Blue Ocean Strategy

Mohamed Fouda

Growth/Innovation

New Brand Development

Managing Costs

Assets utilizationFuture

Strategy

Operational Efficiency

Corporate Brand

Cycle times

Logistics

Global Reach

Creativity Methods

Quality Control

Growth/Innovation

New Brand Development

Managing Costs

Assets utilization

Future Strategy

Operational Efficiency

Corporate Brand

Cycle times

Logistics

Global Reach

Creativity Methods

Quality Control

InnovationRandom Systematic

Entrepreneur Pattern

Trial & error – learning from failure Theory & methodologies

Opportunities & risks come together Risk minimization with opportunity maximization

DNA/Culture Analytical Frameworks

Units of experimentation subsystem approach

Systems Strategic Alignment

Schumpeterian Innovation Blue Ocean Strategy

History of Blue Ocean Creation

• 150 blue ocean creations• More than 30 industries

• Over 100 years (1880-2000)

86% 14%

62% 38%

39% 61%

Business Launch

Revenue Impact

Profit Impact

Video Gaming Industry

Price

High gr

aphics

Non gaming f

unctionali

ties

HDTV Compatabilit

y

Proce

ssing P

ower

Online Gam

ing

Desing &

Archite

cts

Availa

ble Game Title

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Strategy Canvas Model – Video Gaming

Series 1

Nintendo WiiProfitable Growth with new demand creation

We’re not competing against sony or microsoft. We are battling the indifference of people who have no interest in videogames. We want to appeal mothers who don’t want

consoles in their living rooms, and to the elderly and to young women

Satoru Iwata....Nintendo President

Nintendo Wii - Results

• Has been selling at rate of one unit per second since its launch on 19th of November 2006 till December 2010.

• Zipped past sony in market value in June 2007 and became one of japan’s top ten companies for the first time.

• While sony loses 240$-300$ on each PS3 sold, nintendo makes 50$ on every unit.

• Profits reached almost $1.5B or $442,000 per employee in 2007, compared to microsoft’s $177,000 & google’s $288,000.

Price

High gr

aphics

Non gaming f

unctionali

ties

HDTV Compatabilit

y

Proce

ssing P

ower

Online Gam

ing

Desing &

Archite

cts

Availa

ble Game Title

s

Motion

Family

Friendly

Strategy Canvas Model – Video Gaming

Blue Ocean Strategy Propositions

• Value Proposition• Profit Proposition• People Proposition

Red Ocean Strategy Blue Ocean Strategy

Compete in existing market space Create uncontested marketspace

Exploit existing demand Create & capture new demand

Either differentiation OR low cost Differentiation & low cost

Segment the Market De-segment the market

Strategy execution follows formulation Strategic Alignment

The Six PrinciplesFormulation Principles Formulation Risks

Reconstruct Market Boundaries Reduce Search Risk

Focus on big picture, not the numbers Reduce Planning Risk

Reach beyond existing demand Reduce Scale Risk

Get the strategic sequence right Reduce Business model risk

Execution Principles Execution RisksOvercome key organizational hurdles Reduce Organizational risk

Build execution into strategy Reduce Management Risk

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

Eliminate

What factors should be reduced well below the industry standard?

Reduce

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

Create

What factors should be raised well beyond the industry standard?

Raise

How Blue is your strategy?• Exceptionally high value at drastically low cost?• Creating new demand instead of striving to do better than competitors?• Looking for noncustomers instead of getting bigger share of customers?• Challenging assumptions & reconstructing industry & market boundaries?• Pursuing desegmentation instead of finer segment?• Focused on widely shared needs instead of differntiating needs?• Executing strategy while conserving time & resources?