Blue Ocean Strategy

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
Blue Ocean Strategy
Compete
Competeininexisting
existingmarket
marketspace
space
Create
Createuncontested
uncontestedmarket
marketspace
space
Beat
Beatthe
thecompetition
competition
Make
Makethe
thecompetition
competitionirrelevant
irrelevant
Exploit
Exploitexisting
existingdemand
demand
Create
Create&&capture
capturenew
newdemand
demand
Make
Makethe
thevalue-cost
value-costtrade
tradeoff
off
Break
Breakthe
thevaluevalue-cost
costtrade
tradeoff
off
Align
Alignstrategy
strategychoice
choiceof
of
differentiation
differentiationor
orlow
lowcost
cost
Simultaneous
Simultaneouspursuit
pursuitstrategy
strategyof
of
differentiation
differentiationand
andlow
lowcost
cost
Page : 6
Examples of Red and Blue Ocean
Page : 7
Six Principles of Blue Ocean Strategy

Formulation Principles
1. Reach beyond existing
Execution Principles
5. Overcome key
organizational
demand
2. Reconstruct market
hurdles
6. Build execution into
boundaries
3. Focus on the big picture,
strategy
not the numbers

4. Get the strategic
sequence right
Page : 8
Reach Beyond Existing Demand
Second
First Tier
Tier
Your
Blu
Market
First Tier: Soon-to-be noncustomers who are on the edge of

your market, waiting to jump ship
Second Tier: Refusing noncustomers who consciously

choose against your market.
Third Tier: Unexplored non

customers who are in markets
distant from yours.
Third
Tier
an
e
c
eO
Blue Ocean Go for the Largest Catchment of Non-Customers

Page : 9
Example [yellow tail]
[yellow tail] :
Traditional Wine :
An elite, refined image in packaging with heavy
use of wine terminology.
No jargon.Simple and nontraditional label.
Aging quality.
Vibrant and fun.
Prestige of a vineyard and its legacy.
Sweeter and easier to drink.
Complexity and sophistication of a wines taste,

such as tannins and oak.
Only one Red (Shiraz) and one White

(Chardonnay).
Aging is not important.
A diverse range of wines to cover all varieties

of grapes & consumer preferences
Page : 10
Example [yellow tail]

Tier 3 Anyone that drinks water
[yellow tail] did not focus

on the wine market only
Tier 1 Wine drinker market
Second
First Tier
Tier
Third
Tier
Second
First Tier
Tier
Third
Tier
Your
Your
Market
Market
Red
Wine
X
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
Entertainment
Theater
Performance
Circus
Circus
Circus
X
Circus
X
Page : 12
Example [Nintendo]
Electronic Game
Industry
Girls
Other
Males
Young
Antisocial
Males
Nintendo Wii
Nintendo created a Blue Ocean by
reducing the complexity, add the
ease of use and fun!
Everyone
Else
Girls
Other
Males
Everyone
Else
Young
Antisocial
Males
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 Saving Eliminate &
Reduce Competing Factors
Cost
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
Value Curves
High
Offering Level
Competitor 1
Competitor 2
Mid
Your Company
Low
Factor 1
Factor 2
Factor 3
Factor 4
Factor 5
Factor 6
Factor 7
Competing Factors
Factor 8
Factors that
the industry
competes &
invests, also
potential
areas where
customer
value could be
created.
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?
Raise
AANew
New
Value
Value
Curve
Curve

raised well above the
industry's
Create
Strategically
Invest in

created that the industry
has never offered?
Page : 17
Eliminate-Reduce-Raise-Create
(ERRC) Grid
Eliminate
Raise
Reduce
Create
Back
Page : 18
Formulating Blue Ocean Strategy

75 mins
120 mins
Exploration :
Reconstruct Market
Boundaries
Awakening :
As-Is Analysis
Activity 1 (45 min)
Activity 3 (90 min)
Strategizing :
To-Be Strategy
Canvas
Activity 5 (90 min)
Split into 3 Groups
Split into 3 Groups
Split into 3 Groups
Review As-Is Strategy

Canvas (30 min)
Use 6 Paths Framework,

reconstruct market
boundaries & identify
Divergent Factors (60 min)
Use ERRC to construct the

Desired Value Curve (60
mins)
Presentation (5 min each,

15 min total)
120 mins

30 min total)
Activity 2 (30 min)

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

Agree to Top 3-5 Divergent
Factors

30 mins total)
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
Offering Level
High
4.5
4
3.5
3
Mid
2.5
2
1.5
Competitors
XYZ
Low
0.5
0
n
s
e
th
s
ss
a
g
io
ie
t
or
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i
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t
a
P
i
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ta
nk
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i li
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Li
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it ti
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F
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a
Fa
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R
C
pe
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&
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om
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I
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itu
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Fe
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Pr
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Competing Factors
g
in
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an
Br
re
tu
l
u
C
e/
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st
fi e
L
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
Blue
Ocean
Across Functional Emotional

Orientation
Across Time
Page : 21
Across Alternative Industries

BOS Example
Alternatives include products or services that have different functions and

forms but the same purpose.
Commercial
Airline
Pay per use

Good
No
Maintenance
Corporate
Jet
Corporate
Jet
Commercial
Airlines
Less Travel
Time
Less Hassle
P2P
1/16 Ownership
@ $375k
Not P2P
Bad
High Travel
Time
Security
Concern
High Cost
50 hrs/yr
Smaller
Airplanes,
Airport,
Less Staff
Point-to-point, Faster,
Less Hassle, Increase Productivity
Page : 22
Strategy Canvas - NetJets

Raise
Eliminate
Speed of travel time
Ease of travel
Flexibility and Reliability
In flight service
Create
Reduce
Price
Need for customers to

manage aircraft
Deadhead costs
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
Across Alternative Industries

BOS Example
Conventional Airline
Coach
Across
Alternative
Industries
Fast
Expensive
Better Services
Flight Connections
Slow
Cheap
Point to Point
Now Everyone Can Fly!
Price of Coach &

Speed of Flight
P2P Direct Flight
No Frill User Pay
Budget Travel
Package
Page : 24
Strategy Canvas - Air Asia

Raise
Eliminate
Price Competition
Quality of Safety
Seat Selection
Point to Point Direct

Flight
Free Food & Beverages

Air Ticket
VIP Lounge
Flight Connection
Create
Reduce
Air Fare
Web Registration
Capital
Express Boarding
Stopover time
Budget Hotel
Staffing (ground and

air)
High
Offering Level
Air Asia
Other Local Airline
Land Transportation
Low
t
l
l
e
n
p
e
g
e
ty
tF
ly
dg ote
tn
ng
ta
ke
ic
m
fe
im
ng
Co
Re oa r
ec
pi
pp
ec
ic
ffi
a
r
Pr
u
l
T
t
H
i
a
a
u
T
Co
b
S
h
B
D
S
C
r
e
Lo
e
et
er
Se
St
ig
s
W
ic
Ai
ov
at
IP
2P
dg
od
Fl
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o
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P
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B
Xp
St
Page : 25

Across Buyer Groups
Red
Ocean

Products & Services
Blue
Ocean

Orientation
Across Time
Page : 26

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
Good
Full range
exercise and
sporting
options
Home
Exercise
Traditional
Health Club
Womanly
Fun
Low Cost
Privacy
Easy to Use
Machine
Expensive.
Bad
Not easily
accessible.
Complicated.
Peer
Support
Low
motivation
Lack of
Privacy
>10k
Outlets &
> 4M
members
(as of
Oct,
2006)
Affordable
Home Exercise
Page : 27
Strategy Canvas - Curves

Raise
Eliminate
Non threatening same

sex environment
Create
Reduce
Price
Amenities
Womanly fun
atmosphere
Workout equipment
Availability of Instructors
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

Across Buyer Groups
Red
Ocean

Products & Services
Blue
Ocean

Orientation
Across Time
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
Jetcompany
Example : Novo Nordick - from insulin producer to a diabetes care
Traditionally
Now
Prescribe
Better
Medicine
Request
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

Raise
Eliminate
Complexity
Game Library
Movie
Ease of Use
Create
Reduce
Price
Interaction/Group Fun
Graphics
Magic Wand
Physics
Online Pay
High
Nintendo Wii
Gam e Industry
Low
ic
Pr
e
G
cs
hi
p
ra
cs
si
y
Ph
e
in
nl
y
Pa
C
ty
xi
e
pl
om
ie
ov
M
G
am
y
ar
br
i
L
se
Ea
se
U
f
o
ac
er
t
In
up
ro
G
n/
it o
n
Fu
ic
ag
M
d
an
Page : 34

Across Buyer Groups
Red
Ocean

Products & Services
Blue
Ocean

Orientation
Across Time
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
Less Space
More Fuel
Low Initial Price
Purchase
High Initial Price
Delivery
Use
High
Supplementa Maintenanc
ry
e
More Space
Less Fuel
Low
High
Disposal
Low
NABI : Buses made from Fibre Glass

Page : 36
Strategy Canvas - NABI

Raise
Eliminate
Environmental
friendliness
Create
Reduce
Corrosion
Aesthetic design
Maintenance cost
Customer friendliness
Fuel consumption
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:
Operated 798 stores in all 50 U.S. states

and the District of Columbia, as well as
stores in Australia and Canada
Purchasing
Process
Before
Book Selection
Sit Down
Browse Through
Selection
Attend an event
During
Customer Enquiry
Paying
Go to Coffee Shop
Read the Book
Book Signing
Buy DVD, Games, Gift
Immediate Enjoyment!
Book Selection
Event : Story Telling for Kids
After
Book Signing
Carrying bag
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
Mass
Production
Prototyping
Logistics
VI Part
Sourcing &
Production
Inventory
Control
Prototyping
Design
Sourcing
Design
Vertical Integration
(VI) Model
Page : 40
Strategy Canvas - Foxconn

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

Across Buyer Groups
Red
Ocean

Products & Services
Blue
Ocean

Orientation
Across Time
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.
Pricey
Simple
Low Cost
Low Price
Extras
Feelings
Emotional
Functional
Traditional Hair
Saloon
QB House
Rev
Emotional Service -> None

Hair Wash -> Air Wash
$9
1996
2003
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
Low Fee
Low Recognition of
Education Quality
Conventional
Education System
Strategic
Group
Functional ->
Emotional
High Fee
WW Recognized
Certification
Branches in UK, Africa

& China
Collaboration w other
Universities
Open Education
System
6000 students from 90 countries

Vibrant, multicultural and international
Free & Creative
Environment
Many Environmental
Constraints
Diverse Student Base
Local Market
Fun Learning
Exposure
Global Classroom
Academic Exchange
Encourage
Entrepreneurship
Page : 44
Strategy Canvas - LimKokWeng

Raise
Eliminate
Foreign Cert
Superiority
Environmental
Constraints
Reduce
Globalization
Competition
Asian Culture
Creative Thinking
Flexibility Culture
Exposure
Entrepreneurship
Create
Student
Constraints
Unconventional
Teaching Method
Fee Competition
Ecosystem
High
Lim Kok Weng

Private Colleges
Fo
re
ig
n
Fe
C
es
er
En
tS
vi
ro
u
pe
nm
rio
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
s
l iz
tra
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
E
U
x
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
Low
Page : 45

Across Buyer Groups
Red
Ocean

Products & Services
Blue
Ocean

Orientation
Across Time
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
1999
> 2 billion illegally

music flies were being
traded every month
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

Raise
Eliminate
Need for HTML

know-how
Hassle of
undergoing
numerous steps
Fees
Web space allotted

per user
Create
Reduce
Uploading /
downloading time
Ease of Use
technology
FLV technology
Ready-made website
Social networking
Video tags & Search
High
YouTube
Ordinary Webhosting
Low
d
ee
N
fo
L
TM
H
r
ow
-h
w
o
kn
e
sl
as
es
Fe
d/
oa
pl
d
oa
nl
w
do
e
ac
sp
b
e
W
e
ti m
d
tte
ca
o
l
al
r
pe
er
us
s
Ea
se
f- u
-o
te
y
og
ol
n
ch
dy
ea
R
e
ad
-m
te
si
eb
w
V
FL
te
y
og
ol
n
ch
al
ci
So
w
et
ng
ki
or
a
de
Vi
gs
ta
&
ch
ar
se
Page : 49
Look across Time
Weird Science
Future of the
Individual
Climate Change
Longevity
Medicine
Innovation
Economy
Ten Trends
of
the Extreme
Future
Fueling the
Future
Next Workforce
Securing the
Future
Globalization
US- China Future
From the Book Extreme Future
Page : 50
From Head-to-Head Competition to Blue Ocean Creation

Head-To-Head Competition
Blue Ocean Creation

Looks across alternative
industries
Industry
Focuses on rivals within its industry
Strategic Group
Focuses on competitive position within Looks across strategic groups

strategic group
within industries
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

and service offerings
FunctionalFunctional-Emotional
Orientation
Focuses on improving price

performance within the functional emotional orientation of its industry
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
Across Multiple Pathways

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
Across Multiple Pathways

BOS Example NV Multi Corporation
Complementary
Products & Services
Service Team
Prayer Service
White Ladies
A Service Respect For Woman
Professional Band
Across Buyer
Groups
Functional
to Emotional
Notifying Friend &

Relatives
Thank You Cards
Memory Lane
Video & Slideshow
Across
Alternative
Industries
Buyer -> User & User -> Buyer
Pet Memorial Garden
VIP Memorial Garden
Bereavement
Product
Insurance Protection
Capital Gain
Page : 53
Strategy Canvas - NV Multi Corporation

Raise
Eliminate
Price Competition
Fear
Taboos
Well Layout
Cemetery
Staff Appearance
Pre-arranged
One Stop Funeral

Services
Create
Reduce
Sophisticated
Process
Pollution
White Angels
Luxury Cemetery
Customizable
Burial Plots
Care Plan
High
NV Multi
Private Cem etary

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

Identify Divergent Factors
High
4.5
Competitors
3.5
3
Mid
2.5
2
1.5
1
Low
XYZ
0.5
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
Offering Level
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
Raise
Technology
Process
Quality
Talent
High
New Value
Curve
Existing Value
Curve
Mid
Low
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
Political, Operational and

Cultural Changes
Major revisions in routing planes,
retraining, changing
marketing/pricing/culture. Took
MAS 6 years to come up Firefly
Brand Image Conflicts
Economies of Scale
Chanel, CD, etc could not imitate

Body Shop as it would signal an
invalidation of their current
business models
High volume generated by a

value innovation leads to rapid
cost advantages
1st to Market
Natural Monopoly
When a company offers a leap in

value, it rapidly earns brand buzz
and a loyal following in the
marketplace
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
Distribute your
before- and-after
strategic profiles on
one page for easy
comparison
See where your

strategy needs to
change
Observe the
distinctive
advantages of
alternative
products and
services
Get feedback on
alternative strategy
canvases from
customers,
competitors
customers and non
customers
Support only those

projects and
operational moves
that allow your
company close the
gaps to actualize
the new strategy
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
Buyer
Utility
Is there
exceptional buyer
utility in your
business idea?
Cost
Price
Price
Is your price
easily accessible
to the mass of
buyers?
Cost
Can you attain

your cost target to
profit at your
strategic price?
Utility
Adoption
Adoption
Hurdles
Commercially
Viable
Blue Ocean Idea
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
Delivery
Use
Supplement Maintenance
Productivity
the product you

need?
the product
delivered?
Training or
expertise
assistance
required?
Simplicity
How rapidly can

you make a
purchase?
How difficult to
install the new
product?
Easy to store
when not in
used?
How much time

do they take?
How easy to
maintain and
upgrade?
Do buyers have
to arrange
delivery
themselves?
How effective
are features
and functions?
How easy are

they to obtain?
How costly?
Customer How long to find How long to get
The Six Utility Levels
Convenience
Risk
Fun and Image
Is place of
purchase
attractive &
accessible?
Need other
products to
make it work?
How secure is
the transaction
environment?
Require external
maintenance?
6
Disposal
Create waste
items?
How easy to
dispose?
Create waste
items?
Overcharged
with bell and
whistles?
How much
pain do they
cause?
Legal or
environmental
issue of the
product
disposal?
Environmental
Friendliness
Page : 63
Buyer Utility Map XYZs To-Do

The Six Stages of the Buyer Experience Cycle
HR V.I.
Purchase
Delivery
Use
Supplement
Maintenance
Disposal
Customer
Insourcing
Global Guru
The Six Utility Levels
Productivity
Simplicity
Convenience
Risk
Fun and Image
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
2. Specify a Price Level within

the Price Corridor
Three alternative product/service types:
Different Form
Same Form
Same Function
Different Form and

Function, Same Objective
High degree of legal and

resource protection
Difficult to Imitate
(E.g., Dyson)
g
ricin
p
l
leve
r
e
Upp
Price Corridor
of the Mass
Some degree of legal and

resource protection
Mid-level pricing
Low
-lev
el p
ricin
g
Low degree of legal protection

Easy to Imitate
(E.g., Air Asia)
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
Partnering
1500 partners over 50
countries
Metal/leather -> plastic

150 -> 51 parts
Cheaper assembly
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
Bring those in denial

to feel the pain and
meet the customers
Ride the electric sewer

- Experience first hand the real situation on
the ground
Meet with Disgruntled Customers

- You cant outsource your eyes
- Get feedback from biggest critics
Resource
Where are XYZs Hot
spots and Cold spots
?
Revenue vs Resource
?
Beside headcounts,
what other resources
can you trade ?
Meeting room ?
Hot spots
Motivational
Focus on kingpins the key
influencers
Who are your

kingpings ?
Fishbowl management of kingpins
What review/metrics
do you use ?
- Kingpins actions and inactions are made

as transparent to others as are fish in a
bowl of water
Atomization
- Break down overall strategic objective into
bite sized chunks; different levels
understand their goal
Political
Leveraging angels
- Low resources input but high potential

performance gains
- Angels = those who have the most to gain

from the strategic shift
Silencing devils
Cold spots
- Activities that have high resource input but
low performance impact
- Redistribute resources to hot spots from
cold spots
Horse trading
- Swap resources around to where it is
needed
How do we
breakdown the 3
differentiators into
sizeable chunks?
- Devils = those who have the most to lose

from it
Who will align the

most with XYZ ? Who
will fight with XYZ ?
What can you lobby to
become your
Godfather ?
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
Page : 70
Build Execution into Strategy

Strategy
Formulation
Process
Fair Process
Engagement
Explanation
Expectation clarity
Trust &Commitment
Attitude
I feel my opinion counts.
Volunteer
Cooperation
Behavior
Ill go beyond
the call of duty.
Strategy
Execution
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
Political, Operational and

Cultural Changes
Major revisions in routing planes,
retraining, changing
marketing/pricing/culture. Took
MAS 6 years to come up Firefly
Brand Image Conflicts
Economies of Scale
Chanel, CD, etc could not imitate

Body Shop as it would signal an
invalidation of their current
business models
High volume generated by a

value innovation leads to rapid
cost advantages
1st to Market
Natural Monopoly
When a company offers a leap in

value, it rapidly earns brand buzz
and a loyal following in the
marketplace
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

Blue Ocean Strategy

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Blue Ocean Strategy

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Blue Ocean Strategy

How to Create Uncontested Market Space

Facilitators : Yip Khai Biau (ymike27@hotmail.com)

Blue Ocean Strategy (BOS)

BOS Tools : Strategy Canvas & E.R.R.C.

Awakening : As-Is Strategy Canvas

Exploration : Reconstruct Market

Strategizing : To-Be Strategy Canvas

Actualization : Identify actions to actualize

Develop understanding of Blue Ocean Tool Sets and how

Perform As-Is Analysis to Compare Current Strategy of XYZ

Explore Pathways to Breakaway from Market Boundaries to

Brainstorm and Agree on the To-Be Strategy for XYZ

All Rights Reserved KB Yip/YS Lieu

Introduction to Blue Ocean Strategy

History & Background

Defining Red & Blue

Six Principles of BOS

Reach Beyond Existing

All Rights Reserved KB Yip/YS Lieu

History & Background

Defining Red and Blue Ocean

Blue Ocean Strategy

All Rights Reserved KB Yip/YS Lieu

Examples of Red and Blue Ocean

All Rights Reserved KB Yip/YS Lieu

Six Principles of Blue Ocean Strategy

not the numbers

All Rights Reserved KB Yip/YS Lieu

Reach Beyond Existing Demand

First Tier: Soon-to-be noncustomers who are on the edge of

Second Tier: Refusing noncustomers who consciously

Third Tier: Unexplored non

Blue Ocean Go for the Largest Catchment of Non-Customers

Example [yellow tail]

No jargon.Simple and nontraditional label.

Vibrant and fun.

Prestige of a vineyard and its legacy.

Sweeter and easier to drink.

Complexity and sophistication of a wines taste,

Only one Red (Shiraz) and one White

Aging is not important.

A diverse range of wines to cover all varieties

All Rights Reserved KB Yip/YS Lieu

Example [yellow tail]

[yellow tail] did not focus

Tier 1 Wine drinker market

Tier 2 Easier to drink market, eg.,

[yellow tail] created a Blue

All Rights Reserved KB Yip/YS Lieu

Reach Beyond Existing Demand

All Rights Reserved KB Yip/YS Lieu

All Rights Reserved KB Yip/YS Lieu

Value Innovation The Cornerstone of BOS

Value innovation places equal emphasis on value and innovation.

Buyer Value Lifted Raise

All Rights Reserved KB Yip/YS Lieu

Blue Ocean Strategy Tools

All Rights Reserved KB Yip/YS Lieu

What is Strategy Canvas?

Graphical Representation of Strategy

Which factors should be

Which factors should be

All Rights Reserved KB Yip/YS Lieu