Blue ocean strategy primer

- 1 -www.straligence.com

Blue Ocean Strategy Toolkit

http://www.straligence.com/


PART 1A BOS PRIMER

Primer



PRIMER

SECTION TABLE OF CONTENTS

1. INTRODUCTION

Key concepts underlying Blue ocean strategies p. 4

Analytical tools and frameworks: The Strategy Canvas and the 4 Actions Framework p. 5

Blue ocean strategy principles: Overview p. 6

2. STRATEGY FORMULATION

6 paths to reconstructing market boundaries p. 7

Strategic planning: Focus on the big picture, not the numbers p. 8

Sizing up the Blue Ocean: Reach beyond existing demand p. 9

Crafting the Business Model: Get the strategic sequence right p. 10

3. STRATEGY EXECUTION

Mobilizing the organization: Overcome key organizational hurdles p. 15

Execution: build execution into strategy p. 16

The one-pager on Blue Ocean Strategy p. 17



Introduction ⎥ Key concepts underlying blue ocean strategies

THE DIFFERENCE BETWEEN RED AND BLUE OCEANS

In red oceans, industry boundaries are defined and accepted. The competitive rules of the game are known. Companies try to outperform their rivals in order to increase their share of the existing demand.

As the market space gets crowded, profit and growth opportunities are reduced. Products become commodities, and cutthroat competition turns the ocean bloody, i.e. red.

Blue oceans are defined by untapped market space, demand creation, and the opportunity for highly profitable growth. Some blue oceans are created well beyond existing industry boundaries. Most are created within red oceans, by expanding industry boundaries.

In blue oceans, competition is irrelevant because the rules of the game are yet to be set as we create a new market space.

Red oceans will always matter. Traditional competitive strategy will continue to be a point of reference for growing and maintaining revenues at acceptable profit levels. But once supply exceeds demand, competing for a share of an existing market will not be sufficient to sustain high performance. This is when we also need to go beyond competing. This is when, in order to seize new profit and growth opportunities, we also need to create blue oceans.

Each ocean has its own approach to strategy. Red oceans call for building a defensible position within an existing industry. They focus on value creation, i.e. an incremental approach to delivering value to the existing customers of an industry. Blue oceans follow a different strategic logic called value innovation.

VALUE INNOVATION: THE HEART OF BLUE OCEAN STRATEGY

Value without innovation tends to focus on value creation on an incremental scale, i.e. something that improves value but is not sufficient to make us really stand out in the marketplace.

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 occurs only if we align innovation with utility, price, and cost positions. The focus here is not time-to-market, bleeding-edge technology or best practices. It is the ambition to break one of the most commonly accepted dogmas of competition-based strategy: the value-cost trade-off.

It is conventionally believed that companies can either create greater value to customers at a higher cost, or create reasonable value at a lower cost. Here strategy is seen as making a choice between differentiation and cost. In contrast, to create blue oceans, we need to pursue differentiation and low cost simultaneously, by looking within and beyond our industry boundaries and redefining a market altogether.

Instead of focusing on beating the competition, value innovation focuses on making the competition irrelevant by creating a leap in value for buyers and our company, thereby opening up new and uncontested market space. The objective here is not to increase our competitiveness in the market as we know it. Rather, it is to create a whole new market where the rules of the games are yet to be created, by us!

In red oceans, our efforts are focused on the conventional logic that we must outpace the competition with a better solution to a given problem. Blue ocean

strategy invites us to redefine the problem itself. It does so by breaking the value-cost trade-off in view of creating new uncontested market places. Places

where no one has been and where we would be the one defining the rules!

Ch. 1



Introduction ⎥ Analytical tools and frameworks

The strategy canvas is both the start and the end point of a blue ocean strategy formulation. An initial value curve depicts where the industry competes on

and invests in. It is then transformed via the eliminate-reduce-raise-create actions framework. The resulting value curve shows a focused effort that diverges

from existing market offerings and can be easily translated into a compelling tagline.

low

high

Factor (a) Factor (b) Factor (c) Factor (n)

//

//

//

//

FACTORS THE INDUSTRY COMPETES ON AND INVESTS IN

RELATIVE POSITIONIN

G OF PLAYERS AND/OR PLAYERS GROUPS

Eliminate

Create

Which of the factors that the industry takes for granted should be eliminated?

Which factors should be created that the industry has never offered?

Reduce

Raise

Which factors should be reduced well below the industry’s standard?

Which factors should be raised well above the industry’s standard?

COSTS

BUYER VALUE

VALUE INNOVATION

It facilitates the capture of the current state of play in the known market space. It visually plots a value curve that allows us to understand where the competition is currently investing, the factors the industry currently competes on, and what customers receive from the existing competitive offerings in the market.

To fundamentally shift the strategy canvas of our industry, we must begin by reorienting our strategic focus from competitors to alternatives, and from customers to non-customers of the industry. As we shift our focus, we gain insight into how we can redefine the problem the industry focuses on and how we can reconstruct buyer value elements. As a result, we can decide how to reshape our positioning and related offerings to serve both existing customers and non-customers of an industry.

THE STRATEGY CANVAS

The four actions framework is used to reconstruct the buyer value elements that will define our future value curve.First, we should ask ourselves which factors our company should eliminate. Often, these are factors the industry has long competed on. They are based on implicit assumptions that have been taken for granted even though they no longer have value, or may even reduce value.Then we look at whether products or services have been overdesigned in the race to match and beat the competition. This forces us to reduce those elements that over-serve customers, and that increase our cost structure for no gain.At the same time, we should look at factors that are based on a “compromise” within the industry and potentially raise them for greater customer appeal and satisfaction.Finally, we can discover entirely new sources of value for buyers and create new factors that generate demand and change the strategic pricing of the industry.

THE FOUR ACTIONS FRAMEWORK

THE INITIAL VALUE CURVE IS TRANSFORMED THROUGH…

NEW VALUE CURVE

Our new value curve will depict a viable strategy if it has three characteristics:

(1) FOCUS: it shows that we do not diffuse our efforts across all key factors of competition.

(2) DIVERGENCE: the shape of our curve diverges from those of other players.

(3) The curve can be easily translated into a clear, strong, truthful and compelling TAGLINE.

Design new factors of competition

… THE ELIMINATE-REDUCE-RAISE-CREATE GRID, TO CREATE A… … NEW, FOCUSED, DIVERGING VALUE CURVE WITH A COMPELLING TAGLINE

Ch. 2



Reconstruct market boundaries

Introduction ⎥ Blue ocean strategy principles - overview

Focus on the big picture, not the numbers

STRATEGICPLANNING

STRATEGICPLANNING

6 PATHS APPROACH

6 PATHS APPROACH

Reach beyond existing demand

MARKETSIZING

MARKETSIZING

Get the strategic sequence right

BUSINESSMODEL

BUSINESSMODEL MOBILIZATIONMOBILIZATION

Build execution into strategy

EXECUTIONEXECUTION

STRATEGY IMPLEMENTATIONSTRATEGY FORMULATION

1 2 4 63

1 2

Consider six conventional boundaries of competition:

① Alternative industries

② Strategic groups

③ Buyer groups

④ Complementary product and service offerings

⑤ Functional-emotional orientation

⑥ Time

Plan beyond incremental improvements via a visualization approach:

① Visual awakening

② Visual exploitation

③ Visual strategy fair

④ Visual communication

⑤ Pioneer, Migrator, Settler map

Challenge the conventional practice of finer segmentation and resulting smaller target markets.

Focus on demand aggregation by building on commonalities across non customers groups:

① Soon to be

② Refusing

③ Unexplored

Sequence business model design to capture the newly created value:

① Buyer utility mapping

② Pricing and the corridor of the masses

③ Cost targets based on pricing and desired margins

④ Potential adoption obstacles

Through Tipping Point Leadership, tackle traditional hurdles:

① Cognitive

② Resource

③ Motivational

④ Political

Identify and leverage the factors of disproportionate influence in the organization.

Via a Fair Process, aim to motivate people to act on and execute a blue ocean strategy in a sustained way, deep in the organization:

① Engagement

② Explanation

③ Clarity of expectations

Venturing beyond an existing industry space implies a series of risks. The blue ocean strategy approach to strategy is based on six principles that cater for

the major risks of a new market creation project. Together, they define the underlying philosophy of blue oceans.

Search Risk Planning Risk Scale Risk Business Model Risk Organizational Risk

Overcome key organizational hurdles

5

Management Risk

Each building block and their components are detailed in the following pages.



1. Reconstruct market boundaries

The six paths framework challenges the fundamental assumptions underlying many companies’ strategies. It encourages to look at alternative industries,

strategic groups, chain of buyers, complementary offerings, functional and emotional appeal, and time.

Focus on the purpose of a product or service and consider alternatives, not substitutes. Substitutes are those that have a different form but offer the same functionality. Alternatives are those that have different functions and forms but fulfill the same purpose.• What are the alternative industries to our industry? • How do customers make trade-offs across them?• What makes them jump from an industry to another?

Focus on the key factors that lead buyers to trade across alternative industries and eliminate or reduce everything else.

LOOK ACROSSALTERNATIVE INDUSTRIES1

In most industries you can capture the fundamental differences among players within a small number of strategic groups (i.e. group of companies pursuing a similar strategy). As a minimum, you can generally rank them on the basis of price and performance. When looking for a blue ocean, the key is to break out of a strategic group and understand which factors drive customers’ decisions to trade up or down among groups.• What are the strategic groups in our industry? • Why do customers trade up for the higher group? • Why do they trade down for the lower one?

LOOK ACROSS STRATEGIC GROUPS WITHIN INDUSTRIES2

We should always consider the multiple players directly or indirectly involved in the buying decision: the purchasers (who pay for the product or service); the users; and the influencers. Although these groups may overlap, they often differ and hold different definitions of value. Challenging our industry’s conventional beliefs about which buyer group should be targeted can lead to the discovery of new, locked values. For this, we should look across buyer groups to gain new insight and draft new value curves.• What is the chain of buyers in our industry? • Which buyer group does our industry focus on? • If we shifted the attention to another buyer group of our

industry, how could we unlock new value?

LOOK ACROSS THE CHAIN OF BUYERS3

The total solution buyers seek when they choose a product or service may be composed of hidden complementary products and services. A way to define the total solution is to explore what happens before, during and after our product or service is used.We should thus ask ourselves: • What is the context in which our product or service is

used? • What happens before, during and after? • Can we identify the pain points? • Can we eliminate these pain points through a

complementary product or service offering?

LOOK ACROSS COMPLEMENTARY PRODUCT & SERVICE OFFERINGS4

Competition in an industry tends to converge not only on the scope of product and services, but also in terms of functional /rational and feeling/emotional appeal. Yet the appeal of most products or services is rarely one or the other.• Does our industry compete on functionality or on

emotional appeal? • If we compete on emotional appeal, what elements can

we strip out to make it functional? • If we compete on functionality, what elements can be

added to make it emotional?

LOOK ACROSS FUNCTIONAL OR EMOTIONAL APPEAL TO BUYERS5

Blue ocean strategies rarely come out from projecting industry trends. Instead, they arise from business insights into how trends will change value to customers and impact the company’s business model. The idea is to look across time: the value a market delivers today, vs. the value it might deliver tomorrow.When looking at trends, we must focus on those that are decisive to our business, that are irreversible and have a clear trajectory. Having identified these trends, we can look across time at what the market would look like if they were taken to their logical conclusion. Working back, we can identify what must be changed today to unlock a new blue ocean.

LOOK ACROSS TIME6

SIX PATHS TO RECONSTRUCT MARKET BOUNDARIES, BREAK FROM COMPETITION AND CREATE BLUE OCEANS

Blue ocean strategy principles ⎥ Strategy FormulationCh. 3



2. Focus on the big picture

Building on the six paths framework, we can depict our “as-is", “alternative” and “best to-be” strategy canvases. To do so, there are four suggested steps that

will help us create a visual representation of our strategy: visual awakening, visual exploration, visual strategy fair, and visual communication.

• We can compare the focus of our business to the one of our competitors by drawing our “as-is” strategy canvas.

• Here, we need to focus on the areas where we think our strategy needs to change.

• When we will start drawing the strategy canvas(es), we will get into productive arguments and contradictions. This will force our teams and our leadership to share a common view on the strategy essentials.

• The diagram will make a stronger case for change than any argument based on numbers and words.

VISUAL AWAKENINGTrigger change via our as-is canvas

1

• Having drawn our as-is canvas, we need to adopt a human-centered design approach, i.e. we must get into the field to watch customers use our products and services.

• We need to identify the array of complementary products and services that are consumed alongside our own. This will give us an insight on how we could bundle opportunities.

• At the same time, we need to look for alternative ways of fulfilling the need that our product or service satisfies.

• Each opportunity should be translated into a new value curve, e.g. one per each of the six paths, by looking at which factors we should eliminate, create or change.

VISUAL EXPLORATIONDrawing a canvas per every new opportunity

2

• Every colleague (and strategic partner) should be able to compare the new vs. the old strategic profiles. They should recognize where we stood and were we want to focus our efforts to create a compelling future.

• The new strategic profile is explained by all the executives who participated to its creation. They need to emphasize what needs to be reduced, eliminated, increased and created.

• The new picture is to become the reference point for each new initiative and investment decision, i.e. each new project is to be valued against its contribution to reshaping our existing value curve into our future one.

VISUAL COMMUNICATIONNew vs. old value curve is the new metric

4

• Each value curve should be clear and easily translatable into a compelling tagline. We should be able to explain each curve in ten minutes or less.

• We can hang them on the walls, circulate them around and capture their pro’s and cons, their blocks, challenges and implications.

• We must emphasize: (1) factors that we thought were key to our competitiveness but are in fact marginal to customers; (2) factors that we had previously overlooked. This way we can reassess some of our long-held assumptions.

• We will then be able to draw our best “to-be” strategy canvas based on insights from field observations, customers, competitors’ customers, non-customers, key partners and industry experts.

VISUAL STRATEGY FAIRGetting feedback for the best “to-be” canvas

3




3. Reach beyond existing demand

Non-customers tend to offer us far more insight into how to unlock and grow a blue ocean than do relatively content existing customers. Beyond our current

market are “soon to be”, “refusing”, and “unexplored” non-customers, representing untapped demand waiting to be released.

GO FOR THE BIGGEST

CATCHMENT

Look for commonalities across tiers.Our aim is to expand the market

and create new demand.

DE-SEGMENTING MARKETS, AGGREGATING COMMONALITIES AND MAXIMIZING

THE NEW MARKET

Soon-to-be customers are those who minimally use the current market offerings to get by as they search for something better. Upon finding any better alternative, they will eagerly jump ship. Locked within these first-tier non-customers is an ocean of untapped demand waiting to be released.What are the key reasons first-tier non-customers want to jump ship and leave our industry?Look for commonalities across their response. Focus on these, and not on the differences among them.

Refusing non-customers are people who either do not use or cannot afford to use the current market offerings because they find them unacceptable or beyond their means. Their needs are either dealt with by other means or ignored. What are the key reasons non-customers refuse to use the products or services of our industry? Look for the commonalities across their responses. Focus on these, and not on their differences.

This is the farthest away tier of non-customers from our industry’s existing customers. Typically, these unexplored non-customers have not been targeted or thought of as potential customers by any player in our industry. That’s because their needs and the business opportunities associated with them have somehow always been assumed to belong to other markets.Can we reach beyond existing customers and look across multiple markets to aggregate commonalities into a new market?

FIRST TIER

SECOND TIER

THIRD TIER

OurMarket

Soon to be

Refusing

Unexplored

Non-customers who are on the edge of our market waiting to jump ship

Non-customers who consciously choose against our market

Non-customers who are in markets distant from ours




ADOPTION

Identify the bandwidth that captures the largest group of target buyers while making it difficult for our competitors to imitate us.

Stick to to the logic that our strategic price drives our target profit that drives our target cost. Hit target costing via streamlining, partnering and/or pricing innovation.

Educate the fearful: employees, business partners and public opinion at large. Openly discuss to solve issues upfront and get maximum buy in.

Look at the six stages of the buyer’s experience cycle and identify blocks to buyer’s utility. Identify the value proposition that removes the biggest blocks allowing us to turn non-customers into customers.

4. Get the strategic sequence right

We should not let costs drive prices. Nor should we scale down utility because high costs block our ability to profit at a strategic price that is easily accessible

to the mass of target buyers. The right sequence for creating value innovation is (1) buyer utility, (2) price, (3) profit, (4) costs, and (5) adoption.

A COMMERCIALLY VIABLE

BLUE OCEAN IDEA

Does our offering unlock exceptional utility? Is there a compelling reason for the mass of people to buy it?

Is our offering priced to attract the mass of target buyers so that they have a compelling ability to pay for it?

Can we produce our offering at the target cost and still earn a healthy profit margin?Can we profit at the price easily accessible to the mass of target buyers?

What are the adoption hurdles in actualizing our business idea?

Are we addressing them up front?

Create a leap in Net Buyer Value

Creation of Value Innovation and capturing of healthy profits

No, rethink No, rethink No, rethink

COSTPRICEBUYER UTILITY 321 4

Blue ocean strategy principles ⎥ Strategy Formulation

Each step is further detailed in the pages hereafter.

Ch. 6



4. Get the strategic sequence right ⎥ 1. BUYER UTILITY

Does our offering unlock exceptional utility? Is there a compelling reason for the mass of people to buy it?

By locating our proposed offering on the thirty-six spaces of the buyer utility map, we can clearly see how, and whether, the new idea not only creates a

different utility proposition from existing offerings but also removes the biggest blocks to utility that stand in the way of converting non-customers into

customers. If our offering falls on the same space or spaces as those of other players, chances are it is not a blue ocean offering.

The buyer utility map

BUYER EXPERIENCE CYCLE SIX STAGES OF BUYER EXPERIENCE CYCLE⎥

1. PURCHASE 2. DELIVERY 3. USE 4. SUPPLEMENTS 5. MAINTENANCE 6. DISPOSAL

• How long does it take to find the product you need?

• Is the place of purchase attractive and accessible?

• How secure is the transaction environment?

• How rapidly can you make a purchase?

• How long does it take to get the product delivered?

• How difficult is it to “unpack and install” the new product?

• Do buyers have to arrange delivery themselves? If yes, how costly and difficult is this?

• Does the product require training or expert assistance?

• Is the product easy to store when not in use?

• How effective are the product’s features and functions?

• Does the product or service deliver far more power or options than required by the average user? Is it overcharged with bells and whistles?

• Do you need other products and services to make this product work?

• If so, how costly are they?

• How much time do they take?

• How much pain do they cause?

• How easy are they to obtain?

• Does the product require external maintenance?

• How easy is it to maintain and upgrade the product?

• How costly is maintenance?

• Does the use of the product create waste items?

• How easy is it to dispose of the product?

• Are there legal or environmental issues in disposing of the product safely?

• How costly is disposal?

BLOCKS TO BUYER

UTILITY

CUSTOMER PRODUCTIVITY

In which stage are the biggest blocks to customer productivity?

SIMPLICITY In which stage are the biggest blocks to simplicity?

CONVENIENCE In which stage are the biggest blocks to convenience?

RISK In which stage are the biggest blocks to reducing risks?

FUN AND IMAGE In which stage are the biggest blocks to fun and image?

ENVIRONMENTAL FRIENDLINESS

In which stage are the biggest blocks to environmental friendliness?




4. Get the strategic sequence right ⎥ 2. STRATEGIC PRICE

Is our offering priced to attract the mass of target buyers so that they have a compelling ability to pay for it?

EASY TO IMITATE

Low degree of legal and resource protection

DIFFICULT TO IMITATE

High degree of legal and resource protection

CAN BE IMITATED WITH SOME DIFFICULTY

Some degree of legal and resource protectionUpper-le

vel pric

ing

Lower-level pricing

Mid-level pricing

STEP 2:

SPECIFY A PRICE LEVEL WITHIN THE PRICE CORRIDOR

Same form Different form, same function

Different form and function,

same objective

Price Corridor of the MassesThe price bandwidth that captures the largest

groups of target buyers

STEP 1:

IDENTIFY THE PRICE CORRIDOR OF THE MASS

The size of circle is proportional to number of buyers that the product/service is able to attract.

A good way to look outside industry boundaries is to list products and services that fall into the three categories above.

This allows us to see the full range of buyers that can be poached from other industries as well as from non-industries. It provides a way to identify where the mass of target buyers is and what prices these buyers are prepared to pay for the products and services they currently use.

The second step helps us determine how high a price we can afford to set within the corridor of the masses, without inviting competition to imitate products or services.

Blue ocean strategy principles ⎥ Strategy FormulationP

RIC

E



4. Get the strategic sequence right ⎥ 3. TARGET COST

Can we produce our offering at the target cost and still earn a healthy profit margin? Can we profit at the price easily accessible to the mass of target buyers?

STRATEGICPRICE

TARGETPROFIT

STREAMLINING AND COST

INNOVATIONSPARTNERING

PRICING INNOVATION

If you are to arrive at a cost structure that is both profitable and hard for potential followers to match, you must tackle the price equation as price-minus costing, not cost-plus pricing.

Three levers to hit the cost target￭ Can the service’s or product’s

raw materials be replaced by unconventional, less expensive ones?

￭ Can high-cost, low-value added activities in our value chain be significantly eliminated, reduced or outsourced?

￭ Can the physical location of our product or service be shifted from prime real estate locations to lower-cost locations?

￭ Can we truncate the number of parts of steps used in production by shifting the way things are made?

￭ Can we digitize activities to reduce costs?

￭ In bringing a new product or service to market, many companies mistakenly try to carry out all the production and distribution activities themselves.

￭ Partnering provides a way for companies to secure needed capabilities fast and effectively while dropping their cost structure. It allows a company to leverage other companies’ expertise and economies of scale.

￭ Partnering includes closing gaps in capabilities through making small acquisitions when doing so is faster and cheaper, providing access to expertise that has already been mastered.

1 2

3

￭ If streamlining and cost innovation and/or partnering does not bring us to the desired target cost, is changing the pricing model of the industry a viable alternative?

￭ The aim is not to compromise on the strategic price, but to hit the target through a new price model, e.g. renting/leasing vs. selling, equity interest in the customer’s business, etc.

TARGETCOST




4. Get the strategic sequence right ⎥ 4. ADOPTION

Almost by definition, a blue ocean idea threatens the status quo. As a result, it may provoke resistance among employees, partners and the general public.

Often underestimated or put aside because of its cost, educating the “fearful” can have a make or break impact on our new idea. Identifying threats to

employees and third parties and openly discussing issues upfront helps minimize risks and defuse negative opinions that would be much more costly to

address later on.

Business partners

￭ Before going public with an idea, we must communicate to our colleagues the threats and benefits posed by its execution.

￭ We must work with our colleagues to find ways of defusing the threats so that everyone feels as comfortable as possible and is set to win, despite the shifts that will be necessary in people’s roles, responsibilities and rewards.

￭ Will our partners fear that their revenue streams or market positions will be threatened by our new business idea? If so, we must openly discuss the issues with them and find a win-win solution upfront.

￭ Even if a common ground is not found and we are due to put an end to a business relationship, it is in our interest to find an agreement through an open conversation as early as possible. The worst thing that could happen is to see our efforts undermined by a partners’ sales force.

￭ If the idea threatens established social or political norms, general public’s opinion could represent a fierce opposition. Again, the best recommendation is not to underestimate the indirect negative impacts of third parties.

￭ Engaging in an open discussion about why the adoption of the new idea is necessary and beneficial is the best way to defuse negative press upfront.

Employees

Generalpublic

1

2

3

Educate the fearful




5. Key organizational hurdles

We all know that strategy execution is at least as important as, if not more important than, strategy definition. The changes underlying a blue ocean strategy

make execution even more delicate. This is why carefully addressing four key organizational hurdles can make or break our initiative, no matter how strong is

our business case.

COGNITIVE HURDLE

What are the three most important facts and figures that we will use to make people aware of the need for a strategic shift and agree on its causes?

How can we make people, and especially leadership, see the reality first hand? How can customers or third parties help us?

What are the three most effective and practical ways we could leverage to make executives and employees experience and feel the need for change?

POLITICAL HURDLE

How do we overcome potential corporate politics, intrigue and plotting?

Who are the possible negative influencers who can fiercely and vocally oppose the new strategy? Are they only internal? Are they also external to our department, organization, or company?

The Consigliere will help us identify in advance the possible land mines. He/she will profile those who have the most to win and to lose from the new corporate direction. He will help us isolate the detractors and discourage them before their war starts to get any steam.

RESOURCE HURDLE

HOT SPOTS: Which of our activities are currently poorly staffed but have a high potential to deliver superior results?

COLD SPOTS: Which activities do we pursue today that require a high input of resources but deliver a low impact on our performance?

HORSE TRADING: How could we reshuffle our resources allocation for greater impact and business performance?

MOTIVATIONAL HURDLE

KINGPINS: Who are the people inside our group that are the most respected and persuasive natural leaders and influencers that have the ability to unlock or block access to key resources?

FISHBOWL: Can we motivate the kingpins by putting them in the spotlight and showing to others their actions (and inactions) in a repeated and highly visible way?

ATOMIZED CHALLENGE: What are the “bite-size atoms” of our initiative that are individually attainable and collectively allow us to implement our strategy?

Mass ofemployees

Against In favor

Employees with disproportionate

influence

Employees with disproportionate

influence

“Consigliere”

TIPPING POINT LEADERSHIP APPROACHIdentify, focus on and leverage people, acts and activities that exercise disproportionate influence on performance.

Fundamental changes can happen quickly when the beliefs and energies of a critical mass of people create an epidemic movement toward an ideal. Key to unlocking an epidemic movement is concentration, not dispersion/diffusion of effort.

Blue ocean strategy principles ⎥ Strategy Implementation

One of the key factors of our success, no matter how strong our business case, is to know in advance all the likely angles of attack to our proposal. The Consigliere, a highly respected insider, will help us know whom will fight us and whom will be naturally interested in aligning him/herself with the new strategy.

Ch. 7



6. Build execution into strategy Our company will (continue to) stand apart as a great and consistent executor when our people embrace our new strategy with their minds and hearts.

When of their own accord they will be willing to go beyond compulsory execution to voluntary cooperation. When trust and commitment will align attitudes

and behavior to the spirit of our strategy, not to its letter. Adopting a fair process to strategy execution will help us achieve this goal deep into all the ranks

of our company, across teams and departments.

Blue ocean strategy principles ⎥ Strategy Implementation

Emotional recognition:Our colleagues want to be appreciated for their value, for their individual worth, regardless of the hierarchical level. They are not “resources”, “labor factor” or “personnel”. They are human beings who want to and should be treated with full respect and dignity.Intellectual recognition:Our colleagues may have brilliant ideas and new points of view. We must leverage their willingness to be consulted and show that their perspective is appreciated and given thoughtful reflection.

INTELLECTUAL AND EMOTIONAL

RECOGNITION

TRUST& COMMITMENT

VOLUNTARY COOPERATION IN

STRATEGY EXECUTIONEXCEED EXPECTATIONS

Building such an intrinsic and extrinsic motivation within our colleagues can help us pull together our collective wisdom and generate brilliant new ideas, processes and tricks to make us achieve our goals. People will be almost in an auto-pilot mode because they will understand what we are aiming for, they are emotionally bound to the result, they are being valued for their intelligence and skills and trust that this is done in a clear and equal way in the best interest of all of us.

Potentially, such a momentum can be further fuelled by a transcendent motivation, one that goes beyond the goals of the individual and of our company. For example, a goal that is linked to a humanitarian cause linked to our project, to the well being of customers beyond our products and services, or, to the extent our products and services allow us to, to the improvement of the society we live in.

FAIR PROCESS: ENGAGEMENT, EXPLANATION, EXPECTATION CLARITY

ENGAGEMENT: We make sure that we involve our colleagues in the strategic decisions that affect them. We do so by asking for their input and by allowing them to refute the merits of one another’s ideas and assumptions. Our teams show respect for individuals and for their ideas; they encourage refutation in order to sharpen our thinking and leverage collective wisdom.

EXPLANATION: We want every employee involved and affected by our strategy to understand why final strategic decisions are made as they are. By sharing the thinking underlying our decisions, our colleagues will be confident that we have considered all options and opinions, and that decisions have been made impartially in the best interest of the company.

EXPECTATION CLARITY: Once our strategy is set, we must clearly set the new rules of the game. Goals, targets and milestones must be clearly communicated. So must responsibilities and rewards. As a result, political jockeying and favoritism should be killed, letting our people focus on executing strategy rapidly.

Our employees care as much about the justice of the processthrough which our outcome will be produced as they do about the outcome itself!

It is only through actions, not words, that we will gain the trust and commitment of all involved parties. We must walk our talk and make others walk their talk.Indeed, we must create an environment of trust towards those leading the new initiative as well as among those participating to it and being affected by it, directly or indirectly.Recognition and feedback will allow us to build a strong sense of commitment. Ideally it will drive ourselves and our colleagues to override personal self-interest.

When you and I are being considered, valued and feeling recognized, we want to share. Recognizing our intellectual worth inspires us and makes us want to impress and confirm the expectations of those who trust us and in whom we trust.

Additionally, if there is an emotional component to the recognition, we feel emotionally tied to the strategy and the end result. We are much more willing to go the extra mile and give all we’ve got.

Open & collaborative strategic planning Positive and optimistic attitude Proactive and determined behavior

Ch. 8



Red vs. Blue - In red oceans, our efforts are focused on the conventional logic that we must outpace the competition with a better solution to a given problem. Blue ocean strategy invites us to redefine the problem itself. It does so by breaking the value-cost trade-off in view of creating new uncontested market places. Places where no one has been and where we would be the one defining the rules!

Analytical Tools & Frameworks - The strategy canvas is both the start and the end point of a blue ocean strategy formulation. An initial value curve depicts where the industry competes on and invests in. It is then transformed via the eliminate-reduce-raise-create actions framework. The resulting value curve shows a focused effort that diverges from existing market offerings and can be easily translated into a compelling tagline.

Underlying principles - Venturing beyond an existing industry space implies a series of risks. The blue ocean strategy approach to strategy is based on six principles that cater for the major risks of a new market creation project: search risk, planning risk, scale risk, business model risk, organizational risk and management risk. Together, they define the underlying philosophy of blue oceans.

Six paths to reconstruct market boundaries - The six paths framework challenges the fundamental assumptions underlying many companies’ strategies. It encourages to look at alternative industries, strategic groups, chain of buyers, complementary offerings, functional and emotional appeal, and time.

Strategic planning focused on the big picture - Building on the six paths framework, we can depict our “as-is", “alternative” and “best to-be” strategy canvases. To do so, there are four suggested steps that will help us create a visual representation of our strategy: visual awakening, visual exploration, visual strategy fair, and visual communication.

Reaching beyond existing demand - Non-customers tend to offer us far more insight into how to unlock and grow a blue ocean than do relatively content existing customers. Beyond our current market are “soon to be”, “refusing”, and “unexplored” non-customers, representing untapped demand waiting to be released.

Getting the strategic sequence right - We should not let costs drive prices. Nor should we scale down utility because high costs block our ability to profit at a strategic price that is easily accessible to the mass of target buyers. The right sequence for creating value innovation is (1) buyer utility, (2) price, (2b) profit, (3) costs, and (4) adoption.

1. Buyer utility - Does our offering unlock exceptional utility? Is there a compelling reason for the mass of people to buy it? By locating our proposed offering on the thirty-six spaces of the buyer utility map, we can clearly see how, and whether, the new idea not only creates a different utility proposition from existing offerings but also removes the biggest blocks to utility that stand in the way of converting non-customers into customers. If our offering falls on the same space or spaces as those of other players, chances are it is not a blue ocean offering.

2. Strategic Price - Is our offering priced to attract the mass of target buyers so that they have a compelling ability to pay for it?

3. Target Cost - Can we produce our offering at the target cost and still earn a healthy profit margin? Can we profit at the price easily accessible to the mass of target buyers?

4. Adoption - Almost by definition, a blue ocean idea threatens the status quo. As a result, it may provoke resistance among employees, partners and the general public. Often underestimated or put aside because of its cost, educating the “fearful” can have a make or break impact on our new idea. Identifying threats to employees and third parties and openly discussing issues upfront helps minimize risks and defuse negative opinions that would be much more costly to address later on.

Mobilizing the organization to overcome key organization hurdles - We all know that strategy execution is at least as important as, if not more important than, strategy definition. The changes underlying a blue ocean strategy make execution even more delicate. This is why carefully addressing four key organizational hurdles can make or break our initiative, no matter how strong is our business case.

Building execution into strategy via a fair process - Our company will (continue to) stand apart as a great and consistent executor when our people embrace our new strategy with their minds and hearts. When of their own accord they will be willing to go beyond compulsory execution to voluntary cooperation. When trust and commitment will align attitudes and behavior to the spirit of our strategy, not to its letter. Adopting a fair process to strategy execution will help us achieve this goal deep into all the ranks of our company, across teams and departments.

THE ONE PAGER ON BLUE OCEAN STRATEGY



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