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Blue Ocean Strategy

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by

Alec Mackrell

on 10 October 2013

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Transcript of Blue Ocean Strategy

Part 2:
Formulating Blue Ocean Strategy

Blue
Ocean
Strategy

Recronstruct Market
Boundaries
Focus on the
Big Picture
Activity 1:
Netflix Strategy Canvas

The Three Tiers of noncustomers
Reach Beyond
Existing Demand
Get The Strategic Sequence Right
Layout
In groups of 3 select a scenario number (1-5)
15 minutes will be allocated to developing a case solution
After that time, elect a spokes person to give a breif presentation on the information and strategy canvas
Use whatever frameworks you find necessary
Activity 2:
Scenarios

Six Paths Framework
Path 2:
Look Across Strategic
Groups within Industries
Path 3:
Look Across
the Chain of Buyers
Path 4:
Look Across Complementary
Product and Service Offerings
Path 5: Look Across
Functional or Emotional
Appeal to Buyers
Path 6:
Look Across Time
Path 1:
Look Across
Alternative Industries
The Four Steps of Visualizing Strategy
Step 1: Visual Awakening
Draw Strategy Canvas
See where strategy needs to change
Step 2: Visual Exploration
Step 3: Visual Strategy Fair
Step 4: Visual Communication
Two Parts:
Why?
Shows strategic profile of:
Industry
Competitors
Company
Understanding how people use or do not use your offerings
Conduct a Six Path Framework
Observe advantages of altenatives
Look to:
Eliminate
Create
Change
How do we find this?
Discussion
Eliminate
Raise
Reduce
Create
The Case of EFS
Develop a New Strategy Canvas
Relationship Management
Ease of use
Security
Accuracy
Speed
Market commentary
Account executives
Corporate dealers
Confirmation
Tracking
EFS Strategy Canvas: Before and After
Present strategy in an understanding manner to all employees!
Why?
To motivate employees with the change
A Commercially Viable Blue Ocean Idea
Price
Adoption
Cost
Buyer Utility
Why should customers buy your offering?
The Buyer Utility Map
The Buyer Experience Cycle
Ford Model T
From Exceptional Utility to Strategic Pricing
2 Functions of Strategic Price
Consumers feel compelling ability to purchase offering
Discourage imitators
How is it done?
Viewing Outside Industry Boundaries
Focus on:
Different forms, same function
Different forms and functions, same objective
Pricing against different form, same function: Ford's Model T
VS
$
$
From Strategic Pricing to Target Costing
Cost Innovations
Streamlining Operations
Partnering
Cost Innovation
From Utility, Price, and Cost to Adoption
Overcome Fear,
Reap the Rewards
Employees
Shareholders
Business Partners
Are their any modern day bundling oportunities or examples?
Agenda
1. Introduction: Key Concepts
2. Recronstructing Market Boundaries
3. Focus on the Big Picture
4. Activity 1
5. Reach Beyond Existing Demand
6. Get the Strategic Sequence Right
7. Activity 2
8. Final Discussion
Method
Time
2
5
5
3
5
5
5
20
5
What product alternatives can be incorporated in your companies offering?
NetJets took advantages for both alternative forms of air travel and reduced and eliminated everything else
Strategic Groups are divisions of an industry where companies compete with similar strategies
Curves created a low cost health club designed to motivate, not intimidate
Buyers
NovoPen,1985
Innovo,1999
Industries typically sell to one buyer group:
End users
Purchasers
Influencers
Challenging the industry buyer group can lead to blue ocean strategies
Buyer Utility
Price
Cost
Adoption
The Sequence of Blue Ocean Strategy
No - Rethink
No - Rethink
No - Rethink
No - Rethink
Is there exceptional buyer utility in your business idea?
Is your price easily accessible to the mass of buyers?
Can you attain your cost target to profit at your strategic price?
What are the adoption hurdles in actualizing your business idea? Are you addressing them up front?
YES
YES
YES
YES
+
=
Novo Nordisk shifted sales focus from influencer to end user
They analyzed the unpleasant nature of handling syringes, needles, proper dose administration
To addess these factors Novo Nordisk created the user-friendly insulin delivery system
The Price Corridor of the Mass
Do any current companies price against different form and function, but contain the same objective?
The original compact insulin delivery system was known as the NovoPen
NovoLet, 1989 created dosing system
Innovo introduced the integrated electronic memory & cartridge based delivery system
Blue Ocean Index
VS
VS
Value can be created by incorporating complementary product and service offerings to a business model
Hungarian Bus company NABI tapped into this value by asking the question:
What happeneds before, during, and after our product is used?
NABI addressed the issues regarding the product life cycle in the US bus industry
Industry Orientation
Traditionally industries are functionally oriented, finding value in utility or emotionally oriented, finding value in emotional or relational appeal
Functional
Emotional
Challenging the industry orientation can create new market space
Quick Beauty House
QB House made the transition from emotional driven sales to a highly functional one
Stripping emotional elements allowed QB house to reduce cut time from one hour to nine minutes
All industries are affected by external trends over time
Blue Ocean strategies are developed through business insights of value creation from external trends
Companies must work backwards from the point where the trend reaches its logical conclusion
Apple iTunes
To combat the rise of the illegal downloading market Apple created iTunes in 2003
iTunes was easy to navigate and provided high sound quality
Anticipating the mass movement to online music purchasing Apple captured 70% of legal music download market
W. Chan Kim and Renée Mauborgne
Third-Tier Noncustomer
Second-Tier Noncustomers
First-Tier Noncustomers
Your
Market
Customers on the edge of your market who make rare purchases while looking for alternative solutions
Pret A manger capatlized on the weaknesses of the restraurant industry in the UK
time constraints
concern for healthy food
high costs
Refusing customers who do not use or cannot afford market offerings
JCDecaux created demand for outdoor furniture marketing acting on inconsistencies in out of home advertising
Untargeted consumers who didn't hold potential for industry
JSF saw the division of the defense aerospace industry and reduced costs through shared production
Key points from last week
Red vs Blue Oceans
Value Innovation
Strategy Canvas
Blue Ocean ERRC Grid
Based off industry characteristics provided, depict the innovative strategic canvas of Netfix on strategy canvas template provided.
What key factors did they eliminate, reduce, raise and create?
Full transcript