Creating Blue Oceans Chapter 9 Align Value Profit

Creating Blue Oceans Chapter 9: Align Value, Profit, and People Propositions Team 2: Garrett Blevins, Ryan Pollard, Devin Mc. Bryde, Devin Roberson

Three Strategy Propositions ● A Blue Ocean Strategies success hinges on the Development and Alignment of Three Strategy Propositions: 1. Value Proposition: Developing an offering that attracts buyers. 2. Profit Proposition: Creating a business model that enables the company to make money based on the value proposition (offering). 3. People Proposition: Motivating the people who work for or with the company to execute this strategy.

A Breakdown of Strategy The three strategy propositions correspond to the traditional activity system of an organization: ● ● Outputs of an organization’s activities are value for the buyer and revenue for itself. ○ (Value and Profit propositions) Inputs of an organization’s activities are cost to produce them and people to deliver them. ○ (People proposition) Note: A strategy must fully develop and align the Three Strategy Propositions.

Holistic Understanding of Strategy Holistic Approach: The entire organization is considered in its processes, opposed to having weak areas and strong areas. ● ● Distinct People Propositions: Sometimes it is necessary to address more than one group of stakeholders. ○ Ex: Supply Chain Partner and Employees Distinct Value Propositions: Ex: Business-to-business ○ May need two value propositions: one for the business customer and one for the business customer’s customers.

Alignment Around the Strategy Propositions ● Red Ocean Strategy: The alignment of the three strategy propositions in pursuit of Either differentiation Or low cost. ● Blue Ocean Strategy: The alignment of the three strategy propositions in pursuit of Both differentiation And low cost.

Achieving Blue Ocean Strategic Alignment. Comic Relief ● Comic Relief: ○ UK fund-raising charity that was founded in 1985. ○ One of the most distinctive charities in the UK that also enjoys the lowest costs. ○ While UK charities get, on average, 45 percent of their funds from the public, Comic Relief has raised 100 percent of its donations directly from the public with no paid marketing. Key factors from one proposition often support and reinforce the other two propositions.

The Value Proposition Comic Relief ● ● Large amount of smaller donations Red Nose Day Golden Pound Promise Value proposition that is fun, exciting, and clear

How Comic Relief uses Profit Proposition Comic Relief ● ● Leverages retail outlets to sell its red noses Cuts overhead costs of hosting expensive events. Makes grants to other charities instead of competing. Focuses on Community fundraising. Traditional Charities ● ● Writes grant proposals to governments, trusts and foundations. Incurs high overhead costs Hosts galas for wealthy people and corporations. Focuses on donations from a small group of wealthy people.

How Titleist uses Profit Proposition ● Creates different lines of golf balls at different prices to target all skill levels. ● Sponsor golf tournaments and give away merchandise to participants. ● Sponsor Professional Golfers to increase exposure. ● Roll out new and improved equipment before golf season starts.

People Proposition Comic Relief ● ● Focuses on inspiring volunteer fundraisers, corporate sponsors, and celebrities People earn respect from peers while feeling a sense of pride that they are visibly helping make the world a better place Titleist ● ● ● Compensation and benefits for its employees Propositions with the supply chain Proposition for their customers

When a Strategy Is Not Properly Aligned ● Tata Nano: Known as “the People’s car” and got more media attention than any other car launch in the world at the time. ○ Value Proposition: Offered a safe, comfortable, and reliable means of transportation for Indian families. (Captured differentiation and low cost) ○ Profit Proposition : Nano team introduced a series of cost innovations in design, manufacturing, marketing, and maintenance. (captured differentiation and low cost) ○ People Proposition: Tata was unable to secure the cooperation of the Singur community in West Bengal where Tata set out to establish its manufacturing facilities.

Putting it all together Napster & Apple i. Tunes ● ● ● Both seeked to create and capture uncontested market space with digital music. Napster ○ Advantage of being the first mover ○ Pulled in 80 million users because of value proposition ○ Ultimately failed i. Tunes ○ Grew the blue ocean ○ Achieved sustainable success Alignment of the two different strategies is what dictated success or failure

Putting it all together Napster ● ● ● Lacked a holistic view of strategy A revenue -sharing model for digital download was not taken seriously Never understood the need for external people proposition that offered low cost to record labels Took a belligerent approach Later shut down due to copyright infringement Success was short-lived because strategy alignment was ignored

Putting it all together Apple i. Tunes ● ● ● Created a set of developed and aligned strategy propositions The value proposition for buyers and a people proposition for external partners set a path for long term success A deal was set in place for the music companies to receive 70 percent of the purchase price of every song downloaded The alignment of Apple’s value, profit, and people propositions in a new era of music, allowed them to create, capture and dominate a new market

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