Blue Ocean Strategy

A Case Study on Salesforce.com

Presented by :
Ashley Molina
Niranjan Zende
Siddharth Kumar
Zain Yusuf

What is a Blue Ocean ???

Blue ocean is nothing but an analogy to describe the wider, deeper
potential of a market space that is yet to be explored.
They may be termed as industries which are
non-existent today
Untainted by Competition
Demand is created and not fought over
Growth is profitable and rapid
Competition is made irrelevant
The theory is in direct opposition of Porters Five Forces model

Pain Points of Existing CRM

Solutions
Complex requirements and systems infrastructure
required to be integrated with the applications. Small
businesses could not afford these costs or
accommodate the lengthy deployment process
Customers needed proof of concept before they
committed to the purchase. This resulted in sales
cycles of more than 3 months and lengthy technology
discussions among tech professionals. It often took 18
to 24 months for companies to get the application to
work at full functionality

Pain Points of Existing CRM

Solutions (contd)
Cost of purchasing packaged CRM software was high.
A software license for 200 users was approximately
$350,000
Price of software was typically 25% to 30% of the
overall cost. Additionally, customers needed to spend
money on infrastructure, support and maintenance, and
on hiring internal or external professionals to implement
and upgrade the software/hardware and train users.
Including these factors, the cost could easily exceed
$1.8 million in the first year and $4 million in five years

Pain Points of Existing CRM

Solutions (contd)
Vendors normally pursued one of two strategies in the
CRM market:
They either differentiated their product by adding
more features
Or they lured customers with big discounts at the
time of closing the license agreement
Over 60% of CRM deployments failed to work

The Salesforce Blue Ocean

strategy:
Innovation on the Product, Service and Delivery
Platforms:
Based on cloud computing: The applications were
delivered via the internet from central servers on
salesforce.coms side, where systems were
deployed and data were stored. This enabled the
sharing of resources across a large pool of users,
thus increasing economies of scale and cost
efficiency of individual customers

The Salesforce Blue Ocean

strategy (Contd):
Customers were freed of the need to deploy and
maintain the software with their own infrastructure
thereby reducing costs and deployment time
Users could access the applications anywhere from
any device with internet access
The price structure was dramatically simplified as
customers simply paid a monthly subscription fee of
$65/user. Total cost was reduced to $156,000/year
bringing it within reach of small businesses

The Salesforce Blue Ocean

strategy (Contd):
The subscription model removed costs associated with
low value activities in purchasing and deploying the
service, allowing them to focus on strategic activities
with a greater impact on their business
Customers could test the application in a single work
group or division first, then extend the use to other
divisions once the test was successful. Customers
could also quit at any time due to the subscription
model.

The Salesforce Blue Ocean

strategy (Contd):
Salesforce stripped of excessive features and focused
on essentials that catered to buyers core needs in
sales, customer service and support, and marketing
automation. Removing features made the application
simple, more intuitive and user-friendly.
Because of the web based nature, it was possible for
Salesforce to collect information on website usage
patterns and improve its user interface accordingly.
They encouraged customers to build custom programs
according to their business needs using Salesforces
cloud based development tools. Done this way, custom
programs were built four times faster at a lower cost
and reintegrated into salesforce.coms original offering

Red v/s Blue

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 new demand

Make the valuecost tradeoff

Break the valuecost tradeoff

Align the whole system of a

companys activities with its
strategic choice of differentiation
or low cost

Align the whole system of a

companys activities in pursuit of
differentiation and low cost

Differentiating Blue firms

Costs

Eliminate

Costs

Reduce

Value Innovation is
simultaneous pursuit
of High value & Low cost

Create

Value
Traditional Companies

Raise

Value
Blue Ocean Companies

1.

Cost savings are made by eliminating and reducing the factors an industry competes on.

2.

Buyer value is lifted by raising and creating elements the industry has never offered.

Blue Ocean Companies

What is Salesforce.com
Founded in 1999, a global cloud computing
company headquartered in San Francisco

Salesforce Inc. is listed on the NYSE and is a

constituent of the S&P 500 Index

Best known for its Customer Relationship

Management (CRM) product, has also expanded
into commercial applications of social networking

Has clients in plethora of industries ranging from

Financial Services, to Healthcare & Life sciences
and Retail to Non-profit

Pioneer to offer CRM in a SaaS format

Creating a BOS in 4 steps

Eliminate factors that the industry takes for granted but
adds no perceived value to customers.

Reduce factors well below the industrys standard to

avoid the mistake of over delivering in order to beat the
competition

Raise factors well above the industrys standard so

your customer wont have to make compromises.

Create new sources of value that the industry has

never offered.

Traditional CRM Customers

Large businesses
Complex requirements
Complex system infrastructures
Needed highly integrated software

Buyer Utility Map for

Traditional CRM Software
1.
Purchase

Client
productivity

Simplicity

2.
Delivery

3.
Use

4.
Supplement
s

5.
Maintenanc
e

6.
Disposal

Convenience

Risk

Fun and
image

Environment
al
friendliness

Innovation & Delivery

Salesforce.com
Comprehensive and flexible platform.
Small and medium-sized businesses.
Cloud based application: simplicity and convenience.
Reduced cost and time.
Better customer experience.
Centrally deployed applications.
Quit any time.
Focused on essentials

Value Curve of Traditional

CRMs v/s Salesforce

Sustaining Salesforces
Market Leadership
They created another Blue Ocean by encouraging
customers to build custom programs according to their
business needs but in a completely different way:
Force.com - Provided an application development
environment for external developers to create add-on
applications for almost any business need on a cloud
basis and host them on salesforce.coms infrastructure.
Applications could be created four times faster at a low
cost
AppExchange - Used to package and distribute the
software. Developers could upload the software to the
platform. Corporate customers could search, read
reviews, test for free, and ultimately purchase and
download new applications to their salesforce.com
environment.

Sustaining Salesforces
Market Leadership (Contd)
Another Blue Ocean strategy, Chatter provided a
private social network service which allowed
salespeople to collaborate in real time on their work
items. In this way, they got timely updates about what
their colleagues were doing as well as the status of
important projects and deals, and therefore had a full
picture of what mattered most to their business
Traditional CRM solutions with fragmented corporate
implementation rarely got integrated later on. This
compromised the productivity of traditional CRM
solutions.