Blue Ocean

Strategy Institute

Blue Ocean Strategy

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Implementation Scenario
Case:
Tipping Point Leadership and

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Fair Process in Action

SCENARIO CASE

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10/2008-5532
This scenario case was created by Katrina Ling, Institute Executive Fellow of the INSEAD Blue Ocean Strategy
Institute, under the supervision of Professors W. Chan Kim and Renée Mauborgne at INSEAD. It is intended to be
used as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative
situation.
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 Blue Ocean Strategy Institute

Scenario 1 – Health Insurance Sector

You are the Senior VP of Sales and Marketing for a multi-billion-dollar health insurance
company. Over the last few years, you have noticed increased competition in the large group
market – providing health insurance coverage to employees of large companies. No matter

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how much you spend on advertising, endless golf outings with HR directors, and increasing
commissions to spur your sales reps towards achieving their sales quotas, new accounts have
merely trickled in and existing accounts are always ready to jump ship in response to the
slightest premium discounts from your competitors. Your newer reps are struggling to
establish themselves in this red ocean. Your 50-person call center continues to make sales
prospecting calls using purchased lists, but you have only seen minimal results from your
calling campaigns despite the sales experience of your call center reps.

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Your CEO is determined to swim out of the red ocean and into the blue. While others on the
executive team have been tasked with implementing the ERRC grid in various areas of the
company, you have been directed to bring in noncustomers from a different strategic group

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with no additional resources. Specifically, you have been asked to explore the noncustomer
group of small employers with 50 or fewer employees which have been underserved by the
industry. Even though the company has a few small group accounts already, they have not
been very well served. Medical referral requests for small group health insurance members to
see specialists are often delayed and claim payments are slow. Staff responsible for these
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operations see small group accounts as a lower priority because the Operations Director who
oversees this area views this as a minor issue.

You cringe at the thought of telling your large group sales reps to go after smaller accounts
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because not only will they have to forego the country club atmosphere in favor of grassroots
efforts in the neighborhood, but they will also have to close more sales to earn a level of
commission equivalent to a larger account. You expect the greatest resistance to your strategic
shift to come from your more experienced reps with established large group accounts.
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On the bright side, if you perform more community outreach, your doctors will be very happy
since they lack the additional staff and financial resources to promote their medical services to
grow their practice in the community. The doctors believe that on-site health fairs at their
medical practices are the best approach to draw in prospective patients, since many of these
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noncustomers are busy small business owners, whose employees do not take the time for
regular check-ups. You know your CEO can help you revamp the sales team because he has
come up through the ranks as a top sales maverick. You also know your sales managers can
see the untapped market potential and align with your goals, even though the sales quota
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seems a bit ambitious for the first year.

How can you apply the principles of tipping point leadership and fair process to overcome
these organizational hurdles to execute a new blue ocean strategy for your health insurance
company?

Copyright © 2008 INSEAD 1 10/2008-5532

 Blue Ocean Strategy Institute

Scenario 2 – Manufacturing Sector

You are the Product Manager in a technologically innovative company that designs and
manufactures micro-turbines, i.e. small generators for producing electricity. The company is
very proud of its leadership in technological innovations and has the patents to prove it. In
fact, 12 of the 24 engineers are dedicated to producing the documentation for patent

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applications and to monitoring the industry for any patent infringements. You also have the
latest, most expensive testing equipment which is the envy of the local university engineering
professors who wish they had the ability to teach their students using such advanced
technologies.

In order to implement a new blue ocean strategy, your manufacturing process will have to go
through some eliminating, reducing, raising and creating. By combining with technology that

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is already available in the aerospace industry, the strategic shift will make the product much
simpler to make and less prone to malfunction. Historically, when the company’s proprietary
products failed, it often took days for the customer to get a company technician dispatched to
their site for the repair. This delay translates into lost revenues and a logistical nightmare for

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your customers to find an alternative source of energy. The other 12 design engineers are
pushing hard to redesign the manufacturing process and reconfigure the plant to accommodate
the changes. Unfortunately, despite the long hours, the redesign group is falling behind
schedule and you cannot seem to get any empathy from the Chief Technology Officer who
oversees both the design and patent engineers. You feel a bit handicapped because you have
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been given this big task to achieve with no additional resources.

You are also concerned about the plant workers since those whose production station will be
eliminated need to be reassigned to the newly created production station. These workers
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happen to be the ones closest to retirement and cannot be bothered to learn anything new.
Their resistance could cause production delays or, worse still, production problems or defects.
You take comfort in meeting the plant manager who understands your urgency and is
respected by the workers because he has worked hard to rise from the shop floor to
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managerial level. The foreman and quality assurance manager also seem to be on board with
the new blue ocean strategy since they see much simplification and improvement in worker
productivity ahead.

The sales team has already received advance orders for the new micro-turbines. You have
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been given very ambitious production targets to meet the expected new demand. How can you
apply the principles of tipping point leadership and fair process to overcome these
organizational hurdles to roll out a quality line of new machines on time?
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Copyright © 2008 INSEAD 2 10/2008-5532

 Blue Ocean Strategy Institute

Scenario 3 – Government Sector

You are the Deputy Prime Minister in a developing country. The newly elected Prime
Minister wants to create a first-world country in a third-world region by eliminating
corruption, reducing subsidies for failing state-owned enterprises, raising the country’s
domestic output and creating more opportunities for foreign and private investment. Your

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country uses brown coal to generate electricity. This source of energy is not only
environmentally unfriendly, but the current grid does not produce enough electricity to
support the industrial expansion envisioned by the new Prime Minister. Since neither hydro
nor wind power generation is feasible for your country, the new Prime Minister wants you to
promote nuclear energy.

Moving to clean energy has been on the mind of the Planning Minister for many years. He has

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even devised future land use and tax incentives for clean energy power plants. However, each
time the topic has come up in parliament, the Power Minister has always refuted the idea
with: “Yes, but brown coal is so cheap. That’s the only way we can keep our state-run power
plants in operation.” He also reminds everyone of the time citizens fearful of nuclear energy

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had organized a demonstration. Even his staff members oppose the idea of introducing new
technology because the regulators will have to learn new skills to properly inspect a nuclear-
powered plant. As the electricity industry is highly regulated, state regulators currently make
frequent visits to coal-burning plants to inspect the facilities and update their regulations
accordingly.
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You feel caught in a bind. You need to increase the power supply to grow the economy, but
you need a richer economy to pay for the new power infrastructure. You then learn that in
other countries, the government has used the Build-Operate-Transfer model to entice private
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or foreign firms to build new generators, operate for a period of time (e.g., 25 years) to make
enough profit to pay for the original construction, and then transfer the ownership of the
power plant to the government. However, the current price of electricity is too low to make
the payback period feasible. The Finance Minister is unwilling to raise the price of electricity
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for fear of social unrest being unleashed by high prices rippling through the economy.

Your country provides health care for its citizens. Two years ago, a report published by the
Health Ministry showed that an accumulation of brown coal dust in humans decreased their
lung functions. You recall that the former Deputy Prime Minister almost got the Power
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Minister to agree to explore alternative sources of clean energy. However, the report was not
shocking enough to push for real reform, much to the disappointment of the Health Minister
and environmental advocates throughout the country. In fact, that experience piqued the
former Deputy Prime Minister’s interest in the environment. He is now working as an
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environmental advocate in the private sector.

How can you apply the principles of tipping point leadership and fair process to overcome
these organizational hurdles that not only involve the government but also public
stakeholders?

Copyright © 2008 INSEAD 3 10/2008-5532

 Blue Ocean Strategy Institute

Scenario 4 – Banking Sector

You have recently been promoted to the position of branch manager of a national bank that
has been in business for three decades. In your new post, you learn that the branch has
received many customer complaints. Some of those customers were angry enough to have
moved their accounts elsewhere. The customers who left your bank have good credit ratings

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so they are actually customers you wish to keep. In talking with some of them, you discover
that they enjoyed the personalized attention they got from the tellers, but they were irritated
by long wait times, whether they accessed your bank by phone, via the website, or by visiting
your branch in person. They were also aggravated by the many fees your bank charged, which
made it painful to review the monthly statement.

Your Regional VP has tried to attract new customers through heavy advertising and interest

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rate promotions, but the rate of retention is low. You tried to discuss these operational issues
with her but her reply was: “Yes, but customers always complain. Besides, it’s the EVPs who
need to change our policies. Meanwhile, we are investing in more retail locations, renovating
older branches and setting up Welcome Teams to build relationships with customers while
they stand in line.”

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You were curious to see if these issues were affecting branches in other regions, so you
contacted several branch managers and found that they had the same concerns. In fact, they
and their Regional VPs were as eager as you are to do something to stop the exodus of their
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key customers. The call center manager is also eager to improve her call center statistics
including average call queuing time and abandonment rates as they impact her annual bonus.

Upon further investigation, you discover that the common link across these delays is the
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operational procedures built into the decades-old network of computer systems. Some of the
procedures are no longer applied and should be reduced or eliminated, while new procedures
should be raised or created to handle the more complex customer transactions today. You
realize the bank can create a blue ocean by offering the transactional speed of Wall Street
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with the personal touch of Main Street. This strategic shift in the bank’s operations will also
improve staff productivity across the branches and call center, and reduce the cost of labor.
However, the CIO has built his career at the bank on the successful implementation of the last
system upgrade almost 12 years ago. Both he and the CFO are reluctant to make a strategic
shift due to the financial burden it would put on the bank and the anticipated disruption to the
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staff of the call center and the branches.

As you ponder the alternative to simply maintaining the status quo, you notice that a new
board member is the managing director of a major international information technology
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consulting firm and a good friend of the EVP who oversees your region and 11 other regions
across three states.

How can you apply the principles of tipping point leadership and fair process to overcome
these organizational hurdles to execute a new blue ocean strategy for your bank?

Copyright © 2008 INSEAD 4 10/2008-5532

 Blue Ocean Strategy Institute

Scenario 5 – Politics
You are a recent law school graduate running for State Senator. The summer you campaigned
as a volunteer for your US Senator, many people told you they chose not to vote because they
felt their vote would make no difference to the political outcome. Besides, the process to
register was confusing and the voting stations were far from where they lived and worked.
You explored the problem of shrinking voter involvement in your thesis and discovered that

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you could create a blue ocean by combining the reach and interactivity of web-powered
communications with the personal touch of door-to-door outreach, and then reducing or
eliminating everything else. It all sounds good on paper, but how do you begin to execute
such lofty ambitions?

Even though your former thesis advisor is a veteran in politics and can help you put together
your campaign, you are still a neophyte among a field of experienced candidates who are

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better funded. They have raised millions of dollars to spend on television advertising, high-
priced political consultants, lavish events to court big donors and lobby delegates, and
extravagant locations for campaign speeches. In fact, one candidate has already started
running negative ads against the rest of the field to exploit individual weaknesses, such as
inexperience in your case.

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After a few months of organizing, you have assembled a small team including a campaign
manager to oversee the logistics of the entire campaign, a chief strategist to develop your
campaign direction, a communications director to turn the campaign direction into key
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messages, a field director to manage your community volunteers and a finance director to
keep track of campaign funds. A growing number of volunteers are university students who
found you through your website. These are internet-savvy youths who are adept at building
web-based social networks with aspirations to work for high-tech firms in Silicon Valley.
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Over the few days your website has been operational, you have received thousands of blog
comments from young supporters who also support other state senators with political
positions that are aligned with yours. Some university clubs have meeting lounges, complete
with phone and internet access, and even buses that are used occasionally for member
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activities.

Once you announced your candidacy, some of the former campaign staff who worked with
you on the US Senator team have joined your organization. While they bring field-tested
campaign experience, they also bring a superiority attitude rooted in traditional thinking. They
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insist you are wasting your time by registering non-voters because they will not come through
for you on election day. They even argue with you in front of other staff about why you
should focus on big donors to follow the proven approach.
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As you reminisce about the conversations with your law school classmates and how they
shared your passion to make a difference through politics, you wonder how they are enjoying
their work at influential law firms and high-tech, social networking companies in Silicon
Valley.

How can you apply the principles of tipping point leadership and fair process to overcome
these organizational hurdles to execute a new blue ocean strategy to launch your political
career?

Copyright © 2008 INSEAD 5 10/2008-5532

 Blue Ocean Strategy Implementation Scenario Case - Answer Template Handout
Worksheet for Breakout Group __________ Scenario __________
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Key Organizational Hurdles Tipping Point Leadership/Fair Process Approach for Overcoming Each Hurdle

Cognitive Hurdle(s). Describe.

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Resource Hurdle(s). Describe.
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Motivational Hurdle(s). Describe.
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Political Hurdle(s). Describe.
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