1 @thinkerings

Finding Blue Oceans

James AlexanderTPM Mentor

1 @thinkerings

So

urce: T

ida

l Vis

ion

US

A

2 @thinkerings

a little about me

• Strategy and delivery executive at IBM iX

• Product management executive at Adobe for 7 years

• Three start-ups• Two exits

2 @thinkerings

3 @thinkerings

13.5 13.4

10.6 10.410 9.9

9.18.2 8

7.5 7.2 7 6.7 6.6 6.4 6.3 6.3 6.2 6.1 5.9

2014 R&D Spend ($Bn)2014 PWC Global Innovation 1000 Study

innovation is a big business…

top 20 R&D spenders invested $165.3 billion in 2014

4 @thinkerings

Top$20$Spenders9%

21$0 1000$Spenders27%

100102000$Spenders3%

Everyone$Else61%

$165.3 B$481.7 B$48.5 B

$1,083.7 B

The top 1,000 R&D spenders have 40% share of innovation spend.

The next 1,000 companies have just 3% share of spend.

…companies invest on average 3.5% of revenue…

top 1,000 R&D spenders invested $657 billion in 2014

5 @thinkerings

4.5

8

6.6

13.4

0.2 1.7

4.8

10.4

6.2

2

Apple Google Amazon Samsung Tesla Motors 3M General Electric Microsoft IBM Procter & Gamble

Top 10 Most Innovative Companies ($Bn)2014 PWC Global Innovation 1000 Study

1 2 3 4 5 6 7 8 9 10

…but money can’t buy love.only 5 top spenders were ranked most innovative…the top 10 most innovative spent 43% less then the top 10 spenders

6 @thinkerings

3 kinds of innovation

7 @thinkerings

8 @thinkerings

9 @thinkerings

10 @thinkerings

is there a golden ratio?

Companies that allocated

about 70% of their

innovation activity to core

initiatives, 20% to adjacent

ones, and 10% to

transformational ones

outperformed their peers,

typically realizing a P/E

premium of 10% to 20%.

Source: Managing Your Innovation Portfolio - HBR

70%...20%...10%

70%

20%

10%

Core

Adjacent

Transformational

11 @thinkerings

blue ocean strategy

• Proposed by W. Chan Kim and Renee Mauborgne of INSEAD in 2004

• Competing in overcrowded industries is no way to sustain high performance

• The real opportunity is to create blue oceans of uncontested market space

• Blue oceans are not about technology innovation

why compete at all?

Red Ocean

Blue Ocean

12 @thinkerings

key differences between red oceans and blue oceans

• Compete in existing market space

• Beat the competition

• Exploit existing demand

• Make the value/cost trade-off

• Crowded space lowers profits and growth as products become commodities

• Create uncontested market space

• Make the competition irrelevant

• Create and capture new demand

• Break the value/cost trade-off

• Growth is profitable and rapid

red oceans and blue oceans are not mutually exclusive

13 @thinkerings

pioneer-migrator-settler map

create a balanced portfolio; pioneers will be imitated

Settlers are businesses offering me-too value; migrators are businesses with value improvements over competitors'; and pioneers are

businesses that offer unprecedented value—blue ocean offerings.

14 @thinkerings

pioneer-migrator-settler map

create a balanced portfolio; pioneers will be imitated

Settlers are businesses offering me-too value; migrators are businesses with value improvements over competitors'; and pioneers are

businesses that offer unprecedented value—blue ocean offerings.

15 @thinkerings

tools for red oceans and blue oceans

• Porter’s Five Forces• Supplier Power• Buyer Power• Threat of New Entrants• Substitutes• Rivalry

• Blue Ocean Strategy (BOS)• Analytical Tools & Frameworks

(Strategy Canvas & Four Actions Framework)

• Formulating Blue Ocean Strategy• Reconstructing Market Boundaries• Focus on Big Picture• Reach Beyond Existing Demand• Get Strategic Sequence Right

• Executing BOS• Overcome Key Org Hurdles• Build Execution into Strategy

16 @thinkerings

an assignment: four actions frameworkchallenging an industry’s business model

17 @thinkerings

wrap up

• Companies spend $1 trillion annually on innovation

• Innovating thoughtfully saves cost and amplifies impact

• Many existing industries are crowded and commoditized

• One approach is to eliminate competitors by identifying entirely new markets

• A Blue Oceans Strategy is never complete…pioneers will eventually face competition

• Successful product managers will build a balanced portfolio across red and blue ocean opportunities

18 @thinkerings

sources & resources

• Blue Ocean Strategy (Original HBR Article)• https://hbr.org/2004/10/blue-ocean-strategy

• Blue Ocean Strategy (Book)• http://www.amazon.com/Blue-Ocean-Strategy-Uncontested-

Competition/dp/1591396190

• Identify Blue Oceans by Mapping Your Product Portfolio• https://hbr.org/2015/02/identify-blue-oceans-by-mapping-your-product-

portfolio

• PWC 2015 Global Innovation Study• http://www.strategyand.pwc.com/innovation1000

• Managing Your Innovation Portfolio• https://hbr.org/2012/05/managing-your-innovation-portfolio