blue ocean strategy chapter 6: get the strategic sequence right
Post on 23-Feb-2016
119 Views
Preview:
DESCRIPTION
TRANSCRIPT
TEAM 3SARAH ELLENS
COLEMAN CROOKASHTON DAVIS
JESSICA CRUMPTONKEVIN LEVESQUE
Blue Ocean StrategyChapter 6: Get the Strategic
Sequence Right
The Right Strategic Sequence
Buyer UtilityPriceCostAdoption
Steps
Utility- is there a reason to buy it? If no, Park idea or rethink
Price- price should not determine purchase Should still attract buyers
These two address revenue side of a business model and ensure a leap in buyer value
Buyer Value=Utility-Price
Steps cont.
Cost- can you produce the product at target cost and still have a healthy profit margin? Strategic Price= Price easily accessible to the mass of
target buyers Cost should not drive prices, change idea or innovate
Adoption hurdles- done in the beginning to ensure success Key because of significant departure from red oceans
Testing for Exceptional Utility
Phillips CD-I –”imagination Machine” video machine, music system, game player and teaching tool
Do not assume leading technology equals sales (Virgin space flight)
Value innovation does not mean technological innovation
Buyer Utility Map
Outlines levers companies can pull to deliver exceptional utility to buyers as well as experiences can have with the product or service
Identify range of spaces product of service may fill
Buyer Utility Map
Buyer Utility Map
6 Stages of Buyer Experience Cycle6
Levers 1. Purchase 2. Delivery 3. Use
4. Supplements 5. Maintenance 6. Disposal
Customer Productivity
Simplicity
Convenience
Risk
Fun and Image
Environmental Friendliness
Six Stages of the Buyer Experience Cycle
From purchase to disposalEach stage managers can ask a set of questions to
gauge quality of experience1. Purchase- how long to find? Placement? Secure
transaction environment? Timely?2. Delivery- Time? Unpack/Install difficulty? Arrange
delivery/difficulty?3. Use- Training? Storage? Effective? Bells and whistles?4. Supplements- Need other parts/costs? Time? Pain? 5. Maintenance- Required? Upgrade easy? Cost?6. Disposal- Create waste? Disposal easiness? Legal
issues? Cost?
The Six Utility Levers
Utility Levers: the ways companies can unlock exceptional utility for buyers.
The Utility Levers
Customer productivitySimplicityConvenienceRiskFun and imageEnvironmental friendliness
Stages of Buyers experience cycle
The Buyer Utility MapThe buyers experience broken down into six stages.
1. Purchasing2. Delivery
3. Use4. Supplements5. Maintenance
6. Disposal
Southwest Airlines
Purchase online, over-the-phone, at the airport How close is the airport?
Delivery – among the largest airline companies Southwest had the 2nd best on time record
Use – Product requires pilots and service crew
Southwest Airlines continued…
Supplements – gas, airport, and human resources
Maintenance – product needs continual check-ups
Disposal – Planes need space and time
The Price Corridor of the Mass
Identify the Price Corridor of the Mass
Different form, Same function: Many companies that create blue oceans attract
customers from other industries who use a product or services that performs the same function as the new one but takes a very different physical form.
Different form and function, Same objective: Listing the croups of alternative products and
services allows mangers to see the full range of buyers they can poach from other industries as well as from nonindustrial.
This provides a straightforward way to identify where the mass of target buyers is and what prices these buyers are prepared to pay for the products and services currently in use.
Southwest Airlines has a prices corridor of the mass covered the group of people paying, on average, $400 to by an economy-class short-haul ticket to about $60 for the cost of going the same distance by car.
Specify a Level Within the Price Corridor
1) Degree to which the product or services is protected legally through patents or copy rights
2) Degree to which the company owns some exclusive asset or core capability, such as an expensive production plant, that can block imitation.
From Strategic Pricing to Target Costing
To maximize the profit potential of a blue ocean idea, a company should start with the strategic price and then deduct its desired profit from the price to arrive at the target cost.
From strategic pricing to target costing
Addresses the profit side of the business model
Strip out costsModel T – Assembly lineThree principal levers to hit the cost target
First Principal Lever
Streamlining operations Introducing cost innovations from
manufacturing to distributionSwatch
Second Principal Lever
Partnering with other companiesTrying to carry out all activities themselvesFast and effective securing of capabilitiesSometimes these first two levers are not
enough to hit target cost
Third Principal Lever
Changing the pricing model of the industryVideotapes– from selling to rentingEven after target cost is met, pricing
innovation may still be pursued
Stakeholders
No matter the business model success isn’t guaranteed in a blue ocean idea. Fear and resistance may arise from: Employees Business Partners The General Public
Employees
Explain the changes to the employees, address potential threats and how those will be resolved.
Example: Merrill Lynch announcing online brokerage service.
Business Partners
Those that have a vested interest want to know how the implementation of a new business idea will effect current revenues from existing offerings.
Example: Southwest offering international flights
The General Public
Hesitation among the general public can be triggered by a product that is very new and innovative; therefore threatening social or political norms.
Example: Monsanto producing genetically modified foods.
Blue Ocean Idea IndexPhilips CD-I
Motorola Iridium
DoCoMo i-mode Japan
Utility Is there exceptional utility? Are there compelling reasons to buy your offering?
- - +
Price Is your price easily accessible to the mass of buyers?
- - +
Cost Does your cost structure meet the target cost?
- - +
Adoption Have you addressed adoption hurdles up front?
- +/- +
top related