Blueoceanstrategy 100403005918 Phpapp02

Blue Ocean Strategy
How to Create Uncontested Market Space and Make the Competition Irrelevant
Facilitators : Yip Khai Biau (ymike27@hotmail.com) & Lieu Yoke Sun

Group/Presentation Title Agilent Restricted Date ##, 200X
Blue Ocean Strategy (BOS)

Introduction to BOS BOS Tools : Strategy Canvas & E.R.R.C. Awakening : As-Is Strategy Canvas Exploration : Reconstruct Market Boundaries Strategizing : To-Be Strategy Canvas Actualization : Identify actions to actualize the strategies Conclusion
Facilitators : Yip Khai Biau (ymike27@hotmail.com) & Lieu Yoke Sun
All Rights Reserved KB Yip/YS Lieu
Page : 2
Objectives
Develop understanding of Blue Ocean Tool Sets and how to apply them effectively

Strategy Canvas ERRC
Perform As-Is Analysis to Compare Current Strategy of XYZ vs Competitors Explore Pathways to Breakaway from Market Boundaries to look for Bigger Playing Field Brainstorm and Agree on the To-Be Strategy for XYZ
Page : 3
Introduction to Blue Ocean Strategy

History & Background Defining Red & Blue Ocean Six Principles of BOS Reach Beyond Existing Demand Value Innovation
Page : 4
History & Background

Authored by W. Chan Kim and Renee Mauborgne in 2005. Based on a study of 150 strategic moves spanning more than 100 years and 30 industries. BOS is the simultaneous pursuit of differentiation and low cost. The aim of BOS is not to out-perform the competition in the existing industry, but to create new market space or a blue ocean, thereby making the competition irrelevant. BOS offers systematic and reproducible methodologies and processes in pursuit of innovation by both new and existing firms. BOS frameworks and tools are designed to be visual in order to not only effectively build the collective wisdom of the company but also to effectively execute through easy communication.
Page : 5
Defining Red and Blue Ocean Whats Red, Whats Blue?

Red Ocean Strategy
Compete in existing market space Compete in existing market space Beat the competition Beat the competition Exploit existing demand Exploit existing demand Make the value-cost trade off Make the value-cost trade off Align strategy choice of Align strategy choice of differentiation or low cost differentiation or low cost
Blue Ocean Strategy

Create uncontested market space Create uncontested market space Make the competition irrelevant Make the competition irrelevant Create & capture new demand Create & capture new demand Break the value- cost trade off Break the value- cost trade off Simultaneous pursuit strategy of Simultaneous pursuit strategy of differentiation and low cost differentiation and low cost
Page : 6
Examples of Red and Blue Ocean
Page : 7
Six Principles of Blue Ocean Strategy

Formulation Principles 1. Reach beyond existing demand 2. Reconstruct market boundaries 3. Focus on the big picture, not the numbers 4. Get the strategic sequence right Execution Principles 5. Overcome key organizational hurdles 6. Build execution into strategy
Page : 8
Reach Beyond Existing Demand
First Tier: Soon-to-be noncustomers who are on the edge of your market, waiting to jump ship
Second First Tier Tier
Third Tier
Yourlu B Market
cean eO
Second Tier: Refusing noncustomers who consciously choose against your market.
Third Tier: Unexplored non customers who are in markets distant from yours.
Blue Ocean Go for the Largest Catchment of Non-Customers

Page : 9
Example [yellow tail]
Traditional Wine : An elite, refined image in packaging with heavy use of wine terminology. Aging quality. Prestige of a vineyard and its legacy. Complexity and sophistication of a wines taste, such as tannins and oak. A diverse range of wines to cover all varieties of grapes & consumer preferences
[yellow tail] : No jargon.Simple and nontraditional label. Aging is not important. Vibrant and fun. Sweeter and easier to drink. Only one Red (Shiraz) and one White (Chardonnay).
Page : 10
Example [yellow tail]

Tier 3 Anyone that drinks water Tier 1 Wine drinker market
[yellow tail] did not focus on the wine market only
Third Tier
Third Tier
Red Wine X
Your Your Market Market
Tier 2 Easier to drink market, eg., beer, cocktails, soft-drink
[yellow tail] created a Blue Ocean by making its wine more appealing to the bigger population
Page : 11
Reach Beyond Existing Demand
Entertainment Theater Performance Circus
Entertainment Theater Performance Circus
Circus X
Circus X
Page : 12
Example [Nintendo]
Electronic Game Industry Nintendo Wii
Nintendo created a Blue Ocean by reducing the complexity, add the ease of use and fun!
Girls Other Males Young Antisocial Males
Everyone Else Young Antisocial Males
Girls Other Males
Everyone Else
Page : 13
Value Innovation The Cornerstone of BOS

Value innovation places equal emphasis on value and innovation. Value innovation is a new way of thinking about and executing strategy that results in the creation of a blue ocean. The creation of blue oceans is about driving costs down while simultaneously driving value up for buyers.
Cost
Cost Saving Eliminate & Reduce Competing Factors
Value Innovation
Buyer Value
Buyer Value Lifted Raise & Create New Elements
Back
Page : 14
Blue Ocean Strategy Tools
Strategy Canvas Eliminate-Reduce-Raise-Create (ERRC) Grid
Page : 15
What is Strategy Canvas?

Degree of which each competitor offers/invests in each factor
High Competitor 1
Value Curves
Mid
Competitor 2
Your Company Low

Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor 6 Factor 7 Factor 8
Competing Factors
Factors that the industry competes & invests, also potential areas where customer value could be created.
Offering Level
Graphical Representation of Strategy + Big Picture View + Landscape Scanning + Relative Positioning vs. Competitors
Page : 16
4 Actions Framework
Strategically Reduce Cost
Reduce
Which factors should be reduced well below the industry's standard?
Eliminate
Which of the factors that the industry takes for granted should be eliminated?
A New A New Value Value Curve Curve
Raise
Which factors should be raised well above the industry's
Create
Which factors should be created that the industry has never offered?
Strategically Invest in
Page : 17
Eliminate-Reduce-Raise-Create (ERRC) Grid

Eliminate Raise
Reduce
Create
Back
Page : 18
Formulating Blue Ocean Strategy

75 mins 120 mins 120 mins
Awakening : As-Is Analysis
Exploration : Reconstruct Market Boundaries
Strategizing : To-Be Strategy Canvas
Activity 1 (45 min)

Split into 3 Groups Review As-Is Strategy Canvas (30 min) Presentation (5 min each, 15 min total)
Activity 3 (90 min)

Split into 3 Groups Use 6 Paths Framework, reconstruct market boundaries & identify Divergent Factors (60 min) Presentation (10 min each, 30 min total)
Activity 5 (90 min)

Split into 3 Groups Use ERRC to construct the Desired Value Curve (60 mins) Presentation (10 min each, 30 mins total)
Activity 2 (30 min)

Agree to ONE As-Is Strategy Canvas
Activity 4 (30 min)

Agree to Top 3-5 Divergent Factors
Activity 6 (30 min)

Agree to ONE To-Be Strategy Canvas
Page : 19
Activity 1 & 2 : As-Is Analysis

Review XYZ As-Is Strategy Canvas
High
4.5 4 3.5 3
Offering Level
Mid
2.5 2 1.5 1
Competitors XYZ
Low
0.5 0
h s s on rs at ge ie es iti to a P n li t a i nk gn er li t ve ac Li ci iti co re t F e a ry Fa C pe st lR & du om na m C In io ra e ut tit og Fe s Pr In Competing Factors
ng di an Br
/C le y st fe Li
re ltu u
Back
Page : 20
Reconstruct Market Boundaries
There are 6 pathways to reconstruct the market boundaries

Across Alternate Industry Across Strategic Groups Across Buyer Groups
Red Ocean
Across Complementary Scope of Products & Services Across Functional Emotional Orientation Across Time
Blue Ocean
Page : 21
Across Alternative Industries

BOS Example
Alternatives include products or services that have different functions and forms but the same purpose.
Commercial Airline
Corporate Jet
Commercial Airlines
Corporate Jet
Pay per use Good No Maintenance
Less Travel Time Less Hassle P2P
Not P2P Bad High Travel Time Security Concern High Cost
1/16 Ownership @ $375k
50 hrs/yr
Smaller Airplanes, Airport, Less Staff
Point-to-point, Faster, Less Hassle, Increase Productivity

Page : 22
Strategy Canvas - NetJets

Eliminate Raise Speed of travel time Ease of travel Flexibility and Reliability In flight service
Reduce Price Need for customers to manage aircraft Deadhead costs
Create
High
Private Jet NetJets' Value Curve
Com m ercial Airlines
Low Price
Need for customer's to manage aircraft
Deadhead costs
Speed of total travel time
Ease of travel
Flexibility and reliability
In- flight service
Page : 23

BOS Example
Conventional Airline Coach
Slow Cheap Point to Point
Fast Expensive Better Services Flight Connections
Now Everyone Can Fly!

Price of Coach & Speed of Flight P2P Direct Flight No Frill User Pay Budget Travel Package
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Strategy Canvas - Air Asia

Eliminate
Price Competition Seat Selection Free Food & Beverages Air Ticket VIP Lounge Flight Connection
Raise
Quality of Safety Point to Point Direct Flight
Reduce
Air Fare Capital Stopover time Staffing (ground and air)
High
Create
Web Registration Express Boarding Budget Hotel
Air Asia
Offering Level
Other Local Airline
Land Transportation
Low
l l e y F y g p g n e et dg ote on ge ic ct et m it a pl m ct fin ck Re oa r af Pr un le Ti tC H ire ap af up Ti Co b S e t h r B D S C r e Lo e St ig ve ge P t S od W ic Ai P ss Fl ea o po ud Pr VI P2 re S F o B Xp St
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Red Ocean
Blue Ocean
Page : 26
Across Strategic Groups

BOS Example

Strategic Groups Groups of companies within an industry that pursue a similar strategy. E.g., Automobiles Luxury (Mercedes, BMW), Economical (Toyota, Proton).
Traditional Health Club Home Exercise
Traditional Health Club
Womanly Fun
Good
Full range exercise and sporting options
Low Cost Privacy
Easy to Use Machine Peer Support
Expensive. Bad Not easily accessible. Complicated. Lack of Privacy Low motivation
>10k Outlets & > 4M members (as of Oct, 2006)
Affordable Home Exercise

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Strategy Canvas - Curves

Eliminate Raise Non threatening same sex environment
Reduce Price Amenities Workout equipment Availability of Instructors
Create Womanly fun atmosphere
High
Curve s
Hom e Exercise Program
Traditional Health Clubs
Low
Price
Amenit ies
Workout Equipment
Workout Time
A vailabilt y of instructors
Environment encouraging discipline and motivation in exercise
Nonthreatening same- sex environment
Convenience
Womenly fun at mosphere
Page : 28

BOS Example OldTown
Expensive Hygienic Good Ambience & Relaxing Environment
Economical Less Hygienic Less Appealing Environment
Rightly Priced Hygienic Better Environment Emotional Appeal
Page : 29

BOS Example Tune Hotel
4/5 Stars Hotels
Nice Sleep! Hot Shower!

Luxury Expensive Service Facilities Backpacker Hostels
Cheap Sleep & Go
No Frill Cheap - Pay For What You Use! Optional Add-ons: Limited service, basic Low on price, high on personality Walk in
Page : 30

Red Ocean
Blue Ocean
Page : 31
Across Chain of Buyers

BOS Example
There is a chain of buyers who are directly or indirectly involved in the buying decision. Purchasers pay for the product or service
Users use the product or service Influencers influence the decision in the purchase
Corporate Jet Example : Novo Nordick - from insulin producer to a diabetes care company
Traditionally
Now
Prescribe
Request
Better Medicine
Better Pricing
Easy To Use
Insulin Industry
No Unpleasant Feeling
Page : 32
Across Chain of Buyers

BOS Example Nintendo Wii
Everyone is a gamer!
Everyone can play! Reduced Graphics
Nintendo outsold Sony and Microsoft 6:1. Cant keep product on shelves!
Family Fun Wii Fit Increased motion control

Page : 33
Strategy Canvas : Nintendo Wii

Eliminate Complexity Movie Raise Game Library Ease of Use
Reduce Price Graphics Physics Online Pay
Create Interaction/Group Fun Magic Wand
High Nintendo Wii
Gam e Industry
e G s ic ph ra s ic ys Ph y Pa C i ty ex pl om ie ov M G am ry ra ib L se fU o c ra te In n Fu ic ag M d an
Low
ic Pr
e in nl
se Ea
up ro G n/ io t
Page : 34

Red Ocean
Blue Ocean
Page : 35
Across Complementary Products & Services

BOS Example NABI

Define the total solution buyers seek when they choose a product or service. Think about what happens before, during, and after your product is used. Corporate Jet
Example :
Traditional : Buses made from Steel Low Initial Price Less Space More Fuel
High
High
Purchase
Delivery
Use
Supplementa Maintenanc ry e Low
Disposal
High Initial Price
More Space Less Fuel
Low
NABI : Buses made from Fibre Glass

Page : 36
Strategy Canvas - NABI

Eliminate Raise Environmental friendliness
Reduce Corrosion Maintenance cost Fuel consumption
Create Aesthetic design Customer friendliness
High
NABI
Average U.S Transit Bus
Low Initial purchase price Corrosion Maintenance cost Fuel consumption Environmental friendliness Aesthetic design Customer friendliness
Page : 37
Across Complementary Products and Services

BOS Example:
Purchasing Process
Operated 798 stores in all 50 U.S. states and the District of Columbia, as well as stores in Australia and Canada
Before

During

After

Book Selection Sit Down Browse Through Selection Attend an event
Customer Enquiry Paying
Go to Coffee Shop Read the Book Book Signing Buy DVD, Games, Gift
Book Selection
Immediate Enjoyment!
Carrying bag
Event : Story Telling for Kids
Book Signing All Rights Reserved KB Yip/YS Lieu
DVD & Games

Page : 38
Across Complementary Products and Services

BOS Example Largest EMS (Electronics Manufacturing Services) in the World. Ranked 132 at Fortune Global with $51B revenue, higher than Intel (188), Motorola (200), Flextronics (292). Employs 550,000 employees worldwide with design centers/factories at >10 countries. Make Apple Mac/iPod/iPhone, Intel motherboards, Dell, HP, Sony PlayStation, Nintendo Wii, Microsoft Xbox, cell phones for Nokia/Samsung/Motorola/LG/SonyEricsson. Shenzhen facility at Longhua Covers about a square mile. Has its own fire brigade, hospital, swimming pool, restaurants, banks, supermarkets, internet cafe.
Page : 39
BOS Example - Foxconn

Repair & Servicing Repair & Servicing Logistics & Distribution Distribution
Conventional EMS
Mass Production Logistics VI Part Sourcing & Production Inventory Control Prototyping
Mass Production
Prototyping
Design
Sourcing Design
Vertical Integration (VI) Model

Page : 40
Strategy Canvas - Foxconn

High
Foxconn
Othe r EM Se s
Low
ti t iv e en
ss hn ec T
g olo
y Pr
e oc
ss D
y er l iv e
ua
li ty a ti c n lI te g
t ra
io
Co
st
Co
pe
r Ve
Page : 41

Red Ocean
Blue Ocean
Page : 42
Across Functional or Emotional Appeal

BOS Example QB House
Some industries compete principally on price and function - their appeal is rational. Other industries compete largely on feelings - their appeal is emotional.
Simple Low Cost Low Price
Pricey Extras Feelings
Functional
Emotional
Traditional Hair Saloon QB House

Emotional Service -> None Hair Wash -> Air Wash $9
1996 2003 Rev
Hot Towels Message Tea/Coffee Special Hair /Skin Treatments $27 - $45
Page : 43
Across Functional or Emotional Appeal

BOS Example
Institute / College
Across Multiple Pathways

High Fee WW Recognized
Certification

Low Fee Low Recognition of Education Quality Conventional Education System Many Environmental Constraints Local Market
Strategic Group Functional -> Emotional
Branches in UK, Africa & China Collaboration w other Universities 6000 students from 90 countries Vibrant, multicultural and international
Open Education
System
Free & Creative
Environment
Diverse Student Base Fun Learning Exposure Global Classroom Encourage Entrepreneurship Academic Exchange
Page : 44
Strategy Canvas - LimKokWeng

Eliminate Foreign Cert Superiority Environmental Constraints

Raise
Globalization Competition Asian Culture Creative Thinking Flexibility Culture Exposure Entrepreneurship
Reduce Student Constraints Fee Competition
Create Unconventional Teaching Method Ecosystem
High
Lim Kok Weng Private Colleges Low

Fe C es er En tS vi ro up nm er io en rit ta y lC on st ra Fe in ts e C om St pe ud titi en on tC G lo on ba st l iz ra at in io ts n C om pe ti t io As n ia n C ul C tu re re at iv e Th in Fl kin ex g ib i li ty C ul tu re Ex U po nc En su on t re re ve pr nt en io na eu lT rs ea hi p ch in g M et ho d Ec os ys te m
Fo re ig n
Page : 45

Red Ocean
Blue Ocean
Page : 46
Across Time
BOS Example iTune
Apple launched iTunes online music store
Apple teamed up with major Music & Picture Companies Sell Individual song / entire album 30 sec free listening Strategically price
Napster started online music file sharing service
> 2 billion illegally

music flies were being traded every month
1999
2003
iTunes had sold > 4 billion songs 20 million songs on Dec 25, 2007
2008
Page : 47
Across Time
BOS Example :
A video sharing website for upload, view and share video clips User can post video 'responses' and subscribe to content feeds Created in mid-February 2005 by three former PayPal employees Uses Adobe Flash technology to display a wide variety of usergenerated video content Acquired by Google in Nov 2006 for $1.6B
As of Apr 2008, hosting 83.4 million videos and 3.75 million user channels > 100 million videos were being watched every day
Page : 48
Strategy Canvas - YouTube

Eliminate
Need for HTML know-how Hassle of undergoing numerous steps Fees
Raise
Web space allotted per user
Reduce
Uploading / downloading time
Create
Ease of Use technology FLV technology Ready-made website Social networking Video tags & Search
High YouTube
Ordinary Webhosting Low

ow -h w o kn e sl as es Fe d/ oa pl e ti m d te at oc l al er us se f- u -o te gy lo no ch dy ea R te si eb w V FL gy lo no ch al ci So ng ki or a de Vi gs ta & ch ar se
d ee N
fo
L TM H r
d oa nl w do
r pe
e ad -m
te
w et
ce pa bs e W
s Ea
Page : 49
Look across Time
Weird Science Climate Change Future of the Individual
Longevity Medicine
Fueling the Future
Ten Trends of the Extreme Future
Innovation Economy
Next Workforce
Globalization US- China Future
Securing the Future
From the Book Extreme Future

Page : 50
From Head-to-Head Competition to Blue Ocean Creation

Head-To-Head Competition
Industry Focuses on rivals within its industry
Blue Ocean Creation

Looks across alternative industries
Strategic Group
Focuses on competitive position within Looks across strategic groups strategic group within industries Focuses on better serving the buyer group Focuses on maximizing the value of product and service offerings within the bounds of its industry Focuses on improving price performance within the functional emotional orientation of its industry Redefines the industry buyer group
Buyer Group
Scope of Product or Service Offering
Looks across to complementary and service offerings
Functional-Emotional FunctionalOrientation
Rethinks the functionalemotional orientation of its industry
Time
Focuses on adapting to external trends Participates in shaping external as they occur trends over time
Page : 51

BOS Example NV Multi Corporation
Traditional Graveyard NV Multi Corporation Total Peace of Mind
Economical Unpleasant Environment Pollution No Maintenance
Expensive Pleasant Environment 1 Stop Service After Sales Service

Page : 52

BOS Example NV Multi Corporation
Service Team Professional Band
Complementary Products & Services
Prayer Service
White Ladies A Service Respect For Woman
Across Buyer Groups
Functional to Emotional
Notifying Friend & Relatives Thank You Cards Memory Lane Video & Slideshow

Buyer -> User & User -> Buyer Pet Memorial Garden VIP Memorial Garden Bereavement Product Insurance Protection Capital Gain
Page : 53
Strategy Canvas - NV Multi Corporation

Eliminate Price Competition Fear Taboos Raise Well Layout Cemetery Staff Appearance Pre-arranged One Stop Funeral Services Create
High NV Multi
Reduce Sophisticated Process Pollution
White Angels Luxury Cemetery Customizable Burial Plots Care Plan
Private Cem etary Public Cemetery Low

on t io n et er y s ge er y Pl ot ial Ca re ls An Ce m et xu ry Lu Cu st om iz a bl e Bu r bo os Pr ic titi Fe oc e ic e s ce ed ss an pl ar e
ea ra n
Po l lu
ra ng ar
Ce m
Se rv
m pe
Ta
Pr
fA pp
ay ou t
is t ic a
Pr ic
So ph
el lL
St af
ne
St o
Fu n
W hi te
Co
te d
ePr
er al
Page : 54
Activity 3 & 4 : Reconstruct Market Boundaries

Identify Divergent Factors
High
4.5 4
Competitors
Offering Level
3.5 3
Mid
2.5 2 1.5 1
XYZ
Low
0.5 0
C om In pe st itu tit i ve ti o ne na ss lR ec og In ni du ti o st Pr n ry og Li ra nk m ag & e C ar ee rP at h Fa ci li t at or s Fa ci l i ti es Br an Li di fe ng st yl e/ C ul tu re Fa ct or 9 Fa ct or 10 Fa ct or 11
Fe
Competing Factors
Identify the Divergent Factors that Differentiate XYZ from Competitors

Page : 55
Activity 3 & 4 : Reconstruct Market Boundaries

Identify Divergent Factors
Sub-Group :
Divergent Factor
Description
Note : Each sub-group must determine at least ONE Divergent Factor.

Back
Page : 56
Activity 5 & 6 : To-Be Strategy Canvas

Construct Desired Value Curve for XYZ
Eliminate Create Divergent Factors X= Y= Z=
Reduce
Raise
Page : 57
Activity 5 & 6 : To-Be Strategy Canvas

Construct Desired Value Curve for XYZ
Eliminate Competencies Create Divergent Factors X= Y= Z=
Reduce Technology Process
Raise Quality Talent
New Value Curve
High Mid Low
Existing Value Curve
Fee Competencies
Institutional Recognition
Industrial Linkage
Program & Career Path
Facilitators
Facilities Lifestyle/ Culture
Page : 58
Three Characteristics of a Good Strategy
1. Focus
2. Divergence
Now Everyone Can Fly!

3. Compelling Tagline
Page : 59
Barriers to Imitation
Does not Make Sense based on Conventional Strategic Logic

NBC, CBS and ABC rediculed the idea of 24x7 real time news without star broadcasters
Brand Image Conflicts

Chanel, CD, etc could not imitate Body Shop as it would signal an invalidation of their current business models
Economies of Scale
High volume generated by a value innovation leads to rapid cost advantages
Political, Operational and Cultural Changes

Major revisions in routing planes, retraining, changing marketing/pricing/culture. Took MAS 6 years to come up Firefly
1st to Market
When a company offers a leap in value, it rapidly earns brand buzz and a loyal following in the marketplace
Natural Monopoly
Size of market does not make sense to support another player Back
Page : 60
Conclusion: Focus on the Big Picture, not the Numbers

Awakening Exploration Strategy Fair Communication
Compare your business with your competitors' by drawing your As Is Strategy Canvas
Go into the field to explore the six paths to creating blue oceans
Draw your To Be Strategy Canvas based on insights from field observations Get feedback on alternative strategy canvases from customers, competitors customers and non customers
Distribute your before- and-after strategic profiles on one page for easy comparison Support only those projects and operational moves that allow your company close the gaps to actualize the new strategy
See where your strategy needs to change
Observe the distinctive advantages of alternative products and services
See which factors you should eliminate, create or change
Use feedback to build the best 'to be' future strategy Back
Page : 61
Get the Strategic Sequence Right

Red Ocean Sequence
Cost
Price
Utility
Adoption
Buyer Utility
Price
Cost
Adoption Hurdles
Commercially Viable Blue Ocean Idea
Is there exceptional buyer utility in your business idea?
Is your price easily accessible to the mass of buyers?
Can you attain your cost target to profit at your strategic price?
What are adoption hurdles in actualizing your business idea? Are you addressing them up front?
Page : 62
Buyer Utility Map

The Six Stages of the Buyer Experience Cycle
1 Purchase
the product you need? How rapidly can you make a purchase? Is place of purchase attractive & accessible? How secure is the transaction environment? Overcharged with bell and whistles? How much pain do they cause? Legal or environmental issue of the product disposal?
2 Delivery
the product delivered? How difficult to install the new product? Do buyers have to arrange delivery themselves?
3 Use
Training or expertise assistance required? Easy to store when not in used? How effective are features and functions?
6 Disposal
Create waste items?
Supplement Maintenance
Need other products to make it work? Require external maintenance? How easy to maintain and upgrade?
Customer How long to find How long to get Productivity
The Six Utility Levels
Simplicity
How much time do they take?
How easy to dispose?
Convenience
How easy are they to obtain?
How costly?
Risk
Create waste items?
Fun and Image
Environmental Friendliness
Page : 63
Buyer Utility Map XYZs To-Do

The Six Stages of the Buyer Experience Cycle
1 2 Delivery 3 Use 4 Supplement 5 Maintenance 6 Disposal
HR V.I.
Customer Productivity
Purchase
The Six Utility Levels
Simplicity
Insourcing
Convenience
Risk
Fun and Image
Global Guru
Environmental Friendliness
Page : 64
Strategic Pricing
Conventional Test water with price insensitive customers. Drop price over time to attract mainstream buyers. BOS Strategic Pricing Start with Pricing to capture Mass Market. Why ? Volume gives Economy of Scale. E.g., Microsoft Windows XP. All or Nothing. E.g., eBay. Lack of Excludability would give rise to Free-Riding. E.g., Air Asia, OldTown. An offerings reputation must be earned from Day One => Buyers cant refuse.
Page : 65
Price Corridor of the Mass

1. Identify the Price Corridor of the mass
Three alternative product/service types:
2. Specify a Price Level within the Price Corridor
Different Form Same Form Same Function
Different Form and Function, Same Objective
cing l pri ve er-le Upp
High degree of legal and resource protection Difficult to Imitate (E.g., Dyson) Some degree of legal and resource protection Low degree of legal protection Easy to Imitate (E.g., Air Asia)
Price Corridor of the Mass
Mid-level pricing
Low -lev el p
ricin g
Size of circle is proportion to number of buyers that product/service attracts
Page : 66
Mid to Lower Strategic Pricing

Suitable for companies with no patent and asset protection (e.g., expensive production factory).
Their Blue Ocean offering has high fixed costs and marginal variable costs. Their attractiveness depends heavily on network externalities (all-or-nothing proposition such as eBay). Their cost structure benefits from steep economies of scale and scope. Volume brings with it significant cost advantages.
Page : 67
Profit Model of BOS

The Strategic Price
The Target Profit
The Target Cost
Streamlining and Cost Innovative

Metal/leather -> plastic 150 -> 51 parts Cheaper assembly
Partnering
1500 partners over 50 countries
Pricing Innovation
Page : 68
Overcome Key Organizational Hurdles
Cognitive Hurdle
Resource Hurdle
Motivational Hurdle
Political Hurdle
Page : 69
Toppling the 4 Hurdles to Actions

Cognitive
Sewer Underground pipe carrying drainage water or waste Ride the electric sewer
- Experience first hand the real situation on the ground
Motivational
Focus on kingpins the key influencers Fishbowl management of kingpins
- Kingpins actions and inactions are made as transparent to others as are fish in a bowl of water
Who are your kingpings ? What review/metrics do you use ? How do we breakdown the 3 differentiators into sizeable chunks?
Bring those in denial to feel the pain and meet the customers
Meet with Disgruntled Customers

- You cant outsource your eyes - Get feedback from biggest critics
Atomization
- Break down overall strategic objective into bite sized chunks; different levels understand their goal
Resource
Where are XYZs Hot spots and Cold spots ? Revenue vs Resource ? Beside headcounts, what other resources can you trade ? Meeting room ? Hot spots
- Low resources input but high potential performance gains
Political
Leveraging angels
- Angels = those who have the most to gain from the strategic shift
Who will align the most with XYZ ? Who will fight with XYZ ? What can you lobby to become your Godfather ?
Cold spots
- Activities that have high resource input but low performance impact - Redistribute resources to hot spots from cold spots
Silencing devils
- Devils = those who have the most to lose from it
Getting a consigliere on their top management team

- Consigliere = politically adept but highly respected insider who knows in advance all the land mines, including who will fight you and who will support you
Horse trading
- Swap resources around to where it is needed
Page : 70
Build Execution into Strategy

Strategy Formulation Process Attitude
Fair Process
Engagement Explanation Expectation clarity
Trust &Commitment
I feel my opinion counts.
Behavior Strategy Execution
Volunteer Cooperation
Ill go beyond the call of duty.
Exceeds Expectation
Self-Initiated
Page : 71
Barriers to Imitation
Does not Make Sense based on Conventional Strategic Logic

NBC, CBS and ABC rediculed the idea of 24x7 real time news without star broadcasters
Brand Image Conflicts

Chanel, CD, etc could not imitate Body Shop as it would signal an invalidation of their current business models
Economies of Scale
High volume generated by a value innovation leads to rapid cost advantages
Political, Operational and Cultural Changes

Major revisions in routing planes, retraining, changing marketing/pricing/culture. Took MAS 6 years to come up Firefly
1st to Market
When a company offers a leap in value, it rapidly earns brand buzz and a loyal following in the marketplace
Natural Monopoly
Size of market does not make sense to support another player Back
Page : 72
Acknowledgement
Professor Kim and Mauborgne for enlightening us with such a great book. You All, for being such a wonderful audience !
Page : 73
Back Up
Page : 74
Page : 75
So, are Red Ocean Strategies Worthless? NO!

1.
A company must master its traditional markets using conventional strategic planning tools. - It will always be important to swim successfully in the red ocean by out competing rivals. Red oceans will always matter and will always be a fact of business life. - But to focus on the red ocean is therefore to accept the key constraining factors of war- limited terrain and the need to beat an enemy to succeed and to deny the distinctive strength of the business world: the capacity to create new market space that is uncontested.
2.
But to sustain high performance, companies must create their own blue oceans, and make the competition irrelevant! - But blue oceans are largely uncharted a) no analytic fireworks to guide its creation and implementation, b) no principles to effectively manage risk, c) therefore too risky for managers to pursue. The book provides practical examples and guides to create blue oceans.
Page : 76
Successful Application of BOS

World Congress on Information Technology (WCIT) 2008
A premier global ICT forum that brings together global leaders in business, government and academia. Held at the Kuala Lumpur Convention Centre on May 18 22, 2008, 5 days-event. Themed The Global Impact of Information and Communications Technology: Enable Businesses, Empower Societies, Enrich Economies, Very successful event, drew more than 2,500 delegates from over 80 countries!
Mapping the blue ocean strategies

From a strategic point of view, the 16th edition of Witsa's World Congress on Information Technology (Witsa's WCIT 2008) is conceived using the "blue ocean" strategy methodology. WCIT 2008 is constructed from the ground up to be similar to previous editions, primarily from the point of view of its focus on the global impact of ICT. Yet it is significantly different because of the collection of multiple events that are held concurrently. The former gives it continuity while the latter brings additional depth to an outstanding series that started with the first World Congress in 1978. Creating "blue oceans" is a dynamic process of strategising and execution. It is also about doing the right thing at the right time. At first, the organising committee needs to establish the ultimate goals, which must be achieved within a realistic time frame. Overall, there are three phases of development, which span two years. The phases include fundraising, programme formulation and production. At each phase, there are specific strategies being worked out and execution plans being carried out based on the "eliminate-reduce-raise-create" grid. This "E-R-R-C" grid mapped out the ultimate "blue ocean" framework for organising the WCIT 2008. With this framework, the organising committee managed to work out a unique WCIT 2008 strategy canvas for achievements. The strategy set out action plans to eliminate whatever that is redundant, outdated and trivial to the overall organisation of the event. It also eliminated many challenges to minimise operating cost and, at the same time, raise overall quality and create unique value propositions.
Source : The Edge Daily Title : 19 May 2008 CEO's Laptop: All set for a most prestigious event by David Wong David Wong - Pikom chairman and group CEO of SnT Global Sdn Bhd
Page : 77
Successful Application of BOS

Nintendo Wii
Page : 78

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Blue Ocean Strategy

Facilitators : Yip Khai Biau (ymike27@hotmail.com) & Lieu Yoke Sun

Blue Ocean Strategy (BOS)

Strategy Canvas ERRC

All Rights Reserved KB Yip/YS Lieu

Introduction to Blue Ocean Strategy

All Rights Reserved KB Yip/YS Lieu

History & Background

Defining Red and Blue Ocean Whats Red, Whats Blue?