beyond existing demand

[3 TIERS OF NON-CUSTOMERS]

1ST Tier always sits at the edge of the market.

2nd Tier of non customers is people who refuse to use the industry’s offering.

3rd Tier of non customers means who has never thought of your market offering.

1st tiers “SOON TO BE” NON-CUSTOMERS.

Example : 1988 Brit Manager “Pret "of fast food chain expanded its blue ocean - latent Demand3 qualities people looking for in RestrauntsPret’s business is more than $25 million- 130 stores in UK & also established in New York & Hongkong2002- more than $160 million33% Mc Donald's share

2nd tiers“REFUSING “ NON-CUSTOMERS.

Example :1964 JC Decaux- French vendor of outward advertising called street furnitureBillboards & Transport AdvertisementIt remained unpopularHighest GrowthJC Decaux -23 countries

3rd tiers“UNEXPLORED” NON-CUSTOMERS.

Example : Navy, Marine, Air force- difference in conceptionsJSF(Joint strike fighter) look for commonalitiesJSF programmed same Aircraft Reduced cost- $33 millions from $190 million

4.GET THE STRATEGIC SEQUENCE RIGHT.

Uncovering Blocks to Buyer Utility

Purchase Delivery Use Supplements Maintenance Disposal

Customer Productivity:

In which stage are the biggest blocks to customer productivity?

Simplicity: In which stages are the biggest blocks to simplicity?

Convenience: In which stage are the biggest blocks to convenience?

Risk: In which stage are the biggest blocks to reducing risks?

Fun and Image: In which stage are the biggest blocks to fun and image?

Environmental

Friendliness:

In which stage are the biggest blocks to environmental friendliness?

Profit Model of Blue Ocean Strategy

The Strategic Price

The Target Profit

The Target Cost

Streamlining and Cost Innovations

Partnering

Pricing Innovation

EXECUTING BLUE OCEAN STRATEGY

5.OVERCOMING Key organizational hurdles

Once a company is developed a blue ocean strategy with a profitable business model it must execute it . At this point of time it comes across the organizational hurdle.The hurdles are:-Cognitive Hurdle , Limited ResourcesHurdle,Motivational Hurdle , Political Hurdle.

Tipping Point Leadership.

1.It hinges in any organization fundamental changes can happen quickly when the beliefs and energies of critical mass of people create an epidemic movement toward an idea.

2.It was successfully practiced by Bill Bratton in NYPD in 1994.

.

Break Through The Cognitive Hurdle.

In many turnarounds and corporate transformations it is the hardest battle.

It is hard to simply make people aware of the need for strategic shift and to agree on its causes.

Solution By Tipping Point Leadership.

1. It suggest the act of disproportionate influence.

2. Which says make people see and experience the harsh reality firsthand.

Most leaders face the stark reality of limited resources. At this point they do one of the two things 1) Trim there ambitions and demoralize there workforce. 2) Fight for more resources.

Solution By Tipping Point Leadership.

1. Its tells us to concentrate on multiplying the value of the resources we have.

2. Identify your hot and cold spots.

Break Through Limited Resource Hurdle.

Break Through The Motivational Hurdle

People must not only recognize what needs to be done but they must also act on that insight in a sustained and meaningful way.

It’s a constant driving force in an organization.

Solution By Tipping Point Leadership.

1.Motivating King Pins

2.Fish Bowl Management.

3.Atomization.

Every organization as politics in it. By this even the best and the brightest are

regularly eaten alive by politics ,intrigue and plotting.

Solution By Tipping Point Leadership.

1.Leverage your angels and silence your devils.

2.For this first find out who are my devils and angels.

Break Through The Political Hurdle.

6.BUILD EXECUTION INTO STRATEGY

Why does fair process matter??

Fair processViolation of fair

process

Some companies using blue ocean strategy

Apple: Apple computers invented a new market with the iPOD digital music player.

Whirlpool: Whirlpool’s front-loading washer-dryer combo called the Duet. Stokke: Norwegian furniture company NetJets Cirque du Soleil (the circus reinvented for the entertainment market). Starbucks (coffee as low-cost luxury for high-end consumers). EBay (online auctioning). Sony (the Walkman - personal portable stereos). Cars: Japanese fuel-efficient autos (mid-70s) and Chrysler minivan Dell (mid-1990s).

Conclusion The strategy outlines the premise, research, success examples and

the so-called ‘Value Innovation’ framework, which allows companies to create Blue Ocean Strategies and in the process achieve:-

• High-impact, customer-based innovations.

• Significant increase in speed to market, from idea formation to market introduction.

• Significant decrease in development and operational costs.

• An innovation-focused and duly motivated organization & Increasing buyer value.