Blue Ocean vs Red Ocean Strategy

7/29/2019 Blue Ocean vs Red Ocean Strategy

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BLUE OCEAN STRATEGY


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BLUE OCEAN VS RED OCEAN STRATEGY

Create uncontestedmarket space

Make the competitionirrelevant

Create and capture newdemand

Compete in existingmarket space

Beat competition

Exploit existing demand


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Break the value-cost tradeoff

Align the whole system ofa firms activities with its

strategic choice ofdifferentiation and lowcost

Make the value-cost tradeoff

Align the whole system ofa firms activities with its

strategic choice ofdifferentiation or low cost

BLUE OCEAN VS RED OCEAN STRATEGY


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BLUE OCEAN STRATEGY TOOLS

A diagnostic tool for building a compellingblue ocean strategy

It captures the current state of play in the

known market space Allow you to understand:

Where the competition is currentlyinvesting

The factors the industry currentlycompetes on in product, service anddelivery

What customers receive from existingcompetitive offerings on the market


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FOUR ACTION FRAMEWORK


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FOUR ACTION FRAMEWORK

Which factorsshould be createdthat the industryhas neveroffered?

Which factorsshould be reducedwell below theindustrysstandard

Which factorsshould ba raisedwell above theindustrysstandard?

Which of thefactors that theindustry takes forgranted should beeliminated?


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FOUR ACTION FRAMEWORKThe Case of Cirque Du Soleil (The Circus Company)

Theme

Refined Environment

Multiple productions

Artistic Music andDance

Fun and humor

Thrill and danger

Unique Venue Star Performers

Animal Shows

Aisle concession sales

Multiple show arenas


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SIX PRINCIPLES OF

BLUE OCEAN STRATEGY

Reconstruct market

boundaries Focus on the big picture,

not the numbers

Reach beyond existing

demand Get the strategis sequence

right

Overcome key

organizational hurdles Build execution into

strategy


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FORMULATING BLUE OCEAN STRATEGY


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Value InnovationFocusing on value innovation is central to Blue Ocean Strategy.

Costs

Buyer Value

Value

Innovation


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1. RECONSTRUCT MARKET BOUNDARIES

Head-to-Head Strategy Blue Ocean Strategy

Focus on rivals within industry

Focuses on competitive positionwithin strategic group

Focuses on better serving thebuyer group

Looks across alternativeindustries

Looks across strategic groupwithin industry

Redefines the industry buyergroup


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1. RECONSTRUCT MARKET BOUNDARIES

Head-to-Head Strategy Blue Ocean Strategy

Focuses on maximizing thevalue of product or serviceofferings within thebounds of its industry

Focuses on adapting toexternal trands as theyoccur

Looks across thecomplementary productand service offerings

Participates in shapingexternal trends over time


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2. FOCUS ON THE BIG PICTURE, NOT

THE NUMBERS

Focus on the BigPicture, not the

Numbers

THE FOUR STEPS OFVISUALIZING STRATEGY

Visual Awakening

Visual Exploration

Visual Strategy Fair

Visual communication


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Step 1 Visual Awakening

VISUAL AWAKENING

Compare your business with your competitors by drawing your as isstrategy canvas

See where your strategy needs to change


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Strategy Canvas

High

Low

Price Use of

enologicalterminology

Above-the-line

marketing Agingquality

Vineyard prestige

and legacy Winecomplexity

Wine range


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Example:

US Wine Industry Pre-YellowTail

Price Enological

Terminology

Above the line

Marketing

Aging Quality Vineyard

Prestige &

Legacy

Wine

Complexity

Wine Range

Budget Wines

Premium Wines

Low

High


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Step 2. Visual Exploration

VISUAL EXPLORATION

Go to the field to explore the six paths to creating blue oceans

Observe the distinctive advantages of alternative products and services

See which factors you should eliminate, create or change


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The Six Principles of Blue Ocean

Strategy

Formulation Principles Risk factor each principle attenuates

Reconstruct market boundariesFocus on the big picture, not the numbers

Reach beyond existing demand

Get the strategic sequence right

Search riskPlanning risk

Scale risk

Business model risk

Evaluation principles Risk factor each principle attenuates

Overcome key organizational hurdles

Build execution into strategy

Organizational risk

Management risk

This figure highlights the six principles driving the successful formulation

and execution of blue ocean strategy and the risks that these principlesattenuate.


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Identify Market

First Tier:Soon to be non-customers who are the edge of yourmarket, waiting to jump ship

Second Tier:Refusing non-customers who consciously chooseagainst your market

Third Tier:Unexplored non-customers who are in marketsdistant from yours


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How to find new Value CurveFour Actions Framework

Eliminate

Which of the factors that the industry takes for granted should beeliminated?

Reduce

Which factors should be reduced well below the industry'sstandard?

Raise

Which factors should be raised well above the industry'sstandard?

Create

Which factors should be created that the industry has neveroffered?


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Example:

Value Curve for Yellow Tail Eliminate

Enological Terminology

Above the Line

Focus on Aging Quality

Reduce

Vineyard Prestige & Legacy

Wine Complexity

Wine Range

Raise

Price as compared to Budget

Retail Store Environment

Create

Easy Drinking

Ease of Selection

Fun & Adventure


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Step 3. Visual Strategy Creation

Draw your to be strategy canvas based on insights from field observations

Get feedback on alternative strategy canvases from customers, competitorscustomers, and non-customers

Use feedback to build the best to be future strategy


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Revise your Strategy Canvas

High

Low

Price Use of

enologicalterminology

Above-the-line

marketing Agingquality

Vineyard prestige

and legacy Winecomplexity

Wine range

Through a series of iterations a revise your strategy canvas.


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Example: Wine Industry Post

Yellow Tail

Price EnologicalTerminology

Above theline

Marketing

Aging Quality VineyardPrestige &

Legacy

WineComplexity

Wine Range Easy Drinking Ease ofSelection

Fun &Adventure

Budget Wines

Premium Wines

Yellow TailLow

High


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Nintendo WII Case Study


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Nintendo WII Case Study

Eliminated Movie Playing.

Reduced Graphics & Physics.

Raised Fun. Created the Wiimote


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Step 4. Visual Communication

VISUAL COMMUNICATION

Distribute your before and after strategic profiles on one page for easycomparison

Support only those projects and operational moves that allow your company

to close the gap to actualize the new strategy


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4. GET THE STRATEGIC SEQUENCE RIGHTThe Sequence of Blue Ocean Strategy

BUYER UTILITYIs there exceptionalbuyer utility in your

business idea?

PRICEIs your price easilyaccessible to the

mass of buyers?

COSTCan you attain

your cost target toprofit at your

strategic price?

ADOPTIONWhat are the

adoption hurdles inactualizing yourbusiness idea?

A COMMERCIALLYVIABLE BLUE OCEAN

IDEA


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EXECUTING BLUE OCEAN STRATEGY


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5. OVERCOME KEY ORGANIZATIONAL

HURDLES

Zoom in Kingpins (KeyInfluencers)

Place kingpins on afishbowl

Atomize to get theorganization to changeitself

Secure a consigliere onyour top managementteam

Leverage your angelsand silence your devils

Redistribute resources toyour Hot Spots

Redirect your resourcesfrom your Cold Spots

Engage in Horse Trading

Ride the Electric Sewer

Meet with disgruntledcustomers


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6. BUILD EXECUTION INTO STRATEGY

Fair Process- Engagement, Explanation, Expectation Clarity

STRATEGY FORMULATION PROCESS

Trust and Commitment- I feel opinion counts

ATTITUDES

Voluntary Cooperation- Ill go beyond the call of duty

BEHAVIOR

Exceeds Expectation- self initiated

STRATEGY EXECUTION


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How Blue is Your Strategy?


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A Case Study About Smart Pen


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Introduction

This presentation covers how Smart Selling usedBlue Ocean Strategy so as to create a sustainable

business for Smartpen Australia.

This version of the presentation includesexplanation of the core components of Blue

Ocean Strategy.

Certain images within this presentation areowned by UCSIBOSRC and Blue

Ocean Strategy.


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Background Livescribe

The Pulse Smartpen was launched in 2007 inthe US

http://www.livescribe.com

The Pulse Smartpen is a computer in a pen. Itcaptures audio and synchronises this to what

you are writing.
http://www.livescribe.com/http://www.livescribe.com/


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Background Livescribe

Smartpen p is an Australian business thatsells the Livescribe Pulse Smartpen.

Smartpen was the first reseller to offerLivescribe for sale in Australia.


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The Problem

The competition arrived shortly afterSmartpen launched online sales. It wasannounced that the Pulse Smartpen

would also be sold through Officeworks Officeworks are a national retail office

supplies chain similar to Staples

Officeworks could spend more on above theline marketing and could outdiscount

Officeworks had the retail presence to bettercapture impulse buyers


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The Solution

Smartpen wasnt in a position to compete ontraditional red ocean terms

Going head to head wasnt an option. They

wouldve destroyed us K. Palmer Sales Manager Smartpen

Smart Selling suggested using Blue Ocean

Strategy focusing on value innovation ratherthan head to head competition


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The Solution

The Pulse Smartpen had significant hiddenpotential the question for Smartpen waswhether they could tap into that potential

Dont Compete with Rivals, Make Them Irrelevant

www.blueoceanstrategy.com


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Blue Ocean Strategy & Value

Innovation


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The Importance of Value

Innovation Focusing on value innovation is central to

what Smartpen sought to achieve.

Save costs by eliminating and/or reducingthe barriers for noncustomers

Lift value by raising or creating elements theindustry has not offered


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Using Blue Ocean Strategy

Smart Selling worked with Smartpenthrough the core Strategy steps:

1. Visual Awakening

2. Visual Awareness

3. Socializing the Strategy (Strategy Fair)

4. Execution of the Strategy


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Step 1 Create an AsIs

Strategy Canvas The strategy canvas gy is both a diagnosticand an action framework.

It captures the current state of play

Its also used to create the ToBe canvas

Looking at the current market we created anAsIs strategy canvas.


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The AsIs strategy canvas looked like this


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What Does This Tell Us?

Smartpen had little opportunity todifferentiate

Officeworks controlled the factors that couldmost damage Smartpens ability to remain inthe market

Retail Location

Above the line advertising


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Step 2 Visual Exploration


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Visual Exploration Six

Paths Analysis As Smart pen transitioned into the Exploration stage,time was spent on the Six Paths Analysis looking acrossalternate industries, groups, products and services

This analysis identified: Apple stores how they harness desire and

enthusiasm.

In business, who spends a lot of time taking notes or

minutes?

How do the sub groups of educators work and

communicate


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Step 2 Visual ExplorationFrom this study we identified a number of new customer segments

(see diagram).

Our focus shifted to what barriers existed for these noncustomer


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What Did We Hear from

NonCustomers? What does it do? I work in a small rural school. How do we buy

one?

This is my job. Will it help?

Can I use the pen to create mini tutorials formy students?

I work with students from nonEnglishspeaking backgrounds; how will this help?

Will it work with this third party application?


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Step 3 Visual Awareness

ERRC GridOur field research led us to develop the following FourAction Framework


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Step 3 Visual Strategy

Creation


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Visual Strategy Creation

ToBe CanvasThrough a series of iterations a To Be Strategy Canvas was developed


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The Strategy Fair

The ToBe Strategy gy Canvas wassuccessfully validated with all stakeholders.

Executing the strategy involved two things:

1. Changes to the core Smartpen site

2. Development and execution of a social media

strategy


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Creating the Blue Ocean

The Blue Ocean for noncustomers was in thesocial sphere using social technologies toremove the barriers for these noncustomers

so they could become customers

To do this, Smartpen focused on a socialmedia strategy that would allow it to connect

with these noncustomers


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Blue Ocean Strategy & Social

Media At the core of the strategy were principles that included:1. Listening initially passive but soon conversational

listening

2. Be in their social space go out to their worlds andcontribute.

3. Help everyone even if they didnt purchase fromSmartpen help them anyway

4. Encourage Innovation encourage users to innovate;Crowd source how and where the product could bedeveloped

5. Be Patient being social builds loyalty. It wont

happen overnight but it will happen


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Social Media StrategyThis is one way of looking at the strategy


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Social Media Listen and

Learn Goal Listen to the community and learnfrom them

Strategy

1. We use tools like Google Alerts, Twitter, andScout Labs to listen to the conversation

2. Scout Labs has proven more effective as

we can track sentiment

3. Twitter search is good for Twitter specifictraffic


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Social Media Engage.

Dialogue Goal Go into the social world and engageStrategy

1. We contribute advice and knowledge inspecific social networks and forums

2. Be very diligent about not trying to sell

3. If we cant meet their immediate need sendthem to where they can (i.e. the enemy)


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Social Media Encourage

Innovation Goal Capture innovative uses of theLivescribe Smartpen

Strategy

1. By engaging with users we capture examplesof howthe Smartpen is being used

2. Twitter, the blog, and Facebook attract users

who want to share ideas and experiences


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Summary

Smartpen needed to compete against amajor legacy retailer for sales of theLivescribe Pulse Smartpen

Solution:

1. Smartpen used Blue Ocean Strategy toidentify noncustomers and the barriers that

prevented them becoming customers.2. Social Media provided the means to capture

these noncustomers and create a blue ocean

outcome


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Source:W. Chan Kim (Author) and Renee Mauborgne (Author), Blue Ocean Strategy, HBSPublication

www.study Marketing.org
http://www.study/http://www.study/http://www.study/

Documents

Blue Ocean vs Red Ocean Strategy