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Blue Ocean Strategy

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Contents
1. Blue Ocean Vs. Red Ocean Strategy

2. Blue Ocean Strategy Tools

3. Strategy Canvas and Four Action Framework

4. Six Principles of Blue Ocean Strategy

5. Formulating Blue Ocean Strategy

6. Executing Blue Ocean Strategy


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Blue Ocean Vs. Red Ocean
Strategy

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Blue Ocean vs. Red Ocean Strategy

Blue Ocean Strategy Red Ocean Strategy

• Create uncontested • Compete in existing


market space market space
• Make the competition • Beat the competition
irrelevant
• Create and capture • Exploit existing
new demand demand

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Blue Ocean vs. Red Ocean Strategy

Blue Ocean Strategy Red Ocean Strategy

• Break the value- cost • Make the value-cost


trade off trade off
• Align the whole system • Align the whole system
of a firm’s activities with of a firm’s activities with
its strategic choice of its strategic choice of
differentiation and low differentiation or low
cost cost

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Blue Ocean Strategy Tools

• A diagnostic tool for building a


Strategy compelling blue ocean strategy
Canvas • It captures the current state of play in
the known market space
• Allow you to understand :
• where the competition is currently
investing
• the factors the industry currently
competes on in product, service and
delivery
• what customers receive from existing
competitive offerings on the market

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Four Action Framework

Eliminate Raise

Reduce Create

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Four Action Framework

Which of the factors that the industry


Eliminate takes for granted should be eliminated?

Which factors should be reduced well


Reduce below the industry’s standard?

Which factors should be raised well


Raise above the industry’s standard?

Which factors should be created that


Create the industry has never offered?

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Four Action Framework
The Case of Cirque du Soleil (A Circus Company)

Eliminate Reduce

• Star performers • Fun and humor


• Animal shows • Thrill and danger
• Aisle concession sales
• Multiple show arenas

Create Raise

• Theme • Unique venue


• Refined environment
• Multiple productions
• Artistic music and dance
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Six Principles of Blue Ocean Strategy

Formulation Principles Execution Principles

1. Reconstruct market 1. Overcome key


boundaries organizational
2. Focus on the big picture, hurdles
not the numbers 2. Build execution into
3. Reach beyond existing strategy
demand
4. Get the strategic
sequence right

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Formulating
Blue Ocean Strategy

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1. Reconstruct Market Boundaries

Head-to-Head Strategy Blue Ocean Strategy

• Focus on rivals within • Looks across alternative


industry industries
• Focuses on competitive • Looks across strategic
position within strategic group within industry
group • Redefines the industry
• Focuses on better buyer group
serving the buyer group

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1. Reconstruct Market Boundaries

Head-to-Head Strategy Blue Ocean Strategy

• Focuses on maximizing • Looks across to


the value of product or complementary product
service offerings within and service offerings
the bounds of its • Participates in shaping
industry external trends over time
• Focuses on adapting to
external trends as they
occur

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2. Focus on the Big Picture, not the Numbers

Focus on the The Four Steps of


Big Picture,
Picture not Visualizing Strategy
the Numbers

• Visual Awakening

• Visual Exploration

• Visual Strategy Fair

• Visual Communication
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2. Focus on the Big Picture, not the Numbers

• Compare your business with your


Visual competitors’ by drawing your “as is”
Awakening strategy canvas
• See where your strategy needs to
change

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2. Focus on the Big Picture, not the Numbers

• Go to the field to explore the six


Visual paths to creating blue oceans
Exploration
• Observe the distinctive advantages
of alternative products and services
• See which factors you should
eliminate, create, or change

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2. Focus on the Big Picture, not the Numbers

• Draw your “to be” strategy canvas


Visual
based on insights from field
Strategy
observations
Fair
• Get feedback on alternative
strategy canvases from
customers, competitors’
customers, and noncustomers
• Use feedback to build the best “to
be” future strategy

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2. Focus on the Big Picture, not the Numbers

• Distribute your before-and-after


Visual strategic profiles on one page for
Communication
easy comparison

• Support only those projects and


operational moves that allow your
company to close the gap to
actualize the new strategy

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3. Reach Beyond Existing Demand

• First tier: “Soon to be” non-


customers who are the edge of
your market, waiting to jump ship
The Three
Tier of Non- • Second tier: “Refusing” non-
customers customers who consciously
choose against your market

• Third tier: “Unexplored” non-


customers who are in markets
distant from yours

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4. Get The Strategic Sequence Right
The Sequence of Blue Ocean Strategy

Buyer utility Price


Is there exceptional buyer Is your price easily
utility in your business idea? accessible to the mass of
buyers?

Adoption Cost
What are the adoption Can you attain your cost
hurdles in actualizing your target to profit at your
business idea? strategic price?

A commercially viable
blue ocean idea
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Executing
Blue Ocean Strategy

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5. Overcome Key Organizational Hurdles

Cognitive Resource
Hurdle Hurdle
Overcome Key
Organizational
Hurdles
Motivational Political
Hurdle Hurdle

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5. Overcome Key Organizational Hurdles

Cognitive • Ride the “Electric Sewer”


Hurdle • Meet with Disgruntled Customers
(status quo)

• Redistribute resources to your hot


Resource spots
Hurdle • Redirect resources from your cold
spots
• Engage in horse trading

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5. Overcome Key Organizational Hurdles

• Zoom in on Kingpins (key influencers)


Motivational • Place kingpins on a fishbowl
Hurdle
• Atomize to get the organization to
change itself

• Secure a consigliere on your top


Political management team
Hurdle
• Leverage your angels and silence
your devils

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5. Build Execution Into Strategy
Fair Process of Strategy

Strategy Formulation Process


Fair Process – Engagement, Explanation, Expectation clarity

Attitudes
Trust and Commitment – “I feel my opinion counts”

Behavior
Voluntary Cooperation – “I’ll go beyond the call of duty”

Strategy Execution
Exceeds Expectation – self initiated
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Source of Reference

• W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy,


HBS Publication

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End of Material

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