Crystal Hill

Stephen Lechtenberg
Anand McGee
Allison Purtell
Jason Torres

Reconstruct Market
Boundaries
Challenge: Successfully identify, out of
the possibilities that exist, commercially
compelling blue ocean opportunities

Six Paths Framework:

Clear patters for creating blue oceans
They have general applicability across

industry sectors, and they lead companies

into the corridor of commercially viable
blue ocean ideas
These paths challenge the fundamental
assumptions underlying many companies
strategies

Six Fundamental Assumptions:

Keep companies trapped in Red
Define their industry similarly and focus on being
Oceans
the best within it
Look at their industries through the lens of

generally accepted strategic groups, and strive to

stand out in the strategic group they are in
Focus on the same buyer group, whether its the
purchaser, user, or influencer
Define the scope of the products and services
offered by their industry similarly
Accept their industrys functional and emotional
orientation
Focus on the same point in time-and often on
current competitive threats-in formulating strategy

Path 1:Look Across

Alternative Industries
Companies compete not only with the other

companies in its own industry but also with

companies in those other industries that
produce alternative products or services.
Alternatives are broader than substitutes
-Example: Starbucks
Substitutes: House Blend, French Blend, Latin

American Blends, Asian Pacific Blends, etc.

Alternatives: Tazo Teas for Coffee

Path 1: Look Across Alternative

Industries, cont.
In making every purchase decision, buyers

implicitly weigh alternatives, often unconsciously

Sellers rarely think consciously about how their
customers make trade-offs across alternative
industries
Space between alternative industries provides
opportunities for value innovation
By focusing on the key factors that lead buyers
to trade across alternative industries and
eliminating or reducing everything else, you can
create a blue ocean of new market space

Examples: Companies
Looking
Across
Alternative
Home Depot:
Offer the expertise of professional home contractors
Industries

at markedly lower prices than hardware stores

By delivering the decisive advantages of both
alternative industries, and eliminating or reducing
everything else, they have transformed the ordinary
homeowners into do-it-yourselfers

Southwest Airlines:
Concentrated on driving as the alternative to flying,
provided the speed of air travel at the price of car
travel

Examples cont:
Starbucks
Starbucks looked across alternative industries
and entered the markets of:
Ice-Cream
CDs, books
Drinkware-cups, mugs, tumblers
Instant Coffee
Brewing Equipment

Path 2: Look Across Strategic

Groups Within Industries
Figure out which factors determine customers

to trade up or down from one group to

another
Examples:
Ralph
Lexus

Lauren

Curves For Women

Women trade up or down between:
At home exercise programs

More convenient, but easy to get distracted

High end health clubs

Lots of men, expensive, inconvenient

Developed new concept

Women only, more locations, smaller buildings,
cheap to join and manage.

Path 3: Look Across the Chain

of Buyers
Purchasers, users, and influencers
Companies usually focus on a single buyer

group
Create blue ocean by shifting buyer group

Novo Nordisk
From insulin producers to diabetic care
company
Starbucks
Selling coffee beans to grocery stores

PATH 4: Look Across

Complementary Product & Service
Most products and services are affected by
Offerings
other products or services
Many companies fail to notice this
The key is to define a solution buyers seek
when they choose a product or service
A simple way to do this is to think about what
happens
Before
During
After

NABI
Hungarian bus company that applied Path 4

to U.S. transit bus industry

Competition competed on offering the lowest
purchase price for buses
But,
Designs outdated
Delivery times were late
Quality was low

NABI
Discovered it was costs that came after initial

bus was purchased

Maintenance over its 12 year cycle
Repairs after accidents
Fuel usage
Wear and tear
Rusting
Rising demand for cleaner air

NABI Finds Total Solution

Normally made of steel
Heavy
Corrosive
Hard to replace parts after accidents
NABI adopted fiberglass when making its

buses
Solution that killed 5 birds with one stone

Fiberglass Buses
Cut costs by being corrosion free
Light weight cut fuel consumption and

emissions
After accidents they didnt have to replace a
whole panel rather they could cut the
damaged area and replace it
Lighter weight also meant lower powered
engines and fewer axles which cut costs
And gave more space inside the bus

Now we must ask

ourselves
Context of how our product or service is used
What happens before, during and after the

product or service is used

How to eliminate problem areas through a
complementary product or service offering

Path 5: Look Across

Functional
or
Emotional
Emotionally Oriented
Appeal
Buyers
Add priceto
without
enhancing functionality .
Functionally Oriented
Blend commodity products with life by adding
emotion.
Examples:
Swatch, The Body Shop, Quick Beauty House

Quick Beauty House

Created a Blue Ocean in the Japanese

barbershop industry.
Shift from emotional to highly functional
Eliminated the time and cost of getting a

haircut

Re-defined the Japanese barbershop industry.

Cemex
The worlds third largest cement producer.
Created a blue ocean by shifting from

functional to emotional.
Mexicos poor didnt have enough money to
purchase building materials.

Patrimonio Hoy
Created around the traditional Mexican

system of tandas.
Example:
Ten individuals contribute 100 pesos per week

for 10 weeks. Lots are drawn to see who wins

the 1,000 pesos. Each individual wins one time
only.

Patrimonio Hoy works in the same way.

Functional Orientation
Service Industries
Direct Line Group has done away with

traditional brokers.
Eliminating emotional orientation

Vanguard Group, Charles Schwab

Path 6: Look Across Time

What companies tend to do:
Focus on same point in time
Passive actions
Projecting trend itself
External Threats
What companies need to do:
Look into time
Dont predict future
How the trend will bring Value

Assessing Trends
Three principles:
1) The trends must be decisive to your business
2) They must be irreversible
3) They must have a clear trajectory

-Impact on your business

-Work back from conclusion
-Ex: EU, iTunes, Cisco, CNN, Sex and the City

Conceiving New Market

Space
Think across conventional Boundaries
Dont rely on trial/error, predicting, intuition
Engage in structured process

Questions?