Making the Competition Irrelevant

Content
▶ s History
▶ Explanation of BOS with self made story
▶ Introduction and Definition
▶ Types of Strategy
▶ Comparison between RED and BLUE
▶ Blue Ocean Strategy & Strategic Positioning
▶ Six Principles of Blue Ocean Strategy
▶ Strategy Canvas and Four Action Framework
▶ Case Study 1
▶ Case Study 2
 W. Chan
Kim

Based on ‘Blue Ocean Strategy’, a book published in

2005 and written by W. Chan Kim and Renée
Mauborgne, Professors at INSEAD and Co-Directors of
the INSEAD Blue Ocean Strategy Institute
Explanation of Blue
Ocean Strategy
with self made
Story
T H I S S T O R Y I S O F T W ' O B E S T F R I E N D S M A N O J A N D M AY U R

0
M AY U R

THEY 'WERE TOGETHER DOING MBA FROM ITM

THEY U S E TO SPEND LOTS OF TIME TOGETHER
THEY U S E TO STUDY
T H E Y U S E T O HANGOVER
CLUBS & NIGHT OUTS
MAKING FUN O F OTHERS
B U T A F T E R P O S T G R A D U AT I O N (COMPLETING MBA)
Two months
later…….
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O N E. DAY M A Y U R T O O K A D V IS E, F R O :M :M A N TO D ,O T H I S
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M AY U R ' W I T H A N G E R 1
S TA R T S I M I L A R B U S I N E S S
· BLUE OCEAN S RA . E·6
-·T .M L ·.RN
Y ·.T
'H S
1
 BOS defined…
The avoidance of costly competition through
innovation with the aim to create a market where
no firms currently operate, leaving the company
to expand without competition.
• Blue oceans denote all industries NOT
in existence today

• The Unknown market space

• Untainted by competition

• In Blue Oceans, demand is created not

fought over

• In Blue Oceans, growth is profitable

and
rapid
Always choose RIGHT side
for business
 Types of
In the red ocea Sn, tdifrfearenttiaetiogn cyosts beca use
firms compete with the same best-practice principle. Here, the
strategic choices for firms are to pursue either differentiation or low
cost. In the reconstructionist world,
however, the strategic aim is to create new best-practice rules by
breaking the existing value-cost trade-off and thereby creating blue
ocean.
Comparison between
RED OCEAN and BLUE OCEAN
Blue Ocean Strategy
&
Strategic Positioning
 • Increase of value
implies increase of
cost
Cost
Reduction • Reduction of cost
implies decrease
in value

Value
Increase
 • Both cost reduction
and value increase
Cost are possible…
Reduction

Value
Increase
Value Innovation
Value innovation is created in the region where a company’s actions
favorably affect both its cost structure and its value proposition to buyers.
Cost savings are made by eliminating and reducing the factors an industry
competes on. Buyer value is lifted by raising and creating elements the
industry has never offered. Over time, costs are reduced further as scale
economies kick in due to the high sales volumes that superior value
generates.
Eliminate Costs
Reduce

Value
Value
Innovation Innovation

Raise

Create Buyer Value

 • Reconstruct market boundaries
• Focus on the big picture, not
F the numbers
• Reach beyond existing demand
ormulation • Get the strategic sequence right
Principles

• Overcome key
organisational hurdles
Execution • Build execution into strategy

Princ
iples
1. Reconstruct Market Boundaries…
2. Focus on the Big Picture,
Not the Numbers…
• Which of the • Which factors
factors that the should be reduced
industry takes for well below the
granted should be industry
eliminated? standard?

Eliminate Reduce

Raise Create

• Which factors • Which factors

should be raised should be created
well above the that the industry
industry never offered?
standard?
 Reduce

A
Eliminate New Create

Value

Curve
Raise
3. Reach Beyond Existing
Demand…
4. Get the
Strategic
Sequence
Right…
 5. Overcome Key
Organisational Hurdles…
6. Build Execution into
Strategy…

Engagement Explanation

Expectation Clarit
y
Working with other BOS Tools…

www.derekhendrikz.
The Strategy Canvas:
• Shows the strategic profile of an industry by depicting very clearly the
factors that affect competition among industry players, as well as
those that might in the future.
• Shows the strategic profile of current and potential competitors,
identifying which factors they invest in strategically.
• Draws the company’s strategic profile, or value curve, showing how it
invests in the factors of competition and how it might invest in them in the
future.
• The horizontal axis lists factors of competition for the industry.
• The vertical axis indicates the degree to which industry players and the
providers of alternative services invest in the competitive factors.
Strategy Canvas for Cirque du Soleil
The PMS Grid:(Pioneer
Migrator settler
PMS Grid Sample…
The Buyer Experience Cycle /
Buyer Utility Map (BEC / BUM)
Framework

www.derekhendrikz.c
Tipping Point Leadership…
 THIS I S A W'E S
1 1

NOWOMLE S C · EGK-- E
SO.M CASE STUD ES
Blue Ocean
Strategy
Case
Example 1
CLASSICAL ORCHESTRA
INDUSTRY
The Classical
Orchestra Industry
Intensifying
competition Shrinking
Audiences
No. of
Concerts
Avg. No. of Audience per
concert
113
37000
7

27000

74
9

199 200
199 200
Revenue breakdown of
a typical orchestra
Source % of total revenue
Live Performance <60%
Royalties <2%
from
Recordings
Government Funds [31% ~ 9%]
Private [11% ~ 40%]
Philanthropy
Unsustainable
cost structure
▶ Half of orchestra ’s costs go to
salaries and superstar guest soloists
and conductors.
High  Minimum salaries in the Big 5 over
Fixed US$100K with 8 to 9 week vacation
Cost for over one hundred members.
 Conductors earning over US$2M

 Higher marketing costs as

orchestras complete for
Variable shrinking audience and public
costs and private funding.
on the rise
 Strategy Canvas
Traditional Orchestra
Hig
Experience
h
Offering
level

Low

Factors of
A difficult
environment
even
▶ Bostonfor “The Big
Symphony,Chicago Symphony,Cleveland
Five”
Orchestra,New York Philharmonic and
Philadelphia Orchestra

▶ Despite all subsidies. Brand name and quality

of performance, all 5 orchestras, whose
endowments together amount to US$800
million. Are running deficits that go into the
millions.
 Strategy Canvas Andre Rieu vs.
Traditional Orchestra Experience

Eliminate Reduce Rais Create

e
Andre
Rieu
Offering
level

Factors of Competition
CASE STUDY 2 :
To the rescue
of

Analysis and Strategy for survival in

the consoles video game
industry
 Nintendo Wii
Profitable Growth with New
Demand Creation
▶ “We are not competing against SONY or MICROSOFT. We are battling
the indifference of people who have no interest in videogames. We
want to appeal to mothers who don’t want consoles in their living
rooms, and to the elderly and to young women’

▶ Satoru Iwata (Nintendo President) Fortune Magazine 06/11/07

▶ Inside Nintendo, we call our strategy “blue Ocean". yes those who’ve
always played games are still playing, but we’ve got people who’ve
never played to start loving it.

Perrin Kaplan, Forbes Interview

Nintendo Wii :Results
▶ Has been selling at the rate of one unit per second since
its launch on 19th November 2006
▶ Zipped past SONY in market value in June 2007 and
became one of Japan’s top 10 companies for the
first time.
▶ While SONY loses $240~$300 on each PlayStation 3
sold.
Nintendo makes $50 on every unit.
▶ Profits reached almost $1.5 billion. or $442.000 per
employee in 2007. Compared with MICROSOFT’s
$177.000 and Google’s $288.000.
Strategic approach

Nintendo Wii U New Targets

launch

New marketing
Strategy communications

New services
Strategy
1
▶ Big momentum for launch of

▶ Large marketing communica tion

ca mpaign:
▶ PR
▶ Advertising
▶ Events
▶ Activation/trade activities
▶ Highlight differentiators
▶ Offer new services
▶ Strategic alliances with top brands
Strategy
2
Attack new target audiences:

▶ Schools
▶ Parents
▶ Special services
▶ Different channel
▶ Different positioning
▶ Alliance with government
▶ New marketing communications and PR
campaign
Strategy
3
▶ Wii for senior citizens:
▶ Population ageing – longer life
▶ Retired people have a lot of time and money
▶ Activities and services through the Wii
▶ Use the abilities of the Wii for this target
▶ Develop health and exercise ca pabilities
▶ Advertising of products and alliance with
pharmacy companies
▶ Marketing communications and
alliances ca mpaigns for this target
Strategy
4
▶ Wii woman:
▶ Increase usability of women
▶ Shopping
▶ Beauty apps and advise
▶ Alliances with brands
▶ Large marketing, branding and
▶ communica tions ca mpaign targeted
at women, mostly focused on social
networks
Strategy
5
▶ Transform Wii into
an entertainment hub:
▶ Online resources
▶ Targeted at families
▶ Alliance with Disney and other networks
▶ Activities for the family
▶ Advertising and sponsorship trade with
family products.
 Strategy Canvas for
Nintendo Wii
High Eliminate Reduce Raise Create
10

Nintendo Wii
8

6
Offering

Other
Gaming
level

4 Companies

Low
0

Factors of
Competition
I WI . A1P PL
OCE-A-
Y BL- .E' . STRAT!
GY .
FOR M'Y ·CO AC-
1_ I NG
CLASSES -- ,
S.NESSH
After 12
months…
 comparison
Manoj tutorials vs Mayur
between
Tutorials
Manoj On other
was side,
following Mayur
the same took
pattern as advantag
others e of BOS
did..
So due to and
that he implement
was facing ed some
lot of innovative
competition ideas &
as he was change
new in this the entire
field pattern of
business
Following patterns used
by both
Manoj & Others Mayur
• Started classes in the • Web based
prime learning
• location • environment
• Attractive classrooms with • Virtual
• co mforts & good classes
ambienc e • Online
lectures
• Best & high qualified faculties • Online ebooks of all
• Dedic a ted libraries for high
each batch • ended authors
• Online co nsultation &
• Extra curricular job
a c tivities • pla cement support
• Providing • Online
additional examinations
stationery • Globalised a ccess
for
• classes enrolment
Innovation
wins………