blue ocean strategy - toolbox

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„Strategy is the creation of a unique and valuable position, involving a different set of

[combined] activities“ - Michael E. Porter -

Porter, M. E. (1996). What is Strategy? Harvard Business Review, November-December, p. 3-22


blue ocean strategy idea Companies tend to engage in head-to-head competition in search of sustained profitable growth.

Yet in today’s overcrowded industries competing head-on results in nothing but a bloody red ocean of rivals fighting over a shrinking profit pool.

Lasting success increasingly comes, not from battling competitors, but from creating blue oceans of untapped new market spaces ripe for growth.

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

Source: www.blueoceanstrategy.com


http://www.blueoceanstrategy.com


blue ocean strategy 6 Paths Framework





The Six Paths Framework allows managers to address the search risk many companies struggle with. It enables them to successfully identify out of the haystack of possibilities that exist, commercially compelling blue oceans by reconstructing market boundaries.

There are six basic approaches to reconstructing market boundaries. These challenge the six fundamental assumptions underlying many companies’ strategies that keep companies trapped competing in red oceans. Instead of looking within the accepted boundaries of competition, the Six Paths Framework allows managers to look systematically across them to create blue oceans.

The table above outlines these six basic assumptions and the pathway managers can take to break away from head-to-head competition towards blue ocean creation.

blue ocean strategy 6 Paths Framework





blue ocean strategy TIERS of Customers





Typically, to grow their share of a market, companies strive to retain and expand their existing customer base. 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. This reorientation 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.






blue ocean strategy Value Innovation





Value innovation, the cornerstone of blue ocean strategy, is the simultaneous pursuit of differentiation and low cost, creating a leap in value for both buyers and the company.

Because value to buyers comes from the offering’s utility minus its price, and because value to the company is generated from the offering’s price minus its cost, value innovation is achieved only when the whole system of utility, price, and cost is aligned.

Break the value-cost tradeoff by answering the following questions:

• What factors can be eliminated that the industry has taken for granted? • What factors can be reduced well below the industry’s standard? • What factors can be raised well above the industry’s standard? • What factors can be created that the industry has never offered?

blue ocean strategy Value Innovation





blue ocean strategy Four Actions Framework





The Four Actions Framework is used to reconstruct buyer value elements in crafting a new value curve.

To break the trade-off between differentiation and low cost and to create a new value curve, the framework poses four key questions, shown in the diagram, to challenge an industry’s strategic logic.

blue ocean strategy Four Actions Framework





blue ocean strategy ERRC GRID





The Eliminate-Reduce-Raise-Create (ERRC) Grid compliments the Four Actions Framework. It pushes companies not only to ask the questions posed in the Four Actions framework but also to act on all four to create a new value curve, which is essential to 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-cost trade off. It immediately flags companies that are focused only on raising and creating, thereby lifting the cost structure and often overengineering products and services – a common plight for many companies.

It is easily understood by managers at any level, creating a high degree of engagement in its application. Because completing the grid is a challenging task, it drives companies to thoroughly scrutinize every factor the industry.

blue ocean strategy ERRC GRID





blue ocean strategy Strategy Canvas





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, while the vertical axis captures the offering level that buyers receive across all of these key competing factors.

The strategy canvas serves two purposes:

• To capture the current state of play in the known market space, which allows users to clearly see the factors that the industry competes on and where the competition currently invests and

• To propel users to action by reorienting focus from competitors to alternatives and from customers to noncustomers of 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. A strong value curve has focus, divergence as well as a compelling tagline.

blue ocean strategy Strategy Canvas





blue ocean strategy Sequence of BOS





Companies need to build their blue ocean strategy in sequence.

This framework can help companies ask the key questions at four critical steps:

• buyer utility, • price, • cost, • and finally adoption.

blue ocean strategy Sequence of BOS





blue ocean strategy Buyer Utility MAP





blue ocean strategy Buyer Utility MAP The Buyer Utility Map helps to get managers thinking from a demand-side 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 mindset helps managers identify the full range of utility propositions that a product or service can offer.

The Buyer Experience Cycle (BEC): A buyer’s experience can usually be broken down into a cycle of distinct stages, running more or less sequentially from purchase to disposal. Each stage encompasses a wide variety of specific experiences. Purchasing, for example, might include the experience of browsing Amazon.com as well as the experience of pushing a shopping cart through Wal-Mart’s aisles.

Utility levers: Cutting across the stages of the buyer’s experience are what we call utility levers – 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.





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KIRENZ STRATEGY & MARKETING CONSULTING Prof. Dr. Jan Kirenz Wesendonkstr. 44 81925 München


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blue ocean strategy - toolbox

Business

blue ocean creation

compelling blue oceans

companies strategies

paths framework source

headtohead competition

red oceans

competition irrelevant

customer differences