Conclusion:

The

Renewal

of

Sustainability

and

Blue Ocean Strategy

Team 1: Adrienne Collins, Jessica Drummond, Mark Beal, Mario Santos, Michael Sanchez, Spencer Thomas, Alec Wegmann, Chad Hensley

Maintaining a healthy position

• Creating a blue ocean isn’t an achievement, but a

process

.

Success brings imitators

• Once a company proves a blue ocean successful, it is only a matter of time before others attempt to hop on the bandwagon.

• It is only a matter of time.

imitation

Current ocean turning red ?

• As the company and its early imitators succeed and expand the blue ocean, more companies will eventually jump in.

This raises the question: When should a company reach out to create another blue ocean ?

Barriers to Imitation

• • Some can be operational, others cognitive.

BOS will last 15-20 years without any real challenges.

– Southwest Airlines, Cirque du Soleil, Federal Express

Some Imitation Barriers

• • Value innovation just doesn’t make sense to competition when using conventional logic.

– CNN 24 hrs vs. NBC/CBS/ABC being nightly – Called Chicken Noodle News by the industry Brand image conflict can create a sense of invalidation – The Body Shop stayed away from beautiful models and the idea of eternal youth.

Imitation Barriers of Cracker Barrel

• • Old fashioned, ‘down home’, 1930’s styled theme cannot be copied by others.

Country store idea doesn’t make sense to others in the restaurant industry.

– Consumer can recreate the atmosphere at home with pancake batter and syrup sold at the country store.

Sustainability of Imitation Barriers cont.

• • • Natural monopoly blocks imitation when the size of a market cannot support another player.

Patents or legal permits block imitation.

The high volume generated by a value innovation leads to rapid cost advantages, placing potential imitators at an ongoing cost disadvantage.

Barriers to

Imitation

• Network Externalities – Think of

Metcalfe's Law (mgt 3370)

– Robert Metcalfe said the usefulness of a network improves by the square of the number of nodes on the network. – Translation: The Internet, like telephones, grows more valuable as more join in. This is how Ebay grew so profitable so fast.

Barriers to Imitation

• Politics – politics get in the way when imitating a BOS requires companies to make substantial changes to their business practices – ex: SW Airlines created a service that offered the speed of air travel with the cost & flexibility of driving.

• imitating this strategy would call for major revisions in routing planes, pricing, marketing, staff training, and culture.

Offering A Leap In Value

• • • • Earns brand buzz Loyal following in the marketplace Rarely overtaken by competitors’ large advertising Cracker Barrel – Look to attract brand loyal travelers – Also offer retail store (Convenient)

Microsoft Money

vs.

Quicken

• • • • Microsoft wanted to dislodge Intuit’s value innovation For 10 years has not been able to despite large investment Reasons: • • Quicken is easier to navigate through than Money Plus Multi-level categorization Microsoft Money Discontinued

Value Curve

• • • • A graphic depiction of a company’s relative performance across it’s industry’s competition Alerts you to find new Blue Oceans Stops you from leaving a still profitable ocean – Focus – Divergence “ Swim as far as possible in the blue ocean ”

When to Value-Innovate

Again • Distance yourself as far as possible in the Blue Ocean • As competitors’ value curves converge toward yours, you should begin innovation to create a new Blue Ocean

The

Body Shop

– Once dominated its created blue ocean for a decade – Now in the middle of a red ocean – Focused too much on competitors and not enough on reaching out to another value innovation

Yellow Tail

– Swimming in a clear blue ocean of new market space – Has made the competition irrelevant – Test of long run profitable growth will be its ability to value-innovate again when competitors compete aggressively and converge value curves

Six Principles

of

BOS

• Pointers for every company thinking about its future strategy if it wants to thrive • Competition will not suddenly come to a halt but will remain as a present critical factor of the market reality • To obtain high performance in this overcrowded market, companies should go beyond competing for market share to creating blue oceans

Six Principles of BOS Cont’d

• Reality demands that companies succeed in both blue and red oceans, and master the strategies for both • Companies need to learn how to make the competition irrelevant • Aims to help balance the scales so formulating blue ocean strategies comes as systematic as operating in red oceans