THE AUTHOR«

© JOHN ABBOTT

© JOHN ABBOTT

Prof Chan Kim

Prof Renee Mauborgne

BLUE OCEAN STRATEGY
Publisher: Harvard Businesss School Press Boston, Massachusetts First published in 2005 Consist :256 pages Over 2 million copies SOLD Translated into over 41 foreign languages a WORLD RECORD Based on 15 years of research, the authors used 150 successful strategic moves spanning 120 years of business history and across 30 industries to bring the Blue Ocean Strategy theory to life

Table of Content
Part One: Blue Ocean Strategy 1 Creating Blue Oceans 2 Analytical Tools and Frameworks Part Two: Formulating Blue Ocean Strategy 3 Reconstruct Market Boundaries 4 Focus on the Big Picture, Not the Numbers 5 Reach Beyond Existing Demand 6 Get the Strategic Sequence Right Part Three: Executing Blue Ocean Strategy 7 Overcome Key Organizational Hurdles 8 Build Execution into Strategy 9 Conclusion: The Sustainability and Renewal of Blue Ocean Strategy

CHAPTER 1 : Creating Blue Oceans
1) Value Innovation: The Cornerstone of Blue Ocean Strategy

New market space The Continuing Creation of Blue Oceans The Impact of Creating Blue Oceans The Rising Imperative of Creating Blue Oceans From Company and Industry to Strategic Move

2) Formulating and Executing Blue Ocean Strategy

Introduction
Cirque du Soleil s success is that it did not win by taking customers from the already shrinking circus industry, which historically catered to children.

Cirque du Soleil did not compete with Ringling Bros. and Barnum & Bailey. Instead it created uncontested new market space that made the competition irrelevant.

Cirque du Soleil succeeded because it realized that to win in the future, companies must stop competing with each other. The only way to beat the competition is to stop trying to beat the competition.

The Metaphor Of Red And Blue Ocean
companies try to outperform their rivals to grab a greater share of product or service demand As the market space gets crowded, prospects for profits and growth are reduced

the competitive rules of the game are known industry boundaries are defined and accepted

are all the industries in existence today the known market space.

RED OCEANS

Products become commodities and niche, and aggressive competition turns the ocean bloody

Cont d .
denote all the industries not in existence today the unknown market space, untainted by competition an analogy to describe the wider, deeper potential of market space that is not yet explored

BLUE OCEANS

demand is created rather than fought over
ample opportunity for growth that is both profitable and rapid

competition is irrelevant because the rules of the game are waiting to be set

FOUR ACTION TO CREATE BLUE OCEAN
Raise
What factors should be raised well beyond the industry standard?

Eliminate
What factors should be eliminated that the industry has taken for granted?

BLUE OCEAN
Reduce
What factors should be reduced well below the industry standard?

Create
What factors should be created that the industry has never offered?

Value Innovation: The Cornerstone of Blue Ocean Strategy

they call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space.

Innovation without value tends to be technology-driven, market pioneering, or futuristic, often shooting beyond what buyers are ready to accept and pay for.

Value innovation is a new way of thinking about and executing strategy that results in the creation of a blue ocean and a break from the competition.

Chapter 3: Reconstruct Market Boundaries
six reconstruction paths :
Path 1: Look Across Alternative Industries

a company competes not only with the other firms in its own industry but also with companies in those other industries that produce alternative products or services.

Products or services that have different forms but offer the same functionality or core utility are often substitutes for each other.

Path 2: Look Across Strategic Groups Within Industries

Strategic groups can generally be ranked in a rough hierarchical order built on two dimensions: price and performance.

Path 3: Look Across the Chain of Buyers

In most industries, competitors converge around a common definition of who the target buyer is.

They have purchasers (buyers) and users

Path 4: Look Across Complementary Product and Service Offerings

In most cases, other products and services affect their value.

Path 5: Look Across Functional orEmotional Appeal to Buyers

Some industries compete principally on price and function largely on calculations of utility; their appeal is rational

Other industries compete largely on feelings; their appeal is emotional.

Path 6: Look Across Time

Think of the rapid rise of the Internet or the global movement toward protecting the environment.

Looking at these trends with the right perspective can show you how to create blue ocean opportunities.

The sixth assumptions :
Define their industry similarly and focus on being the best within it Look at their industries through the lens of generally accepted strategic groups (such as luxury automobiles, economy cars, and family vehicles), and strive to stand out in the strategic group they play in

Focus on the same buyer group, be it the purchaser (as in the office equipment industry), the user (as in the clothing industry), or the influencer (as in the pharmaceutical industry) Define the scope of the products and services offered by their industry similarly

Accept their industry s functional or emotional orientation

Focus on the same point in time and often on current competitive threats in formulating strategy

Chapter 4:Focus On The Big Pictures, Not The Numbers
The visualizing strategy deals with a lot of visual stimulation in unlocking people s creativity that starts by identifying areas in the current strategy that need to change (visual awakening), and finally comparing before-and-after strategic profiles and choosing the appropriate strategic moves to be actualized (visual communication).

Pioneer-Migrator-Settler (PMS) Map
At the other extreme are settlers ;businesses whose value curves conform to the basic shape of the industry s.

A company s pioneers are the businesses that offer unpreceden ted value.

The potential of migrators lies somewhere in between. Such businesses extend the industry s curve by giving customers more for less, but they don t alter its basic shape.

Chapter 5 : Reach Beyond Existing Demand
The third formulation principle is to reach beyond existing demand. In this sense, the authors recommend that businesses concentrate their locus of attention on attracting non-customers into new demand rather than increasing the market share with existing customers, to seek key commonalities in what buyers value instead of threading their differences, and to exercise desegmentation in place of finer segmentation using : The Three Tiers of Noncustomers

The first tier of noncustomers is closest to Finally, the third tier of the market, but they are The second tier of nonnoncustomers is farthest not loyal to any brand or customers is people who from the market. They have seen offerings in product/service unless are noncustomers who offered something that the market but refuse to have never thought of use them for some they perceive as a leap in the offerings as an particular reasons. their buyer value, which option. will turn them into loyal customers.

Chapter 6

Get the Strategic Sequence Right

Buyer utility : Is there exceptional buyer utility in your business idea?

Adoption :

Cost : Price : Is your price easily accessible to the mass of buyers? Can you attain your cost target to profit at your strategic price?

What are the adoption hurdles in actualizing your business idea? Are you addressing them up front?

A Commercial ly Viable Blue Ocean Idea

In order to enhance readers understanding of these elements, the authors provide additional information about the six stages of the buyer experience cycle (purchase, delivery, use, supplements, maintenance and disposal).

Part 3
first principle, overcoming key covers the last three organizational hurdles , chapters of the book, is then cognitive hurdle dedicated to limited resources, addressing the two motivation and execution principles of politics requires blue ocean strategy companies to abandon perceived wisdom on effecting change.

The final part of Part 3 attends to the second execution principle, namely building execution into strategy.

Kim and Mauborgne admit that creating a culture of trust and commitment that motivates people to execute the agreed strategy is crucial in all types of strategies, but where blue ocean strategy is concerned, this challenge is heightened

They envision fair process, a set of elements that make people trust an adopted strategy so that they will comply with the requirements of such strategy without being coerced

The final point of contention in the book extends from the last execution principle, in which the authors explain the conditions of sustainability for blue oceans and the need for renewal of blue oceans.

In their last chapter, the authors even concede that a successful blue ocean will invite competitors, and in time businesses will have to abandon it and start innovating for a new blue ocean.

Lesson learned
Lesson 1: The Four Actions Framework Create Eliminate Raise Reduce

Be clear which element adds value to our life and which do not. Keeping those useless elements will not bring any good, so we might as well reduce or eliminate them and reserve the space to create and raise those which are more useful.

Lesson 2: Three Characteristics of Good Strategy Focus Divergence Compelling Tagline
Focus: Human is born with only two hands. Sometimes we tend to do too many things at once, but in the end realize that we can t accomplish anything. Be focus. Divergence: Following the crowd will not always lead Compelling Tagline: you to a better path. If you are good in There are times something, prove it when we must stand by action. Always alone and make hard walk the talk. decisions which are very different from the norm.

Lesson 3: Value Innovation
You are good in something, but the sad truth is no one will ever give a damn. People will only appreciates when your effort adds value to their life.

Lesson 4: Get The Strategic Sequence Right

If you can t walk, you can t fly. As mentioned by Sun Tzu in the first chapter of The Art of War , proper planning is always the most crucial first step.

Lesson 5: Overcoming Key Organizational Hurdles

Big problem often comes from small problems. To solve a big problem, always work backward by breaking it into smaller pieces.

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