Blue Ocean Strategy

In their book, Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant, W. Chan Kim and Renee Mauborgne outline a strategy process to create a long-term sustainable competitive advantage.

While a bit too full of consulting speak (as you can see from my notes), it is an excellent and useful book to help you think through your strategy. Especially today, companies need to be more than just another competitor in a mature and over-saturated market. Following the ideas in Blue Ocean Strategy will help you to find and exploit those customer and market niches where you can deliver unique value without all the competition.

  • The typical strategy work (Porter’s Five Forces) focuses on beating the competition in the red ocean where all the competitors are.
  • The concept of Blue Ocean is defined by untapped market space, demand creation and the opportunity for highly profitable growth without all the competitors.
  • Some examples of Blue Ocean strategy:
    • Cirque De Soleil
    • Chrysler Minivan
    • CNN
    • Body Shop
    • Southwest / Ryanair
    • Apple with the I-Pod, I-Phone, and I-Pad platform
  • Blue Ocean is based on value innovation
    • Focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space.
  • Blue Ocean Strategy pursues both differentiation and low cost simultaneously
    • Align the whole system of a firm’s activities in pursuit of differentiation and low cost.
    • Decide what you are going to do. And decide what you are not going to do and not going to offer to the customer. As an example, Southwest does not offer first class or assigned seating.
  • Six Principles of Blue Ocean Strategy
    • Formulation Principles
      • Reconstruct the market boundaries – re-define the market space
      • Focus on the big picture, not the numbers
      • Reach beyond existing demand
      • Get the strategic sequence right
    • Execution Principles
      • Overcome key organizational hurdles
      • Build execution into strategy
  • Analytical Tools and Frameworks
    • Strategy Canvas
      • Analysis of the points of competition and thus differentiation
    • Four Actions Framework
      • Based on the Strategy Canvas to create a new value curve for competing
        • Which factors that the industry takes for granted should be eliminated?
        • Which factors should be reduced?
        • Which factors should be raised well above industry standard?
        • Which factors should be created that the industry has never offered?
    • Three characteristics of a good strategy
      • Focus
      • Divergence
      • Compelling Tagline
  • Formulating Blue Ocean Strategy
    • Reconstruct the market boundaries
      • Look across alternative industries
      • Look across strategic groups within industries
      • Look across the chain of buyers
        • Purchaser
        • User
        • Influencer
        • What group do you typically focus on?
      • Look across complementary product and service offerings
        • What happens before, during and after your product is used?
        • What is the context in which your product is used?
        • What are the pain points? How can they be eliminated through a complementary product and service offering?
      • Look across functional or emotional appeal to buyers
        • Trade-off between emotional appeal v. functionality
      • Look across time
        • Trends that are decisive, irreversible, and with a clear trajectory
    • Focus on the big pictures, not on the numbers
      • Compare your business with your competitors by drawing a strategic canvas (Visual Awakening)
      • Go into the field to explore the paths to creating a Blue Ocean (Visual Exploration)
      • Draw your “to be” strategic canvas and get feedback to improve (Visual Strategy Fair)
      • Communicate and support these projects (Visual Communication)
    • Pioneer – Migrator – Settler Map
      • Classify the different business in your company
    • Reach Beyond Existing Demand – Three Tiers of Non-Customers
      • Your Market
      • First Tier – “Soon to be” non customers who are on the edge of your market, waiting to jump ship
      • Second Tier – “Refusing” non customers who consciously choose against your market
      • Third Tier – “Unexplored” non customers who are in markets distant from yours
    • Get the Strategic Sequence Right
      • Buyer Utility
        • Buyer Utility Map
          • The Six Stage of the Buyer Experience Cycle
            • Purchase
            • Delivery
            • Use
            • Supplements
            • Maintenance
            • Disposal
          • The Six Utility Levers
            • Customer Productivity (help customer do things better and faster)
            • Simplicity
            • Convenience
            • Risk
            • Fun and Image
            • Environmental Friendliness
      • Price
        • Look at network externalities (all or nothing propositions), non rival goods, excludability
      • Cost
        • Look at ‘price minus’ costing, not ‘cost plus’ pricing; focus on the value that you are offering the customer.
      • Adoption – What are the adoption hurdles in actualizing your business ideas?
  • Executing Blue Ocean Strategy
    • Overcome Key Organizational Hurdles
      • Tipping point leadership
      • Use disproportionate influence factors
      • Cognitive Hurdles – People wedded to the status quo
      • Resource Hurdles
        • Redistribute resources to your hot spots
        • Redirect resources from your cold spots
        • Horse trade resources
      • Motivational Hurdle
        • Zoom in on kingpins
        • Put kingpins in a fishbowl
      • Political Hurdles
        • Angels, devils, consigliore
    • Build Execution into Strategy
      • Power of Fair Process to change attitudes and behaviors to improve strategic execution
        • Engagement
        • Explanation
        • Clarity of Expectation – State the new rules of the game
  • Conclusion
    • Blue Ocean Strategies can go unchallenged for 10 – 15 years
    • But, all companies will need to re-implement their Blue Ocean Strategy from time to time to continue the success of the business.

About David Shedd

David has been a President - CEO - COO of an up to $350M group of manufacturing, distribution, specialty retail and services companies, having led 22 different businesses from turnarounds to start-ups to fast growth companies.
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1 Response to Blue Ocean Strategy

  1. Pingback: Porter’s Five Forces VS. Blue Ocean Strategy | irishjanetejano

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