Blue Ocean StrategyTakeaways

How to Create Uncontested Market Space and Make the Competition Irrelevant

TEAM 4Carly Buell Ryan BuellBrian Cote

Shana HartfordApril Miller

Brittany SnethkampAustin Stewart

Red Ocean: Companies compete for customersBlue Ocean: Company creates a new market

Red Ocean Strategy • Focus on existing customers• Compete in existing market

space• Beat the competition• Exploit existing demand• Make the value-cost trade-off• Align the whole system of a

firm’s activities with the strategic choice of differentiation or low cost

Blue Ocean Strategy • Focus on non-customers• Create uncontested market

space• Make the competition irrelevant• Create and capture new demand• Break the value-cost trade-off• Align the whole system of a

firm’s activities• in pursuit of differentiation and

low cost

Value Innovation

GOAL

Decrease Costs

Increase value to customer

Analytical Tools and Frameworks• Strategy Canvas• Four Actions Framework• Eliminate-Reduce-Raise-Create Grid

3 Characteristics of Blue Ocean Strategy1. Focus2. Divergence3. Compelling Tag line

The Strategy Canvas1. Captures the current state of play in the known market space2. It propels you to action by reorienting your focus from competitors to alternatives and from customers to noncustomers of the industry

The Four Actions FrameworkReduce

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

CreateWhich factors

should be created that the industry

had never offered?

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

EliminateWhich of the factors

that the industry takes for granted should be

eliminated?

A New Value Curve

The Four Actions Framework & The Eliminate-Reduce-Raise-Create Grid

EliminateForces you to consider eliminating factors that companies in your industry have long competed on.

RaisePushes you to uncover and eliminate the compromises your industry forces customers to make.

ReduceForces you to determine whether products or services have been overdesigned in the race to match and beat the competition.

CreateHelps you discover entirely new sources of value for buyers, to create new demand and shift the strategic pricing of the industry.

Reconstruct Market Boundaries6 Paths Framework

1.Look Across Alternative Industries2.Look Across Strategic Groups Within Industries3.Look Across the Chain of Buyers4.Look Across Complementary Product and Service

Offerings5.Look Across Functional or Emotional Appeal to Buyers6. Look Across Time

4 Steps of Visualizing Strategy

1. Visual Awakening: See where you are2. Visual Exploration: See how others see you3. Visual Strategy Fair: See where you could be4. Visual Communication: Draw a map for

everyone (Pioneer-Migrator-Settler [PMS] map)

Three Tiers of Noncustomers

3rd Tier

2nd Tier

1st Tier

Your Market

1st Tier: Soon to be Noncustomers

2nd Tier: Refusing noncustomers

3rd Tier: Unexplored noncustomers

Sequence of Blue Ocean Strategy Buyer Utility

Is there exceptional buyer utility in your business idea?

No- Rethink

No- Rethink

No- Rethink

No- Rethink

Yes

Yes

Yes

YesPrice

Is your price easily accessible to the mass of buyers?

A Commercially Viable Blue Ocean Idea

CostCan you attain your cost target to profit at your strategic price?

AdoptionWhat are the adoption hurdles in

actualizing your business idea? Are you addressing them up front?

Buyer Utility Map

  Purchase Delivery Use Supplements Maintenance DisposalCustomerProductivity            

Simplicity            

Convenience            

Risk            

Fun and Image            

Environmental Friendliness            

Six Stages of the Buyer Experience Cycle

Six

Util

ity L

ever

s

COGNITIVE HURDLEan organization weeded

to the status quo

POLITICAL HURDLEopposition from powerful

vested interest

MOTIVATIONAL HURDLEunmotivated staff

RESOURCE HURDLElimited resources

4 Organizational Hurdles to Strategy Execution

Tipping Point vs. Conventional Wisdom

Conventional Wisdom - Focus on the mass of employees for change

Tipping point - Focus on the extremes for fast shift at low cost

Fair Process

Trust and Commitment

Voluntary Cooperation

Exceeds Expectations

A Visual of How Fair Process Affects the Workplace

StrategyFormulation

Process

Attitudes

Behavior

Strategy Execution

The Execution Consequences of the Presence and Absence of Fair Process in Strategy Making

Fair Process

Intellectual and Emotion

al Recogniti

on

Trust and

Commitment

Voluntary Cooperati

on in Strategy

Execution

Violation of Fair

Process

Intellectual and Emotion

al Imagina

tion

Distrust and Resentment

Refusal to

Execute Strateg

y

6 Principles of Blue Ocean Strategy• Formulation Principles

1. Reconstruct market boundaries

2. Focus on the big picture, not the numbers

3. Reach beyond existing demand4. Get the Strategic sequence

right

• Execution Principles5. Overcome key organizational

hurdles6. Build execution into Strategy

• Risk Factor each principle attenuates– Decrease search risk– Decrease planning risk– Decrease scale risk– Decrease business model risk

• Risk Factor each principle attenuates– Decrease organizational risk– Decrease management risk