Blue Ocean Strategy: How To Create Uncontested Market Space and Make The Competition Irrelevant

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

Introduction to Blue Ocean Strategy
 History & Background

 Defining Red & Blue
Ocean
 Six Principles of BOS
 Reach Beyond Existing
Demand
 Value Innovation

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.

Defining Red and Blue Ocean
What’s Red, What’s 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
thevalue-
value-cost
costtrade
tradeoff
off
•• Align
Alignstrategy
strategychoice
choiceofof •• Simultaneous
Simultaneouspursuit
pursuitstrategy
strategyof
of
differentiation
differentiationor
orlow
lowcost
cost differentiation
differentiationand
andlow
lowcost
cost

Examples of Red and Blue Ocean

Six Principles of Blue Ocean Strategy
Formulation Principles Execution Principles
1. Reach beyond existing 5. Overcome key

demand organizational
2. Reconstruct market hurdles
boundaries 6. Build execution into
3. Focus on the big picture, strategy
not the numbers
4. Get the strategic
sequence right

Reach Beyond Existing Demand
 First Tier: “Soon-to-be” non-

customers who are on the edge of
your market, waiting to jump ship
Third
Tier
Second
First Tier  Second Tier: “Refusing non-
Tier
ce an customers who consciously
Your
Blu eO choose against your market.
Market
 Third Tier: “Unexplored” non
customers who are in markets
distant from yours.
Blue Ocean – Go for the Largest Catchment of Non-Customers

Example – [yellow tail]
Traditional Wine : [yellow tail] :

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

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 Third
Tier
Tier Second
Second
First Tier First Tier
Tier Tier
Your
Red Your
Market
Wine Market
X
[yellow tail] created a Blue

Ocean by making its wine
Tier 2 – “Easier to drink” market, eg.,
beer, cocktails, soft-drink
more appealing to the
bigger population
Reach Beyond Existing Demand
Entertainment
Entertainment
Theater
Performance Theater
Performance
Circus
Circus
Circus
Circus
X
X

Example – [Nintendo]
Electronic Game Nintendo Wii
Industry Nintendo created a Blue Ocean by
reducing the complexity, add the
ease of use and fun!
Everyone Everyone
Girls Else Girls Else
Other Other
Males Males
Young Young
Antisocial Antisocial
Males Males

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 Lifted – Raise

Buyer Value
& Create New Elements Back

Blue Ocean Strategy Tools
 Strategy Canvas
 Eliminate-Reduce-Raise-Create
(ERRC) Grid

What is Strategy Canvas?
Degree of which each competitor Value Curves
offers/invests in each factor
High
Competitor 1 Factors that

the industry
Offering Level
Competitor 2 competes &

Mid
invests, also
potential
Your Company
areas where
customer
Low
Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor 6 Factor 7 Factor 8 value could be
Competing Factors created.
Graphical Representation of Strategy

+
Big Picture View
+
Landscape Scanning
+
Relative Positioning vs. Competitors

4 Actions Framework
Strategically
Reduce Cost
Reduce
Which factors should be
reduced well below the
industry's standard?
Eliminate Raise
AANew
New
Which of the factors that Which factors should be
the industry takes for
Value
Value raised well above the
granted should be Curve
Curve industry's
eliminated?
Strategically
Create Invest in
Which factors should be
created that the industry
has never offered?

Eliminate-Reduce-Raise-Create
(ERRC) Grid
Eliminate Raise
Reduce Create
Back

Formulating Blue Ocean Strategy
75 mins 120 mins 120 mins
Exploration : Strategizing :
Awakening :
Reconstruct Market To-Be Strategy
As-Is Analysis
Boundaries Canvas
 Activity 1 (45 min)  Activity 3 (90 min)  Activity 5 (90 min)

• Split into 3 Groups • Split into 3 Groups • Split into 3 Groups
• Review As-Is Strategy • Use 6 Paths Framework, • Use ERRC to construct the
Canvas (30 min) reconstruct market Desired Value Curve (60
boundaries & identify
• Presentation (5 min each, mins)
Divergent Factors (60 min)
15 min total) • Presentation (10 min each,
• Presentation (10 min each, 30 mins total)
 Activity 2 (30 min) 30 min total)
• Agree to ONE As-Is  Activity 4 (30 min)  Activity 6 (30 min)

Strategy Canvas
• Agree to Top 3-5 Divergent • Agree to ONE To-Be
Factors Strategy Canvas

Activity 1 & 2 : As-Is Analysis
Review XYZ As-Is Strategy Canvas
High 4.5
4
Offering Level
3.5
Mid 2.5
2
1.5 Competitors
1 XYZ
0.5
Low 0
ss io
n e th s s g re
n e it a g
P
a tor li tie din ltu
n nk r ta ci
ve og Li ee i li an u
it ti c r c F a
Br e/
C
pe R
e try C
a Fa y l
l s st
om ona n du m
& fi e
C ti I a L
Fe
e
titu ogr
In
s Pr Competing Factors
Back

Reconstruct Market Boundaries
 There are 6 pathways to reconstruct the market boundaries
Across Alternate Industry
Across Strategic Groups
Across Buyer Groups

Blue
Red
Across Complementary Scope of Ocean
Ocean
Products & Services
Across Functional Emotional

Orientation
Across Time

Across Alternative Industries
BOS Example –
 Alternatives include products or services that have different functions and
forms but the same purpose.
Commercial Corporate Corporate

Airline Jet Commercial
Airlines Jet
• Pay per use • Less Travel

Time
Good • No
Maintenance • Less Hassle
• P2P
1/16 Ownership Smaller

50 hrs/yr
@ $375k Airplanes,
• Not P2P
Airport,
• High Travel
Bad • High Cost Less Staff
Time
• Security
Concern Point-to-point, Faster,
Less Hassle, Increase Productivity

Strategy Canvas - NetJets
Eliminate Raise
• Speed of travel time

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

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

Speed of Flight
 P2P Direct Flight
 No Frill – User Pay
 Budget Travel
Package

Strategy Canvas - Air Asia
Eliminate Raise
 Price Competition • Quality of Safety

 Seat Selection • Point to Point Direct
 Free Food & Beverages Flight
 Air Ticket
 VIP Lounge
 Flight Connection
Reduce Create
 Air Fare • Web Registration

 Capital • Express Boarding
 Stopover time • Budget Hotel
 Staffing (ground and
air)
High
Air Asia
Offering Level
Other Local Airline
Land Transportation
Low t l l
ic
e p tn ly ke e n ta e ng ty tF g dg ote
Pr
m ec pp ic ng Co pi im ffi fe ec Re oa r
Co l u T u t a T a S a ir b H
e Se S r Lo ig
h C er St D e B et
ic at od Ai IP Fl ov 2P W s dg
Pr e o V p P r es u
S F o B
St Xp

Across Buyer Groups

Blue
Red
Ocean
Products & Services

Orientation
Across Time

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

Strategy Canvas - Curves
Eliminate Raise
• Non threatening same

sex environment
Reduce Create
 Price • Womanly fun

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

BOS Example – OldTown
 Expensive
 Hygienic
 Good Ambience &
Relaxing Environment
 Rightly Priced
 Economical  Hygienic
 Less Hygienic  Better Environment
 Less Appealing Environment  Emotional Appeal

BOS Example – Tune Hotel
4/5 Stars Hotels
Nice Sleep!
Hot Shower!
 Luxury
 Expensive
 Service
 Facilities
Backpacker Hostels
 No Frill
 Cheap - Pay For What You Use!
 Optional Add-ons:
 Cheap  Limited service, basic
 Sleep & Go  Low on price, high on personality
 Walk in

Across Buyer Groups

Blue
Red
Ocean
Products & Services

Orientation
Across Time

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 Request
Better Better Easy No

Medicine Pricing To Use Unpleasant
Feeling
Insulin
Industry

Across Chain of Buyers
BOS Example – Nintendo Wii
Everyone is a gamer!
Everyone can play!
Reduced Graphics Nintendo outsold Sony and

Microsoft 6:1. Can’t keep
product on shelves!
Family Fun
Wii Fit
Increased motion control

Strategy Canvas : Nintendo Wii
Eliminate Raise
• Complexity • Game Library

• Movie • Ease of Use
Reduce Create
 Price • Interaction/Group Fun

 Graphics • Magic Wand
 Physics
 Online Pay
High
Nintendo Wii
Gam e Industry
e cs cs y ty ie y se
n d
Low ic hi si Pa xi ov ar Fu an
Pr p y e pl
e
M i br f U
up W
ra Ph nl
in
om
L o
ro ic
G e se G ag
O C am Ea n/ M
G it o
ac
ter
In

Across Buyer Groups

Blue
Red
Ocean
Products & Services

Orientation
Across Time

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
Example : Jet
Traditional : Buses made from Steel
• Less Space
• Low Initial Price • More Fuel • High •High
Supplementa Maintenanc
Purchase Delivery Use Disposal
ry e
• High Initial Price • More Space • Low • Low

• Less Fuel
NABI : Buses made from Fibre Glass

Strategy Canvas - NABI
Eliminate Raise
• Environmental
friendliness
Reduce Create
 Corrosion • Aesthetic design

 Maintenance cost • Customer friendliness
 Fuel consumption
High
NABI
Average U.S Transit Bus
Low
Initial purchase Corrosion Maintenance Fuel Environmental Aesthetic Customer

price cost consumption friendliness design friendliness

Across Complementary Products and Services
BOS Example: Operated 798 stores in all 50 U.S. states
and the District of Columbia, as well as
Purchasing stores in Australia and Canada
Process
Before During After
 Book Selection  Customer Enquiry  Go to Coffee Shop

 Sit Down  Paying  Read the Book
 Browse Through  Book Signing
Selection  Buy DVD, Games, Gift
 Attend an event
Carrying bag
Immediate Enjoyment!
Book Selection
Event : Story Telling for Kids DVD & Games

Book Signing
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/Sony-
Ericsson.
• Shenzhen facility at Longhua
• Covers about a square mile.
• Has its own fire brigade, hospital,
swimming pool, restaurants, banks,
supermarkets, internet cafe.

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

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

Across Buyer Groups

Blue
Red
Ocean
Products & Services

Orientation
Across Time

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 • Pricey
• Low Cost • Extras
• Low Price • Feelings
Functional Emotional
Traditional Hair
Saloon
• Hot Towels
QB House
Rev • Message
• Emotional Service -> None
• Tea/Coffee
• Hair Wash -> Air Wash
• Special Hair /Skin
• $9 Treatments
1996 2003 • $27 - $45

Across Functional or Emotional Appeal
BOS Example –
Institute / College
Across  High Fee

Multiple
 WW Recognized
Pathways
Certification
 Low Fee  Strategic  Branches in UK, Africa
& China
Group
 Low Recognition of • Functional ->
 Collaboration w other
Universities
Education Quality Emotional  6000 students from 90 countries
 Open Education  Vibrant, multicultural and international
 Conventional System
Education System
 Free & Creative
 Many Environmental Environment
Constraints  Diverse Student Base Academic Exchange
 Local Market  Fun Learning
 Exposure
 Global Classroom Encourage
Entrepreneurship

Strategy Canvas - LimKokWeng
Eliminate Raise
 Foreign Cert • Globalization

Competition
Superiority
• Asian Culture
 Environmental
Constraints • Creative Thinking
• Flexibility Culture
• Exposure
• Entrepreneurship
Reduce Create
 Student  Unconventional
Constraints Teaching Method
 Fee Competition  Ecosystem
High
Lim Kok Weng
Private Colleges
Low
n
on
d
re
ts
g
y
p
ts
m
re
re
es
io
ho
rit
kin
hi
in
tu
in
titi
te
ti t
su
tu
rio
Fe
et
ra
rs
ul
tra
pe
in
ys
pe
ul
po
eu
M
st
pe
C
Th
C
os
s
om
om
on
en
ty
on
g
u
Ec
in
e
tS
i li
lC
ia
C
tC
pr
iv
ch
ib
As
er
at
t re
e
ta
ex
en
ea
io
Fe
re
C
en
En
at
Fl
ud
lT
C
n
nm
l iz
ig
St
na
ba
re
ro
io
Fo
lo
vi
nt
G
En
ve
on
nc
U

Across Buyer Groups

Blue
Red
Ocean
Products & Services

Orientation
Across Time

Across Time
BOS Example – iTune
Apple launched Apple teamed up with

iTunes online major Music & Picture
music store Companies
 Sell Individual song /
entire album
 30 sec free listening
 Strategically price
Napster started
> 2 billion illegally
music flies were being
online music file
traded every month
sharing service
 iTunes had sold >

1999 2003 4 billion songs 2008
 20 million songs
on Dec 25, 2007

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 user-
generated 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

Strategy Canvas - YouTube
Eliminate Raise
• Need for HTML • Web space allotted

know-how per user
• Hassle of
undergoing
numerous steps
• Fees
Reduce Create
 Uploading / • Ease of Use

downloading time technology
• FLV technology
• Ready-made website
• Social networking
• Video tags & Search
High
YouTube
Ordinary Webhosting
Low
ow sl
e es
e er y te y ng ch
ti m us og si og ki ar
-h as Fe d r ol eb ol or
w H oa pe n w n w se
kn
o
nl d ch e ch et &
te ad te N gs
L
do
w tte se V al
TM ca -m FL ci ta
d/ o f- u dy a
H oa al
l
-o So de
fo
r
pl e s ea Vi
d U ac Ea R
ee sp
N e b
W

Look across Time
Weird Science
Climate Change Future of the

Individual
Longevity
Medicine Innovation
Ten Trends Economy
of
the Extreme
Fueling the
Future
Next Workforce
Future
Securing the
Globalization Future
US- China Future
From the Book “Extreme Future”

From Head-to-Head Competition to Blue Ocean Creation
Head-To-Head Competition Blue Ocean Creation
Looks across alternative

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

Strategic Group
strategic group within industries
Focuses on better serving the buyer Redefines the industry buyer

Buyer Group
group group
Focuses on maximizing the value of

Scope of Product or Looks across to complementary
product and service offerings within
Service Offering and service offerings
the bounds of its industry
Focuses on improving price Rethinks the functional-

Functional-
Functional-Emotional
performance within the functional - emotional orientation of its
Orientation
emotional orientation of its industry industry
Focuses on adapting to external trends Participates in shaping external

Time
as they occur trends over time

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

Across Multiple Pathways
BOS Example – NV Multi Corporation
Complementary
Prayer Service
Service Team
Products & Services
Professional Band White Ladies

A Service Respect For Woman
• Notifying Friend &

Across Buyer Functional Relatives
• Thank You Cards
Groups to Emotional • Memory Lane
• Video & Slideshow
Across
Alternative
Industries
• Buyer -> User & User -> Buyer
• Pet Memorial Garden • Bereavement
• VIP Memorial Garden Product
• Insurance Protection
• Capital Gain

Strategy Canvas - NV Multi Corporation
Eliminate Raise
• Price Competition • Well Layout

• Fear Cemetery
• Taboos • Staff Appearance

• Pre-arranged
• One Stop Funeral
Services
Reduce Create
 Sophisticated • White Angels

Process • Luxury Cemetery
 Pollution
• Customizable
Burial Plots
• Care Plan
High
NV Multi
Private Cem etary
Public Cemetery
Low
s
on
an
s
ar
ot
ed
y
e
ss
os
ls
ce
t io
er
ic e
er
ic
ge
titi
Fe
Pl
e
pl
bo
ng
et
et
n
Pr
l lu
oc
rv
pe
An
ra
m
ial
re
Ta
m
ra
Po
Se
Pr
ea
Ce
Ca
m
Ce
r
ar
te
Bu
Co
pp
d
e-
al
hi
te
ry
ou
er
e
Pr
fA
W
ic a
e
xu
bl
ay
n
ic
af
iz a
Fu
Lu
is t
Pr
lL
St
om
ph
p
el
o
So
st
St
Cu
ne
O

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

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

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

Activity 5 & 6 : To-Be Strategy Canvas
Construct Desired Value Curve for XYZ
Eliminate Create
Competencies Divergent Factors
X=
Y=
Z=
Reduce Raise
Technology Quality
Process
Talent New Value
Curve
High Existing Value

Curve
Mid
Low
Fee Institutional Industrial Program Facilitators Facilities Lifestyle/ X Y Z

Competencies Recognition Linkage & Career Path Culture

Three Characteristics of a Good Strategy
1. Focus
2. Divergence
Now Everyone Can Fly!

3. Compelling Tagline

Barriers to Imitation
Does not Make Sense Brand Image Conflicts Economies of Scale

based on Conventional
Chanel, CD, etc could not imitate High volume generated by a
Strategic Logic
Body Shop as it would signal an value innovation leads to rapid
NBC, CBS and ABC rediculed invalidation of their current cost advantages
the idea of 24x7 real time news business models
without star broadcasters
Political, Operational and 1st to Market Natural Monopoly

Cultural Changes
When a company offers a leap in Size of market does not make
Major revisions in routing planes, value, it rapidly earns brand buzz sense to support another player
retraining, changing and a loyal following in the
marketing/pricing/culture. Took marketplace
MAS 6 years to come up Firefly Back

Conclusion:
Focus on the Big Picture, not the Numbers
Awakening Exploration Strategy Fair Communication
Compare your Draw your To Be Distribute your

Go into the field to
business with your Strategy Canvas before- and-after
explore the six
competitors' by based on insights strategic profiles on
paths to creating
drawing your As Is from field one page for easy
blue oceans
Strategy Canvas observations comparison
Get feedback on Support only those

Observe the
alternative strategy projects and
distinctive
See where your canvases from operational moves
advantages of
strategy needs to customers, that allow your
alternative
change competitors’ company close the
products and
customers and non gaps to actualize
services
customers the new strategy
See which factors

Use feedback to
you should
build the best 'to be'
eliminate, create or
future strategy
change
Back

Get the Strategic Sequence Right
Red Ocean
Sequence Cost Price Utility Adoption
Buyer Adoption Commercially

Price Cost Viable
Utility Hurdles Blue Ocean Idea
Is there Is your price Can you attain What are

exceptional buyer easily accessible your cost target to adoption hurdles
utility in your to the mass of profit at your in actualizing
business idea? buyers? strategic price? your business
idea? Are you
addressing them
up front?

Buyer Utility Map
The Six Stages of the Buyer Experience Cycle
1 2 3 4 5 6
Purchase Delivery Use Supplement Maintenance Disposal
Training or
Customer How long to find How long to get Need other Create waste
expertise Require external
the product you the product products to items?
assistance maintenance?
Productivity need? delivered? required?
make it work?
How difficult to
The Six Utility Levels
How rapidly can Easy to store How easy to

How much time How easy to
Simplicity you make a install the new when not in maintain and
do they take? dispose?
purchase? product? used? upgrade?
Is place of Do buyers have
How effective How easy are
purchase to arrange
Convenience are features they to obtain? How costly?
attractive & delivery
and functions?
accessible? themselves?
How secure is Create waste

Risk the transaction items?
environment?
Overcharged How much

Fun and Image with bell and pain do they
whistles? cause?
Legal or
Environmental environmental
Friendliness issue of the
product
disposal?

Buyer Utility Map – XYZ’s To-Do
The Six Stages of the Buyer Experience Cycle

1 2 3 4 5 6
HR V.I. Purchase Delivery Use Supplement Maintenance Disposal
Customer
Productivity
The Six Utility Levels

Simplicity
Convenience
Insourcing
Risk
Fun and Image
Environmental
Global Guru Friendliness

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 offering’s reputation must be earned from Day One => Buyers can’t refuse.

Price Corridor of the Mass
1. Identify the Price Corridor 2. Specify a Price Level within

of the mass the Price Corridor
Three alternative product/service types:
Different Form
Different Form and
Same Form Same Function Function, Same Objective
High degree of legal and

resource protection
g
l pricin Difficult to Imitate
er-leve (E.g., Dyson)
Upp
Price Corridor Some degree of legal and
Mid-level pricing
of the Mass resource protection
Low
-lev
el p
ricin Low degree of legal protection
g
Easy to Imitate
(E.g., Air Asia)
Size of circle is proportion to number of buyers that product/service
attracts

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.

Profit Model of BOS
The Strategic Price
The Target
Profit
The Target Cost
Streamlining and
Partnering
Cost Innovative
• 1500 partners over 50
• Metal/leather -> plastic
countries
• 150 -> 51 parts
• Cheaper assembly Pricing Innovation

Overcome Key Organizational Hurdles
Cognitive Resource
Hurdle Hurdle
Motivational Political
Hurdle Hurdle

Toppling the 4 Hurdles to Actions
Cognitive Motivational
Sewer – Underground  Ride the electric sewer  Focus on ‘kingpins’ – the key Who are your
pipe carrying drainage influencers
- Experience first hand the ‘real situation on kingpings ?
water or waste
the ground’  Fishbowl management of kingpins What review/metrics
- Kingpins’ actions and inactions are made do you use ?
Bring those in denial  Meet with Disgruntled Customers as transparent to others as are fish in a
bowl of water How do we
to feel the pain and - ‘You can’t outsource your eyes’ breakdown the 3
meet the customers  Atomization
- Get feedback from biggest critics differentiators into
- Break down overall strategic objective into sizeable chunks?
bite sized chunks; different levels
understand their goal
Resource Political
Where are XYZ’s Hot
 Hot spots  Leveraging angels Who will align the
spots and Cold spots
? - Low resources input but high potential - Angels = those who have the most to gain most with XYZ ? Who
performance gains from the strategic shift will fight with XYZ ?
Revenue vs Resource  Silencing devils
 Cold spots What can you lobby to
?
- Activities that have high resource input but - Devils = those who have the most to lose become your
Beside headcounts, low performance impact from it Godfather ?
what other resources  Getting a consigliere on their top
- Redistribute resources to hot spots from
can you trade ? cold spots management team
Meeting room ?
 Horse trading - Consigliere = politically adept but highly
respected insider who knows in advance all
- Swap resources around to where it is
the land mines, including who will fight you
needed
and who will support you

Build Execution into Strategy
Strategy Fair Process

Engagement
Formulation Explanation
Expectation clarity
Process
Trust &Commitment
Attitude “I feel my opinion counts.”
Volunteer
Behavior Cooperation
“I’ll go beyond
the call of duty.”
Strategy Exceeds Expectation

Execution Self-Initiated

Barriers to Imitation
Does not Make Sense Brand Image Conflicts Economies of Scale

based on Conventional
Chanel, CD, etc could not imitate High volume generated by a
Strategic Logic
Body Shop as it would signal an value innovation leads to rapid
NBC, CBS and ABC rediculed invalidation of their current cost advantages
the idea of 24x7 real time news business models
without star broadcasters
Political, Operational and 1st to Market Natural Monopoly

Cultural Changes
When a company offers a leap in Size of market does not make
Major revisions in routing planes, value, it rapidly earns brand buzz sense to support another player
retraining, changing and a loyal following in the
marketing/pricing/culture. Took marketplace
MAS 6 years to come up Firefly Back

Acknowledgement
 Professor Kim and Mauborgne for enlightening us

with such a great book.
 You All, for being such a wonderful audience !

Back Up

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.

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

Successful Application of BOS
Nintendo Wii

Blue Ocean Strategy: How To Create Uncontested Market Space and Make The Competition Irrelevant

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Blue Ocean Strategy: How To Create Uncontested Market Space and Make The Competition Irrelevant

Uploaded by

Copyright:

Available Formats

Blue Ocean Strategy

How to Create Uncontested Market Space

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

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

All Rights Reserved – KB Yip/YS Lieu Page : 2

 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 Page : 3

 History & Background

All Rights Reserved – KB Yip/YS Lieu Page : 4

• Based on a study of 150 strategic moves spanning

• BOS is the simultaneous pursuit of differentiation and

• The aim of BOS is not to out-perform the competition

• BOS offers systematic and reproducible

• BOS frameworks and tools are designed to be visual

All Rights Reserved – KB Yip/YS Lieu Page : 5

Red Ocean Strategy Blue Ocean Strategy

All Rights Reserved – KB Yip/YS Lieu Page : 6

All Rights Reserved – KB Yip/YS Lieu Page : 7

1. Reach beyond existing 5. Overcome key

All Rights Reserved – KB Yip/YS Lieu Page : 8

 First Tier: “Soon-to-be” non-

Blue Ocean – Go for the Largest Catchment of Non-Customers

All Rights Reserved – KB Yip/YS Lieu Page : 9

Traditional Wine : [yellow tail] :

All Rights Reserved – KB Yip/YS Lieu Page : 10

[yellow tail] created a Blue

All Rights Reserved – KB Yip/YS Lieu Page : 12

All Rights Reserved – KB Yip/YS Lieu Page : 13

Cost Cost Saving – Eliminate &

Buyer Value Lifted – Raise

All Rights Reserved – KB Yip/YS Lieu Page : 14

All Rights Reserved – KB Yip/YS Lieu Page : 15

Competitor 1 Factors that

Competitor 2 competes &

Graphical Representation of Strategy

All Rights Reserved – KB Yip/YS Lieu Page : 16

All Rights Reserved – KB Yip/YS Lieu Page : 17

All Rights Reserved – KB Yip/YS Lieu Page : 18

75 mins 120 mins 120 mins

 Activity 1 (45 min)  Activity 3 (90 min)  Activity 5 (90 min)

• Agree to ONE As-Is  Activity 4 (30 min)  Activity 6 (30 min)

All Rights Reserved – KB Yip/YS Lieu Page : 19

All Rights Reserved – KB Yip/YS Lieu Page : 20

Across Alternate Industry

Across Strategic Groups

Across Buyer Groups

Across Functional Emotional

All Rights Reserved – KB Yip/YS Lieu Page : 21

Commercial Corporate Corporate

• Pay per use • Less Travel

1/16 Ownership Smaller

All Rights Reserved – KB Yip/YS Lieu Page : 22

• Speed of travel time

Com m ercial Airlines

All Rights Reserved – KB Yip/YS Lieu Page : 23

 Price of Coach &

All Rights Reserved – KB Yip/YS Lieu Page : 24

 Price Competition • Quality of Safety

 Air Fare • Web Registration

Other Local Airline