Blue Ocean Blue Ocean StrategyStrategy
Preface Preface Chapter 1: Creating Blue Chapter 1: Creating Blue
OceansOceans Group 3Group 3
Anna RendonAnna RendonOlivia ErwinOlivia Erwin
Chase MuellerChase MuellerPaige StonePaige Stone
Tanner GilreathTanner GilreathBrandon LaviageBrandon Laviage
Ashley HoptayAshley Hoptay
Blue Ocean Strategy Blue Ocean Strategy
Blue Ocean Strategy Blue Ocean Strategy To improve the quality of our successes we To improve the quality of our successes we
need to study what we did that made a positive need to study what we did that made a positive difference & understand how to replicate it.difference & understand how to replicate it.
Blue Ocean Strategy challenges companies to Blue Ocean Strategy challenges companies to break out of the red ocean of bloody break out of the red ocean of bloody competition by creating uncontested market competition by creating uncontested market space that makes the competition irrelevant. space that makes the competition irrelevant.
Instead of dividing up existing - and often Instead of dividing up existing - and often shrinking - demand and benchmarking shrinking - demand and benchmarking competition, blue ocean strategy is about competition, blue ocean strategy is about growing demand and breaking away from the growing demand and breaking away from the competition.competition.
Cirque Du SoleilCirque Du Soleil
Created in 1984Created in 1984 Achieved a level of revenues that Achieved a level of revenues that
took Ringling Bros. and Barnum & took Ringling Bros. and Barnum & Bailey- the global champions of the Bailey- the global champions of the circus industry more than 100 years circus industry more than 100 years to attain!to attain!
New Market Space: Cirque New Market Space: Cirque du Soleildu Soleil
Why did Cirque du Soleil see so much success?Why did Cirque du Soleil see so much success? Realized that in order to win in the future, Realized that in order to win in the future,
companies must stop competing with each companies must stop competing with each other. other.
Cirque du Soleil did not compete with Ringling Cirque du Soleil did not compete with Ringling Bros. and Barnum and Bailey. Instead they Bros. and Barnum and Bailey. Instead they appealed to a whole new group of customers: appealed to a whole new group of customers: adults and corporate clients.adults and corporate clients.
They created an unprecedented entertainment They created an unprecedented entertainment experience.experience.
Ex.: Nintendo Wii and Millionaire MatchmakerEx.: Nintendo Wii and Millionaire Matchmaker
Red OceansRed Oceans VS VS Blue Blue OceansOceans
Red OceansRed Oceans All the industries in
existence today = the known market space
Industry boundaries and defined and accepted.
Companies try to outperform rivals
Market space gets crowded: prospects for profits and growth are reduced.
Competition turns the red ocean bloody
Blue OceansBlue Oceans Denote all the industries
not in existence today = the unknown market space
Defined by untapped market space, demand creation and the opportunity for highly profitable growth
Some created well beyond existing industry boundaries, but most are created within red oceans by expanding existing industry boundaries
Competition is irrelevant because the rules of the game are waiting to be set.
Understanding Blue Understanding Blue Oceans Oceans
Blue oceans are largely uncharted, Blue oceans are largely uncharted, so there is little practical guidance so there is little practical guidance on how to create them.on how to create them.
Without the analytical frameworks Without the analytical frameworks and principles to effectively manage and principles to effectively manage risk, managers have viewed the risk, managers have viewed the creation of blue oceans to be to risky creation of blue oceans to be to risky to attempt.to attempt.
The Continuing Creation of The Continuing Creation of Blue Oceans Blue Oceans
Although the term blue oceans is new, Although the term blue oceans is new, their existence is not.their existence is not. Examples: We’re use to these industries, but Examples: We’re use to these industries, but
they weren’t always in existence.they weren’t always in existence. Automobiles Aviation Music Recording Cell Phones Snowboards Coffee Chops
Think of all of the unknown industries the Think of all of the unknown industries the future will reveal.future will reveal.
Industries Continuously Industries Continuously Evolve Evolve
Industries never stand still.Industries never stand still. The Standard Industrial Classification (SIC) The Standard Industrial Classification (SIC)
system was replaced in 1997 by the North system was replaced in 1997 by the North American Industry Classification System American Industry Classification System (NAICS).(NAICS).
The new system expanded the ten SIC The new system expanded the ten SIC industry sectors to reflect the emerging industry sectors to reflect the emerging realities of new industry territories.realities of new industry territories.
SIC system’s replacement is a sign of how SIC system’s replacement is a sign of how significant the expansion of blue oceans has significant the expansion of blue oceans has been because the systems are designed for been because the systems are designed for standardization and continuity. standardization and continuity.
The Impact of Creating The Impact of Creating Blue Oceans Blue Oceans
What Does This Mean? What Does This Mean?
Blue oceans held a little over a tenth of Blue oceans held a little over a tenth of the launches. However, they brought the launches. However, they brought in a more than a third of the revenues in a more than a third of the revenues and almost two-thirds of the profits. and almost two-thirds of the profits.
Given that business launches included Given that business launches included the total investments made for the total investments made for creating red and blue oceans, the creating red and blue oceans, the performance benefits of creating blue performance benefits of creating blue oceans are evident.oceans are evident.
The Rising Imperative of The Rising Imperative of Creating Blue Oceans Creating Blue Oceans
Supply in an increasing number of Supply in an increasing number of industries is beginning to exceed industries is beginning to exceed demand.demand.
There has been an accelerated There has been an accelerated commoditization of products and commoditization of products and services, increasing price wars and services, increasing price wars and shrinking profit margins.shrinking profit margins.
For major product and service For major product and service categories, brands are generally categories, brands are generally becoming more similar.becoming more similar.
Without Differentiation… Without Differentiation… As brands become more similar, people As brands become more similar, people
generally select based on price.generally select based on price. How can you keep customers and sales if How can you keep customers and sales if
brand loyalty is eroding?brand loyalty is eroding? How many people buy the same detergent, How many people buy the same detergent,
toothpaste, peanut butter or paper towels toothpaste, peanut butter or paper towels each time? How many people factor in each time? How many people factor in price as the major buying determinant?price as the major buying determinant?
Managers are realizing that they will need Managers are realizing that they will need to be more concerned with blue oceans as to be more concerned with blue oceans as red oceans become increasingly bloody.red oceans become increasingly bloody. Examples: Laptops and the I-phoneExamples: Laptops and the I-phone
Red Ocean vs. Blue Ocean Red Ocean vs. Blue Ocean Strategy Strategy
The big difference in Red Oceans The big difference in Red Oceans and Blue Oceans is the strategy.and Blue Oceans is the strategy.
Red Ocean companies took a Red Ocean companies took a conventional approach of trying to conventional approach of trying to beat the competition.beat the competition.
Blue Ocean companies didn’t use the Blue Ocean companies didn’t use the competition as a benchmark, but competition as a benchmark, but instead used value innovation. instead used value innovation.
Value Innovation: The Value Innovation: The Cornerstone of Blue Ocean Cornerstone of Blue Ocean
Strategy Strategy Value Innovation - instead of Value Innovation - instead of
focusing on beating the competition, focusing on beating the competition, focus on making the competition focus on making the competition irrelevant by creating a leap in value irrelevant by creating a leap in value for buyers and your company, for buyers and your company, thereby opening up new and thereby opening up new and uncontested market space.uncontested market space.
Value + Innovation Value + Innovation
Value without innovation focuses on Value without innovation focuses on value creation but does not make value creation but does not make you stand out in the marketplace. you stand out in the marketplace.
Innovation without value tends to be Innovation without value tends to be futuristic and go beyond what futuristic and go beyond what buyers are ready for.buyers are ready for.
Value innovation must align Value innovation must align innovation with utility, price, and innovation with utility, price, and cost position.cost position.
Value-Cost Trade Off Value-Cost Trade Off
Red Ocean companies tend to Red Ocean companies tend to choose between low cost and choose between low cost and differentiation.differentiation.
Blue Ocean companies aim for both Blue Ocean companies aim for both simultaneously. simultaneously.
Value Innovation: The Value Innovation: The Cornerstone of Blue Ocean Cornerstone of Blue Ocean
Strategy Strategy
Cirque de Soleil Cirque de Soleil
Added story lineAdded story line Less slap stickLess slap stick Glamorized the tentGlamorized the tent Made more sophisticatedMade more sophisticated Reduced cost by eliminating animalsReduced cost by eliminating animals Priced tickets comparable with the Priced tickets comparable with the
theatretheatre
How do you achieve value How do you achieve value innovation? innovation?
It is done when the whole system of It is done when the whole system of the company’s utility, price, and cost the company’s utility, price, and cost activities are properly aligned with activities are properly aligned with each other each other
So what does it mean? So what does it mean?
Value innovation is more than Value innovation is more than innovation innovation It’s about strategy that embraces the entire
system of a company's activities
What do you need to What do you need to create it? create it?
Value innovation requires companies Value innovation requires companies to orient the whole system toward to orient the whole system toward achieving a leap in value for both the achieving a leap in value for both the buyer and themselves (meaning the buyer and themselves (meaning the company)company)
Structuralist view Structuralist view
Also known asAlso known as Environmental determinism
Goes in part with red ocean strategy, Goes in part with red ocean strategy, assumes that an industry structures are assumes that an industry structures are set and you must compete in it set and you must compete in it
Reconstructionist view Reconstructionist view
Based on the view that market Based on the view that market boundaries and industry structure boundaries and industry structure are not given and can be are not given and can be reconstructed by the actions and reconstructed by the actions and beliefs of industry players beliefs of industry players
Red Ocean vs. Blue Ocean Red Ocean vs. Blue Ocean Strategy Strategy
Red Ocean Strategy Blue Ocean Strategy
Compete in existing market space Create uncontested market space
Beat the competition Make the competition irrelevant
Exploit existing demand Create and capture new demand
Make the value-cost trade-off Break the value-cost trade-off
Align the whole system of a firm’s activities with its strategic
choice of differentiation or low cost
Align the whole system of a firm’s activities in pursuit of
differentiation and low cost
Company/Industry – Company/Industry – Strategic Move Strategic Move
Initial Step to define the basic unit of Initial Step to define the basic unit of analysisanalysis Previously Published Research
In Search of Excellence Built to Last
Basic Unit of Analysis Company
Blue Ocean Strategy Basic Unit of Analysis
Strategic Move
Results Results
Basic Unit of Analysis Company
2/3 of the companies had fallen from their perches as industry leaders
Atari, Data General, Fluor, National Semiconductor
Strategic Move They delivered products and services that
opened and captured new market space, with a significant leap in demand
Ford, GM, CNN, Compaq, Southwest, Cirque du Soleil
Strategic Move Strategic Move
Strategic Move - Cont Strategic Move - Cont
Is a set of managerial actions and Is a set of managerial actions and decisions involved in making a major decisions involved in making a major market creating business offeringmarket creating business offering
Capture?Capture? New Market Space Increased Demand
Examples of Blue Oceans Examples of Blue Oceans
FordFord Model T
General MotorsGeneral Motors Styled cars to emotions
CNNCNN 24/7 News Channel
Cirque Du SoleilCirque Du Soleil Sophisticated Entertainment
Formulating and Executing Formulating and Executing Blue Ocean StrategyBlue Ocean Strategy
Chapter 2: Introduces the analytical tools and Chapter 2: Introduces the analytical tools and frameworks that are essential for creating and frameworks that are essential for creating and capturing blue oceans. capturing blue oceans.
Chapters 3-6: Introduces the principles that drive the Chapters 3-6: Introduces the principles that drive the successful formulation and implementation of blue successful formulation and implementation of blue ocean strategy and explain how they, along with the ocean strategy and explain how they, along with the analytics, are applied in action.analytics, are applied in action.
Chapters 7-8: Turn to the principles that drive Chapters 7-8: Turn to the principles that drive effective execution of blue ocean strategy. Tipping effective execution of blue ocean strategy. Tipping point leadership, organizational risk, fair process, and point leadership, organizational risk, fair process, and management risk are all addressed as new strategies. management risk are all addressed as new strategies.
Chapter 9: Discusses the dynamic aspects of blue Chapter 9: Discusses the dynamic aspects of blue ocean strategy- the issues of sustainability and ocean strategy- the issues of sustainability and renewal.renewal.
The Six Principles of Blue The Six Principles of Blue Ocean StrategyOcean Strategy
Class Take AwaysClass Take Aways Blue Ocean Strategy challenges companies Blue Ocean Strategy challenges companies
to break out of the red ocean of bloody to break out of the red ocean of bloody competition by creating uncontested competition by creating uncontested market space that makes the competition market space that makes the competition irrelevant.irrelevant.
The big difference in Red Oceans and Blue The big difference in Red Oceans and Blue Oceans is the strategy.Oceans is the strategy.
Value Innovation is the cornerstone of Blue Value Innovation is the cornerstone of Blue Ocean Strategy.Ocean Strategy.
Strategic moves should be aimed atStrategic moves should be aimed at delivering products and services that open and capture new market space, with a significant leap in demand.