NOTES ON BLUE OCEAN STRATEGY

By Bob Kolodney
Blue Ocean Strategy is having a big impact; it has become part of
the fabric of Samsung and LG, and is the best selling management
book in China
Orientation.
In Blue Ocean Strategy the idea is "to create new market space and
make the competition irrelevant."
The advice of Professors Kim and Mauborgne is to "Stop
benchmarking the competition. The more you benchmark them,
the more you look like them." They explain that Blue Ocean
Strategy is the "simultaneous pursuit of both differentiation and
low cost".
The objective is to change the elements of the product/service
offering so that they differ significantly from those offered in the
industry, and so that they appeal to a large pool of "noncustomers" - potential customers who are dissatisfied with current
industry offerings or who are not interested in them.
Changing the product/service offering and finding new customers
make possible a new customer value proposition and new market
space in Blue Ocean Strategy this is called "VALUE
INNOVATION.
First Step - Changing the Offering.
Professors Kim and Mauborgne recommend changing the offering
by looking at the elements being offered by competitors in the
industry and deciding what can be ELIMINATED, REDUCED,
RAISED AND CREATED. The new offering can be compared to
those of competitors by plotting the elements of the offerings on a
so-called "strategy canvas":

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 Kim & Mauborgne 2005 all rights reserved

Second Step - Finding New Customers.

In looking for customers for the new venture, the creators of Blue
Ocean Strategy recommend looking for people who are
inadequately served by the existing industry (this is also an
emphasis of the other two management approaches). Blue Ocean
Strategy refers to them as the 'Non-Customers" and suggests that
there are three tiers of them:
- the "soon-to-be" non-customers who are dissatisfied and are
about to jump ship;
- the "refusing' customers who have chosen against your
industry's offerings; and
- the "unexplored" customers who are located in distant markets.
In order to find the appropriate pool of customers for the new
offering Blue Ocean Strategy has a tool called the 6 PATHWAYS:

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New customers can be found by looking for them across six

conventional boundaries that normally delimit a market:
- Industry (find customers from other industries
- Strategic group (find customers from another market
segment)
- Buyer group (sell to a different buyer/decision maker or
influencer)
- Product scope (offer product/service features to meet
needs/overcome barriers of new customers)
- Functional/Emotional orientation (add or remove emotional
component)
- Time (make use of a significant trend or development that
leads to new customers)

Third Step - Testing Validity.

In the Blue Ocean Strategy framework there are ideas about pools
of customers and a related approach to pricing, and there is a
suggested sequence to test the validity of your proposed offering
(reviewing buyer utility, then price, then cost, then adoption

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hurdles, before determining that there is a Blue Ocean idea worthy

of implementing):

Fourth Step - Implementation.

Recognizing that bringing about change is never easy, and that
resources are always limited for a new initiative, the creators of
Blue Ocean Strategy have also worked out an approach to
execution, so-called
"Fair Process" and "Tipping Point Leadership".
Fair Process is a method of getting buy-in by the people who will
execute the strategy - by ENGAGEMENT(so that feedback and
ideas of participants are aired and incorporated), EXPLANATION
(so that decisions made and the reasons for them are well-

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understood), and EXPECTATION CLARITY(so that objectives,

rewards and penalties are clear to everyone).
Tipping Point Leadership emphasizes beginning by working with
extreme and potentially influential allies ("angels") and
counteracting extreme resisters ("devils") - rather than trying
indiscriminately to influence the broad mass of people within the
company, the marketplace and the environment. These methods
are designed to help you have a maximum impact with a minimum
of resources.
An Iterative Process.
Please note that the creators of Blue Ocean Strategy (and the
creators of Disruptive Innovation and The Momentum Effect)
emphasize that the process of devising a new customer value
proposition (with a defined offering and targeted customers), and
the implementation process are iterative - you can anticipate starts,
stops and adjustments while working closely with potential
customers.
Remember - these approaches are useful, but they don't get the
job done by themselves - they serve only to reinforce your
energy, persistence, resourcefulness and flexibility
Additional Information.
You can find other summary information on Blue Ocean Strategy
in the Blue Ocean Strategy Webinar posted on this
Entrepreneurship Tab and in the presentation of Philippe Latapie
posted in the Recent Events section of this website and on
www.blueoceanstrategy.com

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