company x blue ocean strategy

Harrison Hayes and Company X: Blue Ocean Strategy for Drug Delivery

Date Name Title Company X Any Street Any City Any Country

Dear Sir,

Harrison Hayes has incorporated valuable feedback from Company X and is pleased to respond to their request for an internal structure in the development of a Blue Ocean Strategy.

This proposal will clearly outline how the Blue Ocean Strategy and how it will be implemented for Company X. We will detail each of the six principles of Blue Ocean and how Harrison Hayes will address each one.

Harrison Hayes, along with its partnership with the Company X team, will produce an internal think tank utilizing the Blue Ocean Strategy in order to gain a new market place/new customers for Company X. We strongly believe that our methodology and expertise will provide you with a final deliverable that will exceed your expectations. Sincerely, Bill Smith Managing Director Harrison Hayes, LLC Charlotte, NC

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Company X – Blue Ocean Strategy

BLUE OCEAN Overview

For this particular project, Harrison Hayes will deploy a Blue Ocean Strategy that will focus on drug delivery. A “Blue Ocean” is defined as untapped market space, demand creation, and the opportunity for highly profitable growth. In most cases, a blue ocean is created above and beyond typical industry standards. In fact, most blue ocean markets are created from within “red oceans” through the expansion of the existing industry standards/boundaries. “Red Oceans” markets can be described as the typical competitive industry: competitors attempting to out-perform each other and gain a greater share of the market. The ultimate end-goal of Blue Ocean is to create a new market space, void of competition and where the demand for services is uncontested. Blue Ocean can be achieved by not viewing the competition as the standard of success. Companies that deploy a Blue Ocean strategy follow a different logic that is referred to as Value Innovation. The underlying premise of Value Innovation is that companies make the competition irrelevant by creating and opening a new, uncontested market space. Therefore, this proposal will clearly outline the Blue Ocean Strategy that Harrison Hayes will utilize to provide a new market for Company X. Harrison Hayes will closely mimic the traditional Blue Ocean Strategy and focus on the six principles, which are outlined below.

PROJECT SCOPE This project will be global in nature and focus on a Blue Ocean Strategy concentrating on identifying new customers and bridging the gap to existing customers. Additionally, Harrison Hayes will focus on broad, top-line, “mega-structures” that will serve as a basis for an internal Think Tank for Company X.

PROJECT OBJECTIVES

The overall objective of this project is for Harrison Hayes, in conjunction with Company X, to develop a Blue Ocean Strategy that Company X can implement internally in order to identify and target new potential customers and bridge the gap to existing customers. Specific objectives are as follows:

Development of a Blue Ocean Strategy for Company X that it can implement internally and geared towards identifying new customers and markets within drug delivery.

Development of a system to bridge new customers to Company X’s existing customer base.

Development of an internal process that will serve as a Think Tank to serve as the identification and assessment of trending/mega-trending and as an overall vision for the new market.

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METHODOLOGY Harrison Hayes proposes to begin the project by meeting with the Company X project team to conduct due diligence and review currently available information. The purpose of this meeting is to verify the scope of the assignment, project objectives, answer questions, and review the timeline. Harrison Hayes actively engages our clients in collaborative, interactive dialogue throughout the project. We suggest weekly meetings to review and assess the direction and progress of the project. Harrison Hayes proposes to first meet with the Company X project team in order to better understand Company X’s current customers and position in the market. The outcome of this meeting will provide a framework and foundation for the development of a Blue Ocean Strategy as a whole. Once Harrison Hayes has gathered information about Company X’s current state in the market, we will begin to deploy the first principle of Blue Ocean Strategy. The principles of Blue Ocean strategy include:

Reconstruction of Market Boundaries

Focus on the Big Picture

Reach beyond Existing Demand

Strategic Sequence

Overcome Key Organizational Hurdles

Execution

In order to best fulfill a Blue Ocean Strategy, Harrison Hayes will, in conjunction with Company X, construct a Strategy Canvas complete with value curves of the industry. Harrison Hayes will also utilize the Four Actions Framework in order to determine what factors should be Reduced, Created, Raised, and Eliminated in a particular market. To supplement the Four Actions Framework, Harrison Hayes will illustrate these findings in a Eliminate-Reduce-Raise-Create Grid. These two items will serve as the foundation for Value Innovation, which is essential to the successful creation of a Blue Ocean market. These tools, along with the Six Principles, are outlined in subsequent sections.

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MARKET BOUNDARY RECONSTRUCTION

In the Reconstruction of Market Boundaries, Harrison Hayes will examine and outline six (6) different paths. Once outlined, Harrison Hayes will present each path the Company X for them to select the most appropriate and viable path for further examination and exploration. The six (6) paths include:

Examination of alternative markets

Examination of strategic groups within the existing drug delivery market

Examination of different buyers of drug delivery devices

Examination of products complimentary to drug delivery

Examination of drug delivery buyer appeal (emotional or functional)*

Assessment of the future of the business

Each of the paths listed above is outlined in more detail below. Path 1: Examination of Alternative Markets In this path, Harrison Hayes will examine companies that produce alternative products or devices. Within the drug delivery space, patients have a wide range of delivery formats in which to choose such as injection, oral, topical, rectal, optical, nasal, etc. Company X currently offers its customers different options within the injection method for drug delivery. An inhaler serves the same objective as a syringe: it enables a drug to enter the body. It is important to note that a syringe and inhaler are not substitutes, but rather alternative forms of drug delivery. Insulin is a drug that best illustrates this example. A person may either inject or inhale insulin in order to achieve the proper absorption of the drug. Syringes and pen needles are very similar in form, i.e. they are both injection devices. Therefore, a syringe and pen needle would serve as substitutes for one another. On the other hand, an alternative form of delivery would be inhaled insulin through the use of an inhaler. As part of this assessment, Harrison Hayes will examine why patients choose, or avoid, a particular delivery method. Harrison Hayes will examine and assess reasons why patients choose one drug delivery method in order to determine the potential for an unexplored market. Possible reasons why patients choose one drug delivery method over another include: needle fear, difficulty swallowing, type of condition, drug availability, cost, prescription, method of absorption, etc. (NOTE: This will be similar to a Harrison Hayes Voice of the Customer study).

* In drug delivery, it is clear that the appeal is functionality. Harrison Hayes will examine how this buyer

appeal could become more emotional.

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Path 2: Strategic Groups within the Industry A second path Harrison Hayes proposes to explore will be different strategic groups that currently exist within the injectable drug delivery space. In order to identify the strategic differences within the injectable drug delivery industry, Harrison Hayes will interview and examine patients’ thoughts on the different injectable drug delivery mechanisms (NOTE: This will be similar to a Harrison Hayes Voice of the Customer study). In doing so, Harrison Hayes will determine what factors cause a customer to select a particular mode of injectable drug delivery over another. Within the injectable drug delivery space, there are largely two options: pen devices and syringes. Pen needles/devices are widely considered a more premium product over syringes. Therefore, Harrison Hayes will attempt to determine why a patient/user opts to use a pen device rather than a syringe, or vice versa. Reasons may include convenience, ease of use, cost, visibility, psychological mindset, among many others. The overall purpose of this path is to determine if there are in fact potential gaps worth exploring within the injectable drug delivery space that Company X would want to explore further should this path be selected. Path 3: Chain of Buyers In every industry, there are numerous buyers involved in the buying decision process. In general terms there are three (3) main categories: purchasers, users, and influencers. In Company X’s case, purchasers include procurement directors for chain pharmacies, wholesalers, hospitals, etc. The actual users include the end-patient and healthcare providers. The most notable influencers within Company X’s industry consist of one major group: practicing physicians. Historically, Company X has largely focused its efforts on physicians, and more recently, the patients themselves. In this particular path, however, Harrison Hayes will challenge this conventional wisdom by identifying and assessing new buyer groups. Potential new buyer groups Harrison Hayes proposes to explore include:

Practicing Pharmacists Veterinarians

Home Health Providers

Nurses

Note: Additional Buyers will emerge as the project moves forward

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Path 4: Complementary Product/Service Offerings Very few products exist today that can be used alone. Cell phones need batteries and automobiles need gasoline. The injectable medical device industry is not an exception. Company X must heavily rely upon the pharmaceutical industry to produce injectable drugs; similarly, Company X must rely on the physician to prescribe Company X injection devices. For this particular path, the challenge is to determine where untapped value may reside within complementary products and services. In order to fulfill this objective, Harrison Hayes will consider a “total solution” based around the use of Company X’s injectable products. The “total solution” will consist of what happens before, during, and after the product is used. Complementary spaces based around injectable devices that Harrison Hayes will examine include:

Sharps disposal programs and products

Physician education programs (how a Rx is written)

Proper injection technique

Injection aids

Note: Additional complementary areas will emerge

Path 5: Functional/Emotional Appeal to Buyers In most industries, companies appeal to potential buyers through functional or emotional appeal. Within the injectable drug delivery industry, however, the appeal is overwhelmingly functional. Functional appeal can be defined as rational or on calculation of utility. In most all cases, a patient’s need for an injectable medication is inelastic. A patient with diabetes, for example, must purchase insulin syringes or pen devices in order to deliver insulin (insulin pumps are not considered in this example due to their high cost), therefore the appeal is functional. Harrison Hayes will explore different scenarios that challenge the functional appeal of buyers within the injectable drug delivery space and deliver these results to the Company X project team. Potential emotional appeals that Harrison Hayes may explore include:

Green initiatives

Proper disposal initiatives

Good health programs

Adverse event education

Potential product “extras”

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Path 6: Future of the Industry In the medical device industry, as in all industries, it is important to examine external trends that will affect business over the course of time. It is important to question how these inevitable changes will evolve, be adopted, and become the industry standard. It becomes imperative that companies foresee these changes today so it can prepare itself for future changes and innovation. It becomes extremely important for companies to not only assess these changes and how these changes will affect the customer, but how a company may address, overcome, and continue to provide value to its customers. Future trends within the pharmaceutical and medical device industries are paramount for success. In assessment of this path, Harrison Hayes will utilize its trendspotting techniques, secondary research from its internal database, and syndicated and public sources. Trendspotting is a form of trending analysis focused on identifying unmet needs and emerging opportunities that may provide near-term and intermediate-term value generation for Company X’s customers. We do not guess trends; we detect, analyze and evaluate them to make evidentially supported projections. Examples of trends that Harrison Hayes will seek to uncover include:

Emerging regulatory and reimbursement hurdles on a global basis

Future medical, lifestyle, and healthcare related innovation

Technological advances in drug delivery (nanorobotics)

New prescription drugs entering the market

Combinatorial opportunities Path Selection Once Harrison Hayes has properly assessed each path outlined above, it will assimilate all the research data and present these findings to Company X. Each path will be supported by secondary and primary research that has been conducted throughout the process. Harrison Hayes will create a stack ranking of these paths, complete with strategic recommendations as to which path we believe would be the most viable selection for Company X. This report will provide Company X will all the necessary insight around each path and allow Company X to select the most lucrative and applicable path for the remainder of the project. Harrison Hayes will schedule a time to present and discuss our findings and recommendations to Company X. During this meeting, we will discuss in detail our research, findings and recommendations for Company X, including areas of highest relevance for the selection of the most viable Blue Ocean Strategy. From this report, Harrison Hayes proposes to have Company X select the path of interest that will be further explored in the remaining stages of the project.

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BIG PICTURE In order to properly illustrate the “big picture” rather than the intricacies of the drug delivery industry, Harrison Hayes proposes to construct a Strategy Canvas. Harrison Hayes will construct the Strategy Canvas in conjunction with Company X. The Strategy Canvas is meant to portray three (3) things: show a strategic profile of the drug delivery industry, strategic profile of current/potential competitors, and identifying which factors Company X should invest. Additionally, the Strategy Canvas, once complete, should portray Company X’s current and future Value Curve. In order to properly construct the Strategy Canvas, Harrison Hayes will provide current perceptions and principle factors about the drug delivery market and its role in overall customer selection. Principle factors may include characteristics such as:

Price of drug delivery format

Perception of quality

End consumer awareness of drug delivery formats

Ease of product use

Education about the appropriate drug delivery format

Brand positioning of COMPANY X products (how is COMPANY X

comparable/different from competition such as Competitor,

Competitor, etc.)

Perception of pain in drug delivery

Fear of drug delivery (i.e., needle fear; this may be related to

perception of pain)

Once these principle factors have been mutually agreed upon by Company X and Harrison Hayes, Harrison Hayes will begin the Strategy Canvassing process. The Strategy Canvas will be presented in graph format, inclusive of the principle factors that were previously agreed upon. Harrison Hayes will first create a Strategy Canvas for the drug delivery industry as a whole. Below is a sample of how the drug delivery industry’s Strategy Canvas may appear.

Price Quality Product Perception

Product Awareness

Pain Ease of Use

Sample Value Curves for Drug Delivery

Pen Needle

Syringe

High

Low

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Harrison Hayes will then ask Key Executives within Company X (Executives to be selected by Company X) in order to provide a current Strategy Canvas for Company X. Harrison Hayes will analyze the feedback from the Company X Executives in order to provide Company X’s current Value Curve within the industry. When Company X’s Value Curve is placed on the industry Strategy Canvas, it should clearly illustrate where Company X’s strategy is focused, diverged, and compelling. In order to create a new Value Curve for Company X, Harrison Hayes will construct an Eliminate-Reduce-Raise-Create Grid based on the following questions:

Which of the previously agreed factors should be eliminated from the drug delivery industry?

Which factors should be reduced below the drug delivery industry standard?

Which factors should be raised above the drug delivery industry standard?

What new factors should be created that are not currently available in the drug delivery market?

The first two questions will allow Company X and Harrison Hayes to best determine insight into how to lessen the overall cost structure compared to the existing competitors. The third question’s purpose is to uncover and eliminate any compromises the market requires its customers to make. The fourth question assists in the discovery of entirely new sources of value for buyers within the drug delivery space. The end goal of these four (4) questions is to explore how Company X can re-construct user value across different therapeutic areas and assist in the identification of potential new markets. Below is a sample of how Company X’s Eliminate-Reduce-Raise-Create Grid may appear.

Eliminate -Product perception

Raise -Perception of pain

-Ease of use Reduce -Price

Create -Injection aid program

Once the Eliminate-Reduce-Raise-Create Grid has been developed and mutually agreed upon by Harrison Hayes and Company X, Harrison Hayes will develop the updated Strategy Canvas, complete with the updated/proposed Company X Value Curve. This new Strategy Canvas will clearly illustrate and communicate both old and new strategic profiles for Company X. Harrison Hayes will assist Company X in achieving each of the points raised within the Big Picture process in order to successfully produce a Blue Ocean Strategy.

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BEYOND EXISTING DEMAND

The purpose of the third principle of Blue Ocean Strategy is to maximize the size of the created Blue Ocean by reaching beyond existing demand. Traditionally, companies attempt to grow their market by retaining and expanding upon existing customers. Therefore, Harrison Hayes will assist Company X in focusing not on existing customers, but on current non-customers. Blue Ocean separates non-customers into three tiers. The first tier is defined as “soon-to-be” non-customers who are on the edge of the market, waiting to jump ship. Second tier non-customers are those who consciously choose against Company X’s current market/portfolio of products. The third tier non-customers consist of the “unexplored” and are the farthest away from your market. Below is a visual representation of the three tiers of customers.

Three Tiers of Customers Harrison Hayes will perform a market analysis of Company X’s current non-customers as they relate to drug delivery. In this assessment, it is important to note that focus should not be placed on a specific tier of customers. Instead, Harrison Hayes will focus on identifying the customer group that will provide the greatest return for Company X as well as which identification of the customer base with the highest population. In order to best identify the Blue Ocean tiers of customers, Harrison Hayes will first meet with the Company X project team in order to obtain an internal assessment of the current customer base. Based on this information, Harrison Hayes can then perform an in-depth consumer analysis. Harrison Hayes proposes to obtain this customer data through the development of surveys that will be constructed in conjunction with the Company X project team. Additionally, Harrison Hayes proposes to utilize a Netnography study in order to best determine consumers’ thoughts and feeling towards Company X’s products as a whole. Netnography is similar to ethnography studies, but less intrusive. Netnography studies utilize online observations and interactions that are valued as a cultural reflection that

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yields deep human understanding. The online environment offers unlimited access to patients and physicians that will allow Harrison Hayes to gather information unobtrusively and in a timely, efficient manner. Additionally, information gathered in netnography studies is honest and unbiased. Harrison Hayes will segment the identified customers into the appropriate tiers, according to Blue Ocean Strategy, and present these findings to Company X. These findings will be supported by primary and secondary research that has taken place throughout this phase of the project. Harrison Hayes will provide a strategic recommendation as to which customer group would be the most viable and lucrative for Company X. From this report, Harrison Hayes proposes to have Company X select the most appropriate customer group for further examination and validation in order to move forward with a successful Blue Ocean Strategy.

STRATEGIC SEQUENCE Once Harrison Hayes and Company X have mutually agreed upon the previous three (3) principles of Blue Ocean Strategy, Harrison Hayes proposes to develop a strategic sequence for these initiatives. The fourth principle of Blue Ocean Strategy will focus on validating the identified Blue Ocean Strategies and determining their overall viability in the market. Blue Ocean defines the Strategic Sequence of this process as follows:

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Buyer Utility In order to determine buyer utility, Harrison Hayes proposes to develop a Voice of the Customer study guide/questionnaire. This study guide will be developed in conjunction with Company X in order to ensure the focus of the project is being properly addressed. Harrison Hayes will construct the Voice of the Customer study guide in accordance to Blue Ocean Strategy utilizing the “Six Levers” of the buyer experience (Purchase, Delivery, Use, Supplements, Maintenance, and Disposal). The overall goal of this particular study is to determine customers overall perception and acceptance of the proposed Blue Ocean product or service. Assuming feedback from the Voice of the Customer study is positive; Harrison Hayes will make the recommendation to move forward in the next step of strategic sequencing. If feedback is negative, Harrison Hayes will recommend that Company X re-consider the selected Blue Ocean drug delivery product/service. Pricing With the creation of a Blue Ocean product or service relating to drug delivery, it will become extremely important that the product/service is strategically priced. The appropriate strategic price will ensure that it will produce an effective revenue stream for Company X and provide value for its customers. Harrison Hayes will address the customers’ pricing needs in the previously mentioned Voice of the Customer study guide/questionnaire. This study will provide immediate feedback as to customers’ perception of value. Additionally, Harrison Hayes will perform a competitive intelligence piece focusing on similar/related products both within and outside the industry. Based on this primary and secondary research, Harrison Hayes will propose three (3) different pricing options: Upper level pricing, Mid-level pricing, and Lower-level pricing and make a strategic recommendation as to which pricing option would be best suited for each global region. Cost Given the sensitivity to confidential information and Harrison Hayes’s lack of understanding about Company X’s financial metrics, it would be our recommendation to perform a cost analysis on an “as-needed” basis as determined by Company X. Internal Hurdles In order to address internal hurdles within Company X, Harrison Hayes recommends relying on the DIVISION team in order to determine what those hurdles may be. Once the hurdles have been identified and agreed upon by DIVISION and Harrison Hayes, we will mutually construct a platform to address each specific hurdle.

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ORGANIZATIONAL HURDLES & EXECUTION

In order for Blue Ocean Strategy to be successful, all of the stakeholders within the Company X project team must “buy-in” to the strategy. As mentioned in the previous section, Harrison Hayes recommends relying on the DIVISION team to outline these organization hurdles as currently exist and may exist in the future. Once these organizational hurdles are outlined, Harrison Hayes and Company X can effectively create a successful implementation strategy in which all the stakeholders can mutually agree upon and put into practice. This methodology will ensure the successful implementation of a Blue Ocean Strategy internally at Company X.

PROJECT TIMELINE Harrison Hayes proposes to work on this project on a retainer basis until Date X. Upon termination of this period, the agreement may be renewed by Company X in six (6) month intervals.

company x blue ocean strategy

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