Blue Ocean Strategy Ch. 6 Get the Strategic Sequence Right

Blue Ocean StrategyCh. 6 Get the Strategic Sequence RightKristy Strong, John White, Andrew Maale1The Right Strategic SequenceBuyer Utility: Is there a compelling reason for people to buy it?Park the idea or rethink itSetting the right strategic price: Is your offering priced to attract the mass of target buyers so they are compelled to pay?Securing profit brings us to cost: Can you produce your offering at target cost and still earn profit margin?Adoption hurdles: What are the hurdles in rolling out your idea?Are you addressing them up front?

2Testing for Exceptional UtilityIs there Exceptional Buyer Utility in your Business IdeaNeed for Buyer UtilityPhillips CD-iBleeding-Edge Technology Bleeding-Edge UtilityValue Innovation Technology InnovationExpressly Assess Where and How the new product or service will change buyers lives3Buyer Utility Map (figure)

4Buyer Utility Map (explanation)Applying the Right PerspectiveOutlines all the Utility Levers companies can pull to deliver Utility as well as different experiences Buyers can haveManagers can identify the full range of utility propositions that a product or service can offer

5Buyer Experience Cycle (figure)

6Buyer Experience Cycle (Explanation)Ask Questions about each 6 stepsPurchaseDeliveryUseSupplementsMaintenanceDisposalUPS Buyer Experiences Applied7Six Utility Levers

What blocks does your proposed product fill?Using this tool, you can see how and whether your proposed product creates untapped utility for customersIf your product fills spaces as other players, chances are you have not tapped a Blue Ocean8Model-T Ford Example

9From Exceptional Utility to Strategic PricingEnsures that buyers not only will want to buy your offering but will also have the ability to pay for it.Many companies test the waters of a new product by targeting price-insensitive customers.

10It is important to know from the start what price will quickly capture the mass of target buyers.Companies are discovering that volume generates higher returns than it used to.Value of a product may be closely tied to the total number of people using it.Network externalities-sell millions at once, or nothing at all.

11Free RidingThe use of a rival good by one firm precludes its use by another.Use of a nonrival good by one firm does not limit its use by another.Excludability is a function both of the nature of the good and of the legal system.12The Price Corridor of the Mass

13Step 1 Identify the Price Corridor of the MassLook at other products with in the same industry.Compare it to different products offered by non-traditional competitors.Different form, same functionModel T vs. horse drawn carriages.Different form and function, same objective.Bars vs. restaurants vs. movies.14Step 2Specify a level within the Price Corridor.Determines how high a price they can afford to set without bringing in competition.Degree to which the product is protected legally.Degree to which the company owns exclusive asset or core capability.

15From Strategic Pricing to Target CostingPrice-minus costing, not cost-plus pricing.To hit the cost target, companies have 3 principal leversStreamlining and cost innovationsPartneringChanging the pricing model of the industry.16Streamlining and Cost InnovationsStreamlining operationsYou can shorten the number of parts or steps used in production by shifting the way things are made.Introducing cost innovations from ManufacturingDistribution

17PartneringMany companies mistakenly try to carry out all the production and distribution activities themselves.Partnering allows a company to leverage other companies expertise and economies of scale.Can be faster and cheaper.

18Changing the Pricing ModelPricing InnovationSometimes no amount of streamlining or partnering will make it possible for a company to hit its target cost.Blockbuster changed their model from selling to renting.Equity InterestHP trades high-powered servers to Silicon Valley start-ups for a share of their revenue.

19The profit model

20From Utility, Price, and Cost to AdoptionEducate the fearful3 main stakeholdersEmployeesBusiness partnersGeneral public

21EmployeesCommunicate the threats of the ideaWork with them to find ways to defuse the threatsGet the right people on the bus

22Business partnersDiscuss the issues with the partnersConvince them what they have more to gain by cooperatingAnd what there is to compensate from lost revenue

23General PublicBy educating the public, you can help your company by avoiding any activist groupsLet them know you have included them and that they have a voice No surprises

24Blue Ocean Idea IndexYet Another Test to form an integral whole to ensure commercial successExamples to Illustrate this TestPhillips CD-IMotorola IriduimDoCoMo i-mode Japan25Illustration of Blue Ocean Idea Index

26Phillips CD-i

27Motorola Iridium

28DoCoMo i-mode Japan

29What next?After passing the Blue Ocean Idea Index test, the company can shift from Blue Ocean Strategy to ExecutionHow do you bring an Organization with you to execute this strategy even though it represents a different departure from the past?Answer: Overcoming key organizational hurdlesTomorrows BOS presentation30