Blue Ocean Strategy Bos 1202550384361716 4

Blue Ocean Strategy
W. Chan Kim and Renee Maubourgne

Edited by Chitchai P.
Agenda
1. Blue Ocean Strategy (BOS)
Creating Blue Ocean
Analytical Tools and Frameworks
2. Formulating Blue Ocean Strategy
Reconstruct Market Boundaries
Focus on Big Picture
Reach Beyond Existing Demand
Get Strategic Sequence Right
3. Executing Blue Ocean Strategy
Overcome Key Organization Hurdles
Build Execution into Strategy
Conclusion
GJI, pchitchai@gmail.com 2
Agenda
Creating Blue Ocean
Conclusion
Creating Blue Ocean
New Market Space
The Continuing Creation of Blue Oceans
The Impact and Imperative of Crating Blue
Oceans
From Company and Industry to Strategic
Move
Value Innovation: The Cornerstone of BOS
The Six Principles of BOS
Value Innovation:
The Cornerstone of BOS
Costs
Value
Innovation
Buyer Value
The Simultaneous Pursuit of Differentiation and Low Cost

Red Ocean vs. Blue Ocean Strategy
Red Ocean Strategy Blue Ocean Strategy
Compete in existing market space Create uncontested market space
Beat the competition Make the competition irrelevant
Exploit existing demand Create and capture untapped

demand
Make the value-cost trade-off Break the value-cost trade-off
Align the whole system of a firms Align the whole system of a firms
activities with its strategic choices of activities in pursuit of differentiation
differentiation or low cost and low cost
Focuses on adapting to external Participates in shaping external

trends as they occur trends over time
The Six Principles of BOS
Formulating Principles Risk Factor Each

Principle Attenuates
Reconstruct market boundaries Search risk
Focus on the big picture, not the numbers Planning risk
Reach beyond existing demand Scale risk
Get the strategic sequence right Business model risk
Execution Principles Risk Factor Each

Principle Attenuates
Overcome key organization hurdles Organization risk
Build execution into strategy Management risk
Strategy Canvas
Four Actions Framework
Eliminate-Reduce-Raise-Create Grid
Three Characteristics of a Good Strategy
Strategy Canvas
US Wine Industry in the late 1990s
High
Premium Wines
Budget Wines
Low
Price Above-the-line Vineyard prestige Wine
marketing range
Use of enological Aging Wine complexity
terminology and distinctions quality
in wine communication
Four Actions Framework
REDUCE
Which factors should be
reduced well below
the industrys standards?
ELIMINATE A New CREATE

Which of the factors that Which factors should be
the industry take for granted Value created that the industry
should be eliminated? has never offered?
Curve
RAISE
Which factors should be
raised well above
the industrys standard?
Eliminate-Reduce-Raise-Create Grid
Case Study: Yellow Tail
Eliminate Raise
Enological Terminology Price versus budget wines
Aging qualities Retail stores involvement
Above-the-line Marketing
Reduce Create
Wine complexity Easy drinking
Wine range Ease of selection
Vineyard prestige Fun and adventure
A New Value Curve
Strategy Canvas of Yellow Tail
High
Premium Wines
[yellow tail]
Budget Wines
CREATE
RAISE
Low REDUCE
Price Above-the-line Vineyard Wine Ease of
ELIMINATE
marketing
Use of enological Aging
prestige
Wine
range
Easy
selection
Fun and
terminology and quality complexity drinking adventure
distinctions in wine
communication
Strategy Canvas: Southwest Airlines
High
Southwest Airlines
Average Airlines
Car Transport
Low
Price Meals Lounges Seating Hub Friendly Speed Frequent
class choice connectivity Service Pint-to-
point
departure
Strategy Canvas: Cirque du Soleil
High
Ringling Bros. & Barnum & Bailey
Cirque du Soliel
Smaller
Regional
Circuses
Low
Price Animal Multiple Thrill and Theme Multiple
shows show challenge Production
Star Aisle arena Fun Unique Refined Artistic
performers concessions and venue watching music and
humor environment dance
Three Characteristics of a Good Strategy
Focus
Divergence
Compelling Tagline
Agenda
Creating Blue Ocean
Conclusion
Path 1: Look Across Alternative Industries
Path 2: Look Across Strategic Groups within
Industries
Path 3: Look Across Chain of Buyers
Path 4: Look Across Complementary
Products and Service Offerings
Path 5: Look Across Functional or Emotional
Appeal to Buyers
Path 6: Look Across Time
Strategy Canvas: NetJets
Path1: Alternative Industry
High
Private Jet
Corporate travel
NetJets Value Curve
Commercial Airlines
First and Business-Classes travel
Low
Price (fixed Need for Deadhead Speed of total Ease of travel Flexibility and In-flight
purchase + customer to costs travel time (include. reliability service
variable price manage aircraft Check-in,
per flight) (Aircraft M&A) customs, etc.
Strategy Canvas: QuickFit
Path2: Strategic Group
High
Curves
Home Exercise
Program
Traditional
health clubs
Low
Price Workout Availability of Nonthreatening Womanly
equipment instructors same-sex fun atmos-
Amenities Workout Environment Convenience
(treadmill, Environ- phere
time encouraging
weights, ment
discipline and
etc)
motivation in
GJI, pchitchai@gmail.com exercise
20
Strategy Canvas: NABI
Path4: Scope of Product/Service Offerings
High
NABI
Hungarian Municipal
Bus Company
Average US
Transit Bus
Low
Initial Corrosion Maintenance Fuel Environmental Aesthetic Customer
purchase cost consumption friendliness design friendliness
price
Life-Cycle Cost
Strategy Canvas: QB House
Path5: Functional/Emotional Orientation
High
QB House
Average Japanese
Barbershop
Low
Price Reservation Extra Range of Hygiene Time Time High
desk services hair savings on savings on performance
(other than treatments waiting haircut air wash
haircutting) system
Summary:
Conceiving New Market Space
Head-to-Head Competition Blue Ocean Creation
Industry Focuses on rivals within its industry Looks across alternative industries
Focuses on competitive position Looks across strategic groups

Strategic Group within strategic group within industry
Focuses on better serving the buyer

Buyer Group group
Redefines the industry buyer group
Focuses on maximizing the value of

Scope of Product Looks across to complementary
product and service offering within
or Service Offering product and service offerings
the bounds of its industry
Functional Focuses on improving price

Rethinks the functional-emotional
Emotional performance within the functional-
orientation of to industry
Orientation emotional orientation of its industry
Focuses on adapting to external Participates in shaping external

Time trends as they occur trends over time
Four Steps of Visualizing Strategy
The Pioneer-Migrator-Settler Map
Four Steps of Visualizing Strategy
Visual Visual Visual Visual

Awakening Exploration Strategy Fair Communication
Compare your Go into the field to Draw your to be Distribute your

business with your explore the six paths strategy canvas before-and-after
competitors by to creating blue based on insights strategic profiles on
drawing your as is oceans. from field one page for easy
strategy canvas. observations. comparison.
Observe the
See where your distinctive Get feedback on Support only those
strategy needs to advantages of alternative strategy projects and
change. alternative products canvases from operational moves
and services. customers, that allow your
competitor's company to close
See which factors customer, and non- the gaps to actualize
you should customers. the new strategy.
Eliminate, Raise,
Create, or Change. Use feedback to
build the best to be
GJI, pchitchai@gmail.com
future strategy.
27
The PMS Map
Pioneers
Migrators
Settlers
Today Tomorrow
First Tier: Soon-to-be non-
customers who are on the
edge of your market, waiting
Third to jump ship
Tier
Second
First Tier
Tier Second Tier: Refusing non-
Your customers who consciously
Market choose against your market.
Third Tier: Unexplored non

customers who are in
markets distant from yours.
Get the Strategic Sequence Right
Buyer Commercially
Price Cost Adoption Viable Blue
Utility Ocean Idea
Is there Is your price Can you attain What are

exceptional buyer easily accessible your cost target adoption hurdles
utility in your to the mass of to profit at your in actualizing
business idea? buyers? strategic price? your business
idea? Are you
addressing them
up front?
Buyer Utility Map
The Six Stages of the Buyer Experience Cycle

1 2 3 4 5 6
Purchase Delivery Use Supplement Maintenance Disposal
Customer How long to find How long to get
the product you the product Need other
Productivity need? delivered? Training or
products to make
Require external
Create waist
ME
The Six Utility Levels
expertise items?
it work?
How rapidly can assistance
Simplicity you make a required?
How difficult to How easy to
purchase?
unpack and install Easy to store How much time do maintain and How easy to
when not in used? they take?
Is the place of the new product? upgrade? dispose?
How effective areHow easy are they
Convenience purchase
features and to obtain?
attractive and Do buyers have to If so, how costly
arrange delivery functions?
accessible? are they?
How secure is the themselves? If Overcharged with
Risk transaction yes, how costly
bell and whistles?
How costly?
How costly?
environment? and difficult is this How much pain do
they cause?
Fun and
Image
Legal or
Environment environmental
al issue of the
product disposal?
Friendliness
Price Corridor of the Mass
1. Identify the Price Corridor 2. Specify a Price Level within
of the mass the Price Corridor
Three alternative product/service types:
Different Form
Same Different Form and Function,
Form Same Function Same Objective
High degree of legal and
resource protection
Difficult to Imitate
Price Corridor Some degree of legal and

Mid-level pricing
of the Mass resource protection
Low degree of legal protection
Easy to Imitate
Size of circle is proportion to number of
buyers that product/service attracts
Profit Model of BOS
The Strategic Price
The Target
Profit
The Target Cost
Streamlining and
Partnering
Cost Innovative
Pricing Innovation
Adoption
Employees
Partners
General Public
Agenda
Creating Blue Ocean
Conclusion
1. Cognitive Wedded to status quo
2. Political Opposition from powerful vested
interest
3. Motivational Unmotivated
4. Resource Limited resource
Strategy Fair Process

Engagement
Formulation Explanation
Expectation clarity
Process
Trust &Commitment
Attitude I feel my opinion counts.
Volunteer
Behavior Cooperation
Ill go beyond
the call of duty.
Strategy Exceeds Expectation

Execution Self-Initiated
Conclusion
Sustainability and Renewal of Blue Ocean Strategy
Imitation Barriers to BOS

Value Innovation does not make sense to a companys
conventional logic.
Blue Ocean Strategy may conflict with companies brand image.
Natural monopoly: The market often cannot support a second
player.
Patents or legal permits block imitation.
High volume leads to rapid cost advantage for the value innovator,
discouraging followers from entering the market.
Network Externalities discourage imitation.
Imitation often require significant political, operational, and cultural
changes.
Companies that value-innovate earn brand buzz and a loyal
customer following that tends to shun imitators.

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Blue Ocean Strategy

W. Chan Kim and Renee Maubourgne

The Simultaneous Pursuit of Differentiation and Low Cost

Compete in existing market space Create uncontested market space

Beat the competition Make the competition irrelevant

Exploit existing demand Create and capture untapped

Make the value-cost trade-off Break the value-cost trade-off

Focuses on adapting to external Participates in shaping external

Formulating Principles Risk Factor Each

Execution Principles Risk Factor Each

ELIMINATE A New CREATE

NetJets Value Curve

Head-to-Head Competition Blue Ocean Creation

Focuses on competitive position Looks across strategic groups

Focuses on better serving the buyer

Focuses on maximizing the value of

Functional Focuses on improving price

Focuses on adapting to external Participates in shaping external

Visual Visual Visual Visual

Compare your Go into the field to Draw your to be Distribute your

Third Tier: Unexplored non

Is there Is your price Can you attain What are

The Six Stages of the Buyer Experience Cycle

Price Corridor Some degree of legal and

Low degree of legal protection

The Strategic Price

The Target Cost

Strategy Fair Process

Strategy Exceeds Expectation

Imitation Barriers to BOS

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