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Business Model
Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur
Blue Oceans = value innovation(a new market space within mature industry)
• Compete in existing market space
• Beat the competition head-on
• Exploit existing demand
• Make the value/cost trade off
• Create uncontested market space
• Make competition irrelevant
• Create and capture new demand
• Break the value/cost trade off
Red Oceans (most businesses)
Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur
62% 38%
Revenue Impact
39% 61%
Profit Impact
86% 14%
Business Launches
Pioneer, Innovation in Customer Value
Me-too & Value Improvement
• Why seek Value Innovation?
14% of firms in a ‘Blue Ocean’ space 61% of overall profits (Kim’s & Mauborgne’s observation of 108 companies over a 100-year period)
Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur
Tools to find Blue Oceans
The Strategy Canvas:
captures the current state of play in the known market space; reorients focus from competitors to alternatives and from customes to non customers
the range of factors the industry competes on and invests in
the offering level that buyers receive across all of these key competing factors.
Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur
Four actions framework (observations):
Factors that no longer are valuable to potential customers are avoidable costs
Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur
Eliminate-reduce-raise-create grid
Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur
Value innovation example: [yellow tail]
Australian vineyard Casella Wines
sought a way to increase US sales in a
hugely crowded and competitive industry
space with falling margins
The US Wine market –
hardly attractive
Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur
Casella Wines’ value innovation
1. What did the US wine industry strategy canvas look like (on what factors were producers competing)?
Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur
US wine industry - Factor 1: price
Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur
US wine industry - Factor 2: labelling for connoisseurs
Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur
US wine industry - Factor 3: mass media advertising
Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur
US wine industry - Factor 4: aging quality – age=better
Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur
US wine industry - Factor 5: heritage = prestige
Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur
US wine industry - Factor 6: complex bouquet = desirable product
Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur
US wine industry - Factor 7: wide product range = better label
Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur
The US Wine Industry – strategy canvas
Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur
[yellow tail] – 1 and 2
1. Industry Strategy Canvas• Price, packaging, above the line marketing, aging quality, prestige of the
vineyard, complexity of taste, diverse range of wines
2. Four actions framework - observations• Wine was only accessible to a limited number of people + takes years to
appreciate wine• French and worldwide producers were all competing on the factors on
the strategy canvas, bringing down margins• Blue Ocean: not competing on wine market, but on the alternative
market for beers, spirits and cocktails>> Create a new market of new wine drinkers
Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur
[yellow tail] - 3
3. The eliminate-reduce-raise-create grid• Eliminated
» Enological terms on wine packaging, » above the line marketing – (replace with in-store merchandising)» aging quality » => costs and working capital declined
• Reduced» Vineyard prestige, » complexity of taste and range (2 products: Chardonnay and Shiraz)
• Raised» Price versus budget wines, » retail store involvement (display stands, merchandised clothing for staff)
• Created » 3 new factors: easy drinking, easy to select, and ‘fun and adventure’ image of
AustraliaCopyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur
Smaller product range, simpler labelling
Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur
In-store merchandising
Retail store
involvement
Wal-Mart displays
Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur
[yellow tail] value line vs US wine industry
Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur
[yellow tail] - Results
Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur
Further Reading
Kim, W.C. and Mauborgne, R., 2005. Blue Ocean Strategy: How to Create uncontested Market Space and Make the Competition Irrelevant. Boston: Harvard Business School Press.
Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur