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Blueoceanstrategypart2 130417021739 Phpapp01 131223020450 Phpapp01
Blueoceanstrategypart2 130417021739 Phpapp01 131223020450 Phpapp01
Create a value – cost trade off Break the value-cost trade off
Price
Eliminate Price
Reduce
Value Innovation –
Simultaneous pursuit
of high value & Low cost
Create
ELIMINATE CREATE
Create A
Factors that the industry New
Value Factors that the industry
takes for granted and need
has never created
to be eliminated Curve
RAISE
Low Commercial
Airline Industry
• The strategy canvas is the central diagnostic and action framework for building a compelling blue
ocean strategy.
• The Strategy canvas serves two purposes:
– It captures the current state of play in the known market space. This allows you to know where you
are viz competition
– It propels you to action by reorienting your focus:
• From competitors to alternatives
• From customers to non customers of the industry.
Strategic Questions before NetJets
– How to enter into the Aviation Space when the market was dominated by the big Airline groups? -
1983
The Red Ocean
•Over 20 domestic And international Airlines competing in the space
•All of them attracted Business Travelers, Holiday travelers and Casual Travelers
•Corporates spent millions on executive travel every year
•All travelers had to go through the long check ins, security checks, hectic flight transfers, congested
airports, Baggage claims ….
•Business Travelers only have the option of Business Class/ First class or corporate Jet
Created a B2B industry when the entire industry was still B2C
The Story Of Indochino.com
• World’s first Self Service Virtual Suit company
• Customers can choose the fabric, design style and accessories - Online
• Buttons, Lapels, linings, pockets, cuff signature – everything is customizable
• Customers measure themselves and provide fitting details online with video tutorial
• Delivery within 3 weeks (
• If order is less than perfect, Indochino pays for local tailoring or remake sthe suit for free
• Most suits priced under $500 ( Whereas cheap suits cost around $200 and the designer ones around $1500)
5) Focused pedagogy – Teacher talks – Students listen – 5) Analytics drive the understanding of each students strengths
Therefore Students learn & Weakness
6) Teachers Judge student’s strength / weakness Created and captured a new market demand by focusing on
functionality & emotional appeal
Moving Forward
The formulation principles and execution Principles, work in tandem to minimize risks and maximizing
opportunities.
Reconstructing Market Boundaries
Conventional boundaries in a
competitive marketplace
Look across Alternative
Competitors in Industry Industries
Path 6 – Looking across Time value of business Path 5 – Looking across Functional-emotional appeal to buyers
What trends have a high probability of impacting your industry, are Does your industry focus on functionality or emotional appeal? If you
irreversible, and evolving in a clear trajectory? How will these trends compete on emotional appeal, what elements can you strip out to make it
impact your industry? Given this, how can you open up unprecedented functional? If you compete on functionality, what elements can be added
customer utility? to make it more emotional?
Apple Music, Cisco Systems, CNN, Starbucks, QB House, Direct Line Group, Pfizer’s Viagra
HBO’s “Sex and the City”
Reconstructing Market Boundaries
•By building a company’s strategic planning process around a strategy canvas, the company can
focus their main attention on the big picture rather than getting immersed in numbers and
jargons.
Ok
Here
Here
Managers
CEOs Staff
Four Steps of Visualizing Strategy
The four steps that pushes a company’s strategy canvas to blue oceans
• Compare your business • Go into the field to • Draw your ‘to be” • Distribute your before-
with your competitor’s by explore the six paths to strategy canvas based on and-after strategic profiles
drawing your “as is” creating blue oceans. insights from field on one page for easy
strategy canvas. observations. comparison. EXPLANATION
• Observe the distinctive
• See where your strategy advantages of alternative • Get feedback on • Support only those
needs to change. products and services. alternative strategy projects and operational
canvases from moves that allow your
• See which factors you customers, competitor's company to close the gaps
should customer, and non- to actualize the new
Eliminate, Raise, Create, o customers. strategy.
r Change. EXPECTATION : CLARITY
• Use feedback to build
•DO NOT USE MARKET the best “to be” future
RESEARCH strategy.
• This approach mitigates planning risks by investing time & effort to develop a compelling strategy canvas
that is Focused, Divergent & that has a compelling tagline.
• Compares the current business attributes with your competitors’ by drawing your “as is” strategy canvas,
and then evaluating where the strategy needs to change.
The PMS Map
Pioneers • Pioneers: Businesses that
provide unprecedented value
• Settlers: Their business
conforms to the basic value
Migrator curve of the industry or me too
industry
• Migrators: Improved value but
not innovative idea
Settlers
Today Tomorrow
Tier 3 Non
Customers Tier 3 non customers: “unexplored” non customers who are in markets
distant from yours.
Tier 2 Non
Customers Tier 2 non customers: refusing noncustomers who consciously choose against your market
Tier 1 – Non
Customers
Non
Customers Managing the three tiers of Non customers
Non Regular players – young Casual Players - working Non Player Parents- women/
Audience boys & girls bored out of men/ women not enough housewives
traditional games time to play
Change 1 Changed genres completely – Cost of acquisition – free Removed violence
from shooting, arcade, racing,
to simulation
Change 2 Made social networking fun Eliminated hassles of consoles, Play with friends and family –
and more exciting game titles, accessories, not necessarily together / real
hardware & setups time
Results Fun lasts longer, with reduced Non serious casual play to relax No winner – no loser
time and effort / unwind
• Zynga looked across non customers and attracted new buyer groups to
create an industry that did not exist earlier
Reconstructing Market Boundaries
Price Revenue
Is your strategic price Is your price easily accessible to the
attractive enough to mass of buyers?
attract customers?
Yes No
Sequence of Cost
Can your costs be
Blue Ocean significantly lower
than the current
Can you attain your cost target to
profit at your Strategic price?
Costs
Adoption
Are there any
adoption hurdles?
What are the adoption hurdles in Hurdles
actualizing your business idea? Are
What are the you addressing them upfront?
Commercially
Viable Blue
We will explore the Sequence and the formulation in our Ocean Strategy
Next webinar using the tools we have explored today
Buyer Utility Map
A buyer’s experience can usually be broken into a cycle of six stages, running from purchase to
disposal. Each stage encompasses a wide variety of specific experiences. At each stage, managers
need to ask a set of questions to gauge the quality of buyer’s experience.
•How long does it •How long does it •Does the •Do you need •Does the •Does use of the
take to find the take to get the product require other products product require product create
product you need? product training or and services to external waste items?
delivered? assistance? make this product maintenance?
•Is the place of •How easy is it to
work?
purchase •How difficult is it •Is the product •How easy is it to dispose of the
attractive and to unpack and easy to store •If so, how costly maintain and product?
accessible? install the new when not in use? are they? upgrade the
•Are there legal
product? product?
•How secure is the •How effective •How much time or environmental
transaction •Do buyers have are the product’s do they take? •How costly is issues in
environment? to arrange features and maintenance? disposing of the
•How easy are
delivery functions? product safely?
•How rapidly can they to obtain?
themselves?
you make a •Does the •How costly is
purchase? product or disposal?
service deliver far
more power or
options than
required by the
average user? Is
in overcharged
with bells and
whistles?
Uncovering Blocks to Buyer Utility
Uncovering blocks to buyer utility can identify the biggest blocks to buyer experience that stand in the
way of converting noncustomers into customers.
Customer Productivity: In which stage are the biggest blocks to customer productivity?
Fun and Image: In which stage are the biggest blocks to fun and image?
Environmental
In which stage are the biggest blocks to environmental friendliness?
Friendliness:
Testing the Buyer Utility – with Indochino.com
Is it
Productive for the
buyer?
Utility Leavers
Does it have
environment friendly
Buying Experience
Indochino.com
• Buyer Utility Score Blocks– Lower than what is prevalent in the current industry
• Therefore Indochino.com raised the Buyer Utility and Experience
Traditional Suit industry
Exceptional Utility to Strategic Pricing
Three Alternate product / service Types
Different Form &
Same Different Form – Function – Same
Form Same Function objective
• Step 1: Identify the Price Corridor of • Step 2: Specify the price level within
the Mass. the price corridor
Strategic Price
• Unlike traditional companies the
price must be determined first not
Target the costs.
Profit
• The costs is determined based on the
target profit intended
Target Cost • Cost is approached as a target for
reduction
• Target Costs Can be achieved
Streamlining &
Partnering through:
Cost Innovations
– Streamlining Operations
• Outsourcing, digitizing, cloud,
• E.g. Apple
– Partnering
Price Innovations
• Leverage low cost capabilities and reach of
other companies
• E.g. SAP who partnered with Oracle, Cape
Gemeni , Accenture etc
Price ≠ Cost + profit
Overcoming Adoption Hurdles
General Business
Public Partners
•What are the new rules of the game and therefore the new
responsibilities
Expectation Clarity • What are the expectations and standards that each will be
judged upon
How fair Process affects People’s Attitudes & behaviors
Attitudes
Trust & Commitment Trust & Commitment
“ I feel My Opinion Counts”
Getting the
Reconstruct Focus on Big Reach Beyond Overcoming Building
strategic
Market Picture – Not Existing Organization Execution
Sequence
Boundaries Numbers Demand al hurdles into Strategy
Right
Plan beyond
incremental •Sequence the
•Alternative improvements using business Model to
Industries a visualization •Challenge capture newly
Tipping Point
•Strategic groups approach Conventional created value
leadership to Execution
•Buyer Groups •Visual Awakening practices •Buyer Utility
Tackle through:
•Complementary • Visual Exploitation •Consolidate Mapping
• Cognitive hurdles Engagement
Product offerings • Strategy Fair demand by •Pricing & corridors
•Resource Hurdles •Explanation
•Functional • Visual focusing on Non of Masses
•Motivational •Clarity of
Emotional Communication Customers • Cost Targets
•Use PMS map to Hurdles expectations
Orientation • Three tiers of based on margins
identify current & • Political Hurdles
•Time Non Customers desired
future orientation of • Potential
business Adoption obstacles
Thank you