blue ocean strategy

© DKD 25 December 2006 – 3RD JANUARY 2007

BLUE OCEAN STRATEGY

A SUMMARY OFTHOUGHTS


BLUE OCEAN STRATEGY – THE NEW MARKET SPACE

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

RED OCEANS.RED OCEANS.

Known Market Space.Represent all the industries in existence

today.

Known Market Space.Represent all the industries in existence

today.

Industry boundaries are defined andaccepted. Competitive rules of the

games are accepted.

Industry boundaries are defined andaccepted. Competitive rules of the

games are accepted.

BLUE OCEANS.BLUE OCEANS.

Unknown Market Space.Denotes all the industries not in existence

today. Largely uncharted.

Unknown Market Space.Denotes all the industries not in existence

today. Largely uncharted.

Defined by untapped market space,demand creation, and the opportunity

for highly profitable growth.

Defined by untapped market space,demand creation, and the opportunity

for highly profitable growth.

Blue Oceans are created well beyond existing industry boundaries.Most are created within red oceans by expanding existing industry boundaries.

Blue Oceans are created well beyond existing industry boundaries.Most are created within red oceans by expanding existing industry boundaries.

Overriding focus of strategic thinking has been on competition-based red oceanstrategies, thus accepting the key constraining factors of war – limited terrain andthe need to beat the enemy to succeed, and to deny the distinctive strength of thebusiness world i.e. the capacity to create new market space that is uncontested.

Overriding focus of strategic thinking has been on competition-based red oceanstrategies, thus accepting the key constraining factors of war – limited terrain andthe need to beat the enemy to succeed, and to deny the distinctive strength of thebusiness world i.e. the capacity to create new market space that is uncontested.


THE IMPACT OF CREATING BLUE OCEANS

• 86% of launches were line extensions accounting for 62% of revenues and 29% ofprofits.

• 14% of launches were aimed at creating blue oceans and generated 38% of revenuesand 61% of profits.

• 86% of launches were line extensions accounting for 62% of revenues and 29% ofprofits.

• 14% of launches were aimed at creating blue oceans and generated 38% of revenuesand 61% of profits.

The Profit and Growth Consequences of Creating Blue OceansThe Profit and Growth Consequences of Creating Blue Oceans

86%86% 14%14%

62%62% 38%38%

39%39% 61%61%

BUSINESS LAUNCH

REVENUE IMPACT

PROFIT IMPACT

Launches with Red Oceans Launches for creating Blue Oceans


THE RISING IMPERATIVE OF CREATING BLUE OCEANS

DRIVING FORCESDRIVING FORCES

Accelerated TechnologicalAdvances ImprovedIndustrial Productivity

Accelerated TechnologicalAdvances ImprovedIndustrial Productivity

Globalization TradeBarriers are dismantled

Globalization TradeBarriers are dismantled

Unprecedented array ofProducts and Services

Unprecedented array ofProducts and Services

Supply Exceeds DemandsInstant information on

products & prices

Supply Exceeds DemandsInstant information on

products & prices

AcceleratedCommoditization of

Products & ServicesIncreasing Price Wars andshrinking Profit Margins

AcceleratedCommoditization of

Products & ServicesIncreasing Price Wars andshrinking Profit Margins

Brands are becomingmore similar Increased

purchased based uponprice

Brands are becomingmore similar Increased

purchased based uponprice

The business environment in which most strategy and managementapproaches of the 20th century evolved is increasingly disappearing

The business environment in which most strategy and managementapproaches of the 20th century evolved is increasingly disappearing


FROM COMPANY & INDUSTRY TO STRATEGIC MOVE

Strategic Move is the Right Unit of Analysis for explaining the creation of blueOceans and Sustained High Performance.

Strategic Move is the Right Unit of Analysis for explaining the creation of blueOceans and Sustained High Performance.

• Creators of Blue Oceans did not use the competition as their benchmark.• Instead they followed a strategic logic – “Value Innovation” – which places equal

emphasis on VALUE & INNOVATION vs. Competition-based Strategy, the value-costtrade-off.

• Value Innovation occurs when companies align innovation with utility, price and costpositions i.e. pursuing differentiation and low cost simultaneously.

• Creators of Blue Oceans did not use the competition as their benchmark.• Instead they followed a strategic logic – “Value Innovation” – which places equal

emphasis on VALUE & INNOVATION vs. Competition-based Strategy, the value-costtrade-off.

• Value Innovation occurs when companies align innovation with utility, price and costpositions i.e. pursuing differentiation and low cost simultaneously.

A Strategic Move is the Set of ManagerialActions and Decisions involved in makinga Major Market Creating Business Offering

A Strategic Move is the Set of ManagerialActions and Decisions involved in makinga Major Market Creating Business Offering

Strategic Move Delivers Products andServices that opened and captured NewMarket Space, with a significance leap in

Demand

Strategic Move Delivers Products andServices that opened and captured NewMarket Space, with a significance leap in

Demand

Value Innovation – The Cornerstone of Blue Ocean StrategyValue Innovation – The Cornerstone of Blue Ocean Strategy


VALUE INNOVATION – THE CORNERSTONE OF BLUEOCEAN STRATEGY

ValueInnovation

COSTS

BUYER VALUE

• Value innovation is created in the region where a company’s actions favorably effectboth its cost structure and its value proposition to buyers.

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

• Buyer value is lifted by raising and creating elements the industry has never offered.• Over time, costs are reduced further as scale economies kick in due to the high

sales that superior value generates.

• Value innovation is created in the region where a company’s actions favorably effectboth its cost structure and its value proposition to buyers.

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

• Buyer value is lifted by raising and creating elements the industry has never offered.• Over time, costs are reduced further as scale economies kick in due to the high

sales that superior value generates.

The Simultaneous Pursuit of Differentiation and Low Cost

• Value Innovation is MORE THANInnovation.

• Its is about strategy thatembraces the entire system of acompany's’ activities.

• Value Innovation requirescompanies to orient the wholesystem toward achieving a LEAPin VALUE for both buyers andthemselves.

• Value Innovation is MORE THANInnovation.

• Its is about strategy thatembraces the entire system of acompany's’ activities.

• Value Innovation requirescompanies to orient the wholesystem toward achieving a LEAPin VALUE for both buyers andthemselves.


RED OCEAN VS. BLUE OCEAN STRATEGY

• Align the Whole System of a Firm’sActivities in pursuit of Differentiationand Low Cost

• Align the Whole System of a Firm’sActivities with its Strategic Choice ofDifferentiation or Low Cost

• Break the Value-Cost Trade-off• Make the Value-Cost Trade-off

• Create and Capture New Demand• Exploit Existing Demand

• Make the Competition Irrelevant• Beat the Competition

• Create Uncontested Market Space• Compete in Existing Market Space

BLUE

OCEAN STRATGEY

RED

OCEAN STRATEGY

In the “Reconstructionist” World – the Strategic aim is to create New Best-Practice Rules by breaking the existing Value-Cost Trade-off and thereby

creating Blue Ocean.

In the “Reconstructionist” World – the Strategic aim is to create New Best-Practice Rules by breaking the existing Value-Cost Trade-off and thereby

creating Blue Ocean.


FORMULATING AND EXECUTING BLUE OCEANSTRATEGY

How can Companies systematically Maximize the Opportunities while simultaneouslyMinimizing the Risks of Formulating and Executing Blue Ocean Strategy?

Strategy will always involve both Opportunity and Risk!

How can Companies systematically Maximize the Opportunities while simultaneouslyMinimizing the Risks of Formulating and Executing Blue Ocean Strategy?

Strategy will always involve both Opportunity and Risk!

The Six Principles of Blue of Blue Ocean StrategyFORMULATION PRINCIPLES

1. Reconstruct Market Boundaries1. Reconstruct Market Boundaries

2. Focus on the Big Picture, not the Numbers2. Focus on the Big Picture, not the Numbers

3. Reach Beyond Existing Demand3. Reach Beyond Existing Demand

4. Get the Strategic Sequence Right4. Get the Strategic Sequence Right

EXECUTION PRINCIPLES

5. Overcome Key Organizational Hurdles5. Overcome Key Organizational Hurdles

6. Build Execution into Strategy6. Build Execution into Strategy

RISK FACTOR FOR EACH PRINCIPLEATTENUATES

Search RiskSearch Risk

Planning RiskPlanning Risk

Scale RiskScale Risk

Business Model RiskBusiness Model Risk

RISK FACTOR EACH PRINCIPLEATTENUATES

Organizational RiskOrganizational Risk

Management RiskManagement Risk


ANALYTICAL TOOLS AND FRAMEWORKS

1. The Strategy Canvas

The Strategy Canvas is both a Diagnostic and an Action Framework for building a Compelling Blue Ocean Strategy.Captures the Current State-of-Play in the Known Market Space.

Effective Blue Ocean Strategy should be about Risk Minimization and not Risk Taking

The Strategy Canvas is both a Diagnostic and an Action Framework for building a Compelling Blue Ocean Strategy.Captures the Current State-of-Play in the Known Market Space.

Effective Blue Ocean Strategy should be about Risk Minimization and not Risk Taking

• To set a company on a strong, profitable growth trajectory in the face of these industry conditions, benchmarking against the competitors and tryingto out-compete them by offering a little more for a little less will not work. Such a strategy may nudge sales up but will hardly drive a company to openup uncontested market space.

• Nor is extensive customer research the path to blue oceans.

An illustration of a Strategy Canvas [yellow tail] WineHIGH

LOW

Premium Wines

[yellow tail]

Budget Wines

Price Use ofenological

terminology

Above theline

marketing

AgingQuality

Vineyardprestige

and legacy

Winecomplexity

Wine range Easydrinking

Ease ofselection

Fun &adventure

THE FOUR ACTIONFRAMEWORKQUESTIONS

1st Consider eliminating factors thatcompanies in your industry have longcompeted on – No longer have value ORmay detract value.

2nd Determine whether products orservices have been over-designed in therace to match the competition – over-serve the customers, increasing coststructure for no gain.

3rd Uncover and eliminate thecompromises your industry forcescustomers to make.

4th Discover entirely new sources ofvalue for buyers and to creae newdemand and shift the strategic pricing forthe industry.

THE FOUR ACTIONFRAMEWORKQUESTIONS

1st Consider eliminating factors thatcompanies in your industry have longcompeted on – No longer have value ORmay detract value.

2nd Determine whether products orservices have been over-designed in therace to match the competition – over-serve the customers, increasing coststructure for no gain.

3rd Uncover and eliminate thecompromises your industry forcescustomers to make.

4th Discover entirely new sources ofvalue for buyers and to creae newdemand and shift the strategic pricing forthe industry.



2. The Eliminate-Reduce-Raise-Create Grid

The Strategy Canvas is both a Diagnostic and an Action Framework for building aCompelling Blue Ocean Strategy. Captures the Current State-of-Play in the Known

Market Space.Effective Blue Ocean Strategy should be about Risk Minimization and not Risk Taking

The Strategy Canvas is both a Diagnostic and an Action Framework for building aCompelling Blue Ocean Strategy. Captures the Current State-of-Play in the Known

Market Space.Effective Blue Ocean Strategy should be about Risk Minimization and not Risk Taking

A NewValueCurve

A NewValueCurve

2. REDUCEWhich factors should bereduced well below the

industry’s standard?

2. REDUCEWhich factors should bereduced well below the

industry’s standard?

3. RAISEWhich factors should be

raised well above the theindustry’s standard?

3. RAISEWhich factors should be

raised well above the theindustry’s standard?

1. ELIMINATEWhich of the factors that

the industry takes forgranted should be

eliminated?

1. ELIMINATEWhich of the factors that

the industry takes forgranted should be

eliminated?

4. CREATEWhich factors should becreated that the industry

has never offered?

4. CREATEWhich factors should becreated that the industry

has never offered?

THE FOURACTION

FRAMEWORKELIMINATE

• Enologicaldistinctions

• Aging qualities• Above-the-line

marketing

RAISE

• Price vs. budgetwines

• Retail storeinvolvement

REDUCE

• Wine complexity• Wine range• Vineyard prestige

CREATE

• Easy drinking• Ease of selection• Fun and

adventure

Eliminate-Reduce-Raise-Create Grid – [yellow tai]



THREE CHARACTERISTICS OF A GOOD STRATEGY – COMPLEMENTARY QUALITIES(1) FOCUS

(2) DIVERGENCE(3) COMPELLING TAGLINE

THREE CHARACTERISTICS OF A GOOD STRATEGY – COMPLEMENTARY QUALITIES(1) FOCUS

(2) DIVERGENCE(3) COMPELLING TAGLINE

1. FOCUS The company does not diffuse its efforts across all key areas of competition. The company’sstrategic profile or value curves should clearly show it.

2. DIVERGENCE The shape of its value curve diverges from the other players, a result of notbenchmarking competitors but instead looking across alternatives. By applying the Eliminate-Reduce-Raise-Create actions, the company should differentiate its profile from the industry’s average profile.

3. TAGLINE The tagline for the strategic profile is clear. Not only does it deliver a clear message butalso advertise an offering truthfully or else customers will lose trust and interest.

1. FOCUS The company does not diffuse its efforts across all key areas of competition. The company’sstrategic profile or value curves should clearly show it.

2. DIVERGENCE The shape of its value curve diverges from the other players, a result of notbenchmarking competitors but instead looking across alternatives. By applying the Eliminate-Reduce-Raise-Create actions, the company should differentiate its profile from the industry’s average profile.

3. TAGLINE The tagline for the strategic profile is clear. Not only does it deliver a clear message butalso advertise an offering truthfully or else customers will lose trust and interest.

HIGH

LOW

PRICE MEALS LOUNGES SEATINGCLASS

CHOIICES

HUBCONNECTIVITY

FRIENDLYSERVICE

SPEED FREQUENTPOINT TO

POINTDEPARTURE

SouthwestAirline

AverageAirline

CarTransport • Focused Strategic

Profile or ValueCurves

• Differentiate(Eliminate-Reduce-Raise-Create)Strategic Profiles

• Compelling Tagline –“The Speed of a planeat the Price of a Car –Whenever You needit”



READING THE VALUE CURVES1. The strategy canvas enables companies to see the future in the present.2. Embedded in the value curves of an industry is wealth of strategic knowledge on the current status and

future of a business.

READING THE VALUE CURVES1. The strategy canvas enables companies to see the future in the present.2. Embedded in the value curves of an industry is wealth of strategic knowledge on the current status and

future of a business.

1. The 1st question the value curve answers is whether a business deserves to be a winner.2. It’s on the right track when the value curve meets the three criteria – focus, divergence, and a compelling tagline.3. The three criteria serves as a litmus test of the commercial viability of the blue ocean ideas.

1. The 1st question the value curve answers is whether a business deserves to be a winner.2. It’s on the right track when the value curve meets the three criteria – focus, divergence, and a compelling tagline.3. The three criteria serves as a litmus test of the commercial viability of the blue ocean ideas.

A Company caught in the RedOcean

When the Value Curves

converges with its competitors.

Over-delivery without Payback

Company’s Vale Curves shown todeliver high levels across all

factors

Does the market share and profitabilityreflect the investments?

To value-innovate, the company mustdecide which factors to eliminate andreduce – not only those to raise and

create – to construct a divergent ValueCurve.

A company’s explicit or implicit strategytends to be trying to outdo its competition

on the basis of cost or quality. Thissignals slow growth!

An incoherent strategy

Value Curve with no rhyme orreason

Strategy likely based upon independentsub-strategies – a reflection of an

organization with divisional or functionalsilos.

Strategic Contradictions

Offering a high level of competingfactor whilst ignoring others that

support that factor.

An Internally Driven Company

Are Competing Factors stated interms buyers can understand and

value?

The kind of language used in the strategycanvas gives insight as to whether a

company’s strategic vision is built on an“outside-in” perspective – driven by the

demand side OR an “inside-out”perspective that is operationally driven.

Strategic inconsistencies can also befound between the level of the offering

and the price.

Intersection between the analytic techniques and the sixprinciples of formulating and executing blue oceans that

allow companies to break from the competition andunlock uncontested market space.

Six Principles4 Formulation + 2 Execution

Strategy CanvasEliminate-Reduce-Raise-Create Grid+ +


BLUE OCEAN STRATEGY

PRINCIPLE 1

RECONSTRUCT MARKET BOUNDARIES

ATTENUATES SEARCH RISKS


FORMULATING BLUE OCEAN STRATEGY

1. RECONSTRUCT MARKET BOUNDARIES1. RECONSTRUCT MARKET BOUNDARIES

• The 1st Principle of Blue Ocean Strategy is to reconstruct market boundaries tobreak from the competition and create Blue Oceans.

• Six basic approaches to remaking market boundaries – THE SIX PATHSFRAMEWORK.

• These paths have general applicability across industry sectors – based upon lookingat familiar data from a new perspective.

• The 1st Principle of Blue Ocean Strategy is to reconstruct market boundaries tobreak from the competition and create Blue Oceans.

• Six basic approaches to remaking market boundaries – THE SIX PATHSFRAMEWORK.

• These paths have general applicability across industry sectors – based upon lookingat familiar data from a new perspective.

• These paths challenge he six fundamental assumptions underlying manycompanies’ strategies. Specifically, companies tend to do the followings:

• Define their industry similarly and focus on being the best within it.• Look at their industries through the lens of generally accepted strategic groups and

strive to stand out in the strategic group they play in.• Focus on the same buyer group, be it the purchaser, the user, or the influencer.• Define the scope of the products and services offered by their industry similarly.• Accept their industry's functional or emotional orientation.• Focus on the same point in time – and often on current competitive threats in

formulating strategy.

• These paths challenge he six fundamental assumptions underlying manycompanies’ strategies. Specifically, companies tend to do the followings:

• Define their industry similarly and focus on being the best within it.• Look at their industries through the lens of generally accepted strategic groups and

strive to stand out in the strategic group they play in.• Focus on the same buyer group, be it the purchaser, the user, or the influencer.• Define the scope of the products and services offered by their industry similarly.• Accept their industry's functional or emotional orientation.• Focus on the same point in time – and often on current competitive threats in

formulating strategy.

• Need to look across alternative industries, across strategic groups, across buyergroups, across complementary product and service offerings, across the functional-emotional orientation of an industry, and even across time.

• Need to look across alternative industries, across strategic groups, across buyergroups, across complementary product and service offerings, across the functional-emotional orientation of an industry, and even across time.



1. RECONSTRUCT MARKET BOUNDARIES1. RECONSTRUCT MARKET BOUNDARIES

Path 1:Look AcrossAlternative Industries

A company competes not only with the otherfirms in its own industry but also with companiesin other industries that produce alternativeproducts or services.

• Substitutes – Products or services that have different form but offerthe same functionality or core utility.

• Alternatives – Products or services that have different functions andforms but the same purpose.

Path 2:Look AcrossStrategic Groupswithin Industries

Refers to a group of companies within anindustry that pursue similar strategy.In most industries, the fundamental strategicdifferences among industry players are capturedby a small number of strategic groups.

• Most companies focus on improving their competitive position withina strategic group.

• Understand which factors determine customers’ decisions to tradeup or down from one group to the other.

Path 3:Look Across theChain of Buyers

Competitors converge around common definitionof who the target buyer is. In reality there is achain of “Buyers” who are directly or indirectlyinvolved in the buying decision.

• Purchasers – who pay for the product or service may differ from theactual “users”, and in some cases there are important “influencers”as well.

Path 4:Look AcrossComplementaryProduct & ServiceOfferings

Few products are used in a vacuum. In mostcases, other products and services affect theirvalue. In most industries, rivals converge withinthe bounds of their industry’s product and serviceofferings.

• Untapped value is often hidden in complementary products andservices. The key is to define the total solution buyers seek.

• What happens before, during and after a product is used.

Path 5:Look AcrossFunctional orEmotional Appeal toBuyers

Competition in an industry tends to converge notonly on an accepted notion of the scope of itsproducts and services BUT also on one or twopossible bases of appeal – Rational orEmotional.

• Emotionally-oriented industries offer many extras that add pricewithout enhancing functionality.

• Functionally-oriented industries can often infuse commodityproducts with new life by adding a dose of emotion to stimulate newdemand.

Path 8:Look Across Time

All industries are subject to external trends thataffect their business over time. Most companiesadapt incrementally and passively and paceactions to keep up with the development of thetrends.

• Key insights arise from business insights into how the trend willchange value to customers and impact the company's businessmodel.

• Three principles- Decisive to the business, Must be Irreversible andHave Clear Trajectory.



1. RECONSTRUCT MARKET BOUNDARIES – CONCEIVING NEW MARKET SPACE1. RECONSTRUCT MARKET BOUNDARIES – CONCEIVING NEW MARKET SPACE

INDUSTRYINDUSTRY Focus on rivals within the industryFocus on rivals within the industry Looks across alternate industriesLooks across alternate industries

STRATEGICGROUP

STRATEGICGROUP

Focuses on competitive positionwithin strategic group

Focuses on competitive positionwithin strategic group

Looks across strategic groups within theindustry

Looks across strategic groups within theindustry

BUYER GROUPBUYER GROUP Focuses on better serving the buyergroup

Focuses on better serving the buyergroup Redefines the industry buyer groupRedefines the industry buyer group

SCOPE OFPRODUCT OR

SERVCIES

SCOPE OFPRODUCT OR

SERVCIES

Focuses on maximizing the value ofproduct and service offerings withinthe bounds of its industry

Focuses on maximizing the value ofproduct and service offerings withinthe bounds of its industry

Looks across to complementary productand service offerings

Looks across to complementary productand service offerings

FUNCTIONAL-EMOTIONAL

ORIENTATION

FUNCTIONAL-EMOTIONAL

ORIENTATION

Focuses on improving priceperformance within the functional-emotional orientation of its industry

Focuses on improving priceperformance within the functional-emotional orientation of its industry

Rethinks the functional-emotionalorientation of its industry

Rethinks the functional-emotionalorientation of its industry

TIMETIME Focuses on adapting to externaltrends as they occur

Focuses on adapting to externaltrends as they occur

Participates in shaping external trends overtime

Participates in shaping external trends overtime

From Head-to-Head Competition to Blue Ocean CreationFrom Head-to-Head Competition to Blue Ocean Creation

By thinking across conventional boundaries of competition, you can see how to make convention-altering, strategicmoves that construct established market boundaries and create Blue Oceans.

By thinking across conventional boundaries of competition, you can see how to make convention-altering, strategicmoves that construct established market boundaries and create Blue Oceans.

Head-to-Head Competition Blue Ocean Creation


BLUE OCEAN STRATEGY

PRINCIPLE 2

FOCUS ON THE BIG PICTURE, NOT THENUMBERS

ATTENUATES PLANNING RISKS



2. FOCUS ON THE BIG PICTURE, NOT THE NUMBERS2. FOCUS ON THE BIG PICTURE, NOT THE NUMBERS

Align your strategic planning process to focus on the BIG PICTURE and apply these ideas in drawing the Company’s StrategyCanvas to arrive a Blue Ocean Strategy


Lengthy description of current industry conditions and thecompetitive situation

Lengthy description of current industry conditions and thecompetitive situation

Discussion of how to increase market share, capture new segments,or cut costs

Discussion of how to increase market share, capture new segments,or cut costs

Outline of numerous Goals and Initiatives (KPI, BPR)Outline of numerous Goals and Initiatives (KPI, BPR)

A full budget including graphs and spreadsheetsA full budget including graphs and spreadsheets

Culminates with the preparation of a large document culled from amishmash of data provided by various parts of the organization who

often have conflicting agendas and poor communication

Culminates with the preparation of a large document culled from amishmash of data provided by various parts of the organization who

often have conflicting agendas and poor communication

Spend majority of strategic thinking filling in boxes and runningnumbers instead of developing a clear picture of how to break from

the competition

Spend majority of strategic thinking filling in boxes and runningnumbers instead of developing a clear picture of how to break from

the competition

A TYPICAL STRATEGY PLAN

Most strategic plans don’t contain strategy at all but rather asmorgasbord of tactics that individually makes sense but collectivelydon’t add up to to a unified, clear direction that sets a company apart

– let alone makes the competition irrelevant.

Most strategic plans don’t contain strategy at all but rather asmorgasbord of tactics that individually makes sense but collectivelydon’t add up to to a unified, clear direction that sets a company apart

– let alone makes the competition irrelevant.

Draw a strategy Canvas – Overall Dynamics of the IndustryVisualizes the Company’s current Strategic Position – Helps Chart

future strategy

Draw a strategy Canvas – Overall Dynamics of the IndustryVisualizes the Company’s current Strategic Position – Helps Chart

future strategy

4 STEPS OF VISUALIZING STRATEGY4 STEPS OF VISUALIZING STRATEGY

VISUALAWAKENING

VISUALAWAKENING

VISUALEXPLORATION

VISUALEXPLORATION

VISUALSTRATEGY

FAIR

VISUALSTRATEGY

FAIR

VISUALCOMMUNI-

CATION

VISUALCOMMUNI-

CATION

BLUE OCEAN STRATEGY PLAN

GO AFTER CUSTOMERS & NON-CUSTOMERSGO AFTER CUSTOMERS & NON-CUSTOMERS

Revenue, Profitability, Market Share, and CustomersSatisfaction

MEASURES ON COMPANY’S CURRENT POSITION

Revenue, Profitability, Market Share, and CustomersSatisfaction

MEASURES ON COMPANY’S CURRENT POSITION

Balance between Profitable Growth and Cash-Flow at a givenpoint in time.

Balance between Profitable Growth and Cash-Flow at a givenpoint in time.

1st: Shows the strategic profile of an industry depicting clearly thefactors that affect competition among industry players.2nd: Shows the strategic profile of of current and potentialcompetitors, identifying which factors they invest in strategically.Finally: Shows the company’s strategic profile or value curvedepicting how it invests in the factors of competition.

Happens with “Highly Determined Leader” OR “In a Crisis”

1st: Shows the strategic profile of an industry depicting clearly thefactors that affect competition among industry players.2nd: Shows the strategic profile of of current and potentialcompetitors, identifying which factors they invest in strategically.Finally: Shows the company’s strategic profile or value curvedepicting how it invests in the factors of competition.

Happens with “Highly Determined Leader” OR “In a Crisis”






4 STEPS OF VISUALIZING STRATEGY4 STEPS OF VISUALIZING STRATEGY

VISUALAWAKENING

VISUALAWAKENING

VISUALEXPLORATION

VISUALEXPLORATION

VISUALSTRATEGY

FAIR

VISUALSTRATEGY

FAIR

VISUALCOMMUNI-CATION

VISUALCOMMUNI-CATION

• Compare your business withyour competitors by drawingyour “as is” strategy canvas.

• Set where your strategyneeds to change

• Compare your business withyour competitors by drawingyour “as is” strategy canvas.

• Set where your strategyneeds to change

• Go into the field to explorethe six paths to creatingblue oceans.

• Observe the distinctiveadvantages of alternativeproducts and services.

• See which factors youshould eliminate, create,or change.

• Go into the field to explorethe six paths to creatingblue oceans.

• Observe the distinctiveadvantages of alternativeproducts and services.

• See which factors youshould eliminate, create,or change.

• Draw your “to be” strategycanvas based on insightsfrom field observations..

• Get feedback onalternative strategycanvases from customers,competitors’ customers,and non-customers.

• Use feedback to build thebest “to be” futurestrategy.

• Draw your “to be” strategycanvas based on insightsfrom field observations..

• Get feedback onalternative strategycanvases from customers,competitors’ customers,and non-customers.

• Use feedback to build thebest “to be” futurestrategy.

• Distribute your before-and-after strategic profileson one page for easycomparison.

• Support only thoseprojects and operationalmoves that allow yourcompany to close thegaps to actualize the newstrategy.

• Distribute your before-and-after strategic profileson one page for easycomparison.

• Support only thoseprojects and operationalmoves that allow yourcompany to close thegaps to actualize the newstrategy.

Resolve differences about thecurrent state of play

Accept the need for change

Resolve differences about thecurrent state of play

Accept the need for change

A company should neveroutsource its eyes.

Great strategic insights is theproduct of getting into the filedand challenging the boundaries

of competition

A company should neveroutsource its eyes.

Great strategic insights is theproduct of getting into the filedand challenging the boundaries

of competition

Present strategy canvases at aVisual Strategy Fair

Present strategy canvases at aVisual Strategy Fair

One page picture showing newand old strategic profiles so thatevery employee could see wherethe company stood and where it

had to focus its efforts to create acompelling future

One page picture showing newand old strategic profiles so thatevery employee could see wherethe company stood and where it

had to focus its efforts to create acompelling future






VISUALIZING STRATEGY AT THE CORPORATE LEVELVISUALIZING STRATEGY AT THE CORPORATE LEVEL

• When business units present their strategy canvases to one another, they deepen their understanding of the otherbusinesses in the corporate portfolio.

• Example: Samsung Electronics has institutionalized the use of the strategy canvas in its key business creation decisions byestablishing the Value Innovation Program (VIP) Centre in 1998.

• When business units present their strategy canvases to one another, they deepen their understanding of the otherbusinesses in the corporate portfolio.

• Example: Samsung Electronics has institutionalized the use of the strategy canvas in its key business creation decisions byestablishing the Value Innovation Program (VIP) Centre in 1998.

USING THE PIONEER-MIGRATOR-SETTLER (PMS) MAPUSING THE PIONEER-MIGRATOR-SETTLER (PMS) MAP

• A Company’s Pioneers are the businesses that offer unprecedented value.• Settlers are businesses whose value curves conform to the basic shape of the industry’s.• The potential of Migrators lies somewhere in between. Such businesses extend the industry’s curve by giving customers

more for less, but they don’t alter its basic shape. These businesses offer improved value, but not innovative value.

• A Company’s Pioneers are the businesses that offer unprecedented value.• Settlers are businesses whose value curves conform to the basic shape of the industry’s.• The potential of Migrators lies somewhere in between. Such businesses extend the industry’s curve by giving customers

more for less, but they don’t alter its basic shape. These businesses offer improved value, but not innovative value.

OVERCOMING THE LIMITATIONS• Strategic Planning should be more about Collective Wisdom building than top-down or bottom-up planning.• It should be more conversational than solely documentation driven, should be more about building the big picture than about

number crunching exercises.• It should have a creative component instead of being strictly analysis-driven, more motivational, invoking willing commitment,

than bargain driven, producing negotiated commitment.

OVERCOMING THE LIMITATIONS• Strategic Planning should be more about Collective Wisdom building than top-down or bottom-up planning.• It should be more conversational than solely documentation driven, should be more about building the big picture than about

number crunching exercises.• It should have a creative component instead of being strictly analysis-driven, more motivational, invoking willing commitment,

than bargain driven, producing negotiated commitment.

Aristotle pointed out – “The Soul never thinks without an image”Aristotle pointed out – “The Soul never thinks without an image”


BLUE OCEAN STRATEGY

PRINCIPLE 3

REACH BEYOND EXISTING DEMAND

ATTENUATES SCALE RISKS



3. REACH BEYOND EXISTING DEMAND3. REACH BEYOND EXISTING DEMAND

Companies should challenge two conventional strategy practices:1. Focusing on existing customers 2. The drive for finer segmentation to accommodate buyer differences.

Instead of concentrating on customers, need to look at non-customers.Instead of focusing on customer differences, need to build on powerful commonalities in what buyers value.

Companies should challenge two conventional strategy practices:1. Focusing on existing customers 2. The drive for finer segmentation to accommodate buyer differences.

Instead of concentrating on customers, need to look at non-customers.Instead of focusing on customer differences, need to build on powerful commonalities in what buyers value.

THE THREE TIERS OF NON-CUSTOMERSTHE THREE TIERS OF NON-CUSTOMERS

FirstTier

YourMarket

2ndTier

ThirdTier

First Tier: “soon-to-be”non-customers whoare on the edge of yourmarket

Second Tier:“Refusing” non-customers whoconsciously chooseagainst your market

Third Tier:“Unexplored” non-customers who are inmarkets distant fromyours.

First Tier: “soon-to-be”non-customers whoare on the edge of yourmarket

Second Tier:“Refusing” non-customers whoconsciously chooseagainst your market

Third Tier:“Unexplored” non-customers who are inmarkets distant fromyours.

• Focus on the Tier that represents thebiggest catchments.

• But, explore whether there areoverlapping commonalities acrossall three tiers of non-customers.

• The natural strategic orientation istoward retaining existing customersand seeking further segmentationopportunities. This is especially truein the face of competitive pressures.

• However, we should reach beyondexisting demand to non-customers.

• If no such opportunities arise, moveon to further exploit differencesamong exist.

• Focus on the Tier that represents thebiggest catchments.

• But, explore whether there areoverlapping commonalities acrossall three tiers of non-customers.

• The natural strategic orientation istoward retaining existing customersand seeking further segmentationopportunities. This is especially truein the face of competitive pressures.

• However, we should reach beyondexisting demand to non-customers.

• If no such opportunities arise, moveon to further exploit differencesamong exist.


BLUE OCEAN STRATEGY

PRINCIPLE 4

GET THE STRATEGIC SEQUENCE RIGHTATTENUATES BUSINESS MODEL RISKS



4. GET THE STRATEGIC SEQUENCE RIGHT4. GET THE STRATEGIC SEQUENCE RIGHT

Companies need to build their blue ocean strategy in the sequence of buyer utility, price, cost, and adoption.Companies need to build their blue ocean strategy in the sequence of buyer utility, price, cost, and adoption.

ADDRESSING THE REVENUE SIDE OF A COMPANY’S BUSINESS MODEL

1. The starting point is buyer utility – Does your offering unlock exceptional utility?Is there a compelling reason for the mass of people to buy it?

2. Remember a company does not want to rely solely on price to create demand. Isyour offering priced to attract the mass of target buyers so that they have acompelling ability to pay for your offering?

ADDRESSING THE PROFIT SIDE

3. Can you produce your offering at the target cost and still earn a healthy profitmargin? You should not let costs drive prices, nor should you scale down utilitybecause high costs block yor ability to profit at the strategic price.

IT IS THE COMBINATION OF EXCEPTIORNAL UTILITY, STRATEGICPRICING & TARGET COSTING THAT ALLOWS COMPANIES TO ACHIEVEVALUE INNOVATION.

ADDRESSING THE ADOPTION HURDLES

4. What are the adoption hurdles in rolling out your idea? Have you addressedthese up front?

ADDRESSING THE REVENUE SIDE OF A COMPANY’S BUSINESS MODEL

1. The starting point is buyer utility – Does your offering unlock exceptional utility?Is there a compelling reason for the mass of people to buy it?

2. Remember a company does not want to rely solely on price to create demand. Isyour offering priced to attract the mass of target buyers so that they have acompelling ability to pay for your offering?

ADDRESSING THE PROFIT SIDE

3. Can you produce your offering at the target cost and still earn a healthy profitmargin? You should not let costs drive prices, nor should you scale down utilitybecause high costs block yor ability to profit at the strategic price.

IT IS THE COMBINATION OF EXCEPTIORNAL UTILITY, STRATEGICPRICING & TARGET COSTING THAT ALLOWS COMPANIES TO ACHIEVEVALUE INNOVATION.

ADDRESSING THE ADOPTION HURDLES

4. What are the adoption hurdles in rolling out your idea? Have you addressedthese up front?

Buyer UtilityBuyer UtilityIs there exceptionalbuyer utility in your

business idea?

Is there exceptionalbuyer utility in your

business idea?

PricePriceIs your price easily

accessible to the massof buyers?

Is your price easilyaccessible to the mass

of buyers?

CostCostCan you attain your

cost target to profit atyour strategic price?

Can you attain yourcost target to profit atyour strategic price?

AdoptionAdoption

What are the adoptionhurdles in actualizing

your business idea? Areyou addressing them

up-front?

What are the adoptionhurdles in actualizing

your business idea? Areyou addressing them

up-front?

A commerciallyviable blueocean idea

A commerciallyviable blueocean idea

Yes

Yes

Yes

Yes

No-Rethink

No-Rethink

No-Rethink

No-Rethink

SE

QU

EN

CE

OF

BL

UE

OC

EA

NS

TR

AT

EG

Y




Testing for Exceptional UtilityUnless the technology makes buyers’ lives dramatically simpler, more convenient, more productive, less risky, or more fun and

fashionable, it will not attract the masses no matter how many awards it win.

Testing for Exceptional UtilityUnless the technology makes buyers’ lives dramatically simpler, more convenient, more productive, less risky, or more fun and

fashionable, it will not attract the masses no matter how many awards it win.

THE SIX STAGES OF BUYER EXPERIENCE

TH

ES

IXU

TIL

ITY

LE

VE

RS

EnvironmentalFriendliness

Fun andImage

Risk

Convenience

Simplicity

CustomerProductivity

How longdoes it take

to find?

How longdoes it take

to find?

How rapidlycan youmake a

purchase?

How rapidlycan youmake a

purchase?

Is the placeaccessible?

Is the placeaccessible?

How secureis the

transaction?

How secureis the

transaction?

Is the placeattractive &

fun?

Is the placeattractive &

fun?

Is purchasemade in a

friendlymanner?

Is purchasemade in a

friendlymanner?

How longdoes it taketo to deliverthe product?

How longdoes it taketo to deliverthe product?

How difficultto unpack

and install?

How difficultto unpack

and install?

Do buyershave to

arrange?

Do buyershave to

arrange?

How costlyand difficult?

How costlyand difficult?

Wouldcustomer be

anxious?

Wouldcustomer be

anxious?

Is thepackaging

userfriendly?

Is thepackaging

userfriendly?

Does theproductrequire

training?

Does theproductrequire

training?

Does itrequireexpert

assistance?

Does itrequireexpert

assistance?

Effectiveness of features& functions?

Effectiveness of features& functions?

Will ThingsGo wrong?

Ease ofWarranty?

Will ThingsGo wrong?

Ease ofWarranty?

Deliver moreoptions than

userrequire?

Deliver moreoptions than

userrequire?

Availabilityof user

manual?

Availabilityof user

manual?

Need otherproduct to

make itwork?

Need otherproduct to

make itwork?

How easy toobtain?

How easy toobtain?

How muchtime do they

take?

How muchtime do they

take?

How costlyare they?

How costlyare they?

How muchpain do they

cause?

How muchpain do they

cause?

Will itenhanceusability?

Will itenhanceusability?

Requireexternal

maintenance?

Requireexternal

maintenance?

How easy tomaintain &upgrade?

How easy tomaintain &upgrade?

How costlyto maintain?

How costlyto maintain?

Will there berepeat work?

Will there berepeat work?

Friendly andtransparent?

Friendly andtransparent?

Availabilityof manuals?

Availabilityof manuals?

Does use ofproductwasteitems?

Does use ofproductwasteitems?

How easy todispose?

How easy todispose?

How costlyto dispose?

How costlyto dispose?

Legal &Environment

al issues?

Legal &Environment

al issues?

Will itenhance

CSR?

Will itenhance

CSR?

Does it meetstandards?

Does it meetstandards?

1PURCHASE

2DELIVERY

3USE

4SUPPLEMENTS

5MAINTENANCE

6DISPOSAL • Outlines all the levers

companies can pull todeliver exceptional utility tobuyers as well as thevarious experiences buyerscan have with a product orservice.

• This map allows managersto identify the full range ofutility spaces that a productor service can potentially fill.

• To test for exceptionalutility, companies shouldcheck whether their offeringhas removed the greatestblocks to utility across theentire buyer experiencecycle for customers andnon-customers.

• Outlines all the leverscompanies can pull todeliver exceptional utility tobuyers as well as thevarious experiences buyerscan have with a product orservice.

• This map allows managersto identify the full range ofutility spaces that a productor service can potentially fill.

• To test for exceptionalutility, companies shouldcheck whether their offeringhas removed the greatestblocks to utility across theentire buyer experiencecycle for customers andnon-customers.


High Degree of legal andresource protectionDifficult to imitate

High Degree of legal andresource protectionDifficult to imitate



From Exceptional Utility to Strategic PricingTo secure strong revenue stream for your offering, you must set the right strategic price to ensure that not only will buyers

would want to buy your offering, but they would also have the compelling ability to pay for it.It is also increasingly important to know from the start what price will quickly capture the mass of target buyers.

From Exceptional Utility to Strategic PricingTo secure strong revenue stream for your offering, you must set the right strategic price to ensure that not only will buyers

would want to buy your offering, but they would also have the compelling ability to pay for it.It is also increasingly important to know from the start what price will quickly capture the mass of target buyers.

• As the nature of goods becomes moreknowledge intensive, companies bearmuch more of their costs in productdevelopment than in manufacturing.

• To a buyer, the value of a product orservice may be closely tied to the totalnumber of people using it.

• The rise of knowledge-intensive productsalso creates the potential for free riding.The cost and risk of developing aninnovative idea are borne by the initiator,not the follower.

• The strategic price you set for youroffering must not only attract buyers inlarge numbers, but also help to retainthem.

• Companies would be wise to pursuemid-to-lower-boundary strategic pricingfrom the start if the following apply:

• Blue ocean offering has high fixedcosts and marginal variable costs.

• Their attractiveness depend heavilyon network externalities.

• Their cost structure benefits fromsteep economies of scale and scope.

• As the nature of goods becomes moreknowledge intensive, companies bearmuch more of their costs in productdevelopment than in manufacturing.

• To a buyer, the value of a product orservice may be closely tied to the totalnumber of people using it.

• The rise of knowledge-intensive productsalso creates the potential for free riding.The cost and risk of developing aninnovative idea are borne by the initiator,not the follower.

• The strategic price you set for youroffering must not only attract buyers inlarge numbers, but also help to retainthem.

• Companies would be wise to pursuemid-to-lower-boundary strategic pricingfrom the start if the following apply:

• Blue ocean offering has high fixedcosts and marginal variable costs.

• Their attractiveness depend heavilyon network externalities.

• Their cost structure benefits fromsteep economies of scale and scope.

THE PRICE CORRIDOR OF THE MASSFinding the right price for an irresistible offer – which may not necessarily be the lower price.

SameForm

Different FormSame Function

Different FormAnd Function,

Same Objectives

PRICE CORRIDOROF THE MASS

Size of circle is proportional to numberof buyers that product/service attracts

STEP 1: Identify the pricecorridor of the Mass

Upper level pricing

Lower level pricing

Mid-level pricing

STEP 2: Specify pricelevel within the corridor

Three alternative product/service types

The price bandwidth that captures the largestgroups of target buyers is the price corridor of

the mass.

The price bandwidth that captures the largestgroups of target buyers is the price corridor of

the mass.

Some Degree of legal andresource protection

Some Degree of legal andresource protection

Low Degree of legal andresource protection

Easy to imitate

Low Degree of legal andresource protection

Easy to imitate

Determine how high a price they can afford toset within the corridor without inviting

competition form imitation products or services.

Determine how high a price they can afford toset within the corridor without inviting

competition form imitation products or services.




From Strategic Pricing to Target CostingTo maximize profit potential of a blue ocean idea, a company should start with the strategic price and then deduct its desired

profit margin from the price to arrive at a target cost.

From Strategic Pricing to Target CostingTo maximize profit potential of a blue ocean idea, a company should start with the strategic price and then deduct its desired

profit margin from the price to arrive at a target cost.

• Target costing is driven by strategic pricing, and it is usually aggressive.

• Part of the challenge of meeting the target cost is addressed in building astrategic profile that has not only divergence but also focus, which makes acompany strip out costs.

• Sometimes these reductions are sufficient to hit the cost target, but oftenthey are not.

• Target costing is driven by strategic pricing, and it is usually aggressive.

• Part of the challenge of meeting the target cost is addressed in building astrategic profile that has not only divergence but also focus, which makes acompany strip out costs.

• Sometimes these reductions are sufficient to hit the cost target, but oftenthey are not.

PROFIT MODEL OFA BLUE OCEAN STRATEGY

The Strategic PriceThe Strategic Price

The Strategic PriceThe Strategic Price

The Target PriceThe Target Price

Streamlining andCost innovation

Streamlining andCost innovation Partnership

Partnership

Pricing InnovationPricing Innovation

To hit the cost target, companies have three principle leversTo hit the cost target, companies have three principle levers

Streamliningoperations andintroducing costinnovations frommanufacturing to

distribution

Change the pricemodel of the industry– pricing innovation

PartneringForm Development,

manufacturing todistribution

What is a pricing innovation in one industry, is often a standard pricing inanother industry




From Utility, Price, and Cost to AdoptionEven an unbeatable business model may not be enough to guarantee the commercial success of blue ocean idea. It threatens

the status quo, provoke fear and resistance from the company’s main stakeholders: its employees, its business partners& the general public.

THE COMPANY MUST EDUCTAE THE FEARFUL

From Utility, Price, and Cost to AdoptionEven an unbeatable business model may not be enough to guarantee the commercial success of blue ocean idea. It threatens

the status quo, provoke fear and resistance from the company’s main stakeholders: its employees, its business partners& the general public.

THE COMPANY MUST EDUCTAE THE FEARFUL

EMPLOYEESEMPLOYEES THE GENERAL PUBLICTHE GENERAL PUBLICBUSINESS PARTNERSBUSINESS PARTNERS

• Failure to adequately address the concernsof employees about the impact of a newbusiness idea on their livelihoods can beexpensive.

• The company must make a concertedeffort to c to employees that they areaware of the threats posed by theexecution of the idea before going publicwith the idea.

• Companies should work with employees tofind ways of defusing the threats so thateveryone in the company wins, despiteshifts in people’s roles, responsibilities andrewards.

• Failure to adequately address the concernsof employees about the impact of a newbusiness idea on their livelihoods can beexpensive.

• The company must make a concertedeffort to c to employees that they areaware of the threats posed by theexecution of the idea before going publicwith the idea.

• Companies should work with employees tofind ways of defusing the threats so thateveryone in the company wins, despiteshifts in people’s roles, responsibilities andrewards.

• Opposition from the public may arise if thenew business idea is very new andinnovative, particularly if it threatensestablished social or political norms.

• Opposition from the public may arise if thenew business idea is very new andinnovative, particularly if it threatensestablished social or political norms.

• Potentially more damaging would bebusiness partners’ resistance who feartheir revenue streams or market positionsare threatened by a new business idea.

• Potentially more damaging would bebusiness partners’ resistance who feartheir revenue streams or market positionsare threatened by a new business idea.

COMPANIES NEED TO EXPLAIN THE MERITS, SET CLEAR EXPECTATIONS FOR ITS RAMIFICATIONS, ANDDESCRIBE HOW THE COMPANY WILL ADDRESS THEM.

COMPANIES NEED TO EXPLAIN THE MERITS, SET CLEAR EXPECTATIONS FOR ITS RAMIFICATIONS, ANDDESCRIBE HOW THE COMPANY WILL ADDRESS THEM.




Blue Ocean Idea (BOI) IndexProvides a simple and robust test of the blue ocean strategy system.

Blue Ocean Idea (BOI) IndexProvides a simple and robust test of the blue ocean strategy system.

+: There is value innovation- : No value innovation

+: There is value innovation- : No value innovation

UTILITY

PRICE

COST

ADOPTION

Is there exceptional utility?Are there compelling reason to buy your

offering?

Is your price easily accessible to themass of buyers?

Does your cost structure meet thetarget cost?

Have you addressed adoption hurdlesupfront?

+

-

-

-

-

+

+

+

-

-

-

+

YOUNEAREST

COMPETITORINDUSTRY


BLUE OCEAN STRATEGY

PRINCIPLE 5

OVERCOME KEY ORGANIZATIONALHURDLES

ATTENUATES ORGANIZATIONAL RISKS


EXECUTING BLUE OCEAN STRATEGY

5. OVERCOME KEY ORGANIZATIONAL HURDLES5. OVERCOME KEY ORGANIZATIONAL HURDLES

Challenge of ExecutionCompanies often have a tough time translating thought into action particularly for blue ocean strategy where it hinges on shift

from convergence to divergence in value curves at lower costs. This raises the execution bar.

Challenge of ExecutionCompanies often have a tough time translating thought into action particularly for blue ocean strategy where it hinges on shift

from convergence to divergence in value curves at lower costs. This raises the execution bar.

COGNITIVE

LIMITED RESOURCES

MOTIVATION

POLITICS

Waking up employees to the need for a strategic shift.Red Oceans may not be the paths to future profitable growth, but they feel comfortable to people and

may have even served an organization well until now, so why rock the boat?

The greater the shift in strategy, the greater it is assumed are the resources needed toexecute it! But resources are being cut and not raised!

How do you motivate key players to move fast and tenaciously to carry-out a breakfrom the status quo?

Example, “In our Organization, you get shot down before you stand up”

FOUR EXECUTION HURDLES

TO ACHIEVE THIS EFFECTIVELYCompanies must abandon perceived wisdom on effecting change.

Utilize “TIPPING POINT LEADERSHIP” – which allows you to overcome the four hurdles fast and at low cost while winningemployees’ backing in executing from the status quo.

TO ACHIEVE THIS EFFECTIVELYCompanies must abandon perceived wisdom on effecting change.

Utilize “TIPPING POINT LEADERSHIP” – which allows you to overcome the four hurdles fast and at low cost while winningemployees’ backing in executing from the status quo.




TIPPING POINT LEADERSHIPBuilds on the rarely exploited corporate reality that in every organization, there are people, acts, and activities that exercise

disproportionate influence on performance.It is about conserving resources and cutting time by focusing on identifying and then leveraging the factors of disproportionate

influence in an organization.

TIPPING POINT LEADERSHIPBuilds on the rarely exploited corporate reality that in every organization, there are people, acts, and activities that exercise

disproportionate influence on performance.It is about conserving resources and cutting time by focusing on identifying and then leveraging the factors of disproportionate

influence in an organization.

Q1: WHAT FACTORS OR ACTS EXERCISE A DISPROPORTIONATELY POSITIVE INFLUENCE ON BREAKING THE STATUS QUO?.Q1: WHAT FACTORS OR ACTS EXERCISE A DISPROPORTIONATELY POSITIVE INFLUENCE ON BREAKING THE STATUS QUO?.

Q2: WHAT FACTORS OR ACTS EXERCISE A DISPROPORTIONATELY POSITIVE INFLUENCE ON GETTING THE MAXIMUM BANG OUT OFEACH BUCK OF RESOURCES??.

Q2: WHAT FACTORS OR ACTS EXERCISE A DISPROPORTIONATELY POSITIVE INFLUENCE ON GETTING THE MAXIMUM BANG OUT OFEACH BUCK OF RESOURCES??.

Q3: WHAT FACTORS OR ACTS EXERCISE A DISPROPORTIONATELY POSITIVE INFLUENCE ON MOTIVATING KEY PLAYERS TOAGRESSIVELY MOVE FORWARD ITH CHANGE?

Q3: WHAT FACTORS OR ACTS EXERCISE A DISPROPORTIONATELY POSITIVE INFLUENCE ON MOTIVATING KEY PLAYERS TOAGRESSIVELY MOVE FORWARD ITH CHANGE?

Q4: WHAT FACTORS OR ACTS EXERCISE A DISPROPORTIONATELY POSITIVE INFLUENCE ON KNOECKING DOWN POLITICALROADBLOCKS THAT OFTEN TRIP UP EVE THE BEST STRATEGIES?

Q4: WHAT FACTORS OR ACTS EXERCISE A DISPROPORTIONATELY POSITIVE INFLUENCE ON KNOECKING DOWN POLITICALROADBLOCKS THAT OFTEN TRIP UP EVE THE BEST STRATEGIES?

FOUR ORGANIZATIONAL HURDLES TO STATEGY EXECUTION

COGNITIVE HURDLEAn organization wedded to

the status quo

COGNITIVE HURDLEAn organization wedded to

the status quo

MOTIVATIONAL HURDLEUnmotivated staff

MOTIVATIONAL HURDLEUnmotivated staff

RESOURCES HURDLELimited resources

RESOURCES HURDLELimited resources

POLITICAL HURDLEOpposition from powerful

vested interests

POLITICAL HURDLEOpposition from powerful

vested interests




Positive Stimuli reinforces Behavior, Negative Stimuli changeAttitudes and Behavior.

• The hardest battle is simply to make people aware of the theneed for strategic shift and to agree on its causes.

• Messages communicated through numbers seldom stick withpeople. The case for change feels abstract and removed fromthe sphere of the line managers.

• Instead, making people see and experience harsh realityfirsthand would make them remember and hence would respondmost effectively i.e. “seeing is believing”.

• Builds on insight to inspire a fast change in mindset that isinternally driven of people’s own accord.

Positive Stimuli reinforces Behavior, Negative Stimuli changeAttitudes and Behavior.

• The hardest battle is simply to make people aware of the theneed for strategic shift and to agree on its causes.

• Messages communicated through numbers seldom stick withpeople. The case for change feels abstract and removed fromthe sphere of the line managers.

• Instead, making people see and experience harsh realityfirsthand would make them remember and hence would respondmost effectively i.e. “seeing is believing”.

• Builds on insight to inspire a fast change in mindset that isinternally driven of people’s own accord.

FOUR ORGANIZATIONAL HURDLES TOSTATEGY EXECUTION

COGNITIVEHURDLE

An organizationwedded to the

status quo

COGNITIVEHURDLE


status quo

MOTIVATIONALHURDLE

Unmotivated staff

MOTIVATIONALHURDLE

Unmotivated staff

RESOURCESHURDLE

Limited resources

RESOURCESHURDLE

Limited resources

POLITICALHURDLE

Opposition frompowerful vested

interests

POLITICALHURDLE


interests

1. BREAK THROUGH THE COGNITIVEHURDLE

MAKE PEOPLE EXPERIENCE THE NEEDFOR CHANGE!

EXPERIENCE THE NEED FOR CHANGEEXPERIENCE THE NEED FOR CHANGE

PIVOTAL LEVER: DISPROPORTIONATE INFLUENCE FACTORSPIVOTAL LEVER: DISPROPORTIONATE INFLUENCE FACTORS

1“RAPID WAKE

UP CALL”

1“RAPID WAKE

UP CALL”

2“MEET WITH

DISGRUNTLEDCUSTOMERS”

2“MEET WITH

DISGRUNTLEDCUSTOMERS”

• Employees must come face-to-face with the worstoperational problems – POOR PERFORMANCE ISSHOCKING & INESCAPBLE but ACTIONABLE!

• Showing the worst to superiors can also shift their mindsetfast!

• Employees must come face-to-face with the worstoperational problems – POOR PERFORMANCE ISSHOCKING & INESCAPBLE but ACTIONABLE!

• Showing the worst to superiors can also shift their mindsetfast!

•Listen to our most disgruntled customers firsthand – don’trely on market surveys.•Do you ever wonder why sales don’t match your confidencein your product? Do you outsource your eyes and send outmarket research questionnaires?

•Listen to our most disgruntled customers firsthand – don’trely on market surveys.•Do you ever wonder why sales don’t match your confidencein your product? Do you outsource your eyes and send outmarket research questionnaires?




Concentrate on multiplying the value of the resources.

• Organizations rapidly gain insight into freeing up low-returnresources and redirecting them to high-impact areas.

• Whereas the actions of eliminating and resolving and reducing,cut the costs for the organization, raising certain elements orcreating required added investments.

• However, the overall investment of resources remained more orless constant!

Concentrate on multiplying the value of the resources.

• Organizations rapidly gain insight into freeing up low-returnresources and redirecting them to high-impact areas.

• Whereas the actions of eliminating and resolving and reducing,cut the costs for the organization, raising certain elements orcreating required added investments.

• However, the overall investment of resources remained more orless constant!


COGNITIVEHURDLE


status quo

COGNITIVEHURDLE


status quo

MOTIVATIONALHURDLE

Unmotivated staff

MOTIVATIONALHURDLE

Unmotivated staff

RESOURCESHURDLE

Limited resources

RESOURCESHURDLE

Limited resources

POLITICALHURDLE


interests

POLITICALHURDLE


interests

2. JUMP THE RESOURCE HURDLE

ACQUIRING RESOURCES IS OFTEN ALONG, POLITICALLY CHARGED

PROCESS!

MULTIPLY THE VALUE OF AVAILABLE RESOURCESMULTIPLY THE VALUE OF AVAILABLE RESOURCES


1LEVERAGE

“HOT SPOTS”

1LEVERAGE

“HOT SPOTS”

2OPTIMIZE

“COLDSPOTS”

2OPTIMIZE

“COLDSPOTS”

• Activities that have low resource input but high performancegains.

• Activities that have low resource input but high performancegains.

•Activities that have high resource input but low performanceimpact.

•Activities that have high resource input but low performanceimpact.

3“HORSE

TRADING”

3“HORSE

TRADING”•Involve trading your unit’s excess resources in an area andredirecting them to high-impact areas.

•Involve trading your unit’s excess resources in an area andredirecting them to high-impact areas.





COGNITIVEHURDLE


status quo

COGNITIVEHURDLE


status quo

MOTIVATIONALHURDLE

Unmotivated staff

MOTIVATIONALHURDLE

Unmotivated staff

RESOURCESHURDLE

Limited resources

RESOURCESHURDLE

Limited resources

POLITICALHURDLE


interests

POLITICALHURDLE


interests

3. JUMP THE MOTIVATIONAL HURDLE

EMPLOYEES AT EVERY LEVEL MUSTMOVE EN MASSE!


Instead of diffusing change efforts widely, instead seek massiveconcentration.

• You must alert employees to the need for a strategic shift andidentify how it can be achieved with limited resources.

• People must not only recognize what needs to be done, but theymust also act on that insight in a sustained and meaningful way.

Instead of diffusing change efforts widely, instead seek massiveconcentration.

• You must alert employees to the need for a strategic shift andidentify how it can be achieved with limited resources.

• People must not only recognize what needs to be done, but theymust also act on that insight in a sustained and meaningful way.

MOTIVATE MASS OF EMPLOYEES FAST & AT LOW COSTMOTIVATE MASS OF EMPLOYEES FAST & AT LOW COST

1LEVERAGE“KINGPINS”

1LEVERAGE“KINGPINS”

2PLACE

“KINGPINS” inA

“FISHBOWL”

2PLACE

“KINGPINS” inA

“FISHBOWL”

• Concentrate your efforts on “kingpins”, the key influencers inthe organization.

• These are natural leaders who are well-respected andpersuasive and have the ability to unlock or block access tokey resources.

• Concentrate your efforts on “kingpins”, the key influencers inthe organization.

• These are natural leaders who are well-respected andpersuasive and have the ability to unlock or block access tokey resources.

•Motivating “kingpins” in a sustained and meaningful wayrequires transparency, inclusion and fair process.•Through this an intense performance culture would becreated in short period of time.•:Fishbowl” management offers an opportunity for highachievers to gain recognition.

•Motivating “kingpins” in a sustained and meaningful wayrequires transparency, inclusion and fair process.•Through this an intense performance culture would becreated in short period of time.•:Fishbowl” management offers an opportunity for highachievers to gain recognition.

3“ATOMIZE” TO

GET THEORGANIZATION TO CHANGE

ITSELF

3“ATOMIZE” TO

GET THEORGANIZATION TO CHANGE

ITSELF

•Unless people believe that the strategic challenge isattainable, the change is not likely to succeed. Hence“atomization” i.e. the framing of the strategic challenge iscrucial.•To make the challenge attainable, break it up into “bite-sizedatoms” that employees at every level could relate to.

•Unless people believe that the strategic challenge isattainable, the change is not likely to succeed. Hence“atomization” i.e. the framing of the strategic challenge iscrucial.•To make the challenge attainable, break it up into “bite-sizedatoms” that employees at every level could relate to.





COGNITIVEHURDLE


status quo

COGNITIVEHURDLE


status quo

MOTIVATIONALHURDLE

Unmotivated staff

MOTIVATIONALHURDLE

Unmotivated staff

RESOURCESHURDLE

Limited resources

RESOURCESHURDLE

Limited resources

POLITICALHURDLE


interests

POLITICALHURDLE


interests

4. KNOCK OVER THE POLITICALHURDLE

MOVE QUICKLY! BUILD A BROADERCOALITION WITH YOUR ANGELS.


Identify your detractors and supporters! Forget the middle andstrive to create a win-win outcome for both.

• Even the best and brightest are regularly eaten alive by politics,intrigue and plotting. There exist powerful vested interests thatwill resist the impending changes.

• The more likely change becomes, the more fiercely and vocallythese negative influencers – both internal & external – will fight toprotect their positions, and their resistance can seriously damageand even derail the strategy execution process.

Identify your detractors and supporters! Forget the middle andstrive to create a win-win outcome for both.

• Even the best and brightest are regularly eaten alive by politics,intrigue and plotting. There exist powerful vested interests thatwill resist the impending changes.

• The more likely change becomes, the more fiercely and vocallythese negative influencers – both internal & external – will fight toprotect their positions, and their resistance can seriously damageand even derail the strategy execution process.

DON’T FIGHT ALONE! GET THE HIGHER & WIDER VOICETO FIGHT WITH YOU!

DON’T FIGHT ALONE! GET THE HIGHER & WIDER VOICETO FIGHT WITH YOU!

1SECURE A

CONSIGLIERE

1SECURE A

CONSIGLIERE

2LEVERAGE

YOURANGELS

2LEVERAGE

YOURANGELS

• Most leaders concentrate on building a top managementteam having strong functional skills such as marketing,operations, and finance.

• Tipping point leaders have the insight to include a“consigliere” – a respected senior insider who are politicallyadept and who knows the land mines in implementation,including who will fight you and who will support you.

• Most leaders concentrate on building a top managementteam having strong functional skills such as marketing,operations, and finance.

• Tipping point leaders have the insight to include a“consigliere” – a respected senior insider who are politicallyadept and who knows the land mines in implementation,including who will fight you and who will support you.

•Who are my “angels”? Who will algn with me? Who will winthe most by the strategic shift?

•Who are my “angels”? Who will algn with me? Who will winthe most by the strategic shift?

3SILENCE

YOUR DEVILS

3SILENCE

YOUR DEVILS•Who are my devils? Who will fight me? Who will lose themost by the future blue ocean strategy?

•Who are my devils? Who will fight me? Who will lose themost by the future blue ocean strategy?




CHALLENGING CONVENTIONAL WISDOMCHALLENGING CONVENTIONAL WISDOM

• It is never easy to execute a strategic shift, and doing it fast with limited resources is even more difficult.

• By consciously addressing the hurdles to strategy execution and focusing on factors of disproportionateinfluence, you can knock them over to actualize a strategic shift.

• Not every challenge requires a proportionate action. Focus on acts of disproportionate influences.

• This is a critical leadership component for making blue ocean strategy happen.

• It aligns employees’ actions with the new strategy.

• It is never easy to execute a strategic shift, and doing it fast with limited resources is even more difficult.

• By consciously addressing the hurdles to strategy execution and focusing on factors of disproportionateinfluence, you can knock them over to actualize a strategic shift.

• Not every challenge requires a proportionate action. Focus on acts of disproportionate influences.

• This is a critical leadership component for making blue ocean strategy happen.

• It aligns employees’ actions with the new strategy.

Theory of organization change rests on transformingthe mass. So change efforts are focused on movingthe mass, requiring steep resources and long time-

frame.

CONVENTIONAL WISDOM

Mass ofEmployees

Company

To change the mass, focus on the extremes –people, acts, and activities that exercise a

disproportionate influence on performance toachieve a strategic shift at a low cost.

TIPPING-POINT LEADERSHIP

EXTREMES EXTREMES

Company


BLUE OCEAN STRATEGY

PRINCIPLE 6

BUILD EXECUTION INTO STRATEGYATTENUATES MANAGEMENT RISKS



6. BUILD EXECUTION INTO STRATEGY6. BUILD EXECUTION INTO STRATEGY

BUILD PEOPLE’S TRUST & COMMITMENT DEEP IN THE RANKS AND INSPIRE THEIR VOLUNTARY COOPERATIONBUILD PEOPLE’S TRUST & COMMITMENT DEEP IN THE RANKS AND INSPIRE THEIR VOLUNTARY COOPERATION

Allows companies to minimize the management risk, risk of distrust, and even sabotage.

• Companies must reach beyond carrots and sticks. They must reach to fair process in the making and executing of strategy.• Fair process is a key variable that distinguishes successful blue ocean strategic moves from those that failed.

Allows companies to minimize the management risk, risk of distrust, and even sabotage.

• Companies must reach beyond carrots and sticks. They must reach to fair process in the making and executing of strategy.• Fair process is a key variable that distinguishes successful blue ocean strategic moves from those that failed.

POOR PROCESS CAN RUIN STRATEGY EXECUTIONPOOR PROCESS CAN RUIN STRATEGY EXECUTION

THE POWER OF FAIR PROCESSHow fair process affects people’s attitudes and behavior

Strategy FormulationProcess

Strategy FormulationProcess

Fair ProcessEngagement, Explanation, Expectation Clarity

Fair ProcessEngagement, Explanation, Expectation Clarity

AttitudesAttitudes Trust and Commitment“I feel my opinion counts”

Trust and Commitment“I feel my opinion counts”

BehaviorBehavior Voluntary Cooperation“I’ll go beyond the call of duty”

Voluntary Cooperation“I’ll go beyond the call of duty”

Strategy ExecutionStrategy Execution Exceeds ExpectationsSelf-initiated

Exceeds ExpectationsSelf-initiated

THE THREE PRINCIPLESOF FAIR PROCESS

Three mutually reinforcingelements that defines fairprocess: Engagement,Explanation andExpectation Clarity.

THE THREE PRINCIPLESOF FAIR PROCESS

Three mutually reinforcingelements that defines fairprocess: Engagement,Explanation andExpectation Clarity.

People at the front-line care aboutthe proper process as those at

the Top

People at the front-line care aboutthe proper process as those at

the Top




WHY DOES FAIR PROCESS MATTER?WHY DOES FAIR PROCESS MATTER?

Why does the observance or violation of fair process in strategy making have the power tomake or break a strategy’s execution?

• It all comes down to intellectual and emotional recognition.• EMOTIONALLY, individuals seek recognition of their value as Human Beings, who are

treated with full respect and dignity and appreciated for their individual worth regardless ofhierarchical level.

• INTELLECTUALY, individuals seek recognition that their ideas are sought after and giventhoughtful reflection, and that others think enough of their intelligence to explain theirthinking to them.

Why does the observance or violation of fair process in strategy making have the power tomake or break a strategy’s execution?

• It all comes down to intellectual and emotional recognition.• EMOTIONALLY, individuals seek recognition of their value as Human Beings, who are

treated with full respect and dignity and appreciated for their individual worth regardless ofhierarchical level.

• INTELLECTUALY, individuals seek recognition that their ideas are sought after and giventhoughtful reflection, and that others think enough of their intelligence to explain theirthinking to them.

INTELLECTUAL & EMOTIONAL RECOGNITION THEORYINTELLECTUAL & EMOTIONAL RECOGNITION THEORY

Frederick Herzbergs’s Theory on Motivation

• Recognition was found to inspire strong intrinsic motivation, causing people to go beyondthe call of duty and engage in voluntary cooperation.

• Trust and cherish the individual as well as a deep-seated confidence in the individual’sknowledge, talents and expertise.

Frederick Herzbergs’s Theory on Motivation

• Recognition was found to inspire strong intrinsic motivation, causing people to go beyondthe call of duty and engage in voluntary cooperation.

• Trust and cherish the individual as well as a deep-seated confidence in the individual’sknowledge, talents and expertise.




EXECUTION CONSEQUENCES OF THE PRESENCE AND ABSENCE OF FAIR PROCESS IN STRATEGY MAKINGEXECUTION CONSEQUENCES OF THE PRESENCE AND ABSENCE OF FAIR PROCESS IN STRATEGY MAKING

FAIR PROCESS & BLUE OCEAN STRATEGYFAIR PROCESS & BLUE OCEAN STRATEGY

• Commitment, trust, and voluntary cooperation are not merely attitudes or behaviors. They areINTANGIBLE CAPITAL.

• When people have trust, they have heightened confidence in one another’s intentions and actions.• When people have commitment, they are even willing to override personal self-interest in the interests of

the company.• Commitment, trust, and voluntary cooperation allows companies to stand apart in the speed, quality, and

consistency of their execution and to implement strategic shifts fast at a low cost.

• Commitment, trust, and voluntary cooperation are not merely attitudes or behaviors. They areINTANGIBLE CAPITAL.

• When people have trust, they have heightened confidence in one another’s intentions and actions.• When people have commitment, they are even willing to override personal self-interest in the interests of

the company.• Commitment, trust, and voluntary cooperation allows companies to stand apart in the speed, quality, and

consistency of their execution and to implement strategic shifts fast at a low cost.

FAIRPROCESS

FAIRPROCESS

VIOLATION OF FAIRPROCESS

VIOLATION OF FAIRPROCESS

Intellectual &Emotional

Recognition

Intellectual &Emotional

Recognition

Intellectual &EmotionalIndignation

Intellectual &EmotionalIndignation

Trust andCommitment

Trust andCommitment

Distrust andResentment

Distrust andResentment

VoluntaryCooperation in

Strategy Execution

VoluntaryCooperation in

Strategy Execution

Refusal to ExecuteStrategy

Refusal to ExecuteStrategy


BLUE OCEAN STRATEGY

CONCLUSION

SUSTAINABILITY & RENEWAL


CONCLUSION – THE SUSTAINABILITY AND RENEWAL OFBLUE OCEAN STRATEGY

CREATING BLUE OCEANS IS NOT A STATIC ACHIEVEMENT BUT A DYNAMICPROCESS

CREATING BLUE OCEANS IS NOT A STATIC ACHIEVEMENT BUT A DYNAMICPROCESS

BARRIERS TO IMITATION – A Blue Ocean Strategy brings with it considerable barriers to imitation.Some of these are operational and others are cognitive.

A Blue Ocean strategy will go without credible challenges for TEN to FIFTEEN years.

BARRIERS TO IMITATION – A Blue Ocean Strategy brings with it considerable barriers to imitation.Some of these are operational and others are cognitive.

A Blue Ocean strategy will go without credible challenges for TEN to FIFTEEN years.

• A Value-Innovation move does not make sense based on conventional strategic logic.• A Value-Innovation move does not make sense based on conventional strategic logic.

• Brand image conflict prevents companies from imitating as this would signal an invalidation ofcurrent business models.

• Brand image conflict prevents companies from imitating as this would signal an invalidation ofcurrent business models.

• Natural Monopoly blocks imitation when the size of the market cannot support another player.• Natural Monopoly blocks imitation when the size of the market cannot support another player.

• Patents of Legal Permits.• Patents of Legal Permits.

• The high volume generated by a value innovation leads to rapid cost advantages.• The high volume generated by a value innovation leads to rapid cost advantages.

• Network externalities also block companies from easily and credibly imitating.• Network externalities also block companies from easily and credibly imitating.

• Imitation often requires companies to make substantial changes to their existing businesspractices.

• Imitation often requires companies to make substantial changes to their existing businesspractices.

• When a company offers a leap in value, it rapidly earns brand buzz and a loyal following in themarket place.

• When a company offers a leap in value, it rapidly earns brand buzz and a loyal following in themarket place.

CNNCNN

THE BODYSHOP

THE BODYSHOP

KINEPOLISKINEPOLIS

VIAGRAVIAGRA

Wal-MartWal-Mart

E-BayE-Bay

SouthwestAirlines

SouthwestAirlines

Intuit’sQUICKEN

Intuit’sQUICKEN

Blue Ocean Strategy – A Systems approach that requires getting the strategic elements right &aligning them in an integral system to deliver value innovation.

Blue Ocean Strategy – A Systems approach that requires getting the strategic elements right &aligning them in an integral system to deliver value innovation.


CONCLUSION – THE SUSTAINABILITY AND RENEWAL OFBLUE OCEAN STRATEGY

WHEN TO VALUE-INNOVATE AGAINWHEN TO VALUE-INNOVATE AGAIN

To avoid the trap of competing, you need to monitor value curves on the strategy canvas.Monitoring Value Curves signals when to value-innovate and when not to.

When your Vale Curve begins to converge with the competitors, you need to reach out for anotherBlue Ocean.

To avoid the trap of competing, you need to monitor value curves on the strategy canvas.Monitoring Value Curves signals when to value-innovate and when not to.

When your Vale Curve begins to converge with the competitors, you need to reach out for anotherBlue Ocean.

• Do not pursue another blueocean when your current offeringis still profitable.

• Do not pursue another blueocean when your current offeringis still profitable.

• If your company’s value curvestill has focus, divergence, and acompelling tagline.

• If your company’s value curvestill has focus, divergence, and acompelling tagline.

• Dominate the blue ocean of yourimitators for as long as possible.

• Dominate the blue ocean of yourimitators for as long as possible.

• THERE IS STILL A HUGE PROFIT STREAM• THERE IS STILL A HUGE PROFIT STREAM

• SHOULD FOCUS ON LENGTHENING, WIDENING &DDEPENING YOUR RENT STREAM THOUGHOPERATIONAL IMPROVEMENTS & GEOGRAPHICALEXPANSIONTO ACHIEVE MAXIMUM ECONOMIES OFSCALE & MARKET COVERAGE.

• SHOULD FOCUS ON LENGTHENING, WIDENING &DDEPENING YOUR RENT STREAM THOUGHOPERATIONAL IMPROVEMENTS & GEOGRAPHICALEXPANSIONTO ACHIEVE MAXIMUM ECONOMIES OFSCALE & MARKET COVERAGE.

• YOU SHOULD SWIM AS FAR AS POSSIBLE IN THE BLUEOCEAN, MAKING YOURSELF A MOVINNG TARGET,DISTANCING YOURSELF FROM THE EARLY IMITATORS& DISCOURAGING THEM IN THE PROCESS.

• YOU SHOULD SWIM AS FAR AS POSSIBLE IN THE BLUEOCEAN, MAKING YOURSELF A MOVINNG TARGET,DISTANCING YOURSELF FROM THE EARLY IMITATORS& DISCOURAGING THEM IN THE PROCESS.

Because Blue Oceans have always co-existed with Red Oceans, practical realities demand thatcompanies succeed in BOTH OCEANS and MASTER the STRATEGIES for BOTH.

Because Blue Oceans have always co-existed with Red Oceans, practical realities demand thatcompanies succeed in BOTH OCEANS and MASTER the STRATEGIES for BOTH.


BLUE OCEAN STRATEGY

CONCLUSION

MARKET DYNAMICS


MARKET DYNAMICS OF VALUE-INNOVATIONP

RIC

E

QUANTITYQ1

P1

P2

Q2

D1

D2

y

x

a b

cd

e

h

f

g

LRAC1

LRAC2

DEMAND

Long-run Average Cost Curve

Capture the mass of target buyers from the outset andexpand the size of the market by offering radicallysuperior value at price points accessible to them.

Capture the mass of target buyers from the outset andexpand the size of the market by offering radicallysuperior value at price points accessible to them.

1. Value innovation radically increases theappeal of a product, shifting the demandcurve from D1 to D2.

2. The price is set strategically, shifted fromP1 to P2 to capture the mass buyers in theexpanded market.

3. This increases the quantity sold from Q1to Q2 and builds strong brand recognition,for unprecedented value.

5. The company engages in target costing tosimultaneously reduce the long-runaverage cost curve from LRAC1 toLRAC2 to expand its ability to profit and todiscourage free riding and imitation.Buyers receive a leap in value, shifting theconsumer surplus from axb to eyf.

6. The company earns a leap in profit andgrowth, shifting the profit zone from abcdto efgh.

7. The rapid brand recognition built by thecompany as a result of the unprecedentedvalue offered in the marketplace,combined with the simultaneous drive tolower costs, makes the competitionnearly irrelevant, and makes it hard tocatch up, as economies of scale,learning and increasing returns kick in.

1. Value innovation radically increases theappeal of a product, shifting the demandcurve from D1 to D2.

2. The price is set strategically, shifted fromP1 to P2 to capture the mass buyers in theexpanded market.

3. This increases the quantity sold from Q1to Q2 and builds strong brand recognition,for unprecedented value.

5. The company engages in target costing tosimultaneously reduce the long-runaverage cost curve from LRAC1 toLRAC2 to expand its ability to profit and todiscourage free riding and imitation.Buyers receive a leap in value, shifting theconsumer surplus from axb to eyf.

6. The company earns a leap in profit andgrowth, shifting the profit zone from abcdto efgh.

7. The rapid brand recognition built by thecompany as a result of the unprecedentedvalue offered in the marketplace,combined with the simultaneous drive tolower costs, makes the competitionnearly irrelevant, and makes it hard tocatch up, as economies of scale,learning and increasing returns kick in.

THE EMERGENCE OF A WIN-WIN MARKET DYNAMICSTHE EMERGENCE OF A WIN-WIN MARKET DYNAMICS


BLUE OCEAN STRATEGY

APLLICATION

STRATEGY CANVAS


AUTOMOTIVE INDUSTRY STRATEGY CANVAS

1.

Alli

an

ces

&C

on

solid

atio

n

2.

Glo

balM

ark

et

3.

Safe

ty&

Em

issio

nR

egu

latio

ns

4.

Te

chno

logy

and

Inno

vatio

ns

5.

Le

velof

Inve

stm

en

t

6.

Re

turn

of

Inve

stm

en

t

7.

Ma

rgin

Le

vels

8.

Pla

tfo

rmE

ngin

ee

rin

g

9.

Mo

du

lar

En

gin

ee

rin

g

10

.1

stT

ier

Sup

plie

rs&

Vendo

rs

11

.Le

velof

Ou

t-sou

rcin

g

12

.N

um

be

ro

fM

od

els

13

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rod

uctL

ife-C

ycle

s

14

.In

tegra

ted

Lo

gis

tics

15

.In

tegra

ted

Fin

an

cin

g

16

.M

ark

et

/C

usto

me

rO

rie

nta

tion

(CS

I)

17

.D

om

estic

Ma

rke

tP

rote

ctio

n

HIGH

LOW

MID

PROTON

INDUSTRY(Worldwide)

M’SIANCOMPETITOR

18

.B

ran

d&

Em

otio

n


PROTON STRATEGY CANVAS

Providing Customer-Oriented Products and Ancillary Services that areSatisfied through the Integration of Friendly Purchase and Ownership

Experience

Providing Customer-Oriented Products and Ancillary Services that areSatisfied through the Integration of Friendly Purchase and Ownership

Experience

HIGH(100)

LOW(0)

CL

AR

ITY

OF

VIS

ION

&S

TR

AT

EG

Y

CL

AR

ITY

OF

MIS

SIO

NO

BJE

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PR

OF

IT-

OR

IEN

TA

TIO

N

CU

ST

OM

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-O

RIE

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AT

ION

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AM

WO

RK

(CR

OS

S-

FU

NC

TIO

NA

LT

EA

MS

)

SE

NS

EO

FU

RG

EN

CY

TR

AN

SP

AR

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CY

CL

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OF

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UN

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TIO

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GA

GE

ME

NT

1 2 3 4 5 6 7 8 9 10

CO

ST

OR

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11 12 13

TIM

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NT

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HU

MA

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AU

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15

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17

NA

TIO

NA

LC

AR

AV

ER

AG

E

CURRENT

TO-BE


PROTON PRODUCT STRATEGY CANVAS(VALUE-CURVES)

Providing Value / Customer-Oriented ProductsProviding Value / Customer-Oriented Products

ELIMINATE RAISE

1. NATIONAL CAR “ASSOCIATION”

1. CLARITY OF VISION & STRATEGY2. CLARITY OF MISSION OBJECTIVES3. PROFIT ORIENTATION4. SENSE OF URGENCY5. COMMUNICATION CLARITY & ENGAGEMENT6. COST ORIENTATION7. TIME ORIENTATION8. DECISION MAKING & EXECUTION9. HUMAN CAPITAL DEVELOPMENT10. TECHNICAL & ENGINEERING DEVELOPMENT11. MANUFACTURING CAPABILITY

REDUCE CREATE

1. CUSTOMER ORIENTATION (VALUE TO CUSTOMER)2. TEAMWORK (CROSS-FUNCTIONAL TEAMS) –

Business Growth, Purchasing, Manufacturing &Logistics, Research & Development, Sales &Marketing, General Administration Services, Finance,Product Phase-out and Organization & Value-Added.

3. TRANSPARENCY4. AUTHORITY5. INTERNAL EQUITY




PR

ICE

QU

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ITY

SA

FE

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FE

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(CR

AS

H–

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1 2 3 4 5 6 7 8 9 10 11 12

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LOW(0)

13

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ELIMINATE RAISE

1. CUSTOMIZATION2. NATIONAL CAR IDENTITY

1. QUALITY2. SAFETY FEATURES3. ENVIRONMENT4. PERFORMANCE & FUN5. RELIABILITY (TGW & TCGW)6. MAINTAINABILITY7. MARGIN

REDUCE CREATE

1. VALUE FOR MONEY2. PRICE (COST)

1. MORE MODEL RANGE (SpecificallyLow-Cost MPV / Mini-Van)

2. CONTINUOUS IMPROVEMENT (CC,FL, FMC)

3. ERGONOMICS4. VALUE TO CUSTOMER


1.

Manufa

ctu

ring

Cost

2.

Inve

nto

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3.

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eliv

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4.

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8.

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ization

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/Com

po

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tics

MANUFACTURING STRATEGY CANVAS(VALUE-CURVES)

Providing Manufacturing Services Satisfying Customers through EffectiveManagement of Resources Ensuring Sustainable Growth

Providing Manufacturing Services Satisfying Customers through EffectiveManagement of Resources Ensuring Sustainable Growth




ELIMINATE RAISE

1. MFG PROCESS & PRODUCT QUALITY2. EFFECTIVE UTILIZATION OF RESOURCES3. VENDOR SUPPLY CAPABILITY4. CONTINUOUS IMPROVEMENT5. ORGANIZATIONAL RESPONSE6. 3 INTEGRATED PLANTS7. 2 AMORTIZED PLANTS8. PHYSICAL PROTOTYPING FACILITIES9. PRODUCT & COMPONENTS RELIABILITY

REDUCE CREATE

1. MFG COST2. INVENTORY CYCLE3. ORDER TO DELIVERY

1. OUTSOURCING (VENDOR PARTNERSHIPS)2. STANDARDIZATION LEVELS3. INTEGRATED LOGISTICS


MANUFACTURING ENGINEERING STRATEGY CANVAS

Providing Manufacturing Engineering Services Satisfying Customers throughEffective Integration of Processes and Facilities

Providing Manufacturing Engineering Services Satisfying Customers throughEffective Integration of Processes and Facilities

HIGH(100)

LOW(0)

INV

ES

TM

EN

TL

EV

EL

TE

CH

NIC

AL

&E

NG

INE

ER

ING

ST

AN

DA

RD

S

PR

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ME

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ON

TR

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OR

GA

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SP

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SE

1 2 3 4 5 6 7 8 9 10

TO BE

CO

ST

OF

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NE

RS

HIP

CURRENT

11

OE

ME

XP

ER

IEN

CE

12

PL

CA

PP

LIC

AT

ION

S

13

ON

E-S

TO

PS

OL

UT

ION

AV

ER

AG

E




ELIMINATE RAISE

1. PROCESS TECHNOLOGY INNOVATION2. EFFECTIVE UTILIZATION OF RESOURCES3. FLEXIBILITY LEVELS4. PROJECT MANAGEMENT & CONTROL5. ORGANIZATIONAL RESPONSE6. OEM EXPERIENCE7. PLC APPLICATION8. ONE-STOP SOLUTION

REDUCE CREATE

1. INVESTMENT LEVELS2. ORDER TO DELIVERY TIME3. COST OF OWNERSHIP

1. TECHNICAL & ENGINEERING STANDARDS2. CONTRACTOOR & SUPPLIER

PARTNERSHIPS

© DKD 5th JANUARY 2007

PROTON’S 2006 SITUATION VS. NISSAN’S1999 SITUATION

1.

Cla

rity

of

Vis

ion

&S

tra

tegy

2.

Cla

rity

of

Mis

sio

nO

bje

ctive

s

3.

Le

velof

Deb

t(P

rofit

Orie

nta

tion

)

4.

Cu

sto

me

rO

rien

tation

5.

Sen

seof

Urg

en

cy

6.

Com

pa

rtm

en

taliz

ation

(La

ck

of

Cro

ss

Fu

nctio

na

lT

ea

ms)

7.

Co

st

Orien

tation

8.

Com

mun

ica

tion

Tra

nsp

are

ncy

&E

nga

gem

en

t9

.D

ecis

ion

Ma

kin

g&

Exe

cu

tion

Eff

icie

ncy

10

.S

upp

lier

“Ke

ire

tsu

”(N

um

be

rof

Supp

liers

)

11

.C

apa

city

Utiliz

atio

n

12

.N

um

be

ro

fP

latf

orm

s

13

.N

um

be

ro

fP

rodu

ct

Life

-C

ycle

s

14

.M

anufa

ctu

rin

gS

yste

mC

apa

bili

ty

15

.P

ers

onne

lM

otiva

tion

16

.R

&D

and

Te

chn

olo

gy

Inno

vatio

n

17

.S

ale

s,

Ma

rke

ting

&D

istr

ibu

tion

Eff

icie

ncy

18

.R

ea

chof

Glo

ba

lM

ark

ets

HIG

HL

OW

MID

19

.S

tra

tegic

Alli

an

ce

NISSAN - 1997

SOURCE: SHIFTInside Nissan’s Historic Revival

Carlos Ghosn – Jan 2005

PROTON - 2006


PROTON’S FUTURE REVIVAL IF IT WERETO EMULATE NISSAN’S HISTORIC REVIVAL

1.

Cla

rity

of

Vis

ion

&S

tra

tegy

2.

Cla

rity

of

Mis

sio

nO

bje

ctive

s

3.

Le

velof

Deb

t(P

rofit

Orie

nta

tion

)

4.

Cu

sto

me

rO

rien

tation

5.

Sen

seof

Urg

en

cy

6.

Com

pa

rtm

en

taliz

ation

(La

ck

of

Cro

ss

Fu

nctio

na

lT

ea

ms)

7.

Co

st

Orien

tation

8.

Com

mun

ica

tion

Tra

nsp

are

ncy

&E

nga

gem

en

t9

.D

ecis

ion

Ma

kin

g&

Exe

cu

tion

Eff

icie

ncy

10

.S

upp

lier

“Ke

ire

tsu

”(N

um

be

rof

Supp

liers

)

11

.C

apa

city

Utiliz

atio

n

12

.N

um

be

ro

fP

latf

orm

s

13

.N

um

be

ro

fP

rodu

ct

Life

-C

ycle

s

14

.M

anufa

ctu

rin

gS

yste

mC

apa

bili

ty

15

.P

ers

onne

lM

otiva

tion

16

.R

&D

and

Te

chn

olo

gy

Inno

vatio

n

17

.S

ale

s,

Ma

rke

ting

&D

istr

ibu

tion

Eff

icie

ncy

18

.R

ea

chof

Glo

ba

lM

ark

ets

HIG

HL

OW

MID

19

.S

tra

tegic

Alli

an

ce

NISSAN - 2004

PROTON - 2006

PRIORIY FOCUSAREAS FOR ACTION


PROTON REVIVAL STRATEGY CANVAS(VALUE-CURVES)

3. Level of Debt (Profit Orientation)

6. Compartmentalization (Lack of CrossFunctional Teams)

10. Supplier “Keiretsu” (Number ofSuppliers)

12. Number of Platforms

1. Clarity of Vision & Strategy

2. Clarity of Mission Objectives

4. Customer Orientation

5. Sense of Urgency

7. Cost Orientation

9. Decision Making & Execution Efficiency

11. Capacity Utilization

14. Manufacturing System Capability

15. Personnel Motivation

16. R&D and Technology Innovation

17. Sales, Marketing & Distribution Efficiency

8. Communication Transparency &Engagement

13. Number of Product Life-Cycles

18. Reach of Global Markets

19. Strategic Alliance

ELIMINATE RAISE

REDUCE CREATE


PROTON’S FUTURE REVIVAL IF IT WERETO EMULATE NISSAN’S HISTORIC REVIVAL

1.

Le

velof

Deb

t(P

rofit

Orie

nta

tion

)2

.C

om

pa

rtm

en

taliz

ation

(La

ck

of

Cro

ss

Fu

nctio

na

lT

ea

ms)

3.

Supp

lier

“Ke

ire

tsu

”(N

um

be

rof

Supp

liers

)

4.

Num

be

ro

fP

latf

orm

5.

Cla

rity

of

Vis

ion

and

Str

ate

gy

6.

Cla

rity

of

Mis

sio

nO

bje

ctive

s

7.

Cu

sto

me

rO

rien

tation

8.

Sen

seof

Urg

en

cy

En

ga

gem

en

t

9.

Co

st

Orien

tation

10

.D

ecis

ion

Ma

kin

gand

Exe

cu

tion

Eff

icie

ncy

11

.C

apa

city

Utiliz

atio

n

12

.M

anufa

ctu

rin

gS

yste

mC

apa

bili

ty

13

.P

ers

onne

lM

otiva

tion

14

.R

&D

&T

ech

nolo

gy

Inno

vatio

n

15

.S

ale

s,

Ma

rke

ting

&D

istr

ibu

tion

Eff

icie

ncy

16

.C

om

mun

ica

tion

Tra

nsp

are

ncy

&E

nga

gem

en

t17

.N

um

be

ro

fP

rodu

ct

Life

-Cyc

les

18

.R

ea

chof

Glo

ba

lM

ark

ets

HIG

HL

OW

MID

19

.S

tra

tegic

Alli

an

ce

PRIORIY FOCUSAREAS FOR ACTION

ELIMINATE

REDUCE

RAISE

CREATE

“TO-BE”

blue ocean strategy

Documents

creation of blue oceans

red oceans

creation of blue strategic

blue oceansthe profit

untapped market space

unknown market space

blue oceansdriving forces

aamajor market