Blue Ocean Strategy

Prof Renee Mauborgne

© JOHN ABBOTT

Prof Chan Kim

© JOHN ABBOTT

The Book and the Authors

Creating New Market Space

To win in the future New Market Space, companies must stop competing with each other.

Because the only way to beat the competition is to stop trying to beat the competition.

Two Oceans

RED OCEAN

BLUE OCEAN

Two 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 new demand.

Make the value-cost trade-off.

Break the value-cost trade-off.

Align the whole system of a strategic firm's activities with its choice of differentiation or low cost.

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

From Kim & Mauborgne, 2005

BOS Logic: The Core Principles

Reconstruct Market Boundaries… overcome believes.

Reach beyondexisting Demand… go for uncontested space.

Get the strategic sequence right… value [innovation] first.

VIVI

COST

VALUE

BOS Logic: Reconstruct market boundaries

IndustryFocuses on rivals within its industry

Strategic GroupFocuses on competitive position within strategic group

Buyer GroupFocuses on better serving the buyer group

Scope of Product and Service

Offerings

Focuses on maximizing the value of product and service offerings within the bounds of its industry

Functional-emotional Orientation of an

Industry

Focuses on improving price-performance with the functional-emotional orientation of this industry

Time/TrendsFocuses on adapting to external

trends as they occur

Looks across alternative industries

Looks across strategic groups within its industry

Redefines the buyer group of the industry

Looks across to complementary product and service offerings that go beyond the bounds of its industry

Rethinks the functional-emotional orientation of its industry

Participation in shaping external trends over time

Boundaries of Competition

Head-to-HeadCompetition

Creating New Market Space

BOS Logic: Reach beyond existing demand

Core Customer Noncostumer

Soon-to-be-NC Refusing Customer

BOS Logic: Get the Strategic Sequence right

Buyer utility

Is there exceptional buyer utility in your business idea?

Adoption

What are the adoption hurdles in actualizing your business idea?

Are you addressing them up front?

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 Strategy

YES

YES

YES

YES

No Rethink

No Rethink

No Rethink

No Rethink

Which Strategy?

Compete in existing market space

Beat the competition

Exploit existing demand

Make the value/cost trade-off

Align the whole system of an organization’s activities with its

strategic choice of differentiation OR low cost

SUSTAINING (RED)

DISRUPTIVE (BLUE)VS.

Create uncontested market space

Make the competition irrelevant

Create and capture new demand

Break the value/cost trade-off

Align the whole system of an organization’s activities in pursuit of differentiation AND low cost.

From Kim & Mauborgne, 2005

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

Four Actions to create a Blue Ocean From Kim & Mauborgne, 2005

FIRST STEP• Sit with your group members & establish your

company.• Reappoint your members to hold various

positions (please ensure each member has a different role from previous assignments).– CEO/MD– COO– CRO– CFO– CMO– CTO– CIO

• Fill in the company’s list form

Sailing The Blue Ocean The Task:

Using the materials provided and not more than 3 materials from your surroundings, use your creativity to design a creative product using the Blue Ocean Strategy.

Determine a price for your product.Display your products with a poster with a

product name, description, features, promotion tag line and the selling price.

Market & sell your product to the BUYER/Class.Record your performance/Customers Reaction.

BLUE OCEAN PARTS MATERIALS

NO GIVEN PARTS QUANTITY

1 STRAWS 10 PIECES

2 STRING 1 STRAND

3 PAPER 4 PIECES

4 UNKNOWN OBJECT 1 PIECE

NO FOUND PARTS QUANTITY

1

2

3

4

5

COMPANY NAME: DATE:

Company’s List

NO. POSITION NAME NICKNAME SIGNATURE

1.

2.

3.

4.

5.

6.

7.

CEO

CFO

COO

CMO

CTO

CRO

CIO

COMPANY NAME: DATE:

BLUE OCEAN PRODUCT

PRODUCT NAME

PRODUCT DESCRIPTION

PRODUCT FEATURE

PRODUCT MARKET

PROMOTION TAG LINE

PRODUCT PRICE

SELLING PRICE

PROFIT

COMPANY NAME: DATE: