blue ocean strategy - 21.1.2012

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Is that you, The Blue Cow? “The secret impresses no one. The trick you use it for is everything.”

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Blue Ocean Strategy

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Page 1: Blue ocean strategy - 21.1.2012

Is that you, The Blue Cow?

“ T h e s e c r e t i m p r e s s e s n o o n e . T h e t r i c k y o u u s e i t f o r i s e v e r y t h i n g . ”

Page 2: Blue ocean strategy - 21.1.2012

R E A L I T Y I N A M I N U S C U L E

C o n s u m e r d o n ’ t c a r e a b o u t y o u a t a l l .

T h e y a r e s t u p i d .

T h e y h a v e t o o m a n y c h o i c e s a n d t o o l i t t l e t i m e , t h e o b v i o u s

t h i n g t h e y d o i s “ I g n o r e s t u f f ”. I f y o u c a n f o o l t h e m e v e n f o r

a s e c o n d , I t w i l l m a k e t h e m w o n d e r.

B y t h e w a y, W h a t i s t h i s B l u e c o w ? S o u n d s f u z z y ?

W e ’ r e d r i v i n g d o w n a c o u n t r y s i d e . W e s e e n c o w s b e f o r e .

N o b o d y g o i n g t o s t o p o v e r t o s a y, “ O h , w o w ! L o o k , a c o w.”

C o w s a r e i n v i s i b l e , c o w s a r e b o r i n g . I s n ’ t i t ?

B u t w h a t i f t h e c o w i s B l u e ? I s n ’ t t h a t a s p e c i a l e f f e c t ?

W o u l d n ’ t w e s t o p b y t o n o t i c e i t ? B u t i f a l l w e r e b l u e

p r o b a b l y w e m a y g e t b o r e d t o o .

Page 3: Blue ocean strategy - 21.1.2012

A n a l o g y - R e a l i t y

T h e t h i n g t h a t i s g o i n g t o d e c i d e , w h a t g e t s c h a n g e d , w h a t g e t s

p u r c h a s e d , w h a t g e t s d o n e , w h a t g e t s b u i l t i s :

‘ I s i t r e m a r k a b l e ? ’

o n e s e l l s t h i n g s t h a t a r e s u p e r - e x p e n s i v e i n a b l u e b o x , a n d

o n e s e l l s t h i n g s t h a t a r e a s c h e a p a s t h e y c a n m a k e t h e m .

T h e o n l y t h i n g t h e y h a v e i n c o m m o n i s t h a t t h e y ' r e d i f f e r e n t .

C o m p e t i n g i n o v e r c r o w d e d i n d u s t r i e s i s n o w a y t o s u s t a i n

p e r f o r m a n c e . T h e r e a l o p p o r t u n i t y i s t o c r e a t e t h e

u n c o n t e s t e d m a r k e t s p a c e .

Page 4: Blue ocean strategy - 21.1.2012

T I M E M A C H I N E

B a c k t o 1 0 0 y e a r s : A u t o m o b i l e s , M u s i c

r e c o r d i n g , A v i a t i o n , P e t r o c h e m i c a l s , P h a r m a c e u t i c a l s a n d

M a n a g e m e n t c o n s u l t i n g - b a s i c I n d u s t r i e s – B u t u n k n o w n , u n -

h e a r d a n d U n - e x p l o r e d .

B a c k t o 3 0 y e a r s : M u t u a l f u n d s , C e l l u l a r

t e l e p h o n e s , B i o t e c h n o l o g y, D i s c o u n t r e t a i l i n g , E x p r e s s

p a c k a g e d e l i v e r y, S n o w b o a r d s , C o f f e e b a r s a n d H o m e v i d e o s

– N o n e o f t h e s e e x i s t e d i n a m e a n i n g f u l w a y.

F o r w a r d 2 0 y e a r s : H o w m a n y I n d u s t r i e s t h a t a r e u n k n o w n

t o d a y w i l l e x i s t t h e n ? I f h i s t o r y i s a n y p r e d i c t o r o f

f u t u r e , t h e a n s w e r i s M A N Y.

Page 5: Blue ocean strategy - 21.1.2012

P a r a d o x o f S t r a t e g y : C o m p e t i t i o n o r D i f f e r e n t i a t i o n ?

I n a s t u d y o f b u s i n e s s l a u n c h e s i n 1 0 8 c o m p a n i e s , w e f o u n d

t h a t 8 6 % o f t h o s e n e w v e n t u r e s w e r e l i n e e x t e n s i o n s - 1 4 %

a i m e d a t c r e a t i n g n e w m a r k e t s / i n d u s t r i e s .

L i n e s E x t e n s i o n s a c c o u n t e d f o r 6 9 % o f t o t a l r e v e n u e s a n d

3 9 % o f t o t a l p r o f i t s .

B y c o n t r a s t , 1 4 % i n v e s t e d i n c r e a t i n g n e w m a r k e t s a n d

i n d u s t r i e s d e l i v e r e d 3 8 % o f t h e t o t a l r e v e n u e s a n d a s t a r t l i n g

6 1 % o f t o t a l p r o f i t s .

C o m p e t i t i o n d e r i v e d f r o m M i l i t a r y s t r a t e g y - C o n f r o n t i n g a n

o p p o n e n t a n d d r i v i n g h i m o f f t h e b a t t l e f i e l d o f l i m i t e d

t e r r i t o r y.

D i f f e r e n t i a t i o n – N o c o m p e t i t o r. F i n d a n d d e v e l o p m a r k e t s

w h e r e t h e r e i s l i t t l e / n o c o m p e t i t i o n - E x p l o i t a n d p r o t e c t i t .

Page 6: Blue ocean strategy - 21.1.2012

S o m e t i m e s i n v o l v e d , b u t n o t a d e f i n i n g f e a t u r e

I t i s a l l a b o u t l i n k i n g t e c h n o l o g y t o w h a t B u y e r s v a l u e d .

B e i t C h r y s l e r M i n i v a n / F o r d T m o d e l / G M ’s c a r f o r e v e r y

p u r s e a n d p u r p o s e / J a p a n e s e f u e l e f f i c i e n t a u t o s / A p p l e

P c s / D e l l c u s t o m i z a t i o n / N i c k e l o d e o n , t h e y a l l l o o k e d

u n a t t r a c t i v e a t t h e c r e a t i o n s t a g e a n d d r i v e n b y v a l u e

p i o n e e r i n g w i t h t h e u s e o f e x i s t e n t t e c h n o l o g i e s .

I s D i f f e r e n t i a t i o n a l l a b o u t t e c h n o l o g y i n n o v a t i o n ?

L O W C O S T

H I G H V A L U E

Page 7: Blue ocean strategy - 21.1.2012

C O M P E T I T I O N

C o m p e t e i n e x i s t i n g m a r k e t

s p a c e

B e a t t h e c o m p e t i t i o n

E x p l o i t e x i s t i n g d e m a n d

M a k e t h e v a l u e / c o s t t r a d e

o f f

A l i g n t h e w h o l e s y s t e m o f

c o m p a n y ’s a c t i v i t i e s w i t h

i t s s t r a t e g i c c h o i c e o f

d i f f e r e n t i a t i o n O R l o w

c o s t .

D I F F E R E N T I AT I O N

C r e a t e u n c o n t e s t e d m a r k e t

s p a c e

M a k e t h e c o m p e t i t i o n

i r r e l e v a n t

C r e a t e a n d c a p t u r e n e w

d e m a n d

B r e a k t h e v a l u e / c o s t t r a d e

o f f

A l i g n t h e w h o l e s y s t e m o f

c o m p a n y ’s a c t i v i t i e s i n

p u r s u i t o f d i f f e r e n t i a t i o n

A N D l o w c o s t .

I n a N u t s h e l l

Page 8: Blue ocean strategy - 21.1.2012

C I R Q U E D U S O L E I L

Page 9: Blue ocean strategy - 21.1.2012

CI

RQ

UE

D

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SO

LE

IL

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OM

PA

NY

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• Cirque du Soleil is a Quebec based company recognized the world over for high-quality, artistic entertainment.

• Since its dawn in 1984, Cirque du Soleil has constantly sought to evoke the imagination, invoke the senses and provoke the emotions of people around the world.

• In 1984, 73 people worked for Cirque du Soleil.

• Today, the business has 5,000 employees worldwide, including more than 1,300 artists with its headquarters at Montreal.

• More than 100 types of occupations can be found at Cirque.

• The company’s employees and artists represent more than 50 nationalities and speak 25 different languages.

• More than 100 million spectators have seen a Cirque du Soleil show since 1984.

• Close to 15 million people will see a Cirque du Soleil show in 2012.

• Cirque du Soleil hasn’t received any grants from the public or private sectors since 1992.

Page 10: Blue ocean strategy - 21.1.2012

W h a t i s s o s p e c i a l a b o u t C i r q u e d u S o l e i l ?

Cirque staged dozens of productions seen by 40 million people in 90 cities all

over the world.

In 20 years it has achieved the revenues that Ringling Bros. and Barnum &

Bailey – the world’s leading circus – took more than a century to achieve -in a

period when the circus industry was in decline because of TV, sports, video

games and Play stations.

Cirque profitable increased its revenues by a factor of 22 in such an

unattractive environment.

“ W E R E I N V E N T T H E C I R C U S ”

Page 11: Blue ocean strategy - 21.1.2012

F a c t s t o p r o v e a s w h y C i r q u e d u S o l e i l i s s o s p e c i a l

Cirque did not made money by competing within the confines of industry limits or by stealing customers from Ringling Bros. and others

It created an uncontested market space that made the competition irrelevant

It pulled in the whole group of traditionally non-customers towards the industry

Customers were Adults and corporate clients who turned to theater, opera or ballet and therefore prepared to pay more than the price of a conventional circus ticket for an unprecedented entertainment

Traditional circuses tried traditional strategies to be different by conducting Lion tamers, clowns and these efforts raised the cost-structure. As a result of rising costs without rising revenues, there existed a downward spiral in overall circus demand

Rather than a traditional experience Cirque provided the fun andthrill of circus and the intellectual sophistication & artistic richness of a theatre

Page 12: Blue ocean strategy - 21.1.2012

I n s i g h t s a n d Ta k e a w a y s f r o m t h e H i s t o r y o f C i r q u e

If one has to step in the pursuit of differentiation, he has to break the trade off between cost and differentiation by achieving both differentiation and low cost with increase in value.

Proper alignment of cost structure, price, value and utility is the key ingredient of Success.

No structuralist/ environmentalist view ( Competition) , base the strategy upon world view in which market boundaries and industries can be reconstructed by the actions and beliefs of industry players and call it as ‘Re-constructionist’ view.

Create a barrier in such a way that nobody can imitate. Since imitation of differentiation requires companies to make changes to their whole system of activities , organization politics and a paradigm shift in the ability to imitate a divergent model.

F I N A L LY, M A K E A D I F F E R E N C E , T H E S T U P I D S C A N ’ T O B V I O U S LY I G N O R E Y O U R S T U F F.

Page 13: Blue ocean strategy - 21.1.2012

S o w h a t d o s t r a t e g i s t s c a l l t h i s b l u e c o w a s a f t e r a l l w e n e e d n a m e s t o b e c a l l e d b y s o m e o n e ? ? ? ? ?

BLUE OCEAN STRATEGY

Page 14: Blue ocean strategy - 21.1.2012

R e f e r e n c e s

• W.Chan Kim and Renee Mauborgne, Blue Ocean Strategy, Harvard Business review, October 2004.

• Blalock Agnes, Growth strategy model in a Blue ocean, McKinsey Quarterly Business Article, March 2012.

• TED talk by Seth Godin on “ Standing Out”, TED 2003 TALKS, Filmed Feb 2003, aired April, 2007.

Page 15: Blue ocean strategy - 21.1.2012

N o w, A r e y o u l o o k i n g f o r t h e s e c r e t ? Yo u n e v e r f i n d i t , b e c a u s e y o u ’ r e n o t r e a l l y l o o k i n g . Yo u d o n ’ t r e a l l y w a n t t o k n o w. Yo u w a n t t o b e f o o l e d .

- C h r i s t o p h e r P r i e s t

byVidhyalakshmi K