Blue Ocean Strategy Renew Blue Oceans Group 2

Blue Ocean Strategy: Renew Blue Oceans Group 2 10: 00 AM Emilye Webb Maddie Campbell Christian Todd

When should a company create another blue ocean? - Creating Blue Oceans are not static achievements, they are dynamic processes - Once a company creates a blue ocean and is known, imitators soon appear - As a company and its early imitators succeed and expand the blue ocean, more companies are always trying to join them and eventually the ocean turns red

Barriers to Imitation There are 4 barriers: 1. The Alignment Barrier - aligns value, profit, and people 2. The Cognitive and Organizational Barrier - requires significant organizational changes, value innovation doesn't make sense to company's logic 3. The Brand Barrier - may conflict with other companies’ brand image, companies that value-innovate earn brand buzz and a loyal customer following that tends to shun imitators 4. The Economic and Legal Barrier - natural monopoly, high volume leads to rapid cost advantage, network externalities discourage imitation, patents or legal permits block imitation

Renewal at the Individual Business Level ● To avoid the trap of competing, RENEWAL is needed. ● When a businesses value curve begins to converge with competition, it alerts the business to reach out for another blue ocean. ● Value curve also keeps a business from pursuing another blue ocean when profit is still huge in its current offering.

Example of Renewal Process: ● Salesforce. com made several strategic moves to renew its blue ocean in the CRM (customer relationship management) industry. ● Has maintained undisputed market leadership in the blue ocean for about 15 years. ● Competition has urged to dislodge, but they stay ahead by value-innovating.

Continued: ● In 2001, salesforce. com innovated the CRM software industry, making the traditional packaged software irrelevant. ● Competitors, over time, hopped in to profit in this market. ● To deepen their blue ocean and venture away from competition, salesforce. com created “Chatter, ” a social networking service. ● This has allowed Salesforce. com to expand the size of the blue ocean and maintain a gap between their value curve and their competitions value curve.

Renewal at the Corporate Business Level ● For companies with a diverse portfolio of business offerings, the renewal of their businesses should be monitored with a corporate perspective. ● A pioneer-migrator-settler (PMS) map is best used for tracking this. ● Pioneers ○ ○ ○ A company’s value innovations Offers unprecedented value Most powerful sources of profitable growth ● Migrators ○ ○ Represent value creation Generally offer improved value but not innovative value ● Settlers (me to business) ○ Will not generally contribute much to a company’s future growth

Apple’s PMS Map

Apple’s PMS continued. . . ● In order to maximize growth prospects, there needs to be a balance between pioneers for future growth and migrator and settlers for cash flow at any given point in time. ● Throughout time pioneers become migrators and then eventually turn into settlers as imitations begin and intensify. ● The Apple Store is considered a blue ocean in the retail industry but is not plotted due to the sales already being accounted for in the existing products. ● Apple has maintained strong profitable growth by keeping a successful balance even when their pioneers lost status

Blue and Red Oceans ● Companies with a diverse business portfolio will always need to swim in both red and blue oceans at any given time and be able to succeed in both oceans at the corporate level. ○ Therefore applying competition-based principles of red ocean strategies are also needed. ● When IPod began to be imitated, Apple rapidly launched a range of IPod variants at various price points. ○ Expanded it’s oceans therefore capturing more profits. ● By the time the IPod’s blue ocean was crowded with competition, Apple introduced another blue by introducing the IPhone. ● Red and blue ocean strategies are complementary strategic perspectives and each serve different and important purposes.