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Value Innovation: Blue Ocean Strategy

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Victor Vaquero

on 18 December 2013

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Transcript of Value Innovation: Blue Ocean Strategy

Value Innovation: Blue Ocean Strategy
J.C. Amortegui Cuevas
Anna Danielak
Meysam Khosroparviz
Felip Martí Carrillo
Víctor Vaquero Gómez

Innovation is the process of applying better solutions to meet new or existing needs. This is accomplished by designing, developing and creating new effective products, technologies, or even ideas, that would be readily available to the public.
Value Innovation
Is the art of making competition irrelevant by creating such a leap in value for your buyers and company that you open up new and uncontested market space and swim in a sea of prosperity.

Open Innovation
Assumes that companies should not only use its internal ideas, but also the external ideas and paths to market looking to advance in their technology. In one way, it could be defined as innovating with partners by sharing the risks and rewards in such a way that innovations can easily be transferred inwards and outwards
The six Principles of Blue Ocean Strategy
Blue Ocean Strategy
Frameworks, Tools and Methodologies
Cases of study
A Blue Ocean is created when a company achieves value innovation that creates a value for both the buyer and the company (product, service, delivery…)

Goes against the previously used strategies (Porter’s model) which claimed that a successful businesses are either low-cost providers or niche-players.

In this situation, each company would stay comfortable without the need to compete.

First time concept published in 2005, by Renée Mauborgne and W. Chan Kim.

Change of mind of the industries and companies: create a new uncontested market space where “navigate” smoothly rather than being constantly competing.

Blue Ocean propose finding value that crosses conventional market segmentation offering added value and lower cost.

When this is not achieved ->

Red Ocean
represents the already known
conventional approach
beating competition
not nice
Red Ocean VS Blue Ocean
Apple (iPad)
Released in 2010
Released in 2003
Wii (Nintendo)
Build Execution Into Strategy
Overcome Key Organizational Hurdles
Get The Strategic Sequence Right
Reach Beyond Existing Demand
Focus On The Big Picture, Not The Numbers
Reconstruct Market Boundaries
a) The Strategy Canvas

capturing the current state of play in the market, which allows to see the investments of competition and factors that the industry competes on

propelling to put operations into action by changing focus from competitors to alternatives
The first principle of blue ocean strategy is to reconstruct market boundaries to break from the competition and create blue oceans

The challenge is to successfully identify, out of all the possibilities that exist, commercially compelling blue ocean opportunities
The Six Paths Framework

Look Across Alternative Industries

Look Across Strategic Groups Within Industries

Look Across the Chain of Buyers

Look Across Complementary Product and Service Offerings

Look Across Functional or Emotional Appeal to Buyers

Look Across Time

Alternative strategy approach that consistently produces strategies for opening companies eyes to blue oceans

By building a companys strategic planning process around a strategy canvas, the company focuses their main attention on the big picture rather than becoming immersed in numbers

The Four Steps of Visualizing Strategy
1. Visual Awakening
2. Visual Exploration
3. Visual Strategy Fair
4. Visual Communication
Companies should challenge two conventional strategy practices:
The focus on existing customers
The drive for finer segmentation to accommodate buyer differences

As companies compete to embrace preferences through finer segmentation, they often risk creating too-small target markets”
—“How do you maximize the size of the blue ocean you are creating?”
Companies strategic sequence is validating blue ocean ideas to ensure their commercial viability. with a right strategic sequence and of how to assess blue ocean ideas along the key criteria in that sequence, dramatically you will reduce business model risk.
The sequence goes:
Buyer utility
Once a company has developed a blue ocean strategy with a profitable business model, it must execute it.

Companies, like individuals, often have a tough time translating thought into action whether in red or blue oceans

Compared with red ocean strategy, blue ocean strategy represents a significant departure from the status quo.

A company equals everyone from the top to the front lines

Create a culture of trust and commitment

—Involve front lines in creation of strategy

—To build trust and commitment and to inspire voluntary cooperation
“Creating blue oceans is not a static achievement but a dynamic process. Once a company creates a blue ocean and its powerful performance consequences are known, sooner or later imitators appear on the horizon. The question is, how easy or difficult is your blue ocean strategy to imitate?”

Barriers to Imitation

—A value innovation does not make sense based on conventional strategic logic.
—Brand image conflict can prevent companies from attempting to imitate a blue ocean strategy.
—Natural monopoly can block imitation if the size of the market cannot support another player.
—Copyrights, patents or other legal blocks are in place.
b) Four Actions Framework

Based on four key questions, to lead the user to the
trade-off breaking between differentiation and low cost and also to developing a new value curve with the result of reconstructing buyer value elements in crafting a
new value curve.

c) Six Paths Framework
used to find, highlight and take care of the risk
enables capturing possibilities existing around the company
reconstructing and moving market boundaries by challenging six most important establishments that refers to strategies in the red ocean
-> Result: “release” from the red ocean
d) Sequence Framework
BOS needs to be built in special order. it is essential to avoid risk
steps need to be completed one - by - one

e) Tipping Point Leadership
‘What factors or acts will lead to break the status quo?’

‘How to use the resources in the most efficient way?’

‘What is the way to compete the aggressive players?’

‘How to deal with the political roadblocks?’‘
complimenting the Four Action Framework
not only asking the questions but also act on all four of them in order to
create a new value curve
Acting is essential to unlock a new blue ocean. Filling in the ERRC

- gives immediate benefits:
pursuing differentiation and low costs of breaking the value - cost trade off at the same time
flagging companies focused only on raising and creating by lifting costs
by “overengineering”
very easy to use and to understand
f) Eliminate - Reduce - Raise - Create Grid
g) Pioneer - Migrator - Settler Map
A lot of migrators -> growth can be expected

! The more industry is populated by settlers, the greater the opportunity to value - innovate and create a blue ocean of new market space.

h) 3 Tiers of Noncustomers
1) The closest to the current market -> they minimally purchase offerings out of necessity

2) Buyers who have seen the current offering as an option to fulfill their needs but decided not to participate

3) The ones who have never considered the market’s offering as an option
i) Four steps visualizing strategy process
j) Buyer utility map
COGNITIVE: even if the red oceans are not the future, they still have served
the organisation and employees are used to them - they need to woken up

RESOURCE: the greater the shift in strategy, the greater the greater the
resources it requires for execution.

MOTIVATIONAL: how to motivate the key player and persuade them to
break from the status quo?

POLITICAL: “In our organization you get shot down before you stand up.”
Having the best strategy does not mean having supporters.
Helps managers to identify the full range of utility propositions that a product or service can offer

Shows the demand - side perspective and outlines the levels, which companies can pull to deliver both exceptional utility and experiences to potential buyers.

Released in 2006
Released in 1971
Any questions?
J.C. Amortegui Cuevas
Anna Danielak
Meysam Khosroparviz
Felip Martí Carrillo
Víctor Vaquero Gómez
The blue ocean strategy should not be considered to be a static attainment.

Managers need to know that to succeed, the dynamic side of this strategy has to be completely used. Companies should always be aware that sooner or later the blue ocean will start slowly changing to the red ocean.
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