BLUE OCEAN STRATEGY

BLUE OCEAN VS RED OCEAN STRATEGY

Create uncontested

Compete in existing

market space Make the competition irrelevant Create and capture new demand

market space Beat competition Exploit existing demand

BLUE OCEAN VS RED OCEAN STRATEGY

Break the value-cost trade

Make the value-cost trade

off Align the whole system of a firms activities with its strategic choice of differentiation and low cost

off Align the whole system of a firms activities with its strategic choice of differentiation or low cost

BLUE OCEAN STRATEGY TOOLS

A diagnostic tool for building a compelling

blue ocean strategy

It captures the current state of play in the

known market space

Allow you to understand:
Where the competition is currently

investing The factors the industry currently competes on in product, service and delivery What customers receive from existing competitive offerings on the market

FOUR ACTION FRAMEWORK

FOUR ACTION FRAMEWORK

Which of the factors that the industry takes for granted should be eliminated? Which factors should ba raised well above the industrys standard?

Which factors should be reduced well below the industrys standard

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

FOUR ACTION FRAMEWORK

The Case of Cirque Du Soleil (The Circus Company) Star Performers Animal Shows Aisle concession sales Multiple show arenas Unique Venue

Fun and humor Thrill and danger

Theme Refined Environment Multiple productions Artistic Music and Dance

SIX PRINCIPLES OF BLUE OCEAN STRATEGY

Reconstruct market

Overcome key

boundaries Focus on the big picture, not the numbers Reach beyond existing demand Get the strategis sequence right

organizational hurdles Build execution into strategy

FORMULATING BLUE OCEAN STRATEGY

Value Innovation
Focusing on value innovation is central to Blue Ocean Strategy.

Costs

Value Innovation

Buyer Value

1. RECONSTRUCT MARKET BOUNDARIES

Head-to-Head Strategy
Focus on rivals within industry
Focuses on competitive position

Blue Ocean Strategy

Looks across alternative

industries
Looks across strategic group

within strategic group

Focuses on better serving the

within industry
Redefines the industry buyer

buyer group

group

1. RECONSTRUCT MARKET BOUNDARIES

Head-to-Head Strategy
Focuses on maximizing the

Blue Ocean Strategy

Looks across the

value of product or service offerings within the bounds of its industry Focuses on adapting to external trands as they occur

complementary product and service offerings Participates in shaping external trends over time

2. FOCUS ON THE BIG PICTURE, NOT THE NUMBERS

Focus on the Big Picture, not the Numbers

THE FOUR STEPS OF VISUALIZING STRATEGY

Visual Awakening Visual Exploration Visual Strategy Fair Visual communication

Step 1 Visual Awakening

VISUAL AWAKENING
Compare your business with your competitors by drawing your as is strategy canvas See where your strategy needs to change

Strategy Canvas

High

Low
Price Wine range Vineyard prestige Use of Above-the-line enological marketing Aging and legacy Wine quality complexity terminology

Example: US Wine Industry Pre-Yellow Tail

High

Low
Price Enological Above the line Aging Quality Terminology Marketing Vineyard Prestige & Legacy Wine Complexity Wine Range

Budget Wines Premium Wines

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

The Six Principles of Blue Ocean Strategy This figure highlights the six principles driving the successful formulation
and execution of blue ocean strategy and the risks that these principles attenuate.

Formulation Principles
Reconstruct market boundaries Focus on the big picture, not the numbers Reach beyond existing demand Get the strategic sequence right

Risk factor each principle attenuates

Search risk Planning risk Scale risk Business model risk

Evaluation principles
Overcome key organizational hurdles Build execution into strategy

Risk factor each principle attenuates

Organizational risk Management risk

Identify Market

First Tier: Soon to be non-

customers who are the edge of your market, waiting to jump ship Second Tier: Refusing noncustomers who consciously choose against your market Third Tier: Unexplored noncustomers who are in markets distant from yours

How to find new Value Curve

Four Actions Framework
Eliminate
Which of the factors that the industry takes for granted should be

eliminated?
Reduce
Which factors should be reduced well below the industry's

standard?
Raise
Which factors should be raised well above the industry's

standard?
Create
Which factors should be created that the industry has never

offered?

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

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, competitors customers, and non-customers Use feedback to build the best to be future strategy

Revise your Strategy Canvas

Through a series of iterations a revise your strategy canvas.

High

Low
Price Wine range Vineyard prestige Use of Above-the-line enological marketing Aging and legacy Wine quality complexity terminology

Example: Wine Industry Post Yellow Tail

High

Budget Wines Premium Wines

Low

Yellow Tail

Price

Enological Terminology

Above the Aging Quality Vineyard line Prestige & Marketing Legacy

Wine Complexity

Wine Range Easy Drinking

Ease of Selection

Fun & Adventure

Nintendo WII Case Study

Nintendo WII Case Study

Eliminated Movie Playing.

Reduced Graphics & Physics. Raised Fun. Created the Wiimote

Step 4. Visual Communication

VISUAL COMMUNICATION
Distribute your before and after strategic profiles on one page for easy comparison Support only those projects and operational moves that allow your company to close the gap to actualize the new strategy

4. GET THE STRATEGIC SEQUENCE RIGHT

The Sequence of Blue Ocean Strategy

BUYER UTILITY
Is there exceptional buyer utility in your business idea?

PRICE
Is your price easily accessible to the mass of buyers?

COST
Can you attain your cost target to profit at your strategic price?

A COMMERCIALLY VIABLE BLUE OCEAN IDEA

ADOPTION
What are the adoption hurdles in actualizing your business idea?

EXECUTING BLUE OCEAN STRATEGY

5. OVERCOME KEY ORGANIZATIONAL HURDLES

Ride the Electric Sewer Meet with disgruntled customers Redistribute resources to your Hot Spots Redirect your resources from your Cold Spots Engage in Horse Trading

Secure a consigliere on your top management team Leverage your angels and silence your devils

Zoom in Kingpins (Key Influencers) Place kingpins on a fishbowl Atomize to get the organization to change itself

6. BUILD EXECUTION INTO STRATEGY

STRATEGY FORMULATION PROCESS Fair Process- Engagement, Explanation, Expectation Clarity ATTITUDES

Trust and Commitment- I feel opinion counts

BEHAVIOR Voluntary Cooperation- Ill go beyond the call of duty STRATEGY EXECUTION Exceeds Expectation- self initiated

How Blue is Your Strategy?

A Case Study About Smart Pen

Introduction
This presentation covers how Smart Selling used Blue Ocean Strategy so as to create a sustainable business for Smartpen Australia. This version of the presentation includes explanation of the core components of Blue Ocean Strategy.
Certain images within this presentation are owned by UCSIBOSRC and Blue Ocean Strategy.

Background Livescribe
The Pulse Smartpen was launched in 2007 in the US

http://www.livescribe.com
The Pulse Smartpen is a computer in a pen. It

captures audio and synchronises this to what you are writing.

Background Livescribe
Smartpen p is an Australian business that sells the Livescribe Pulse Smartpen. Smartpen was the first reseller to offer Livescribe for sale in Australia.

The Problem
The competition arrived shortly after

Smartpen launched online sales. It was announced 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 the line marketing and could outdiscount Officeworks had the retail presence to better capture impulse buyers

The Solution
Smartpen wasnt in a position to compete on traditional 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 rather than head to head competition

The Solution
The Pulse Smartpen had significant hidden potential the question for Smartpen was whether they could tap into that potential

Dont Compete with Rivals, Make Them Irrelevant www.blueoceanstrategy.com

Blue Ocean Strategy & Value Innovation

The Importance of Value Innovation

Focusing on value innovation is central to what Smartpen sought to achieve.
Save costs by eliminating and/or reducing

the barriers for noncustomers Lift value by raising or creating elements the industry has not offered

Using Blue Ocean Strategy

Smart Selling worked with Smartpen through the core Strategy steps:

1. Visual Awakening 2. Visual Awareness 3. Socializing the Strategy (Strategy Fair) 4. Execution of the Strategy

Step 1 Visual Awakening

Step 1 Create an AsIs Strategy Canvas

The strategy canvas gy is both a diagnostic and 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 an AsIs strategy canvas.

Step 1 Visual Awakening

The AsIs strategy canvas looked like this

What Does This Tell Us?

Smartpen had little opportunity to differentiate
Officeworks controlled the factors that could

most damage Smartpens ability to remain in the market Retail Location Above the line advertising

Step 2 Visual Exploration

Visual Exploration Six Paths Analysis

As Smart pen transitioned into the Exploration stage,

time was spent on the Six Paths Analysis looking across alternate 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

Step 2 Visual Exploration

From this study we identified a number of new customer segments (see diagram).

Our focus shifted to what barriers existed for these noncustomer

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 for my students? I work with students from nonEnglish speaking backgrounds; how will this help? Will it work with this third party application?

Step 3 Visual Awareness ERRC Grid

Our field research led us to develop the following Four Action Framework

Step 3 Visual Strategy Creation

Visual Strategy Creation ToBe Canvas

Through a series of iterations a To Be Strategy Canvas was developed

The Strategy Fair

The ToBe Strategy gy Canvas was successfully 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

Creating the Blue Ocean

The Blue Ocean for noncustomers was in the social sphere using social technologies to remove the barriers for these noncustomers

so they could become customers To do this, Smartpen focused on a social media strategy that would allow it to connect with these noncustomers

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 and contribute. 3. Help everyone even if they didnt purchase from Smartpen help them anyway 4. Encourage Innovation encourage users to innovate; Crowd source how and where the product could be developed 5. Be Patient being social builds loyalty. It wont happen overnight but it will happen

Social Media Strategy

This is one way of looking at the strategy

Social Media Listen and Learn

Goal Listen to the community and learn from them
Strategy

1. We use tools like Google Alerts, Twitter, and Scout 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 specific traffic

Social Media Engage. Dialogue

Goal Go into the social world and engage

Strategy 1. We contribute advice and knowledge in specific social networks and forums 2. Be very diligent about not trying to sell 3. If we cant meet their immediate need send them to where they can (i.e. the enemy)

Social Media Encourage Innovation

Goal Capture innovative uses of the Livescribe Smartpen

Strategy 1. By engaging with users we capture examples of howthe Smartpen is being used 2. Twitter, the blog, and Facebook attract users who want to share ideas and experiences

Summary
Smartpen needed to compete against a major legacy retailer for sales of the Livescribe Pulse Smartpen

Solution: 1. Smartpen used Blue Ocean Strategy to identify 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

Source:
W. Chan Kim (Author) and Renee Mauborgne (Author), Blue Ocean Strategy, HBS Publication www.study Marketing.org