Blue Ocean Strategy

Creating own market space

Uncontested
and
away from competition

RED OCEAN
CONSISTS OF
SHRINKING DEMAND AND
>Competition Leading To Draining Of Blood Of
Rivals
RISING
SUPPLIES
>For Better Market Share Within Given

Confines.
> Retaining Identity : Similar Brands.
>Offering Advantages At The Cost Of Profits
> Bleeding Assets Through Over engineering.
> Over advertising.
> Raising Expectations
> Eventually Turning The Field Into Red
Ocean.

BLUE OCEAN MEANS

CREATING
> NEW MARKET SPACE.
> NEW OPPERTUNITIES.
>UNTAPPED POTENTIALS.
>NEW PROFIT AND GROWTH OPPERTUNITIES.
> RISING OUT OF THE RED OCEAN
THROUGH
> STRATEGIC MOVES.
> TIMELY MANAGERIAL AND BUSINESS
DECISIONS.

DYNAMIC NATURE OF WORLD

ECONOMY.
> CONTINUOUS EVOLVEMENT OF NEW SYSTEMS

AND OPERATIONS.
> IMPROVEMENT OF EXISTING OPERATIONS.
> MARKET EXPANSIONS.
> NEW AND UNHEARD OF INDUSTRIES AND
SERVICES BEING ADDED.
> US CENSUS 1940 HAD 10 STANDARD
INDUSTRIAL CLASSIFICATION.
> 1997 EXPANDED TO 20 SECTORS IN ADDITION
TO SEVEN BUSINESS SERVICE SECTORS VIZ;
INFORMATION, HEALTH CARE, SOCIAL
ASSISTANCE ETC. ETC.

BLUE OCEAN STRATEGY

BEGINS WITH:
> VALUE INNOVATION.
> VALUE INNOVATION DOES NOT MEAN

BENCH MARKING.
> DOES NOT MEAN BEATING THE
COMPETITION.
VALUE INNOVATION MEANS
> CREATING A LEAP IN VALUE FOR BUYER
AND COMPANY BY ALIGNING INNOVATION
WITH UTILITY PRICE AND COST.

Blue ocean strategy

Value innovation
Costs

Value cost trade-off

Value
innovation

Buyer value
COST STRUCTURE OF THE COMPANY GOES DOWN.
VALUE PROPOSITION TO CUSTOMER GOES UP.
STRATEGISING COMPANY THINKING AND WORKING TO CREATE WIN WIN SITUATION FOR BOTH.

RED OCEAN VS BLUE OCEAN

RED OCEAN COMPETES IN

GIVEN CONFINES.
BEAT THE COMPETITION.
EXPLOIT THE EXISTING
DEMAND.
MAKE THE VALUE COST TRADE
OFF.
ALIGN SYSTEM WITH CHOICE
OF DIFFERENTIATION OR LOW
COST.

BLUE OCEAN CREATES

UNCONTESTED MARKET SPACE
.MAKES THE COMPETETION IRRELEVANT.
CREATE AND CAPTURE NEW DEMAND.
BREAK THE VALUE COST TRADE OFF.
ALIGN SYSTEM TO PERSUE DIFFERENTIAL
AND LOW COST.

SIX PRINCIPLES OF BLUE

OCEAN STRATEGY

Formulation principles &

Risk factors
reconstruct market boundaries involves search risk.
Focusing on big picture involves planning risk.
Reaching beyond existing demand involves scale
risk.
Getting the strategic sequence right involves
business model risk.
Execution principles
&
Risk factors
Overcoming key organizational hurdles involves
organizational risk
Building expectation into strategy means
management risk.

Four key questions for value

which factors
innovation. Reduce:
can be reduced
below industry standards

Eliminate: which factors

industry takes for
granted should
be eliminated

New value curve

Raise: which factors

should be raised
above industry
standards

Create: factors
industry has
never offered

 > Eliminate factors that are no longer relevant

perceive value change for customer. E.G. Automobiles

lasting for generations / model change every year
> Reduce the over designed, over engineered .E.G.
Maruti improved version over thick metal of
ambassador.
> The two factors will bring the cost down vis--vis
competition.
> Raise buyer value by : offering new experience. E.G.
Comfortable drive / international models.
> Raise expectations : each year better version,
better facilities on cost advantage.

U.S. WINE INDUSTRY vs

CASSELA WINE CASE
STUDY
PREMIUM WINES
( YELLOW TAIL )

BUDGET WINES

PRICE
COMMUNICATION

AOL
MKTG

AGING
QLTY

BRAND
WINE
PRESTIGE COMPLEXITY RANGE

EASE
FUN
OF
&
DRINKING ADVENTURE

EASY
DRINKING

FORMULATING BLUE OCEAN

STRATEGY :
RECONSTRUCT MARKET

BOUNDARIES BY MAXIMISING
OPPORTUNITY AND MINIMISING RISK.
SIX PATH STRATEGY WILL HELP
IDENTIFY THE NEW MARKET
POTENTIAL AND UNIVERSE.

PATH 1: LOOK ACROSS

ALTERNATE INDUSTRY.
RED OCEAN DEFINES BEING THE

BEST WITHIN GIVEN INDUSTRY,

BLUE OCEAN LOOKS ACROSS
ALTERNATE INDUSTRY VIZ.
CINEMA VS. RESTAURANT,
COFFEE HOUSE VS. CYBER CAF ,
SHOPPING MALLS VS. OLD
BAZARS.

PATH 2 : LOOK ACROSS

STRATEGY GROUPS.
RED FOCUSES ON COMPETENCE WITHIN

DIFFERENT STRATEGIC GROUPS IE. BE

THE BEST WITHIN GIVEN CONFINES
BASED ON PRICE, PERFORMANCE,AND
SEGMENTS THE CUSTOMERS.
BLUE LOOKS ACROSS STRATEGIC
GROUPS WITHIN INDUSTRY. BREAKS OUT
OF THE NARROW TUNNEL BY
DETERMINING FACTORS LEADING TO
CHANGE EG. HEALTH CLUBS/HOME
HEALTH VIDEOS/ YOGA CLASSES BY
RAMDEV.

PATH 3 : LOOKS ACROSS

THE UNIVERSE OF BUYERS.
IT REDIFENES THE INDUSTRY BUYER GROUPS.
THE BUYER AND NON BUYER GROUPS ARE

DEFINED AS EXISTING CUSTOMERS, THE

FENCE SITTERS , THE REFUSING CUSTOMERS
AND THE UNHEARED OF CUSTOMERS.
NOVO NORDISK THE INSULIN MANUFACTURER
CREATED HISTORY BY FOCUSING ON THE
PATIENTS RATHER THAN ON THE DOCTORS
AND CHEMISTS BY INTRODUCING SELF
INJECTING INSULIN PENS AND MEMORY
CARTRIDGES THUS ELIMINATING THE NEED
FOR A DOCTOR/ COMPOUNDER/ ETC. ETC.

PATH 4 : LOOK ACROSS

COMPLEMENTARY
PRODUCTS/ SERVICES.
RED FOCUSES ON MAXIMISING THE VALUE OF PRODUCT

AND SERVICES WITHIN THE BOUNDS OF INDUSTRY BLUE

LOOKS AT COMPLEMENTARY INDUSTRY OFFERINGS.
PERCEIVED VALUE OF THE COMPLEMENTARY PRODUCTS /
SERVICES ALWAYS COMPARED BY CUSTOMERS .
DEFINE TOTAL SOLUTION CUSTOMER SEEKS.
THINK ABOUT WHAT HAPPENS BEFORE, DURING AND
AFTER THE PRODUCT IS USED.
ENTERTAINMENT INDUSTRY : MOVIE THEATERS WILL
NEED CAR PARKING, BABY SITTING, SHOPPING, AND
EVEN THE EATING OUT AFTER THE SHOW THE OUT COME
IS MEGAPLEXES WITH CINEMAS, RESTAURANTS,
CHILDREN GAMES, COFFEE SHOPS, CYBER CAFES.
CROSSWORDS: READING AT LEISURE AND PLEASURE
WITH COFFEE SHOP AND CYBER CAF.

PATH : 5 LOOK ACROSS

FUNCTIONAL/ EMOTIONAL
APPEAL.
BLUE OCEAN INSISTS ON RETHINKING AND

REWORKING THE FUNCTIONAL / EMOTIONAL

APPEAL OF ITS INDUSTRY
UTILITY BASED APPEAL- LOGIC
FEELING BASED APPEAL- EMOTIONAL
CHALLENGE THE TREND SET BY INDUSTRY TO FIND
A NEW WAY OUT AND A NEW MARKET SPACE.
ADD NEW LIFE BY ADDING EMOTIONS- LOGICCLEAN TOILETS- EMOTIONS : TAKE CARE OF YOUR
FAMILY HEALTH.
REDUCE COST BY FOCUSING ON UTILITY- CREATE
FUNDAMENTALLY SIMPLE COOLING MACHINE AND
NOT AIR CONDITIONERS WITH STATUS SYMBOLS.

PATH 6 : LOOK ACROSS

TIME.
RED OCEAN FOCUSES ON ADAPTING TO EXTERNAL

CHANGES AS THEY OCCUR WHEREAS BLUE OCEAN

PARTICIPATES IN SHAPING EXTERNAL CHANGES AS
THEY OCCUR.
LOOK ACROSS HOW THE TREND WILL CHANGE VALUE
TO CUSTOMER AND EVENTUALLY BUSINESS.
VALUE DELIVERED TODAY VS. VALUE EXPECTED
TOMORROW.
IT COULD BE CHANGE IN FASHION, TECHNOLOGY OR
EVEN USAGE.
THE INSIGHT INTO TRENDS WILL LEAD TO NEW BLUE
OCEAN.
INDIAN TWO WHEELER INDUSTRY COULD SEE THE
TREND FOR FUEL EFFICIENT LIGHT WEIGHT BIKES
THUS CREATING AN ALTOGETHER NEW BLUE OCEAN.

VISUALISING THE BLUE OCEAN

STRATEGY: THE BIG PICTURE
AND
NOT
THE NUMBERS.
AWAKENING ; COMPARE ON AS IS BASIS WITHIN
1 : VISUAL

COMPETITION.
2 : VISUAL EXPLORATION: EXPLORE SIX PATHS THROUGH
FIELD RESEARCH.
EXPLORE ALTERNATES, SOLUTIONS.
EXPLORE WHAT NEEDS ELIMINATE , CREATE OR CHANGE.
3 : VISUAL STRATEGY PLANNING ; DRAW STRATEGY BASED
ON EXPLORATION. ANALYSE FEEDBACK FROM CUSTOMERS
AND NON CUSTOMERS. SHORT LIST THE BEST STRATEGY.
4 : VISUAL STRATEGY COMMUNICATION :
DISTRIBUTE BEFORE AND AFTER PROFILES.
COMPARE SITUATIONS.
SYNERGISE FOR ACTUALISATION.

STRATEGIC SEQUENCE
SYNERGISATION

BUYER UTILITY
DOES THE UTILITY VALUE TO CUSTOMER GOES UP IF NO REWORK IF

YES
LOOK AT THE PRICE IS YOUR PRICE REACHABLE TO MASSES IF NO
REWORK THE PRICE IF YES LOOK AT THE COST
CAN YOU BUDGET COST AT THIS PRICE TO GIVE ADEQUATE RETURNS IF
NO REWORK THE COST IF YES PROCEED TO ADOPT
CAN YOU OVERCOME THE ADOPTION HURDLES TO ACTUALISING THE
BUSINESS IDEA IF NO REWORK IF YES
CREATE COMMERCIALLY VIABLE BLUE OCEAN .

PROFIT MODEL OF BLUE OCEAN

STRATEGY
STRATEGIC
PRICE
TARGET
PROFIT

TARGET COST

STREAMLINING COST /
INNOVATE

PARTNERSHIP
OUTSOURCING

PRICE
INNOVATION

WILL LEAD TO VALUE INNOVATION

ADOPTION OF BLUE OCEAN

STRATEGY.
> NEW STRATEGY MEANS CHANGE IN STATUS QUO
> EVOKES APPREHANSION, FEARS, RESISTANCE AND EVEVN

INDIFFERENCE TOWARDS THE UNKNOWN.

IDENTIFY THE MAIN STAKE HOLDERS.
1 EMPLOYEES, 2 BUSINESS PARTNERS, 3 GENARAL PUBLIC.
EMPLOYEES : WAKE UP EMPLOYEES TO NEED FOR CHANGE, THE
NEED FOR STRATEGIC SHIFT.
ADDRESS THEIR CONCERNS, ENCOURAGE DISCUSSIONS,
ELIMINATE FEARS, ENSURE PARTICIPATION.
BUSINES PARTNERS : ENSURE CHANGE NEEDED FOR STRATEGIC
SHIFT IN BUSINES IDEA.
ENSURE BETTER / SIMILAR REVENUES
LONG TERM SURVIVAL
GENERAL PUBLIC : ADDRESS CULTURAL/ SOCIAL/ POLITICAL/
LEGAL / ETHICAL NORMS
ADDRESS ENVIRONMENTAL PROBLEMS ENCOURAGE OPEN
DISCUSSIONS

OVERCOMING BLUE OCEAN KEY

HURDLES :
COGNITIVE HURDLES :

ORGANISATIONAL CULTURE
RESOURCE HURDLES : LIMITED
RESOURCES
MOTIVATIONAL HURDLES :
UNMOTIVATED STAFF
POLITICAL HURDLES : VESTED
INTERESTS

COGNITIVE HURDLES
- CHANGING CULTURE IS THE MOST

DIFFICULT ASPECT.
MAKE PEOPLE SEE HARSH REALITIES FOR
CHANGE
NEGATIVE STIMULI WILL CHANGE
ATTITUDE / BEHAVIOR
POSITIVE WILL REINFORCE BEHAVIOR
LET PEOPLE EXPERIENCE FIRST HAND
MEET THE DISGRUNTLED CUSTOMERS/
EMPLOYEES.

FAIR PROCESS WILL CHANGE

ATTITUDE AND BEHAVIOR
STRATEGY FORMULATIONPROCESS FAIR

PROCESS, ENGAGEMENT, EXPLANATION,

EXPECTATION CLARITY.
ATTITUDE- TRUST AND COMMITMENT MY
OPINION COUNTS
BEHAVIOR- VOLUNTARY COOPERATION
GOING BEYOND THE CALL OF DUTY
STRATEGY EXECUTION- EXCEEDS
EXPECTATIONS SELF INITIATION

RESOURCE HURDLE
JUMPING
- EITHER TRIM DOWN AMBITIONS
- ASK FOR MORE ( LOANS, SHAREHOLDERS/ SELF

FINANCE, NEW PARTNERS ETC)

OR IDENTIFY HOT SPOTS/ COLD SPOTS AND
PRACTISE HORSE TRADINGS
HOT SPOTS CONSIST OF HIGH POTENTIAL
PERFORMANCE WITH LOW RESOURCE INPUT
COLD SPOTS WILL YIELD LOW PERFORMANCE
WITH HIGH INPUT
OPTIMISE THE RESOURCE UTILISATION TO
OVERCOME THE RESOURCE HURDLE

CEROSSING THE
MOTIVATIONAL HURDLES
RED OCEAN LOOKS AT VISION AND SPREADS IT EVENLY

DOWNWARDS THUS STRETCHING RESOURCES

BLUE OCEAN SEEKS CONCENTRATION THROUGH : ZOOMING IN ON
THE KINGPINS
KING PINS ARE KEY INFLUENCERS : CREATE WAVES WITH ONE
THROW AND DO NOT THROW STONES AT ALL THE WAVES
IDENTIFY THE NATURAL LEADERS CHANGE THEM POSITIVELY
INDULGE IN FISHBOWL MANAGEMENT : MAKE EVERY ACTION
TRANSPARENT LIKE FISH IN A BOWL
ACTION / IN ACTION MUST BE HIGHLIGHTED WITH FOCUSED LAMP
POSTS
MAKE THEM OUTSHINE EACH OTHERS
ATOMISATION HELPS : MAKE IT ACTIONABLE AND ATTAINABLE
IDENTIFY THE PRECINCTS, IDENTIFY TERRITORIES FOR OWNERSHIP
INSTEAD OF ENTIRE ORGANISATION EXPECT CHANGE IN THESE
ATOMS WHO PUT TOGETHER WILL MAKE A BOMB

KNOCKING OVER THE

POLITICS

CHANGE WILL CREATE POLITICS TO RAISE BARRIERS

PEOPLE FIGHT TO PROTECT THEIR POSITIONS
FOCUS ON : DISPROPORTIONATE INFLUENCE
FACTORS
LEVERAGE THE ANGELS- THE ONES TO GAIN MOST
FROM WILL NATURALLY ALIGN HENCE FORM A
STRONG FORCE OF POSITIVE INFLUENCERS
ISOLATE DETRACTORS- THE DEVILS- IDENTIFY THE
WEAK SPOT OF ATTACK SOLIDIFY THEM
APPOINT A CONSIGLIERE IE THE MOST RESPECTED
SENIOR MEMBER TO BALANCE THE FORCES

FINALLY
BUILD TRUST AND CONFIDENCE FOR COMING OUT

OF THEIR COMFORT ZONES AND OUTPERFORM

ALIGN ORGANISATION MIND AND HEART WITH NEW
STRATEGY
TOP BOTTOM INTERACTION THROUGH TIPPING
POINTS BASED ON MUTUAL TRUST AND CONCERN
INSPIRE VOLUNTARY COOPERATION TO OVERCOME
NONCOOPERATION AND SABOTAGE
MAKE VALUE INNOVATION A CONSTANT FOR
CREATING YET ANOTHER BLUE OCEAN

Thank YOU
For sparing your valuable time.