the times, they are changing may 15 naed [autosaved]
DESCRIPTION
We are giving a presentation at the National Association of Electrical Distributors on May 15 that we thought you would enjoy sharing.TRANSCRIPT
“The Times, They are Changing” Finding New “Blue Ocean” Market Space
in Changing Times
Andrea J. Simon PhD
Can you find a Blue Ocean?
Goal is to help you understand the essence of Blue Ocean Strategy
Encourage you to go exploring
Leave with a tool kit to start the process
3
Blue Ocean Strategy
W. Chan Kim and Renee Mauborgne
Studied 150 Companies in 50 industries over 100 year horizon
What worked and what didn’t?
And, how do I do it?
5
Let’s begin with a little mood musicAndre Rieu
What did you see, feel and think?
Classical Music
Traditional Setting
Dress in classic form
Conductor’s back
Disengaged
Focused on adults
Funeral
Pop Music
Untraditional setting
Colors, fashion
Conductor’s Personality Face First
Totally engaged
Young and Old
Party
6
7
Must have a Real Strategy
A well-defined, integrated, cohesive approach
A clear, simple story
What’s your hook?
8
All Strategies Ask…
Which customers or markets?
What distinguishes us?
What value proposition?
Why key processes give us competitive advantage?
What are the human, technological or organizational enablers of the strategy?
9
Classic Structured Strategic Thinking
Takes market structure as a given.
Drives you to carve out a position against the competition in the existing market space.
Reel in the competition
10
So, How Do You Win?
Grabbing a bigger share of the market is a zero-sum game—
One wins, the other loses.
11
Blue Ocean Strategy
Reconstruct the market
Creating demand in market space that does not exist today
12
Why Should You?
Studied business launches in 150 companies
86% line extensions with 62% total revenues
39% of total profits
Red Ocean of Competition
14% invested in creating new market space
38% total revenues but a startling
61% of total profits
Blue Ocean of New Market Space
13
Want to Swim?
Red Ocean of Bloody Competition?
Blue Ocean of Unmet Demand?
I need that !!!
OR
14
Blue Ocean Strategy
Add Value + InnovationMake the Competition IrrelevantChange the “Value-Cost” Trade-offFocus on the NonuserAlign the Entire Organization
15
It is All About You!
All about the Strategic Moves people made to solve problems differently.
They saw solutions in different ways. And then made them happen.
16
Case Studies Might Help
Skeptical?
17
What did these folks see?
(yellow-tail)® wine
18
Interesting industry to tackle
About 6,500 wine brands in US.
Ninety-six percent of those wine brands sold less than 100,000 cases in 2002
Only 23 wine brands sold at least 2 million cases each, accounting for 40 percent of a growing market of 245 million cases.
First time they tried to tackle the market (yellow tails’ )® predecessor, the Carramar Estate Label, failed for the Cassella Wine Company
19
What to do?
John Soutter and the Cassella family, rethought the industry established keys to the promotion of wine as:
a unique beverage
for the informed wine drinker
worthy of special occasions
20
Wine Red Ocean Strategic Canvas
How to make fun and nontraditional wine that’s easy to drink for everyone—particularly non-wine drinkers?
High
Low
Vineyard Prestige and Legacy
Use enological terminology and distinctions in wine communication
PriceAbove-the-line marketing
Aging Quality
Wine Complexity
Budget Wines
Wine Range
Premium Wines
21
Went looking for a Blue Ocean
Reconstructured its market strategy to
Turn non-drinkersinto frequent enjoyers.
Only 15% of Americans drank wine-Red Ocean
85% drank other things-Blue Ocean waiting for them
22
Which factorsshould be reducedwell below the
industry’s standards
Reduce
A NewValueCurve
Raise
Which factors shouldbe raisedwellabove the
industry’s standard?
Eliminate Create
Which of the factorsthat the industrytakes for granted
should be eliminated?
Which factorsshould be createdthat the industryhas never offered?
The Four Actions Framework -- ERRC
23
For (yellow tail)®…
Eliminate RaiseEnological terminology and distinctionsAging qualitiesAbove-the-line marketing
Price versus budget winesRetail store involvement
Reduce CreateWine complexityWine rangeVineyard prestige
Easy drinkingEase of selectionFun and adventure
24
Strategic Canvas (yellow tail)® wines
High
Low
Price
Use of Encological Distinctions
Above-the-line Marketing
Aging Quality
Vineyard Prestige
Wine Complexity
Wine Range
EasyDrinking
Ease of Selection
Fun and Adventure
Strategy Canvas (yellow tail)
(yellow tail)Focus
DiversificationTag Line
Premium Wines
Budget Wines
25
Results
John Soutter expected to sell 25,000 cases in 2001, the first year (yellow tail)® would hit the market.
Cautious but lucky--the wine sold 9 times as much!
Bold branding
Good product
Very affordable price
Bottles with the fancy kangaroo leapt off the shelf.
26
Execution helped
Retailers received the brightly colored branded displays on time and were clearly built into the entire process
27
Today, Dominates the American Market
« Dominating the overseas export market, [yellow tail]® is the fastest growing imported wine in US market history. The Shiraz is currently ranked as the No.1 selling 750ml red wine in the USA. The [yellow tail]® Merlot being the No. 1 selling Merlot in the USA. Selling more than 300,000 bottles a day, [yellow tail]® is now regarded as a global phenomenon. »
28
Others?
29
Today new stories coming out
Shimano—Coasting Bike for non-bikers
Wii—gaming for non-game players
30
Pattern Here
Concept Targeted Nonusers
Alternatives
Andre Rieu Non-concert goers/younger people
Rock, pop, jazz everything but classical music
Yellow Tail Non-wine drinkers Beer/hard liquorFord Non-car drivers HorsesSouthwest Non-fliers Drove distancesCurves Women who did not
work outGold’s Gym or in-home equipment
American Girl Girls but not the dolls
Video games/no time with mom
Cirque Du Soleil Adults—non-circus goers
Theater, dance, circuses for kids
Wii Non-gamers Lots of optionsShimano Coasting Bike
Non-bikers Lots of options
31
EAC/Integrated Power Solutions
A Battery Design and Manufacturing Company
“We were OEM’s–Original Equipment Manufacturer in the battery creation business”
32
Strategic Canvas Process
Beginning of the process they thought what mattered to the customer was:
Vertically Integrated
Battery design experts
Global Manufacturer
Good Customer Service, responsive to solving problems
Good supplier relationships
33
Not of much importance
Branding
Financial stability
Charger capabilities
34
Their Strategic Canvas
5-High tg/am
sb/jd tg/jd tg/am/jr tg/am/jr jr
3-Medium jr am am/jr sb/jd sb/jd sb
tg/ am/ jr/jd tg/jr/sb/jd tg/am/jr/sb jr
1- Low sb jd tg/am/jd tg/am/sb/jd
Vertical
Integration
Battery
Expertise/
Experience
Charger
Expertise
Wholly Owned
Global
Manufacturing
Customer
Service
Supplier
Relationships
Financial
Stability
CM
relationships Branding
Summary Strategic Canvas
35
How they saw their competitors
What they thought about their competition along the same attributes that they thought were important to their own customers.
36
Took them out to the field
Found a whole different set of issues for their customers and nonusers among their customers
Speed to marketInnovative ideas about mobile power solutionsStay on top of the battery power industry—what was happening that could help them? Teach them about rechargeable power.Give them a competitive edge.Longer, stronger, lighter power solutions.
37
For EAC…
Eliminate RaiseFocus on only disposable batteriesActing like an order taker
Integrated Power SolutionsSpeedCompetitive AdvantageTechnical AdvantageProactive leadership and consultative services
Reduce CreateConcern with pricingConcern with reactive customer service Focus on Vertical Integration
Charger CapabilitiesInnovationBranding
38
Now they Visualized a Blue Ocean
5-High tg/am
sb/jd tg/jd tg/am/jr tg/am/jr jr
3-Medium jr am am/jr sb/jd sb/jd sb
tg/ am/ jr/jd tg/jr/sb/jd tg/am/jr/sb jr
1- Low sb jd tg/am/jd tg/am/sb/jd
Vertical
Integration
Battery
Expertise/
Experience
Charger
Expertise
Wholly
Owned
Global
Manufactur
ing
Customer
Service
Supplier
Relationship
s
Financial
Stability
CM
relationship
s Branding
speed to
market
help
them be
cutting
edge
innovative
(game
boy)
Customer-
centric
needs
technical
talent
needs
state of
the art
information
n
Summary Strategic Canvas
Customer
Needs/Desires
Change the Focus, Differentiation and the Brand•Tag line: Lighter, Longer Power Solutions •What we do: Batteries and Chargers and Ideas and Solutions
What are you investing in? Not investing in?
What is on the bottom of your canvas? What do you and your industry invest in—or use to?
What could be on your canvas but isn’t?Marketing
Fun
Environmental benefits
Easy to use/to buy
Less complex
Innovation
39
40
What could be on the bottom of yours?
Would you look just like your competitors?Do you have a focus or are you all over the canvas?What are potential customers using instead of your industry?
High
Low
Vineyard Prestige and Legacy
Use enological terminology and distinctions in wine communication
PriceAbove-the-line marketing
Aging Quality
Wine Complexity
Budget Wines
Wine Range
Premium Wines
Let’s think about your Strategic Canvas
41
High
Low
PRICE
Strategy Canvas -- Your Company
INDUSTRY ATTRIBUTES YOU ARE INVESTING IN
Would you look just like your competitors?Do you have a focus or are you all over the canvas?What are potential customers using instead of your industry?
42
Maybe you see yourself as the low price distributor
Do you know what you are focused on and investing in?Are these the things that you are investing in?Are you investing in the things that matter to customers?
High
Low
PriceCustomer Service
Full line of products
Good inventory
Excellent sales people
Above the line marketing
Online strategy
Maybe you are the premium distributor
43
High
Low
PriceCustomer Service
Full line of products
Good inventory
Excellent sales people
Above the line marketing
Online strategy
Or are you the premium distributor?Are you innovative and using the Internet ?Are you investing in the things that matter to customers?
Maybe there are other things
44
Maybe you are going out and listening to the end user?Maybe there are things you can do to address their headaches?Hit those levers to make it easier for them?
High
Low
PriceCustomer Service
Full line of products
Good inventory
Excellent sales people
Online conversations Innovation
Ease of use
Simple to buy
Make them more profits
Let me share a story with you
A company who did this in your industry
Wanted to add value but in an innovative way
Went out and listened to users and nonusers, customers and noncustomers
Did a Blue Ocean Strategy without even calling it that
45
Techline Snap Track
46
Culture of Techline
Belief that adding value in an innovative way is exactly what they should be investing in—strategic canvas would be high in innovation
Went out exploring to listen to customers and non-customers
Went back and found ways to re-think what was being done, improve buyer’s utility:
Make it easier to get the job done
Make it better ROI—faster and simplerCreated demand in an entirely new market space
47
What did they do?
Looked across industriesApplied a Lego-model to electrical fittings
Thought about time in a new wayWhat use to take hours takes seconds
From a buyer’s useMore safely, more productively, more fun
48
What came out was very Blue Ocean
Snap Track was developed in response to repeated requests for a complete industrial cable tray system designed for the limited width requirements of instrumentation data cable.
Snap Track has been designed to provide the ease of installation and the economy of wire basket tray while retaining the stability and inherently superior cable protection of traditional raceway. Our philosophy is simple – the purpose of a cable tray system is to support and “Protect the Cable”.
49
HOW DO I DO THIS?Ok, so I am interested…
50
Visual Awakening
Take your management team through a Visual Awakening• What does your industry invest in?
• What do you invest in?
• What could you invest in to create a Blue Ocean and open up new market space?
51
High
Low
Industry Attributes
Strategy Canvas -- Your Company
Let’s Go Exploring…
Get out of the office
Go into the fieldTake a camera
Take a video camera
Spend a day with a customer
Listen to nonusers—don’t ask them
Take an anthropologist
53
Headaches? Go-Arounds?
What could you see that would add value in an innovative way?
Six Levers to improve Buyer’s UtilityMake Buying Easier?Use Simpler?
Reduce the Risks?
Make Them More Productive?
More Environmentally Friendly?
Make it Fun, and Adventure
Buyer Experience Cycle
54
1.
Purchase
2.
Delivery
3.
Use
4.
Supplements
5.
Maintenance
6.
Disposal
Customer Productivity
Simplicity
Convenience
Risk
Fun and Image
Environmental friendliness
The Six Stages of the Buyer Experience Cycle
55
Third Tier
Second Tier
Who am I looking for?
Nonusers The first tier minimally buy an industry’s offering out of necessity.The second tier refuse to use your industries offerings. The third tier never thought of your market’s offerings as an option.
Your BOS Market
First Tier
56
Where are they? Shift your Focus
Kim & Mauborgne 2005
Industry
Strategic group
Buyer group
Scope of product or service offering
Functional-emotional orientation of an
industry
Time
Blue Ocean Across
these
Red Ocean
Stuck within
57
Once you are done, what next?
Draw your “To Be” CanvasVisualize some ideas about new solutions
Get feedback on alternative strategy
Use feedback to build the best “to be” future strategy
High
Low
Industry Attributes
Strategy Canvas -- Your Company
58
Go ExploringWhere do I find my Blue Ocean Opportunity?
59
Time for to get out of the office
“ If you want to understand how a lion hunts, don’t go to the zoo. Go to the Jungle.” (Kevin Roberts, Saatchi & Saatchi)
60
Please, don’t ask them what they need
Henry Ford’s quote:“If I had asked people how I could improve their transportation they would have told me to make their horses go faster.”
61
What are you trying to do?
Blue Ocean Strategic Theory Add Value + InnovationMake the Competition IrrelevantChange the “Value-Cost” Trade-offFocus on the NonuserAlign the Entire Organization
62
Why Should I Find My Blue Ocean?
Because it could open up an entirely new opportunity for you!
63
This copy of our presentation today was created to help you take these tools and apply them to your own company. The goal is to discover your company’s own Blue Ocean with new ideas, new market space, new customers and new demand. Please let us know how your exploring goes. We like to help others with case studies. Perhaps you will become a success story we can share as well.
Send us your story to: [email protected] would love to continue our discussions. Feel free to Skype us andrea.j.simon or connect however you like.
Simon Associates Management Consultants1905 Hunter Brook RoadYorktown Heights, NY [email protected] 914-245-1641Cell 914-261-1631