Blue Ocean Strategy Rebecca Eggerman Alexander Johnson Miguel

Blue Ocean Strategy Rebecca Eggerman Alexander Johnson Miguel A. Lopez Hannah Stephens Carissa Tarnowski

Preview �Cirque du Soleil �Blue Vs. Red Ocean �Creation of New Blue Oceans �Blue Vs. Red �Result of Blue Ocean Initiatives �The Rising Imperative of Creating Blue Oceans �Results �From Company and Industry to Strategic Move

Preview �The Strategic Move �Value Innovation �Value-Cost Trade-off �Benchmarking Competition �Breaking the Market Boundaries �Formulating and Executing Blue Ocean Strategy �Frameworks for Success �Beyond the Text

Cirque du Soleil �Created in 1984 by group of street performers �Seen by 40 million people in 9 cities around the world �Achieved the same level of revenues that Ringling Bros. and Barnum & Bailey made in 100 years but in only 20 years

Blue Vs. Red Ocean �Represents all the industries in existence today �This is known as the market place �Industry boundaries are defined and accepted �Competitive rules of the game are known �Companies try to outperform their rivals to grab a greater share of existing demand

Blue Vs. Red Ocean �Blue Ocean �Is defined by untapped market space, demand creation, and the opportunity for highly profitable growth �Some are created within red oceans by expanding existing industry �Competition is irrelevant because the rules of the game are waiting to be set �They are uncharted

Creation of New Blue Oceans �New industries are constantly being created �Historically, countless industries that exist today did not exist decades ago �Change from SIC to NAICS �Military strategy in business

Blue Oceans �New industries are constantly being created that would not have even been thought of 30 or even 10 years ago �Smartphones, flat screen televisions, clean jet engines vs. airplane, automobile, radio, television

Blue Ocean vs. Red Ocean �Majority of new business plans are aimed at red ocean strategies �Only 14 percent of new business launches were aimed at blue oceans

Result of Blue Ocean Initiatives �Blue ocean business launches do not affect revenues but increase profits much more often than red ocean endeavors �Impact of blue oceans is notable even though they make up such a small minority of business endeavors

The Rising Imperative of Creating Blue Oceans �Technological advances �Increasing numbers of industries �Supply exceeds demand �Globalization �Readily available consumer information �Drowning markets

Results �Accelerated commoditization �Products and services becoming similar �Consumer selection based on price � Ex. Colgate vs. Crest � Red oceans become “deeper” �More cut throat competition �Need for blue oceans

From Company and Industry to Strategic Move �How to achieve blue ocean status �Researching “excellence” and “visionaries” � Ex. In Search of Excellence and Built to Last �Industry vs. company success (Creative Destruction) � Ex. Hewlett-Packard �Right one minute, wrong another � Companies and industries not correct analysis unit

The Strategic Move “Set of managerial actions and decisions involved in making a major market creating business offering” �Blue ocean research �Small/large companies �Young/old managers �Private/public �Low/high –tech �Similar pattern �Strategy

Value Innovation: The cornerstone of Blue Ocean Strategy �Approach to strategy- what separated the winners from the losers �Consistent across time regardless of industry �Red ocean companies raced to beat competition through defensible position �Blue ocean companies didn’t use competition as a benchmark �Followed value innovation

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 � Equal emphasis on value and innovation � Value without innovation= value creation � Innovation without value= technology driven, market pioneering, or futuristic � Occurs only when companies align innovation with utility, price, and cost positions � A new way of thinking about and executing strategy that results in creation of a blue ocean and a break from competition

Value-cost trade-off �Conventional belief- companies can create greater value to customers at a higher cost or create reasonable value at a lower cost �Examples? � Should pursue low cost and differentiation simultaneously

Benchmarking competition and maximizing shrinking share �Red ocean strategy

Breaking the market boundaries of theater and circus �Blue ocean strategy �Achieved both differentiation and low cost

Red Ocean Vs. Blue Ocean Strategy Red Ocean Strategy Blue Ocean Strategy Compete in existing market place Create uncontested market space Beat the competition Make the competition irrelevant Exploit existing demand Create and capture new demand Make the value-cost trade-off Break the value-cost trade-off Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost Align the whole system of a firm’s activities in pursuit of differentiation and low cost

Formulating and Executing Blue Ocean Strategy �Success �Lower odds? �Strategy �Opportunity �Risk �Analytical Frameworks and Tools �Red Oceans

Frameworks For Success �Chapter 2 �Analytical Tools �Chapter 3 �Search Risk �Chapter 4 �Value Innovations �Chapter 5 �Market Size �Chapter 6 �Business Model �Chapter 7 �Tipping Point Leadership �Chapter 8 �Strategy Making �Chapter 9 �Dynamic Aspects

Principles

Beyond the Text �Single-cup Coffee Makers

Overview �Cirque du Soleil �Blue Vs. Red Ocean �Creation of New Blue Oceans �Blue Vs. Red �Result of Blue Ocean Initiatives �The Rising Imperative of Creating Blue Oceans �Results �From Company and Industry to Strategic Move

Overview �The Strategic Move �Value Innovation �Value-Cost Trade-off �Benchmarking Competition �Breaking the Market Boundaries �Formulating and Executing Blue Ocean Strategy �Frameworks for Success �Beyond the Text

“We cannot predict the future. But we can create it. ” -Jim Collins, Great by Choice