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’