Blue Oceans

and
Other BIG Strategic Ideas

What You Will Learn

Become familiar with concepts behind

Blue Ocean Strategy

Learn what MPI has done to apply Blue
Ocean concepts to your association
Learn about net creation and open
innovation
Formulate ideas on how you might be
able to apply these ideas to your own
work

Red Oceans represent all industries in

existence today.
They have defined rules, competitors, and
market boundaries.
Key words might include competition, price
wars, market share, commoditization,
benchmarking, strategic positioning, value
add.

Blue Oceans represent all industries

NOT
in existence today.
This is undefined market space, otherwise
known as OPPORTUNITY.
Key words might be value innovation, focus,
differentiation, creation of demand, new
marketplace

Most blue oceans are created from red

ocean companies expanding industry
boundaries.
For example, Cirque du Soleil or
[yellowtail]
(more on this in a bit)

The phrase Blue oceans is new, but

the concept is not. Think of what
industries existed in 1900.
Take 3 minutes
At your table, brainstorm a list of
industries that have emerged since
then.

Some of them might be

automotives, aviation, health care,
plastics, DVDs, computers, personal
entertainment devices (iPods, for
example).
All of these industries created
new market space.

The premise is simple:

To win in the future, companies must
stop competing with each other.
The only way to beat the competition is
to stop trying to beat the competition.

The business environment in which

most business strategy and
management has been based on is
changing, evolving or disappearing.
Some of this change is due to
technology. Other reasons might be
culture, globalization, speed of new
information, or the role of
demographics in the workplace.

Value innovation is the new strategic

logic behind Blue Ocean Strategy.
Instead of focussing on beating the
competition, you focus on making it
irrelevant by creating a leap in value for
buyers and creating uncontested market
space.

Value innovation only occurs when

organizations have aligned innovation with
utility, price and costs.
The market must be ready to accept the
product, meaning that timing is key.
The focus is on both differentiation and low
cost to provide value to both customers
and the organization.

Graph of Value Innovation

Case study: Cirque du Soleil

Other circuses focused on:
Benchmarking the competition
High-profile stars, which increased
costs but who were largely unknown
to the general public
Traditional venue
Traditional audiences

Case study: Cirque du Soleil

Cirque du Soleil focused on:
Creation of a hybrid between the circus and
the theatre
Retention of the symbolic and glamorous
aspects of circus, such as the tent and the
more breathtaking aspects, such as acrobats
Incorporation of more comfort,
sophistication, elegance and theatrical plots;
this brought not only the richness of theatre
but a whole new demographic of customers
It looked across market boundaries and
created new ones.

The Strategy Canvas

Captures the current state of play in

the market by detailing the factors

players compete on in product,
service and delivery
For example, the wine industry
competes on price per bottle, refined
image in packaging, marketing
strategies, aging quality of wine,
prestige of vineyard, complexity of
taste and diverse product range

The Strategy Canvas

Each factor is plotted on the canvas,
with a high score reflecting the level
of investment a specific company
makes in that factor (for example a
high score on price means that the
price per bottle is high)
When you plot all US wineries, they
score remarkably similarly

Example of a Strategy
Canvas

Blue
Ocean
Space

The Strategy Canvas

To differentiate yourself in the market
place, you must focus on alternatives
and non-customers to re-define the
marketplace
For example, Casella Wines looked at
the strategy canvas and redefined
the question: How do you make a
fun and non traditional wine that is
easy for everyone to drink?

Case Study: [yellowtail]

Casella saw that most US consumers

preferred beer, spirits and prepackaged cocktails to wine

Consumers saw wine as a turn-off due
to
It was pretentious
The taste was too complex
It could be intimidating

Case Study: [yellowtail]

They created a wine that broke out of

the red ocean by creating a wine that:

Appealed to beer and spirits drinkers by
being fun and unpretentious as well as to
wine drinkers
Had a less complex, sweeter and smooth
taste
Was easy to select as it did not focus on
prestige, aging, etc.
They eliminated all factors that the wine
industry had long competed on

Four Actions:
Eliminate/Reduce/Raise/Create
Which of the factors that the industry
takes for granted should be
eliminated?
Which should be reduced?
Which should be raised well above
standard?
Which factors should be created that
have not existed before?

3 Characteristics of
a Good Strategy
It is focused; it is not diffused across
all potential aspects of the market
The shape of the value curve
diverges from any potential
competitors
It has a compelling tagline

Your Strategy Canvas

At your table, choose an industry one (or
more) of you belong to.
What industry are you in?
What factors does it traditionally
compete on? (i.e. price, amenities, etc.)
Are there any factors that set you
apart?
Are there any factors that do not add
any value and could be dropped?
What could be created to add value?

Creation Nets and Open

Innovation
Open innovation is the concept that

by looking beyond your own

boundaries, you can gain access to
better ideas, knowledge and
technology than you could by relying
on your own resources
Networks of creation, or Creation
Nets are an extension of this concept

Creation Nets
Involve many sometimes hundreds

or even thousands of people from

diverse backgrounds coming together,
often over the internet, to create
knowledge, learn best practices, and
build on each others work.
Nobody is as smart as everybody
William C. Taylor, Founder of Fast Company

The Positive Press

For companies, creation nets have many
advantages:

The rapid flow of change in todays economy

makes new knowledge valuable, as opposed
to the past where a private knowledge base
could give value overlong periods
Greater access to intellectual resources
Greater access to new and different
technologies
Ability to tap into knowledge across
traditional knowledge boundaries and
industries
Creative breakthroughs

The Negative Press

Trust can be hard to establish
Concerns about proprietary information
Large groups of people working to

innovate together can be hard to control

Conflict among participants increases the
more people involved
Different tolerances for cost
Uncertainty on how to create value
Loss of confidence in own abilities

Net Creation at Work

Development of iPod was stimulated

through a creation net formed by a

smaller player in the marketplace,
PortalPlayer
The development of Linux, a computer
operating system, was through net
creation and involved companies such
as IBM, Intel and Hewlett Packard
The discovery of gold in an Ontario
mine at Goldcorp, today considered
the worlds richest mine

Net Creation at Work

Development of the internet itself
The worlds most important technology
platform relies on ideas and computer
code generated largely by a
decentralized corps of volunteer
programmers, most of whom have
never met each other and few of whom
work together in any formal setting
William C. Taylor, Mavericks at Work

Net Creation Summary

Just because you are in charge doesnt

mean you need to have all the answers

Just because people dont work for you
doesnt mean that they cant work with
youbut you have to invite them
No one is as smart as everyone
It is about the architecture of
participation (Tom OReilly, OReilly Media)

Personal Creation Networks

Find a partner:
How can you utilize this concept either
personally or at work?
What technology exists that you can use?
At your table:
Share your ideas.
Pick one that you can share with the
room