Blue Ocean StrategyFramework and Applications

BackgroundApplicationsFrameworkBlue Ocean StrategyImportance to BusinessCreateUncontestedMarket SpaceImplementationInvent andCapture NewDemand2ConsiderationsExamplesCustomerValue LowCost

BackgroundApplicationsFrameworkBlue Ocean StrategyImportance to es intechnologyBrand Similarityand pricecompetitionPrice Wars andShrinking ProfitMarginsImprovedProductivityWhy BlueOcean Strategymust ationeffects3

derationsExamplesBlue Ocean StrategyCore Principles1. Grounded in Data 10 year study/150 strategic moves 30 industries/100 years2. Pursues Differentiation Low Cost “and-and” not “either-or” Reduce competing factors/create new factors3. Creates Uncontested Market Space Make competition irrelevant Look outside the boundaries4. Tools and Frameworks Underlying frameworks exist as a guide Built on common strategic patterns of Blue Ocean Strategy4

derationsExamplesBlue Ocean StrategyCore Principles5. Provides Step-by-Step Process Provides a stepped process for implementation Gives management an alternative to traditional strategies6. Maximizes Opportunity/Minimizes Risk Mitigates risk Increases odds of success7. Builds Execution into Strategy Ensures employee support Process and tools are inclusive8. Creates a Win-Win Outcome Strategy aligns value, profit and people Ensures acceptance, support, sustainability5

BackgroundApplicationsFrameworkImplementationBlue Ocean StrategyFor Innovation and Growth Difference between Blue Ocean Strategyand innovation(value innovation vs. innovation) Innovation: tech-driven, marketpioneering, futuristic Value Innovation: align innovation withutility, price, cost position6ConsiderationsExamples

derationsExamplesBlue Ocean StrategyFrameworkBlue Ocean Strategyprovides a framework to: Grow market share while minimizing risk Succeed in entrepreneurship7

derationsExamplesBlue Ocean Strategy vs.Traditional Competitive Strategies Traditional Competitive Strategies: Cost Leadership (Ex: Costco) Differentiation (Ex: BMW) Focus Strategy (Ex: LinkedIn) Traditional Competitive Strategy vs Blue Ocean Strategy Competitive Advantage - Porter’s Five Forces Blue Ocean Strategy is a: Value Innovation Strategy – competes in an uncontested market space “Combination Strategy”: pursue differentiation while controlling costs. Achieved via the delivery of features that have a highest marginal benefit tocustomer needs8

derationsExamplesBlue Ocean Strategy ExecutionTipping Point Leadership Change the mass by transforming the extremes The Extremes: the people, acts, and activities that exercise adisproportionate influence on performance The Advantage? Tipping point leaders are able to change thecore fast and at low cost to execute their new strategy. The Key: Identify and leverage factors with disproportionateinfluence on the organization to effect change9

derationsBlue Ocean Strategy ExecutionHurdles The Cognitive Hurdle The Resource Hurdle The Motivational Hurdle The Political Hurdle10Examples

BackgroundApplicationsFrameworkBlue Ocean Strategyand s What is Diversification? Diversification is a corporate level strategy used to create value Categorized into: Related diversification (ex: Dairy farm acquiring a cheese factory) Unrelated diversification (ex: Dairy farm acquiring a coffee plantation) Blue Ocean Strategy Proper execution of a Blue Ocean Strategy requires alignment of 3propositions/components People – Must motivate employees to execute strategy Value – Must develop an offering attractive to buyers Profit – Must enable company to make a profit11

les:Smartphone Industry (2007)Step 1: Examine the industry and its customers What was working: Raw technology was already available (CPU, screens etc.) What was not working: Software were not user-friendly Poor cellphone web-browsing capabilities Cellphones lacked useful third-party AppsStep 2: Decide which features to add and eliminate Add Underserved Features: Software ease of use Hardware quality and aesthetics Availability of third-party Apps Eliminate Unnecessary Features: Excessive customizability of hardware and software A high megapixel camera Lots of different cellphone modelsStep 3: Results Apple became a leader in the smartphone industrywithin 5 years12ConsiderationsExamples

les:Wine Industry (2000)Step 1: Examine the industry and its customers What was working: Wine was perceived as a refined, high-end drink What was not working: Industry consisted of either premium or budget wines To younger, casual drinkers, wine seemed intimating andold-fashioned Younger and casual drinkers were a disengaged marketStep 2: Decide which features to add and eliminate Add Underserved Features: Simple taste Affordable prices Marketing focused on fun, adventure, and simplicity Eliminate Unnecessary Features: Prestige marketing Complex taste High pricesStep 3: Results In 3 years (2003), Yellow Tail became US’ #1 selling wine A reinvention of wine-drinking as trendy, modern, and fun13ConsiderationsExamples

derationsExamplesExamples (non-profit):Sankara Eye Foundation (2000)Step 1: Identifying the problem / issue What was working: Several Non Profit Organizations already working in India for Eradicating Curable Blindness. What was not working: No organization in the US working on eradicating Curable Blindness for India Indian organizations working on multiple issues ( Poverty Alleviation, Education , Healthcare )Step 1a: Formulating a strategy Focus: To reach out to the India’s rural poor and provide quality eye care free of cost to the needy by buildingoperationally self-sufficient super specialty eye care hospitals across India. Divergence: Responsibility, Honesty and Commitment towards the donors, people they serve and fellow volunteers Compelling Tagline: Their vision is to eradicate curable blindness in India by the year 2020. “Vision 20/20 by the year 2020”14

derationsExamples (non-profit):Sankara Eye Foundation (2000)Step 2: Decide which features to add andeliminate Add Underserved Features: Identify untapped donor groups. Active Donor Engagement Innovative FundraisingEliminate Unnecessary Features: Keep costs to a minimum Keep Volunteer morale high Maintain Committed PartnershipStep 3: Results Sankara became a leading Non-profitOrganization by 2007 Performing 500 free eye surgeries / day Raising 3.5 Million / year with Over 100,000donors15Examples

RecommendationsTo implement a Blue Ocean Strategy: You don’t need to be Steve Jobs or Elon Musk But, you do need to: Examine the industry to identify the customer needs that it currentlyserves and doesn’t serve Study the industry’s customers and potential customers for what theyreally need Structure your own offering to focus on customer needs that have yetto be addressed, while minimizing features that have been overserved.16