blue ocean strategy

Blue Ocean StrategyTeam 4

The Three Characteristics of a Good Strategy Create a unique and exceptional value

curve to unlock a blue ocean Utilize focus, divergence, and a

compelling tagline Southwest Airlines

Focus Friendly service, speed, and frequent

point-to-point departures No extra investments in meals, lounges,

and seating choices Hard to match their prices

Divergence When a company’s strategy is formed

reactively to keep up with competition, it loses uniqueness

Eliminating, reducing, raising, creating to differentiate

Point-to-point travel between mid sized cities instead of hub-and-spoke system

Compelling Tagline Deliver a clear message Be truthful The strength of a strategy can be seen

from a strong and authentic tagline

Compelling Tagline – Best Buy “making technology work for you” “not only tired, it is a death sentence

that is bland, old, worn, uninspired and not reflective of a single strand of your customer’s aspirations” – David Brier, brand specialist

Reach beyond Existing Demand Best Buy started as audio specialty store

Very popular and successful Saw potential other customers

Moved into all electronics Ability to satisfy more people = more

customers Did well and thrived with great customer

service By 2008 had 1,000 store

Existing demand gave them this opportunity

The new Growth Seemed great and profitability was there

Unaccounted competitors Small single owned electronic stores

Ability to not charge as much and more personable Online help and ordering

Could order any parts for cheaper and do it yourself Not only service kept Best Buy going (sales as well) Such companies like Amazon took became too easy

Best Buy top sellers were being sold on-line Adv. never even leave the house

Best Buy did not see these as competitors Soon realized the threat they offered

Need for new customers Tried joint with Carphone Warehouse 2010

Financial struggles led to closure in Europe Geek Squad was their answer for new customers

this created their store-within-a-store However closed 50 stores in U.S. The attempt was to build stable customer service

and relationships with previous as well as new customers

Overcome Key Organizational Hurdles Cognitive, limited resources, motivation, politics Small but viable is the fact that customers got

mad about reserved parking for quick customers (hard enough to find parking as is) One example of many things that has went wrong

Law suites were used to settle this dispute $200,000 Pricing errors are recorded

Ex selling a smart phone for $100 cheaper

One thing Best Buy did do to improve their image environmentally was become more “green”

Increased energy efficiency in products Reduced customer waste

More recyclable packaging, proper disposal of certain electronics components, etc

To make up for past years the company introduced they introduced a recycling program These are just a few examples where Best Buy has

improved and can continue to do more

Reconstructing Market Boundaries

The first principle of blue ocean strategy is to reconstruct market boundaries to break from the competition and create blue oceans.

Chapter Goals Are there systematic patterns?

Are these patterns applicable across all types of industry sectors?

Six Paths of remaking market boundaries

Six Paths Path 1: Look Across Alternative

Industries Path 2: Look Across Strategic Groups Path 3: Look Across the Chain of Buyers Path 4: Look Across Complimentary

Product and Service Offerings Path 5: Look Across Functional or

Emotional Appeal to Buyers Path 6: Look Across Time

Best Buy

Electronics CellphonesBESTBUY

Competing on what you know! Most prestigious companies compete on

what they did in the past. Behavior affects buyer’s expectations

Market research rarely reveals new insights into what attracts customers.

Conceiving New Market Space

Recording market realities in a new way: Reconstructing existing market elements

across industry and market boundaries, leading them to free themselves from head-to-head competition in the red ocean

Now reframe strategy planning process to focus on the big picture and apply these paths in forming your blue ocean strategy!

Accessing Trends Across Time To form the basis of Blue Ocean Strategy…..

Must be decisive to your business Must be irreversible Must have clear trajectory

Ex: discontinuing technology, rise of new lifestyle, change in environment (regulatory or social)

Strategy Execution Create a culture of trust and commitment

Do employees trust management? Must align hearts and minds Require people to step outside of comfort

zone Do employees think outside of the norm

Inspire voluntary cooperation Quick to grasp new strategy? Strategy must

be forced onto them?

Poor Process Can Ruin Strategy Execution Failure to explain a strategy can halt the

execution Trust must be built with employees to

begin to accept the new strategy

The Power of Fair Process What is fair process?

Engagement Explanation Expectation clarity

How does it allow companies to build execution into strategy?

The Three E Principles of Fair Process

Engagement- Involving individuals in the strategic decisions that affect them by asking for their input. Communicates management’s respect Better strategic decisions Greater commitment from those involved

Explanation- Making sure everyone involved and affected should understand why final strategic decisions are made. Establish confidence in managers Allows employees to trust managers Powerful feedback loop

Expectation clarity- Stating clearly the new rules of the game after a strategy is set. Understood standards to be held by Strategy can be executed rapidly

Fairness/Justice Cont. When fair process is exercised, it is

believed that a level playing field exists Inspires employees to voluntarily

cooperate in executing the new strategy Involves going beyond the call of duty

Why Does Fair Process Matter? Intellectually

Recognition and reflection of individual’s ideas

Emotionally Individual recognition of value

It all comes down to intellectual and emotional recognition.

Fair Process and Blue Ocean Strategy Commitment, trust, and voluntary cooperation

are intangible capital Allows companies to stand apart in the speed,

quality, and consistency of their execution and to implement strategic shifts fast at low cost

When people have trust, they have heightened confidence in others intentions and actions

When people have commitment, they are willing to override personal self-interest in the interests of the company

Fair Process and Blue Ocean Strategy (Continued) Intangible Capital is directly related to

success or failure in executing blue ocean strategies

How do companies create trust, commitment, and voluntary cooperation? Incentives of money and power Exercise of fair process

Fair Process and Blue Ocean Strategy By organizing the strategy formulation

process around the principles of fair process, you can build execution into strategy making from the start

Compromises and sacrifices are necessary in building a strong company