Session 8

STRATEGIC VISION &

BLUE OCEAN STRATEGY

How do we currently view the future?

Through theRear View Mirror of historic data?

Or with a Fortune Teller?

The main problem is that people don’t know what they don’t know

and

don’t know that they don’t know

How can we help firms anticipate the future?

Innovation Life Cycle

Innovator/ Entrepreneur creates a new

concept / product / process

Major Trend A consistent

pattern of events - all firms

invest in criticalsuccess factors

Evidence of use by leaders

A pattern is

emerging

Introduction of new CMs

Fad Innovation Major Trend Fact of Life

CM = Competitive Method

How can we help firms anticipate the future?

Co-alignment Principle

Macro-economic environmental forces• > Potential impacts• > Emerging trends• > Strategic choices• > Firm structure• > Focused innovation & NPD• > Competitive advantage

The PESTLE analysis

The PESTLE analysis is a tool to think about an industry’s external environment (what’s in the news) that will be a force for change in the industry, and takes in the:•Political environment

• such as structures and processes of government•Economic environment

• including types of business activities and companies; also includes the financial environment

•Social environment• including cultural factors

•Technological environment• including innovation levels and protection of intellectual property

Legal environment• pro or anti-business laws

•Ecological environment• includes environmental protection and climate change

Visioning the future

• http://www.nowandnext.com/• http://www.wfs.org/futurist• http://www.blueoceanstrategy.com/

• http://vimeo.com/21191249

W. Chan Kim

• The Boston Consulting Group

Renée Mauborgne

INSEAD

Blue Ocean

What have the following got in common?

Answer

All examples of business that were Blue Oceans-•Novel•Reframed or created demand•Launched amidst little or no competition•Created or co-created industries.

An antidote to Porter?

Red Oceans Red Oceans andand Blue OceansBlue Oceans

Crowded, existing markets

NEW STRATEGIC SPACE,

UNCHARTERED

Creating Blue Oceans

• Red Oceans• All industries in existence today

(known market space)

• Blue Oceans • All industries not in existence today

(unknown market space)

New Market Space

Red Oceans•Fairly good understanding of how to compete in Red Oceans e.g. 5F, Pestel etc.

Blue Oceans•Little academic guidance on how to create them

Comparison

Red Oceans•Compete in existing market space•Beat competition•Meet existing demand•Make the value-cost trade-off.•Aim for differentiation or cost lead

Blue Oceans•Create and locate new market space.•Make the competition irrelevant.•Create, capture and point out new demand.•Break the value-cost trade-off.•Align the whole system of firm's operations towards differentiation and low cost.

The Impact of Creating Blue Oceans

• In the Kim and Mauborgne study of the launches of 108 companies

• 86% = line extensions (or Red Oceans)

• However, these only accounted for • 62% of total revenues and 39% of total profits

• The other 14% of launches were aimed at creating Blue Oceans

• accounted for 38% of revenue and 61% of total profit

Move to an emphasis on strategy

• The company • not the correct starting point for Blue Oceans.

• Blue Oceans • focus on the strategic initiatives rather than

company or industry tradition.

• The book • focuses on 150 strategic moves made from 1880

to 2000 in various industries.

• Blue Oceans found in: • new and existing firms• attractive and unattractive industries• private and public sector.

Value Innovation: Key to Blue Ocean Strategy

• Value creation improves value to customer but does not make firm stand out.

• Innovation alone does not create demand• Value innovation occurs only when companies

align innovation with utility, price, and cost positions

Value innovation:• Makes the competition irrelevant• Creates a step-change in value over competition and

for customers• Opens up new and uncontested market space and

segments

Three Levels of Customers

1st

2nd

3rd

There is a universe of non-There is a universe of non-customers which can be customers which can be made into customers via made into customers via blue oceaning.blue oceaning.

1st tier: “Soon-to-be” non-1st tier: “Soon-to-be” non-customerscustomers

2nd tier: “Refusing” 2nd tier: “Refusing” non-customersnon-customers

3rd tier: “Unexplored” 3rd tier: “Unexplored” non-customers i.e. new non-customers i.e. new segmentssegments

3rd

Four Actions Framework

Strategy Canvas

Source: http://www.ivoryresearch.com/writers/emily-parker-ivory-research-writer/

Cirque du Soleil

• Cirque du Soleil achieved rapid growth in a declining industry

• Cirque du Soleil created uncontested new market space that made the competition irrelevant

Cirque du Soleil

• Cirque du Soleil provide both the fun and thrill of a circus and the intellectual sophistication of a show.

• Because of this, Cirque du Soleil appealed to both circus customers and noncustomers (theatre-goers).

Cirque du Soleil

• Each show, like a theatre show has a theme and tale.

• This caused customers to return to the show.

• They also cut costs/no frills approach.