Download An Introduction to Blue Ocean Strategy

Blue Oceans
and
Other BIG Strategic Ideas
What You Will Learn
• Become familiar with concepts behind
Blue Ocean Strategy
• Learn what MPI has done to apply Blue
Ocean concepts to your association
• Learn about net creation and open
innovation
• Formulate ideas on how you might be able
to apply these ideas to your own work
Red Oceans represent all industries in existence
today.
They have defined rules, competitors, and market
boundaries.
Key words might include competition, price wars,
market share, commoditization, benchmarking,
strategic positioning, value add.
Blue Oceans represent all industries
NOT
in existence today.
This is undefined market space, otherwise known
as OPPORTUNITY.
Key words might be value innovation, focus,
differentiation, creation of demand, new
marketplace
Most blue oceans are created from red
ocean companies expanding industry
boundaries.
For example, Cirque du Soleil or [yellowtail]
(more on this in a bit)
The phrase “Blue oceans” is new, but the
concept is not. Think of what industries
existed in 1900.
Take 3 minutes…
At your table, brainstorm a list of industries
that have emerged since then.
Some of them might be…
automotives, aviation, health care, plastics,
DVDs, computers, personal entertainment
devices (iPods, for example).
All of these industries created
new market space.
The premise is simple:
To win in the future, companies must stop
competing with each other.
The only way to beat the competition is to
stop trying to beat the competition.
The business environment in which most
business strategy and management has
been based on is changing, evolving or
disappearing.
Some of this change is due to technology.
Other reasons might be culture,
globalization, speed of new information, or
the role of demographics in the workplace.
Value innovation is the “new” strategic logic
behind Blue Ocean Strategy.
Instead of focussing on beating the competition,
you focus on making it irrelevant by creating a
leap in value for buyers and creating
uncontested market space.
Value innovation only occurs when organizations
have aligned innovation with utility, price and
costs.
The market must be ready to accept the product,
meaning that timing is key.
The focus is on both differentiation and low cost to
provide value to both customers and the
organization.
Graph of Value Innovation
Case study: Cirque du Soleil
Other circuses focused on:
• Benchmarking the competition
• High-profile “stars”, which increased costs
but who were largely unknown to the
general public
• Traditional venue
• Traditional audiences
Case study: Cirque du Soleil
Cirque du Soleil focused on:
 Creation of a hybrid between the circus and the
theatre
 Retention of the symbolic and glamorous
aspects of circus, such as the tent and the more
breathtaking aspects, such as acrobats
 Incorporation of more comfort, sophistication,
elegance and theatrical plots; this brought not
only the richness of theatre but a whole new
demographic of customers
 It looked across market boundaries and created
new ones.
The Strategy Canvas
• Captures the current state of play in the
market by detailing the factors players
compete on in product, service and
delivery
• For example, the wine industry competes
on price per bottle, refined image in
packaging, marketing strategies, aging
quality of wine, prestige of vineyard,
complexity of taste and diverse product
range
Competetive Factors
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Ranking Scale
Possible Wine Canvas
12
10
8
6
4
2
0
Quails Gate
Mission Hill
Yellowtail
The Strategy Canvas
• Each factor is plotted on the canvas, with
a high score reflecting the level of
investment a specific company makes in
that factor (for example a high score on
price means that the price per bottle is
high)
• When you plot all US wineries, they score
remarkably similarly
Example of a Strategy Canvas
Blue Ocean
Space
The Strategy Canvas
• To differentiate yourself in the market
place, you must focus on alternatives and
non-customers to re-define the
marketplace
• For example, Casella Wines looked at the
strategy canvas and redefined the
question: How do you make a fun and
non traditional wine that is easy for
everyone to drink?
Case Study: [yellowtail]
• Casella saw that most US consumers
preferred beer, spirits and pre-packaged
cocktails to wine
• Consumers saw wine as a turn-off due to
– It was pretentious
– The taste was too complex
– It could be intimidating
Case Study: [yellowtail]
• They created a wine that broke out of the
red ocean by creating a wine that:
– Appealed to beer and spirits drinkers by being
fun and unpretentious as well as to wine
drinkers
– Had a less complex, sweeter and smooth
taste
– Was easy to select as it did not focus on
prestige, aging, etc.
– They eliminated all factors that the wine
industry had long competed on
Four Actions:
Eliminate/Reduce/Raise/Create
• Which of the factors that the industry
takes for granted should be eliminated?
• Which should be reduced?
• Which should be raised well above
standard?
• Which factors should be created that have
not existed before?
3 Characteristics of
a Good Strategy
• It is focused; it is not diffused across all
potential aspects of the market
• The shape of the value curve diverges
from any potential competitors
• It has a compelling tagline
Your Strategy Canvas
At your table, choose an industry one (or
more) of you belong to.
• What industry are you in?
• What factors does it traditionally compete
on? (i.e. price, amenities, etc.)
• Are there any factors that set you apart?
• Are there any factors that do not add any
value and could be dropped?
• What could be created to add value?
Creation Nets and Open Innovation
• Open innovation is the concept that by
looking beyond your own boundaries, you
can gain access to better ideas,
knowledge and technology than you could
by relying on your own resources
• “Networks of creation”, or Creation Nets
are an extension of this concept
Creation Nets
• Involve many – sometimes hundreds or
even thousands of people – from diverse
backgrounds coming together, often over
the internet, to create knowledge, learn
best practices, and build on each other’s
work.
“Nobody is as smart as everybody”
William C. Taylor, Founder of Fast Company
The Positive Press
• For companies, creation nets have many
advantages:
– The rapid flow of change in today’s economy
makes new knowledge valuable, as opposed
to the past where a private knowledge base
could give value overlong periods
– Greater access to intellectual resources
– Greater access to new and different
technologies
– Ability to tap into knowledge across traditional
knowledge boundaries and industries
– Creative breakthroughs
The Negative Press
• Trust can be hard to establish
• Concerns about proprietary information
• Large groups of people working to innovate
•
•
•
•
together can be hard to control
Conflict among participants increases the more
people involved
Different tolerances for cost
Uncertainty on how to create value
Loss of confidence in own abilities
Net Creation at Work
• Development of iPod was stimulated
through a creation net formed by a
smaller player in the marketplace,
PortalPlayer
• The development of Linux, a computer
operating system, was through net
creation and involved companies such as
IBM, Intel and Hewlett Packard
• The discovery of gold in an Ontario mine
at Goldcorp, today considered the world’s
richest mine
Net Creation at Work
• Development of the internet itself
“The world’s most important technology
platform relies on ideas and computer
code generated largely by a decentralized
corps of volunteer programmers, most of
whom have never met each other and few
of whom work together in any formal
setting”
William C. Taylor, Mavericks at Work
Net Creation Summary
• Just because you are in charge doesn’t
mean you need to have all the answers
• Just because people don’t work for you
doesn’t mean that they can’t work with
you…but you have to invite them
• No one is as smart as everyone
• It is about the “architecture of
participation” (Tom O’Reilly, O’Reilly Media)
Personal Creation Networks
Find a partner:
• How can you utilize this concept either
personally or at work?
• What technology exists that you can use?
At your table:
• Share your ideas.
• Pick one that you can share with the room