Blue Ocean Strategy

Rebecca EggermanAlexander Johnson

Miguel A. LopezHannah StephensCarissa Tarnowski

PreviewCirque du SoleilBlue Vs. Red OceanCreation of New Blue OceansBlue OceansBlue Vs. RedResult of Blue Ocean InitiativesThe Rising Imperative of Creating Blue

OceansResultsFrom Company and Industry to Strategic

Move

PreviewThe Strategic MoveValue InnovationValue-Cost Trade-off Benchmarking CompetitionBreaking the Market BoundariesFormulating and Executing Blue Ocean

StrategyFrameworks for SuccessBeyond the Text

Cirque du SoleilCreated in 1984 by group of street

performers

Seen by 40 million people in 9 cities around the world

Achieved the same level of revenues that Ringling Bros. and Barnum & Bailey made in 100 years but in only 20 years

Blue Vs. Red OceanRed Ocean

Represents all the industries in existence todayThis is known as the market placeIndustry boundaries are defined and acceptedCompetitive rules of the game are knownCompanies try to outperform their rivals to

grab a greater share of existing demand

Blue Vs. Red OceanBlue Ocean

Is defined by untapped market space, demand creation, and the opportunity for highly profitable growth

Some are created within red oceans by expanding existing industry

Competition is irrelevant because the rules of the game are waiting to be set

They are uncharted

Creation of New Blue OceansNew industries are constantly being createdHistorically, countless industries that exist

today did not exist decades agoChange from SIC to NAICSMilitary strategy in business

Blue OceansNew industries are constantly being created

that would not have even been thought of 30 or even 10 years ago

Smartphones, flat screen televisions, clean jet engines vs. airplane, automobile, radio, television

Blue Ocean vs. Red OceanMajority of new business plans are aimed at

red ocean strategiesOnly 14 percent of new business launches

were aimed at blue oceans

Result of Blue Ocean InitiativesBlue ocean business launches do not affect

revenues but increase profits much more often than red ocean endeavors

Impact of blue oceans is notable even though they make up such a small minority of business endeavors

The Rising Imperative of Creating Blue Oceans Technological advances

Increasing numbers of industriesSupply exceeds demand

GlobalizationReadily available consumer informationDrowning markets

ResultsAccelerated commoditization

Products and services becoming similarConsumer selection based on price

Ex. Colgate vs. Crest

Red oceans become “deeper”More cut throat competitionNeed for blue oceans

From Company and Industry to Strategic MoveHow to achieve blue ocean status

Researching “excellence” and “visionaries” Ex. In Search of Excellence and Built to Last

Industry vs. company success (Creative Destruction) Ex. Hewlett-Packard

Right one minute, wrong another Companies and industries not correct analysis unit

The Strategic Move

Blue ocean research Small/large companiesYoung/old managersPrivate/publicLow/high –tech

Similar patternStrategy

“Set of managerial actions and decisions involved in making a major market creating business offering”

Value Innovation: The cornerstone of Blue Ocean StrategyApproach to strategy- what separated the

winners from the losersConsistent across time regardless of industry

Red ocean companies raced to beat competition through defensible position

Blue ocean companies didn’t use competition as a benchmarkFollowed value innovation

Value InnovationFocus on making the competition irrelevant by creating a

leap in value for buyers and your company, thereby opening up new and uncontested market space

Equal emphasis on value and innovation Value without innovation= value creation Innovation without value= technology driven, market

pioneering, or futuristic

Occurs only when companies align innovation with utility, price, and cost positions

A new way of thinking about and executing strategy that results in creation of a blue ocean and a break from competition

Value-cost trade-off Conventional belief- companies can create

greater value to customers at a higher cost or create reasonable value at a lower costExamples?

Should pursue low cost and differentiation simultaneously

Benchmarking competition and maximizing shrinking share

Red ocean strategy

Breaking the market boundaries of theater and circus

Blue ocean strategyAchieved both differentiation and low cost

Red Ocean Vs. Blue Ocean StrategyRed Ocean Strategy Blue Ocean Strategy

Compete in existing market place Create uncontested market space

Beat the competition Make the competition irrelevant

Exploit existing demand Create and capture new demand

Make the value-cost trade-off Break the value-cost trade-off

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

Align the whole system of a firm’s activities in pursuit of differentiation and low cost

Formulating and Executing Blue Ocean StrategySuccess

Lower odds?Strategy

OpportunityRisk

Analytical Frameworks and ToolsRed Oceans

Frameworks For SuccessChapter 2

Analytical ToolsChapter 3

Search RiskChapter 4

Value Innovations

Chapter 5Market Size

Chapter 6Business Model

Chapter 7Tipping Point

LeadershipChapter 8

Strategy MakingChapter 9

Dynamic Aspects

Principles

Beyond the TextSingle-cup Coffee Makers

OverviewCirque du SoleilBlue Vs. Red OceanCreation of New Blue OceansBlue OceansBlue Vs. RedResult of Blue Ocean InitiativesThe Rising Imperative of Creating Blue

OceansResultsFrom Company and Industry to Strategic

Move

OverviewThe Strategic MoveValue InnovationValue-Cost Trade-off Benchmarking CompetitionBreaking the Market BoundariesFormulating and Executing Blue Ocean

StrategyFrameworks for SuccessBeyond the Text

“We cannot predict the future. But we can create it.”

-Jim Collins, Great by Choice