Blue Ocean Strategy Chapter 1 Creating Blue Oceans

Blue Ocean Strategy Chapter 1 - Creating Blue Oceans Team 3 – Hayley Jacobs, Paige Adams, Dan Lawson, Gage Mitchell, Laura Freeman, Haley Smith

Learning Objectives § What are blue oceans? § How do you create a blue ocean? § Why are blue oceans important? § What is value innovation?

What are blue oceans? “Creating uncontested new market space that makes the competition irrelevant. ”

New Market Spaces Red Blue Represents all industries already in existence Untapped market space Industry boundaries are defined and accepted Demand creation Competitive rules of the game are known Opportunity for highly profitable growth Companies try to outperform rivals Most blue oceans are created from within a red ocean The more competition there is, the slower growth becomes Little practical guidance exists on how to create them Will always be necessary Risky from a business standpoint

Creation of Blue Oceans § Blue oceans have evolved over time § Standard Industrial Classification (SIC) system vs. North American Industry Classification Standards (NAICS) system § Ten sectors into twenty § Service sector expanded into seven

What Blue Oceans have been created in our lifetime?

Rising Imperative of Creating Blue Oceans § Price vs. Brand Loyalty Nike vs. Adidas § Technology innovation leads to supply exceeding demand § Shrinking profit margin

From Company and Industry to Strategic Move • In Search of Excellence, Built to Last, and Creative Destruction • “Stable excellent visionary companies” tend to fall quickly • Strategic move: a move that delivers goods and services that opens and captures new market spaces • Strategic move is the unit of analysis for blue oceans • Blue oceans are in all industries • Not predominantly in any one industry according to the authors

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. § Value without Innovation is not sufficient § Innovation without Value is not considerate of buyers § ISQS 3344 - Tucker: The Man and His Dream

What to Consider in Value Innovation § The whole system § Differentiation and Low Cost – Blue Oceans use both strategies Cost § Apple vs. HP Value Innovation Buyer Value

Structuralist vs. Reconstructionist • Standard view of business • Create new “best practice” • Contains standards and guidelines • Breaks existing value-cost trade-off

Conclusion • Blue Ocean Strategy will always contain both opportunity and risk • Managers are concerned about the risks and don’t take the opportunity • Red oceans will continue even as Blue Ocean Strategy becomes urgent

Questions?