Blue ocean Strategy notes

BLUE OCEAN STARTEGY

NEW MARKET SPACE

This means creating a new market demand. Companies need to stop competing with each other, they need to stop competiting with the competiton.

Red ocean- all the industries in exisitence

Blue Ocean- All the industries that are not in exisitance- unknown market space.

THE CONTINUING CREATION OF BLUE OCEANS

Most of earlier industries were once upon a time blue ocean – automobiles, health care, avation

Market is on a continuous evolution. Industries never stand still.

Most of the strategic thinking has been based red ocean stragegies.

14% of business launches are blue ocean that take 38% of companies revenue and reap a 61% profit in a company as compared to Red ocean which occupies the rest.

THE NEED FOR BLUE OCEAN MARKETS

While supply is on the rise there is no clear rise in the demand and this includes developing markets to. In overcrowded industries differentiating brands become harder in both economic upturns and down turns.

FROM COMPANY TO INDUSTRY TO STRAGIC MOVE

Companies need not compete head on. A strategic move is a set of managerial actions and decisions involved in making a major market creating business offerings. Blue ocean can be captured by all and any industry.

VALUE INNOVATION THE CONNERSTONE OF BLUE OCEAN

Blue ocean does not follow a bench mark of competition instead it looks toward value innovation. Value innovation looks to create a new set of demand and market. It does not focus on beating the competition but opening new and uncontested market space. Value innovation place equal focus on value and innovation. Value without innovation focuses on value creation. Value innovation is a new way of thinking about and executing strategy that results in creation of a blue ocean and a break from the competition. Value innovation sees that blue ocean purses differentiation and low cost simultaneously. For example a circus acquiring expensivce clowns and lion tamers results in having high cost structure and no new experience for the customers. However Cirque du Soleil created a theme which had a story lined which resulted in a theatre performance and eliminated the expensive and gave a whole new experience.

Value innovation (Figure 1-2) involves reducing cost (eliminating things that the industry competes on) while increasing buyer value(by creating and offering a whole new experience)

FOUR ACTION FRAMEWORK (Figure 2-2)

Reduce- Raise A new value curve Eliminate-Create

1^ST Question: Which of the factors that the industry take for granted should be eliminated?

2^nd Question Which factors should be reduced well below the industries standers?

3^rd Question Which factors should be raised well above the industries standards?

4^th Question Which factors should be created that the industry has never seen?

[This system forces a person to ask question and take action

1^st Question- Eliminate factors that companies have long competed on. These are factors that have been take for granted which no longer have any value or may even detract value.

2^nd Question- Determine if products or services have been overdressed to compete with others and have resulted in a burden for customers.

3^rd Question- Uncover and eliminate the compromise ur industry forces customers to make.

4^th Question- Help u discover new sources of value for ur buyers and to create new demand and shift the strategic pricing of the industry.]

1^st Managers do not eliminate or reduce their investment on what the industry competes on resulting in mounting cost structures.

2^nd Gives insight into buyer’s value and new demand. Also shows how to reconstruct buyer value element resulting in giving a whole new experience and keeping cost structure low.

For example Yellow tail did not steal the sale form the competitors it grew its market. Yellow tail did not have to compete with sale as it grew its own market; it bought non-wine drinkers (beer drinker and cocktail drinkers) into the market by offering wine which was soft in taste and the flavours were of fruit flavours; the packaging was of simple bottles of bright vibrant colours- orange and yellow; the employees became the brand ambassadors by wearing bushman hats, oil skins and jackets, and this made the employees very happy; the variety of the wine were of only two a red and white. All this contribute to creating a new market- wine towards non-wine drinkers.

Applying the four grid system gives four benefits:

§ It pushes industry to pursue low cost and differentiation.

§ It forces on companies that are only focused on raising and creating and lifting costs structure and over engineered products and services-- a common plight amoung companies

§ It is easily understood by all level managers and creates a high level of engagement in its application.

§ Coz completing the grid is challenging it forces a company to scrutinize every inch of itself.

THREE FEATURES OF A GOOD STRATEGY

FOUCS: Every strategy has a focus and a company’s strategic profile or value curve should show that. For example Southwest’s profile gives three focuses—friendly services, speed and frequent point to point departures.

Divergence: The value curve of blue ocean strategies always are different from the rest. By applying the four grid system they differentiate their profile and stand apart from the rest.

Compelling Tag Line: A good tag should not only deliver a clear message but also advertise an offering otherwise the customer may lose interests. A good strategy always contains a strong and authentic tagline.

FOCUS ON THE BIG PICUTRE AND NOT NUMBERS

Focus on the big picture, not numbers. This approach unlock the creativity of many people within an organization, opens an organization’s eyes to blue ocean strategy and are easy to understand and communicate for effective execution.

FOCUSING ON THE BIG PICTURE

By building a company’s strategic planning process around a strategy canvas a company focus and its managers focus on their main attention(big picture) rather than become immersed in numbers and jargon and getting caught up in operational details.

Strategy Canvas does three things:

§ 1^st it shows the strategic profile of an industry by depicting the factor (and the future factors) that affect competition

§ 2^nd it shows the strategic profile of current and potential competitors .

§ 3^rd it shows a company’s strategic profile/ value curve—depicting how it invests and how it might invest in the future.

If a company’s strategy curve does not reveal that then it is likely to mixed-up, undifferentiated and hard to communicate.

DRAWING YOUR STRATEGY CANVAS

Asses what extent you company and its competitors offer various competition factors. Most managers thing they know how they and their competitors fare, but what they have is only a two dimensional image and few can see the overall dynamics of the industry.

§ 1) Visual Awakening: --- Compare your business with you competitors by drawing ‘as is’ strategy canvas.

--- See where your strategy needs change.

§ 2) Visual Exploration: ---Go into the field to explore the six paths of creating blue ocean

--- Observe the distinctive advantage of alternative products and services.

--- See which factors you should eliminate, create or change

§ 3) Visual Strategy: --- Draw your ‘to be’ strategy canvas based on insights from your field observation.

--- Get feedback on alternative strategy from customers, customer’s competitors and non customers.

--- Use feedback to build the best ‘to be’ strategy’

§ 4) Visual Communication: --- Distribute your before-and-after strategy profiles on one page for easy comparison.

--- Support only those projects and operational moves that allow your company to close the gape to actualize the new strategy.