Transcript Blue Ocean Strategy - Texas Tech University

Book Review
Daisy, Sara, Cher, Sarah, Sean
Ch. 1 Creating Blue Oceans
Red Oceans
Blue Oceans
Compete in existing market space.
Create uncontested market space.
Beat the competition.
Make the competition irrelevant.
Exploit the existing demand.
Create and capture new demand.
Make the value-cost trade-off.
Break the value-cost trade-off.
Strategic choice of differentiation or
low cost.
Pursuit of differentiation and low
cost.
Value Innovation: Cornerstone of
BOS
• Approach to strategy separates the winners from the
losers.
• Creators do not use the competition as a benchmark.
• Value Innovation
– Instead of beating the competition, focus on making
competition irrelevant.
– Value innovation occurs when innovation is aligned
with utility, price, and cost positions.
– Create Blue Oceans by pursuing differentiation and low
cost simultaneously.
Six Principles of Blue Ocean
Strategy
 Reconstruct market boundaries
 Focus on the big picture, not the numbers
 Reach beyond existing demand
 Get the strategic sequence right
 Overcome key organizational hurdles
 Build execution into strategy
Ch. 2 Analytical Tool and
Frameworks
• Strategy Canvas
– An analytic framework that is central to value innovation and
the creation of blue oceans.
– Value Curve
•
graphic depiction of a company’s relative performance across its
industry’s factors of competition.
• Four Actions Framework
– Questions to challenge strategic logic and business model
• Eliminate-Reduce-Raise-Create Grid
– Act on Four Actions to create a new value curve
• Characteristics of a Good Strategy
– Focus, Divergence, & Compelling Tagline
– Company is on the right track if it meets the criteria.
CH 3: Breaking from Competition
 Break from the competition to create blue oceans
 Are there systematic patterns for reconstructing market
boundaries to create blue oceans?
 If so, can they be applied across all industry sectors?

Yes, there are six basic approaches to remaking market
boundaries.
 Six Paths Framework
CH 3: Six Paths Framework
 Path 1: Look across Alternative Industries
 Path 2: Look Across Strategic Groups Within Industry
 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
CH 4: Visual Awakening Strategy
 Step 1: Visual Awakening
 As-Is strategy- compare your company with competitors
 Step 2: Visual Exploration
 Send managers into field to study use of products
 Observe advantages of alternative products
 Find factors to eliminate, create or change in your
business
 Step 3: Visual Strategy Fair
 Business units present their strategy to everyone to see
business portfolio and big picture
CH 4: Using the Pioneer-
Migrator-Settler (PMS) Map
 Pioneer- the businesses that offer unprecedented value
 Pioneers have maximum growth potential but often consume
cash to finance growth as they expand.
 Settler - the businesses whose value curves conform to the
basic shape of the industry’s
 Even though settlers have marginal growth potential, they are
frequently today’s cash generators.
 Migrators- lie somewhere in between the pioneers and the
settlers, and fall between red oceans and blue oceans.
Chapter 5: Reach Beyond Existing
Demand
 How do you maximize the size of the blue ocean you
are creating?
 You reach beyond existing demand (the 3rd principle of
blue ocean strategy)
 To maximize the size of your blue ocean you need to
concentrate your focus on non-customers and
commonalities in what those buyers value
 Non-customers before customers
 Commonalties before differences
 De-segmentation before finer segmentation
Chapter 5: Reach Beyond Existing
Demand
 Three tiers of non-customers
 Soon-to-be non-customers
 Refusing non-customers
 Unexplored non-customers
 Within these three groups there is an ocean of
untapped demand waiting to be released
Chapter 5: Reach Beyond Existing
Demand
Remember you should go for the biggest catchment, or the biggest
group of non-customers
Chapter 6: Get the Strategic
Sequence Right
 The 4th principle of blue ocean strategy: get the
strategic sequence right
 Discusses the strategic sequence of fleshing out and
validating blue ocean ideas to ensure their commercial
viability
Chapter 6: Get the Strategic
Sequence Right
Your business must pass all
of these four tests to become
a viable blue ocean idea
CH 7: Breaking through Hurdles
 Break through the cognitive hurdle
 Jump the resource hurdle
 Jump the motivational hurdle
 Knock over the political hurdle
CH 7: Tipping Point Leadership
 Tipping Point Leadership-allows you to overcome
these four hurdles fast and at low cost while winning
employees’ backing in executing a break from the
status quo.
 Ex. Target
CH 8: The power of fair process
 Strategy formulation process- fair process
 Attitudes-trust and commitment
 Behavior-voluntary cooperation
 Strategy Execution-exceeds expectations
CH 8: Successful companies
 Successful companies do not consist of top, middle,
and bottom hierarchies; it is a collective process that
includes all who make up the organization.
 Intangible capital(commitment, trust, voluntary
cooperation) is a must have in order to be successful.
 Ex. Target in the community
CH 9: Imitators
 Once a company creates a blue ocean and their
performance is known…
 Sooner or later there will be companies trying to imitate
 As they succeed and expand the blue ocean, more
companies will try to join themselves.
 Barriers to Imitation
 Some are operational, and others are cognitive.
 Most often a blue ocean strategy will go without
competition for 10 to 15 years.

This is due to imitation barriers rooted in blue ocean strategy
CH 9: Imitation Barriers
 Value innovation does not make sense to a company’s




conventional logic.
Blue ocean strategy may conflict with other
companies’ brand image.
Natural Monopoly: The market often cannot support a
second player.
Patents of legal permits block imitation.
High volume leads to rapid cost advantage for the
value innovator, discouraging followers from entering
the market
CH 9: When to ValueInnovate Again
 Almost every blue strategy will be imitated.
 Avoid the trap of competing by monitoring value
curves on the strategy canvas.
 This will signal when to value-innovate and when not
to.
 You should swim as far as possible in the blue ocean,
making yourself a moving target, distancing yourself
from your early imitators, and discouraging them in
the process.
 You need to dominate the blue ocean over your
imitators for as long as possible.
Conclusion: Blue Ocean Strategy
 Ch 2: Six Principles to Blue Ocean Strategy
 Ch 3: Six Paths Framework
 Ch 5: Go for the biggest catchment
 Ch 6: The four tests: Utility, Price, Cost, Adoption
 Ch 7: Breaking through Hurdles
 Ch 9: Imitation Barriers