Professional Documents
Culture Documents
Blue Ocean Strategy: Business Creativity & Innovation
Blue Ocean Strategy: Business Creativity & Innovation
Rene Mauborgne
The INSEAD Distinguished Fellow and Professor of Strategy and International Management
Two worlds
Red Ocean Compete in crowded markets Blue Ocean Create and capture new market space
Blue Oceans all industries not in existence today (unknown market space)
and accepted, and the competitive rules of the game are known In Blue Oceans, there exists untapped market space, demand creation, and the opportunity for highly profitable growth Most Blue Oceans are created from within red oceans by expanding industry boundaries
Two worlds
Red Ocean Strategy
Compete in existing market space. Beat the competition. Exploit existing demand.
revenue impact
62%
38%
Profit Impact
39%
61%
to make you stand out in the marketplace Innovation alone will often create a product that buyers are not willing to pay for Value innovation occurs only when companies align innovation with utility, price, and cost positions
Value innovation:
Make the competition irrelevant Create a leap in value for both buyers and your company Open up new and uncontested market space
Price
Set a price that attracts a mass of buyers
Cost
Set the structure based on a target
V1
V1 Quality
Quality
C1
Low
Structuralist
Reconstructionist
Minimizing Risks and Maximizing Opportunities in Formulating and Executing Blue Ocean Strategy
Core/Formulation Principles
Reconstruct market boundaries Focus on the big picture, not the numbers Reach beyond existing demand Get the strategic sequence right
Formulation Risks
Search Risk Planning Risk Scale Risk Business Model Risk
Execution Principles
Overcome key organizational hurdles
Execution Risks
Organizational Risk
Management Risk
COST
VI VI
VALUE
Head-to-Head Competition
Focuses on rivals within its industry Focuses on competitive position within strategic group Focuses on better serving the buyer group
Strategic Group
Buyer Group
Focuses on maximizing the value Scope of Product and of product and service offerings Service Offerings within the bounds of its industry
Functional-emotional Orientation of an Industry Time/Trends Focuses on improving priceperformance with the functionalemotional orientation of this industry Focuses on adapting to external trends as they occur
COST
VI VI
VALUE
Core Customer
Noncostumer
Soon-to-be-NC
Refusing Customer
3rd
2nd
new buyer utilities, at a price that attracts a mass of buyers, given target costs.
COST
VI VI
VALUE
No Rethink YES
Price Is your price easily accessible to the mass of buyers?
No Rethink
YES
Cost Can you attain your cost target to profit at your strategic price?
No Rethink
YES
Adoption What are the adoption hurdles in actualizing your business idea? Are you addressing them up front?
No Rethink
YES
Eliminate What factors that the industry has taken for granted should be eliminated?
Creating new markets: A new value curve
Create/Add What factors that the industry has never offered should be created or added?
Raise What factors should be raised well above the industry standard? Cirque du Soleil example
Strategy Canvas
high
low
Industry Variables
2. Visual Exploration
Go into the field to explore the six paths to creating blue oceans Observe the distinctive advantages of alternative products and services See which factors you should eliminate, create or change
4. Visual Communication
Distribute your before-and-after strategic profiles on one page for easy comparison Support only those projects and operational moves that allow your company to close gaps and actualize the new strategy
a declining industry with low profit potential Cirque du Soleil created uncontested new market space that made the competition irrelevant http://www.youtube.com/watch?v=M4lAPI 5BAuk
competition, Cirque du Soleil offered people both the fun and thrill of the circus and the intellectual sophistication of the theater Because of this, Cirque du Soleil appealed to both circus customers and noncustomers
Eliminate-Reduce-Raise-Create
Eliminate Star Performers Animal shows Aisle concession sales Multiple show arenas Reduce Fun and humor Thrill and danger Raise Unique venues
Create Theme Refined environment Multiple productions Artistic music and dance
lo
Price Animal Shows Star Performers Multiple Show Arenas Thrills & Danger Fun & Humor Theme Multiple Productions Refined Viewing Environment Artistic Music & Dance
Kim & Mauborgne 2006
Aisle Concessions
Unique Venue
Eliminate
Reduce
Raise
Create
Cirque du Soleil
offering level
lo
Price
Theme
Aisle Concessions
Unique Venue
Raise
Price versus budget wines Retail store involvement
Above-the-line marketing
Reduce
Wine complexity Wine range Vineyard prestige
Create
Easy drinking Ease of selection Fun and adventure
High
Low Price Above-the-line marketing Vineyard prestige Wine range Ease of selection
Aging quality
38
Wine complexity
Easy drinkability
Eliminate
Raise
Price versus budget wines Retail store involvement
Strategy Canvas
Costs
Value Innovation
Reduce
Wine complexity
Create
Easy drinking Ease of selection Fun and adventure
Buyer Value
> average 2* hotel > average 2* hotel > average 2* hotel 100 FF 200 FF of industry
Average Airline
Car Transport
Lounges
Hub Speed Frequent pointSeating connectivity Friendly to-point Class service departure choices
offering level
The Pencil
lo
Price Ease of Use Optional Features Speed Accuracy
Kim & Mauborgne 2006
Exercise
1. List Factors of
Competition
1. List 8 to 12 important Factors of Competition 2. Enter top 2 or 3 in each ERRC Grid Quadrant 3. Draw the Strategy Canvas: 1 on left, 4 on right
2. Top 2 or 3 in ERRC
Grid Quadrants
1. Eliminate:
3. Raise:
2. Reduce:
4. Create:
Rev: 2006.02.21
Exercise
3. 4. 5.
Write on Worksheet: E left, C right Draw As Is Draw To Be
Project Name:
Value Factors
Examples
Examples
Examples
References
W. Chan Kim, Rene Mauborgne, Blue Ocean Strategy, 2005,
Havard Business School Press. http://www.blueoceanstrategy.com HANDELSBLATT, Donnerstag, 06. Oktober 2005, Mit Nichtkunden neue Mrkte finden. http://www.hotelformule1.com
Assignment:
Choose a real product that is already on the market (it can be either one of the above or your own preferences of product), brainstorm the value factors of the product and develop the Strategy Canvas
Thank you