Blue Ocean Strategy

Instructors: Dr. Pradeep Hota, Dr. Akanksha Batra, Dr. Pavitra

Dhamija
  Simultaneous pursuit of differentiation and low cost to
open up a new market space and create new demand
WHAT IS BLUE  Create and capture uncontested market space, thereby
making the competition irrelevant
OCEAN
 It is based on the view that market boundaries and
STRATEGY? industry structure are not a given and can be
reconstructed by the actions and beliefs of industry
players
  Red oceans includes all the industries in existence
today – the known market space
 In red oceans, industry boundaries are defined and
WHAT ARE accepted, and the competitive rules of the game are
RED OCEANS known
AND BLUE  Here, companies try to outperform their rivals to grab a
OCEANS? greater share of existing demand. As the market space
gets crowded, profits and growth are reduced.
Products become commodities, leading to cutthroat or
‘bloody’ competition. Hence the term red oceans
  Blue oceans denote all the industries not in existence
today – the unknown market space, untainted by
competition
WHAT ARE  In blue oceans, demand is created rather than fought
RED OCEANS over. There is ample opportunity for growth that is both
AND BLUE profitable and rapid.
 In blue oceans, competition is irrelevant because the
OCEANS? rules of the game are waiting to be set. A blue ocean is
an analogy to describe the wider, deeper potential to
be found in unexplored market space
  Value Innovation is the simultaneous pursuit of
differentiation and low cost
 It is conventionally believed that companies can create
greater value to customers at a higher cost or create
reasonable value at a lower cost
 You can ask questions like:
VALUE  Which of the factors that the industry takes for
INNOVATION granted should be eliminated?
 Which factors should be reduced well below the
industry’s standard?
 What factors should be raised well above the
industry’s standard?
 What factors should be created that the industry has
never offered
  Apple’s strategic moves took the form of the iPod,
iTunes, the App Store, the iPhone, the iPad, and more
 Rather than trying to outrun competitors in existing
industries, all these strategic moves created new
market space, generated new demand and made Apple
Apple’s case the most admired and valuable American company
within a decade
 Apple may not have been the industry’s first mover, but
it was the value pioneer that pushed the industry’s
frontiers outward and tapped latent demand
  Rather than making the mobile phone smarter by
adding more hardware features (such as a high-
resolution built-in camera, email push key, and so on),
Apple invested in developing a more reliable operating
system and more intuitive user interface, making it
Apple’s case easier for people to use their mobile phones effectively.
 By eliminating, reducing, raising, and creating factors
that the industry competed on, Apple reconstructed
the mobile industry to create a product a revolutionary
new product
SIX PATHS
FRAMEWORK
STRATEGY
CANVAS
BUYER
UTILITY MAP
  The Cognitive Hurdle: Waking employees up to the
need for a strategic shift. Red oceans may not be the
paths to future profitable growth, but they may have
served the organization well historically, so why rock
the boat?
FOUR  The Resource Hurdle: It is assumed that the greater the
HURDLES TO shift in strategy, the greater the resources it requires for
execution
STRATEGY
 The Motivational Hurdle: How do you motivate key
EXECUTION players to move fast and tenaciously to carry out a
break from the status quo?
 The Political Hurdle: Opposition from powerful vested
interests. As one manager put it, “In our organization,
you get shot down before you stand up”
  Founded in 1939, Marvel Comics initially struggled in a red ocean
producing primarily me-to knock-off comic books.
 In the early 1960s, Marvel took a blue ocean turn by focusing on
noncustomer college students. Marvel invented characters that
were people first and superheroes second: Spider-Man, The Hulk,
Iron Man, the X-Men. The business thrived.
 In late 1996 Marvel filed for bankruptcy, a victim of red ocean
Marvel’s case management practices. New management purchased the
business out of bankruptcy in 1998 but faced a daunting task:
Marvel owed $30 million in annual interest payments on a $250
million loan, cash was so tight that they almost missed payroll,
and movie rights for many of their best characters were licensed
to others.
 First managers stabilized the business then Marvel created a new
type of blue ocean that went on to produce the most profitable
movie franchise in history