Blue ocean strategy presentation

Ajay Mohan Goel [email protected]

mailto:[email protected]

A wake up Call!!!!

Between 1975 and 1995, 60 percent of Fortune 500 companies were replaced on the list.

Markets are opening

Competitors are agile

Competitors can pick and choose where to compete

In 10 years time will your market place still be populated by the same dominant industry players????

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The Lessons we all need to learn

Industries and companies continuously rise and fall.

Therefore, there are no permanently great industries or companies

Instead, there are strategic moves that propel companies and continuously create new industries.

Example: Nokia

137 year old company, leading mobile manufacturer with USD 31 Billion in sales in 130 countries

Has practiced renewal for a lifetime, starting out making paper, then boots, rain coats, hunting rifles, consumer electronics and now mobile phones.

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Staying at the top is not about having a great new technology to deploy

In strategy formation, innovation is often equated with technology requiring sizable development and investment.

In contrast, Value Inn0vation aims to substantially raise the value proposition towards customers (Hence “Innovation in Value”).

The question is: “How can we best identify and serve their overall needs and offer them unparalleled value?”

Example: IBM

Between 1991-1993, $16B in losses

In ‘93 first non-IT CEO switches co. focus from ‘technology driven’ to ‘customer solutions driven’, creating new “Global Services Group”

By 2001 the Global Services Group represents $35B of $86B in total sales.

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When should a company consider using value innovation

Highly competitive industry

Few differentiators

Low entry barriers

Downward margin pressures

Limited opportunity for new customers

Struggling to compete

Leadership position stagnant

Forced into acquisition model to sustain growth expectations.

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The Commerce Bank Experience – Blue Ocean Strategy in Financial Services

The Commerce Model

Growth Retailers Not Bankers

FANS Not Customers

Unique Deposit Driven/Retail Focus

Service Not Rate Drives Growth

Growth is Essential to Success and Value

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How Commerce Bank changed the paradigm

Key Elements of Product, Service and Delivery 7

What did Commerce Bank do?

Moving to a convenience retailer

Assessing what’s really important to customers

Convenience (62%)

Convenience (29%), Checking account (16%), Personal/Friendly/Nice, Treated well (9%), Good Service (8%)

Good Rates/Returns (3%)

The Philosophy of Commerce Bank is ‘dare to be different’

Bankers Hours – Open 7 days

Need a pen

Paint your vans

Dogs rule!

Coins!

Results are impressive: •Consistently winning consumer awards •Annual growth of 19%

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Comparing Conventional Thinking with Value Innovation approaches

Conventional Value Innovation Industry Assumption

Industry conditions are given Industry conditions can be shaped

Strategic Focus

Build competitive advantages to beat the competition

Create a quantum leap in buyer value to dominate the market

Customer Retain and expand the customer base through further segmentation and customisation. Think in terms of embracing customer differences

Go for the mass of buyers and willingly let some existing customers go. Think in terms of embracing key customer value commonalities.

Assets & Capabilities

Think in terms of a company’s existing assets and capabilities. Build on what it has.

Think free from a company’s existing assets and capabilities. Ask, what if we start anew?

Product/ Service offerings

Think in terms of products/ services offered by the industry. Seek to maximise the value of these offerings.

Think in terms of buyer’s solution even if that transcends the industry. Seek to solve buyer’s major bottlenecks/ chief compromises in using the products/services of the industry.

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What are the characteristics of Blue and Red Oceans

Market space is in existence today

Boundaries are defined

Competitive rules are known

Companies compete fiercely

Market space (Ocean) is crowded

Market share / profit share

Competition is cut –throat

Market space (ocean) ‘bloody’

Untapped Markets

Products / Services not in existence

Demand is yet to be created

Non-customers

Opportunity to earn high profits

No competition

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Value Innovation encourages organisations to seek strategies in ‘Blue’ rather than ‘Red’ oceans

RED OCEAN STRATEGY BLUE OCEAN STRATEGY

Compete in existing market space Create uncontested market space

Beat the competition Make the competition irrelevant

Exploit existing demand Create and capture demand

Make the value cost trade-off Break the value-cost trade off

Align the whole system of a firm’s activities with its strategic choice of differentiation

Align the whole system of a firm’s activities in pursuit of differentiation and low cost.

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Tier 3 Tier 2 Tier 1

Blue ocean strategy is all about customers and non-customers.

Tier 1 ‘soon to be’ Tier 2 ‘refusing’ Tier 3 ‘unexplored

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Cirque du Soliel – Revolutionising a dying industry

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Cirque du Soliel

Traditional circus

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Cirque du Soliel

Traditional circus

REDUCED OR

ELIMINATED

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1 1 1

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Cirque du Soliel

Traditional circus

REDUCED OR

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& CREATED

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1 1 1

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Cirque du Soliel

Traditional circus

REDUCED OR

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& CREATED

Sales Increase X22 in 10 years

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Understanding where the value innovation took place at Cirque de Soleil

Across Industries

Across Strategic Groups

Across Buyers

Across Complementary

Offerings

Across Emotional/ Functional

Appeal

Across Time/ Trends

New Value Curve

Focus on Adults

•Opera •Theatre •Rock Music •Ballet

Reduces Animal Acts

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Eliminate-Reduce-Raise-Create Grid: Cirque du Soleil

Eliminate

Star performers Animal Shows Aisle concession sales Multiples show arenas

Raise

Unique venue

Reduce

Fun and Humor Thrill and danger

Creates

Theme Redefined environment Multiple productions Artistic music and dance

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Steps in Value Innovation

Drawing the existing Value Curve

Creating a new ‘Value Curve’ (‘to-be’) that fundamentally differentiates your offering

In creating our ‘to-be’ value curves we seek to address four elements – eliminate, reduce, raise, create.

This allows us to address the leap in value at the same time as reducing the cost structure

PUSHING FOR A QUANTUN LEAP IN BUYER VALUE

WHILE:

PUSHING FOR A SHARP DROP IN THE INDUSTRY COST STRUCTURE

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Six Pathways Across Industries


Across Buyers

Across Complementary Offerings

Across Emotional/Functional

Appeal

Across Time/ Trends

New Value Curve

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Six Pathways Across Industries


Across Buyers

Across Complementary Offerings

Across Emotional/Functional

Appeal

Across Time/ Trends

New Value Curve

Reduce Factors well below the

industry standard

Reduce Factors well beyond the

industry standard

Create Factors that the

industry has never offered

Eliminate Factors that the

industry has taken for granted

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The Four steps of Value innovation

VISUAL AWAKENING Compare your “as is” strategy canvas with your ‘competitors’ See where your strategy needs to change

VISUAL EXPLORATION

Go into the field to see how people use or not use your products Discover adoption hurdles and advantages of alternative offerings Review both customers and non-customers

VISUAL STRATEGY FAIR

Draw several “to be” strategy canvases based on field insights Get feedback form customers, lost customers, competitors’

customers and non-customers to build best “to be” strategy.

VISUAL COMMUNICATION Distribute old and new strategic profiles Support only initiatives that meet new strategic needs

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Typical stages of a Value Innovation project

Phase 1: Visual Awakening

Phase 2: Visual Exploration

Phase 3: Visual Strategy Fair

Phase 4: Visual Commn.

1a. See the Need for Change 1b. Start the conversation

2a. Broadening Perspectives 2b. Sourcing for Feedback

4a. Awareness & Internalisation of strategy & Initiatives

3a. Determining “to be” strategy Programmes and initiatives O

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1c. “As is” Curves based on current strategy blueprints

2c. Alternative “to be” strategy canvas

4b. Effective commn. of strategy canvas & initiatives

3b. Teams “to be” Value Curves 3c. Proposed Programmes & initiatives D

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1a. See the Need for Change 1b. Start the conversation

Ob

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1c. “As is” Curves based on current strategy blueprints D

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Activity Team led by Date

Kick off training for team

Create “as is” Value curve

Present “as is” Value curve and finalise

15/Dec 7/Feb






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Activity Team led by

Date

Study Customers, non-Customers, competitors customers, placement clients, Tech partners, BPs,

Each team prepares six value curves each

23/Dec 7/Feb

2a. Broadening Perspectives 2b. Sourcing for Feedback

2c. Alternative “to be” strategy canvas

31/Apr






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Activity Team led by

Date

Strategy Fair at 4 Zones

Refinement of 6 value curves by each team

Strategy Fair at Delhi & Finalisation of “to be” value curve

Development of Proposed programmes & initiatives, communication plan and action plan

1/5Dec 25/Jan 31/Apr 7/Jun

3a. Determining “to be” strategy Programmes and initiatives

3b. Teams “to be” Value Curves 3c. Proposed Programmes & initiatives






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Activity Resp: Date

Implementation of action plan & communication

Review implementation

1/Dec 7/Jan 28-Feb 9-Apr

4a. Awareness & Internalisation of strategy & Initiatives

4b. Effective commn. of strategy canvas & initiatives

Leadership & Management

Blue ocean strategy presentation