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Blue Ocean Strategy: How To Create Uncontested Market Space and Make The Competition Irrelevant
Blue Ocean Strategy: How To Create Uncontested Market Space and Make The Competition Irrelevant
Blue Ocean Strategy: How To Create Uncontested Market Space and Make The Competition Irrelevant
Introduction to BOS
BOS Tools : Strategy Canvas & E.R.R.C.
Awakening : As-Is Strategy Canvas
Exploration : Reconstruct Market
Boundaries
Strategizing : To-Be Strategy Canvas
Actualization : Identify actions to actualize
the strategies
Conclusion
Compete
Competeininexisting
existingmarket
marketspace
space Create
Createuncontested
uncontestedmarket
marketspace
space
Beat
Beatthe
thecompetition
competition Make
Makethe
thecompetition
competitionirrelevant
irrelevant
Exploit
Exploitexisting
existingdemand
demand Create
Create&&capture
capturenew
newdemand
demand
Make
Makethe
thevalue-cost
value-costtrade
tradeoff
off Break
Breakthe
thevalue-
value-cost
costtrade
tradeoff
off
Align
Alignstrategy
strategychoice
choiceofof Simultaneous
Simultaneouspursuit
pursuitstrategy
strategyof
of
differentiation
differentiationor
orlow
lowcost
cost differentiation
differentiationand
andlow
lowcost
cost
Third Third
Tier
Tier Second
Second
First Tier First Tier
Tier Tier
Your
Red Your
Market
Wine Market
X
Entertainment
Entertainment
Theater
Performance Theater
Performance
Circus
Circus
Circus
Circus
X
X
Everyone Everyone
Girls Else Girls Else
Other Other
Males Males
Young Young
Antisocial Antisocial
Males Males
Value
Innovation
Strategy Canvas
Eliminate-Reduce-Raise-Create
(ERRC) Grid
High
Eliminate Raise
AANew
New
Which of the factors that Which factors should be
the industry takes for
Value
Value raised well above the
granted should be Curve
Curve industry's
eliminated?
Strategically
Create Invest in
Which factors should be
created that the industry
has never offered?
Reduce Create
Back
Exploration : Strategizing :
Awakening :
Reconstruct Market To-Be Strategy
As-Is Analysis
Boundaries Canvas
High 4.5
4
Offering Level
3.5
Mid 2.5
2
1.5 Competitors
1 XYZ
0.5
Low 0
ss io
n e th s s g re
n e it a g
P
a tor li tie din ltu
n nk r ta ci
ve og Li ee i li an u
it ti c r c F a
Br e/
C
pe R
e try C
a Fa y l
l s st
om ona n du m
& fi e
C ti I a L
Fe
e
titu ogr
In
s Pr Competing Factors
Back
Across Time
Reduce Create
Price
Need for customers to
manage aircraft
Deadhead costs
High
Private Jet
NetJets' Value
Curve
Low Price Need for Deadhead Speed of total Ease of travel Flexibility and In- flight service
customer's to costs travel time reliability
manage aircraft
Across
Alternative
Industries Slow
Cheap
Point to Point
Fast
Expensive
Better Services Now Everyone Can Fly!
Flight Connections
Reduce Create
High
Air Asia
Offering Level
Land Transportation
Low t l l
ic
e p tn ly ke e n ta e ng ty tF g dg ote
Pr
m ec pp ic ng Co pi im ffi fe ec Re oa r
Co l u T u t a T a S a ir b H
e Se S r Lo ig
h C er St D e B et
ic at od Ai IP Fl ov 2P W s dg
Pr e o V p P r es u
S F o B
St Xp
Across Time
Traditional Home
Health Club Exercise Traditional
Health Club
Womanly
Fun
Full range Low Cost
exercise and
Privacy >10k
Good sporting
options Easy to Use Outlets &
Machine > 4M
members
Expensive. (as of
Peer Oct,
Not easily
accessible. Support
Bad Low 2006)
Complicated. motivation
Lack of
Privacy Affordable
Home Exercise
Reduce Create
Workout equipment
Availability of Instructors
High
Curve s
Low Price Amenit ies Workout Workout Time A vailabilt y of Environment Nonthreatening Convenience Womenly fun
Equipment instructors encouraging same- sex at mosphere
discipline and environment
motivation in
exercise
Expensive
Hygienic
Good Ambience &
Relaxing Environment
Rightly Priced
Economical Hygienic
Less Hygienic Better Environment
Less Appealing Environment Emotional Appeal
Nice Sleep!
Hot Shower!
Luxury
Expensive
Service
Facilities
Backpacker Hostels
No Frill
Cheap - Pay For What You Use!
Optional Add-ons:
Cheap Limited service, basic
Sleep & Go Low on price, high on personality
Walk in
Across Time
Traditionally Now
Prescribe Request
Family Fun
Wii Fit
Increased motion control
Reduce Create
High
Nintendo Wii
Gam e Industry
e cs cs y ty ie y se
n d
Low ic hi si Pa xi ov ar Fu an
Pr p y e pl
e
M i br f U
up W
ra Ph nl
in
om
L o
ro ic
G e se G ag
O C am Ea n/ M
G it o
ac
ter
In
Across Time
Corporate
Example : Jet
Traditional : Buses made from Steel
Less Space
Low Initial Price More Fuel High High
Supplementa Maintenanc
Purchase Delivery Use Disposal
ry e
Environmental
friendliness
Reduce Create
High
NABI
Low
Carrying bag
Immediate Enjoyment!
Book Selection
Repair &
Servicing
Logistics &
Distribution
Conventional
Distribution EMS
Mass
Production
Logistics
Mass
Production VI Part
Sourcing &
Production
Inventory
Prototyping Control
Prototyping
Sourcing
Design
Design
Vertical Integration
(VI) Model
Foxconn
Othe r EM Se s
Low
e ss g y ss ry li ty io
n
en olo oc
e l ive ua ra
t
iv n e Q
ti t ch Pr D
n te
g
pe T e lI
m a
Co r ti c
st Ve
Co
Across Time
Simple Pricey
Low Cost Extras
Low Price Feelings
Functional Emotional
Traditional Hair
Saloon
Hot Towels
QB House
Rev Message
Emotional Service -> None
Tea/Coffee
Hair Wash -> Air Wash
Special Hair /Skin
$9 Treatments
1996 2003 $27 - $45
Exposure
Global Classroom Encourage
Entrepreneurship
Reduce Create
Student Unconventional
Constraints Teaching Method
Fee Competition Ecosystem
High
Private Colleges
Low
n
on
d
re
ts
g
y
p
ts
m
re
re
es
io
ho
rit
kin
hi
in
tu
in
titi
te
ti t
su
tu
rio
Fe
et
ra
rs
ul
tra
pe
in
ys
pe
ul
po
eu
M
st
pe
C
Th
C
os
s
om
om
on
en
ty
on
g
u
Ec
in
e
tS
i li
lC
ia
C
tC
pr
iv
ch
ib
As
er
at
t re
e
ta
ex
en
ea
io
Fe
re
C
en
En
at
Fl
ud
lT
C
n
nm
l iz
ig
St
na
ba
re
ro
io
Fo
lo
vi
nt
G
En
ve
on
nc
U
Across Time
Napster started
> 2 billion illegally
music flies were being
online music file
traded every month
sharing service
As of Apr 2008, hosting 83.4 million videos and 3.75 million user channels
> 100 million videos were being watched every day
Reduce Create
High
YouTube
Ordinary Webhosting
Low
ow sl
e es
e er y te y ng ch
ti m us og si og ki ar
-h as Fe d r ol eb ol or
w H oa pe n w n w se
kn
o
nl d ch e ch et &
te ad te N gs
L
do
w tte se V al
TM ca -m FL ci ta
d/ o f- u dy a
H oa al
l
-o So de
fo
r
pl e s ea Vi
d U ac Ea R
ee sp
N e b
W
Weird Science
Longevity
Medicine Innovation
Ten Trends Economy
of
the Extreme
Fueling the
Future
Next Workforce
Future
Securing the
Globalization Future
Economical Expensive
Unpleasant Environment Pleasant Environment
Pollution 1 Stop Service
No Maintenance After Sales Service
Complementary
Prayer Service
Service Team
Products & Services
Across
Alternative
Industries
Buyer -> User & User -> Buyer
Pet Memorial Garden Bereavement
VIP Memorial Garden Product
Insurance Protection
Capital Gain
Reduce Create
High
NV Multi
Public Cemetery
Low
s
on
an
s
ar
ot
ed
y
e
ss
os
ls
ce
t io
er
ic e
er
ic
ge
titi
Fe
Pl
e
pl
bo
ng
et
et
n
Pr
l lu
oc
rv
pe
An
ra
m
ial
re
Ta
m
ra
Po
Se
Pr
ea
Ce
Ca
m
Ce
r
ar
te
Bu
Co
pp
d
e-
al
hi
te
ry
ou
er
e
Pr
fA
W
ic a
e
xu
bl
ay
n
ic
af
iz a
Fu
Lu
is t
Pr
lL
St
om
ph
p
el
o
So
st
St
Cu
ne
O
High 4.5
4 Competitors
Offering Level
3.5
3
Mid 2.5
2
1.5
1 XYZ
0.5
Low
0
h
n
ss
ng
es
re
10
11
9
at
ti o
ag
or
ne
or
tu
rP
i ti
di
ni
at
or
or
nk
ul
ci l
ct
i ve
an
og
li t
ee
ct
ct
Fa
C
Li
Fa
ci
Br
Fa
Fa
tit
ec
e/
ar
Fa
ry
pe
yl
lR
C
st
st
om
du
&
na
fe
m
In
C
Li
ti o
ra
e
itu
og
Fe
st
Competing Factors
Pr
In
Identify the
Divergent Factors
that Differentiate XYZ
from Competitors
Sub-Group :
Back
Eliminate Create
Divergent Factors
X=
Y=
Z=
Reduce Raise
Eliminate Create
Competencies Divergent Factors
X=
Y=
Z=
Reduce Raise
Technology Quality
Process
Talent New Value
Curve
Mid
Low
1. Focus
2. Divergence
Red Ocean
Sequence Cost Price Utility Adoption
How difficult to
The Six Utility Levels
Legal or
Environmental environmental
Friendliness issue of the
product
disposal?
Customer
Productivity
Convenience
Insourcing
Risk
Environmental
Global Guru Friendliness
Conventional Test water with price insensitive customers. Drop price over time to
attract mainstream buyers.
Why ?
Volume gives Economy of Scale. E.g., Microsoft Windows XP.
All or Nothing. E.g., eBay.
Lack of Excludability would give rise to Free-Riding. E.g., Air Asia, OldTown.
An offerings reputation must be earned from Day One => Buyers cant refuse.
Different Form
Different Form and
Same Form Same Function Function, Same Objective
Suitable for companies with no patent and asset protection (e.g., expensive production
factory).
Their Blue Ocean offering has high fixed costs and marginal variable costs.
Their attractiveness depends heavily on network externalities (all-or-nothing proposition such
as eBay).
Their cost structure benefits from steep economies of scale and scope. Volume brings with
it significant cost advantages.
The Target
Profit
Streamlining and
Partnering
Cost Innovative
1500 partners over 50
Metal/leather -> plastic
countries
150 -> 51 parts
Cheaper assembly Pricing Innovation
Cognitive Resource
Hurdle Hurdle
Motivational Political
Hurdle Hurdle
Sewer Underground Ride the electric sewer Focus on kingpins the key Who are your
pipe carrying drainage influencers
- Experience first hand the real situation on kingpings ?
water or waste
the ground Fishbowl management of kingpins What review/metrics
- Kingpins actions and inactions are made do you use ?
Bring those in denial Meet with Disgruntled Customers as transparent to others as are fish in a
bowl of water How do we
to feel the pain and - You cant outsource your eyes breakdown the 3
meet the customers Atomization
- Get feedback from biggest critics differentiators into
- Break down overall strategic objective into sizeable chunks?
bite sized chunks; different levels
understand their goal
Resource Political
Where are XYZs Hot
Hot spots Leveraging angels Who will align the
spots and Cold spots
? - Low resources input but high potential - Angels = those who have the most to gain most with XYZ ? Who
performance gains from the strategic shift will fight with XYZ ?
Revenue vs Resource Silencing devils
Cold spots What can you lobby to
?
- Activities that have high resource input but - Devils = those who have the most to lose become your
Beside headcounts, low performance impact from it Godfather ?
what other resources Getting a consigliere on their top
- Redistribute resources to hot spots from
can you trade ? cold spots management team
Meeting room ?
Horse trading - Consigliere = politically adept but highly
respected insider who knows in advance all
- Swap resources around to where it is
the land mines, including who will fight you
needed
and who will support you
Trust &Commitment
Attitude I feel my opinion counts.
Volunteer
Behavior Cooperation
Ill go beyond
the call of duty.
- But to focus on the red ocean is therefore to accept the key constraining factors
of war- limited terrain and the need to beat an enemy to succeed and to deny
the distinctive strength of the business world: the capacity to create new market
space that is uncontested.
2. But to sustain high performance, companies must create their own blue oceans,
and make the competition irrelevant!
The book provides practical examples and guides to create blue oceans.