about blue ocean strategy

8/3/2019 About Blue Ocean Strategy

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Blue and Red Ocean Business Strategy

Blue ocean strategy was created by W.Chan Kim and Renee Mauborgne after a decade-long study of 150 strategic moves on

more than 30 industries over 100 year. The term blue ocean means industries not yet in existence while a red ocean is already

established and is heavily contested. The rise of blue ocean industries relies heavily on innovation in creating new products and

services not yet in existence. By creating a blue ocean, you are uncontested.

Creating a blue ocean means creating an industry that hasnt existed yet. By combining new and old technology, you can create

new innovating products that can define a new industry. Also, by combining new and old methods of services, you can create an

industry that hasnt existed yet. Creating new industries for unlimited potential and profit is the core of the blue ocean strategy.

Red ocean is where competitions exists and are heavily contested. Profits and growths are thin in a red ocean. It is basically a

zero sum game were only the strongest survives. However, it is easier to enter because the industries are defined already so you

can just copy others; however, surviving is a different story. Lets just say red ocean is easy to enter, hard to survive.

Each ocean has it own advantages and disadvantages. Red ocean is easier to enter since the industry is already defined but it is

much harder to survive. Blue ocean are hard to do because it means creating a whole new industry that can be risky if there is no

demands for it, but if there is a market you have vast and almost limitless growth. Of the two oceans, which one are you? I want

to say thathuman ad spaceis sort of a blue ocean!
http://marketingdeviant.com/human-ad-space-the-future-of-advertising/http://marketingdeviant.com/human-ad-space-the-future-of-advertising/http://marketingdeviant.com/human-ad-space-the-future-of-advertising/http://marketingdeviant.com/human-ad-space-the-future-of-advertising/http://marketingdeviant.com/human-ad-space-the-future-of-advertising/http://marketingdeviant.com/human-ad-space-the-future-of-advertising/


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About Blue Ocean Strategy|Deutch|English|Espaol|Francais|Italiano|

Companies have long engaged in head-to-head competition in search of sustained, profitable growth.

They have fought for competitive advantage, battled over market share, and struggled for

differentiation.

Yet in todays overcrowded industries, competing head-on results in nothing but a bloody red oceanof rivals fighting over a shrinking profit pool. In a book that challenges everything you thought you

knew about the requirements for strategic success, W. Chan Kim and Rene Mauborgne contend that

while most companies compete within such red oceans, this strategy is increasingly unlikely to create

profitable growth in the future.

Based on a study of 150 strategic moves spanning more than a hundred years and thirty industries,

Kim and Mauborgne argue that tomorrows leading companies will succeed not by battling

competitors, but by creating blue oceans of uncontested market space ripe for growth. Such

strategic movestermed value innovationcreate powerful leaps in value for both the firm and its

buyers, rendering rivals obsolete and unleashing new demand.

Blue Ocean Strategy provides a systematic approach to making the competition irrelevant. In this

frame-changing book, Kim and Mauborgne present a proven analytical framework and the tools for

successfully creating and capturing blue oceans. Examining a wide range of strategic moves across a

host of industries, Blue Ocean Strategy highlights the six principles that every company can use to

successfully formulate and execute blue ocean strategies. The six principles show how to reconstruct

market boundaries, focus on the big picture, reach beyond existing demand, get the strategic

sequence right, overcome organizational hurdles, and build execution into strategy.

Upending traditional thinking about strategy, Blue Ocean Strategy charts a bold new path to winning

the future.

Blue Ocean Strategy Tools, Frameworks and Methodologies

What blue ocean strategy seeks to do is to make the creation and capturing of blue oceans as

systematic and actionable as competing in the red waters of known market space. For although blue

ocean strategists have always existed, for the most part their strategies have been largely
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unconscious. Blue ocean strategy seeks to remedy this by not only decoding the pattern and principles

behind the successful creation of blue oceans, but also providing the analytical frameworks and tools

to act on this insight.

Strategy Canvas

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The strategy canvas is the central diagnostic and action framework for building a compelling blue

ocean strategy. The horizontal axis captures the range of factors that the industry competes on and

invests in, and the vertical axis captures the offering level that buyers receive across all these key

competing factors.

The strategy canvas serves two purposes:

Firstly, it captures the current state of play in the known market space. This allows you tounderstand where the competition is currently investing and the factors that the industry competes

on.

Secondly, it propels you to action by reorienting your focus from competitors to alternativesandfromcustomers to noncustomersof the industry.

The value curve is the basic component of the strategy canvas. It is a graphic depiction of a

company's relative performance across its industry's factors of competition.

As you can see on the diagram above, what makes a good value curve is focus, divergence as well as

a compelling tagline.

4 Actions Framework

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To reconstruct buyer value elements in crafting a new value curve, we use the Four Actions

Framework. As shown in the diagram above, to break the trade-off between differentiation and low

cost and to create a new value curve, there are four key questions to challenge an industry's strategic

logic and business model:

Which of the factors that the industry takes for granted should be eliminated? Which factors should be reduced well belowthe industry's standard? Which factors should be raised well above the industry's standard? Which factors should be createdthat the industry has never offered?

ERRC Grid

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The Eliminate-Reduce-Raise-Create Grid (ERRC) is complementary with thefour actions framework. It

pushes companies not only to ask all four questions in thefour actions framework but also to acton

all four to create a new value curve, essential for unlocking a new blue ocean. By driving companies to

fill in the grid with the actions of eliminating and reducing as well as raising and creating, the grid

gives companies four immediate benefits:

It pushes them to simultaneously pursue differentiation and low cost to break the value-costtrade off.

It immediately flags companies that are focused only on raising and creating and thereby liftingthe cost structure and often overengineering products and services - a common plight in many

companies.
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It is easily understood by managers at any level, creating a high level of engagement in itsapplication.

Because completing the grid is a challenging task, it drives companies to robustly scrutinizeevery factor the industry competes on, making them discover the range of implicit assumptions

they make unconsciously in competing.

Pioneer-Migrator-Settler Map

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A useful exercise for a corporate management team pursuing profitable growth is to plot the

company's current and planned portfolios on thepioneer-migrator-settler (PMS) map. For the purpose

of the exercise, settlers are defined as me-too businesses, migrators are business offerings better

than most in the marketplace, and a company's pioneers are the businesses that offer unprecedented

value. These are your blue ocean strategies, and are the most powerful sources of profitable growth.

They are the only ones with a mass following of customers.

If both the current portfolio and the planned offerings consist mainly of settlers, the company has a

low growth trajectory, is largely confined to red oceans, and needs to push for value innovation.

Although the company might be profitable today as its settlers are still making money, it may well

have fallen into the trap of competitive benchmarking, imitation, and intense price competition.

If current and planned offerings consist of a lot of migrators, reasonable growth can be expected. But

the company is not exploiting its potential for growth, and risks being marginalized by a company that
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value-innovates. In our experience the more an industry is populated by settlers, the greater the

opportunity to value-innovate and create a blue ocean of new market space.

This exercise is especially valuable for managers who want to see beyond today's performance.

Revenue, profitability, market share, and customer satisfaction are all measures of a company's

current position. Contrary to what conventional strategic thinking suggests, those measures cannot

point the way to the future; changes in the environment are too rapid. Today's market share is a

reflection of how well a business has performed historically.

Clearly, what companies should be doing is shifting the balance of their future portfolio toward

pioneers. That is the path to profitable growth. ThePMS mapabove depicts this trajectory, showing

the scatter plot of a company's portfolio of businesses, where the gravity of its current portfolio of

twelve businesses, expressed as twelve dots, shifts from a preponderance of settlers to a stronger

balance of migrators and pioneers.

Buyer Experience Cycle / Buyer Utility MapReturn to BOS tools

The buyer utility map helps to get managers thinking from the right perspective. It outlines all the

levers companies can pull to deliver utility to buyers as well as the different experiences buyers can

have of a product or service. This lets managers identify the full range of utility propositions that a

product or service can offer. Lets look at the maps dimension in detail.
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The six stages of the buyer experience cycle. A buyer's experience can usually be broken down

into a cycle of six distinct stages, running more or less sequentially from purchase to disposal. Each

stage encompasses a wide variety of specific experiences. Purchasing, for example, includes the

experience of browsing Amazon.com as well as the experience of pushing a shopping cart through

Wal-Marts aisles.

The six utility levers.Cutting across the stages of the buyers experience are what we call the levers

of utility the ways in which companies unlock utility for their customers. Most of the levers are

obvious. Simplicity, fun and image, and environmental friendliness need little explanation. Nor does

the idea that a product could reduce a buyers financial or physical risks. And a product or service

offers convenience simply by being easy to obtain and or use. The most commonly used lever but

perhaps the least obvious- is that of customer productivity. An innovation can increase productivity by

helping them do things faster, better, or in different ways. The financial information company

Bloomberg, for example, makes traders more efficient by offering on-line analytics that analyze and

compare the raw information it delivers.

By locating a new product on one of the 36 spaces of the buyer utility map, managers can clearly see

how the new idea creates a different utility proposition from existing products. In our experience,

managers all too often focus on delivering more of the same stage of the buyers experience. That

approach may be reasonable in emerging industries, where theres plenty of room for improving a

companys utility proposition. But in many existing industries, th is approach is unlikely to produce a

market-shaping blue ocean strategy.

3 Tiers of Noncustomers

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Typically, to grow their share of a market, companies strive to retain and expand existing customers.

This often leads to finer segmentation and greater tailoring of offerings to better meet customer

preferences. The more intense the competition is, the greater, on average, is the resulting

customization of offerings. As companies compete to embrace customer preferences through finer

segmentation, they often risk creating too-small target markets.

To maximize the size of their blue oceans, companies need to take a reverse course. Instead of

concentrating on customers, they need to look to noncustomers. And instead of focusing on customer

differences, they need to build on powerful commonalities in what buyers value. That allows

companies to reach beyond existing demand to unlock a new mass of customers that did not exist

before.

Although the universe of noncustomers typically offers big blue ocean opportunities, few companies

have keen insight into who noncustomers are and how to unlock them. To convert this huge latent

demand into real demand in the form of thriving new customers, companies need to deepen their

understanding of the universe of noncustomers.

There are three tiers of noncustomers that can be transformed into customers. They differ in their

relative distance from your market. The first tier of noncustomers is closest to your market. They sit

on the edge of the market. They are buyers who minimally purchase an industrys offering out of

necessity but are mentally noncustomers of the industry. They are waiting to jump ship and leave the
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industry as soon as the opportunity presents itself. However, if offered a leap in value, not only would

they stay, but also their frequency of purchases would multiply, unlocking enormous latent demand.

The second tier of noncustomersis people who refuse to use your industrys offerings. These are

buyers who have seen your industrys offerings as an option to fulfill their needs but have voted

against them.

The third tier of noncustomers is farthest from your market. They are noncustomers who have never

thought of your markets offerings as an option. By focusing on key commonalities across these

noncustomers and existing customers, companies can understand how to pull them into their new

market.

Sequence of Blue Ocean Strategy
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4 Hurdles to Execution

Once a company has developed a blue ocean strategy with a profitable business model, it must

execute it. The challenge of execution exists, of course, for any strategy. Companies, like individuals,

often have a tough time translating thought into action whether in red or blue oceans.

The challenges managers face are steep. They face four hurdles:

A cognitive hurdle. waking employees up to the need for a strategic shift. Red oceans may not bethe paths to future profitable growth, but they feel comfortable to people and may have even

served an organization well until now, so why rock the boat?

Limited resources. The greater the shift in strategy, the greater it is assumed are the resourcesneeded to execute it. But many companies find resources in notoriously short supply

Motivation. How do you motivate key players to move fast and tenaciously to carry out a break fromthe status quo?

Politics. As one manager put it, In our organization you get shot down before you stand up.Although all companies face different degrees of these hurdles, and many may face only some subset

of the four, knowing how to triumph over them is key to attenuating organizational risk.

To achieve this effectively, however, companies must abandon perceived wisdom on effecting change.Conventional wisdom asserts that the greater the change, the greater the resources and time you will

need to bring about results. Instead, you need to flip conventional wisdom on its head using what we

call tipping point leadership. Tipping point leadership allows you to overcome these four hurdles fast

and at low cost while winning employees backing in executing a break from the status quo.

The key questions answered by tipping point leaders are as follows: What factors or acts exercise a

disproportionately positive influence on breaking the status quo? On getting the maximum bang out of

each buck of resources? On motivating key players to aggressively move forward with change? And on

knocking down political roadblocks that often trip up even the best strategies? By single-mindedly

focusing on points of disproportionate influence, tipping point leaders can topple the four hurdles thatlimit execution of blue ocean strategy. They can do this fast and at low cost.
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Three Principles of Fair Process

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What is fair process? Fair process builds execution into strategy by creating people's buy-in up front.

When fair process is exercised in the strategy making process, people trust that a level playing field

exists. This inspires them to cooperate voluntarily in executing the resulting strategic decisions.

There are three mutually reinforcing elements that define fair process: engagement, explanation, and

clarity of expectation. Whether people are senior executives or shop employees, they all look to these

elements. We call them the three principles of fair process.
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Conventional Wisdom vs Tipping Point Leadership

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The conventional theory of organizational change rests on transforming the mass. So change efforts

are focused on moving the mass, requiring steep resources and long time frames luxuries few

executives can afford. Tipping point leadership, by contrast, takes a reverse course. To change the

mass it focuses on transforming the extremes: the people, acts, and activities that exercise a

disproportionate influence on performance. By transforming the extremes, tipping point leaders are

able to change the core fast and at low cost to execute their new strategy.
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