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BLUE OCEAN STRATEGY
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BLUE OCEAN VS RED OCEAN STRATEGY
Create uncontestedmarket space
Make the competitionirrelevant
Create and capture newdemand
Compete in existingmarket space
Beat competition
Exploit existing demand
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Break the value-cost tradeoff
Align the whole system ofa firms activities with its
strategic choice ofdifferentiation and lowcost
Make the value-cost tradeoff
Align the whole system ofa firms activities with its
strategic choice ofdifferentiation or low cost
BLUE OCEAN VS RED OCEAN STRATEGY
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BLUE OCEAN STRATEGY TOOLS
A diagnostic tool for building a compellingblue ocean strategy
It captures the current state of play in the
known market space Allow you to understand:
Where the competition is currentlyinvesting
The factors the industry currentlycompetes on in product, service anddelivery
What customers receive from existingcompetitive offerings on the market
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FOUR ACTION FRAMEWORK
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FOUR ACTION FRAMEWORK
Which factorsshould be createdthat the industryhas neveroffered?
Which factorsshould be reducedwell below theindustrysstandard
Which factorsshould ba raisedwell above theindustrysstandard?
Which of thefactors that theindustry takes forgranted should beeliminated?
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FOUR ACTION FRAMEWORKThe Case of Cirque Du Soleil (The Circus Company)
Theme
Refined Environment
Multiple productions
Artistic Music andDance
Fun and humor
Thrill and danger
Unique Venue Star Performers
Animal Shows
Aisle concession sales
Multiple show arenas
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SIX PRINCIPLES OF
BLUE OCEAN STRATEGY
Reconstruct market
boundaries Focus on the big picture,
not the numbers
Reach beyond existing
demand Get the strategis sequence
right
Overcome key
organizational hurdles Build execution into
strategy
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FORMULATING BLUE OCEAN STRATEGY
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Value InnovationFocusing on value innovation is central to Blue Ocean Strategy.
Costs
Buyer Value
Value
Innovation
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1. RECONSTRUCT MARKET BOUNDARIES
Head-to-Head Strategy Blue Ocean Strategy
Focus on rivals within industry
Focuses on competitive positionwithin strategic group
Focuses on better serving thebuyer group
Looks across alternativeindustries
Looks across strategic groupwithin industry
Redefines the industry buyergroup
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1. RECONSTRUCT MARKET BOUNDARIES
Head-to-Head Strategy Blue Ocean Strategy
Focuses on maximizing thevalue of product or serviceofferings within thebounds of its industry
Focuses on adapting toexternal trands as theyoccur
Looks across thecomplementary productand service offerings
Participates in shapingexternal trends over time
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2. FOCUS ON THE BIG PICTURE, NOT
THE NUMBERS
Focus on the BigPicture, not the
Numbers
THE FOUR STEPS OFVISUALIZING STRATEGY
Visual Awakening
Visual Exploration
Visual Strategy Fair
Visual communication
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Step 1 Visual Awakening
VISUAL AWAKENING
Compare your business with your competitors by drawing your as isstrategy canvas
See where your strategy needs to change
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Strategy Canvas
High
Low
Price Use of
enologicalterminology
Above-the-line
marketing Agingquality
Vineyard prestige
and legacy Winecomplexity
Wine range
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Example:
US Wine Industry Pre-YellowTail
Price Enological
Terminology
Above the line
Marketing
Aging Quality Vineyard
Prestige &
Legacy
Wine
Complexity
Wine Range
Budget Wines
Premium Wines
Low
High
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Step 2. Visual Exploration
VISUAL EXPLORATION
Go to the field to explore the six paths to creating blue oceans
Observe the distinctive advantages of alternative products and services
See which factors you should eliminate, create or change
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The Six Principles of Blue Ocean
Strategy
Formulation Principles Risk factor each principle attenuates
Reconstruct market boundariesFocus on the big picture, not the numbers
Reach beyond existing demand
Get the strategic sequence right
Search riskPlanning risk
Scale risk
Business model risk
Evaluation principles Risk factor each principle attenuates
Overcome key organizational hurdles
Build execution into strategy
Organizational risk
Management risk
This figure highlights the six principles driving the successful formulation
and execution of blue ocean strategy and the risks that these principlesattenuate.
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Identify Market
First Tier:Soon to be non-customers who are the edge of yourmarket, waiting to jump ship
Second Tier:Refusing non-customers who consciously chooseagainst your market
Third Tier:Unexplored non-customers who are in marketsdistant from yours
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How to find new Value CurveFour Actions Framework
Eliminate
Which of the factors that the industry takes for granted should beeliminated?
Reduce
Which factors should be reduced well below the industry'sstandard?
Raise
Which factors should be raised well above the industry'sstandard?
Create
Which factors should be created that the industry has neveroffered?
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Example:
Value Curve for Yellow Tail Eliminate
Enological Terminology
Above the Line
Focus on Aging Quality
Reduce
Vineyard Prestige & Legacy
Wine Complexity
Wine Range
Raise
Price as compared to Budget
Retail Store Environment
Create
Easy Drinking
Ease of Selection
Fun & Adventure
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Step 3. Visual Strategy Creation
Draw your to be strategy canvas based on insights from field observations
Get feedback on alternative strategy canvases from customers, competitorscustomers, and non-customers
Use feedback to build the best to be future strategy
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Revise your Strategy Canvas
High
Low
Price Use of
enologicalterminology
Above-the-line
marketing Agingquality
Vineyard prestige
and legacy Winecomplexity
Wine range
Through a series of iterations a revise your strategy canvas.
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Example: Wine Industry Post
Yellow Tail
Price EnologicalTerminology
Above theline
Marketing
Aging Quality VineyardPrestige &
Legacy
WineComplexity
Wine Range Easy Drinking Ease ofSelection
Fun &Adventure
Budget Wines
Premium Wines
Yellow TailLow
High
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Nintendo WII Case Study
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Nintendo WII Case Study
Eliminated Movie Playing.
Reduced Graphics & Physics.
Raised Fun. Created the Wiimote
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Step 4. Visual Communication
VISUAL COMMUNICATION
Distribute your before and after strategic profiles on one page for easycomparison
Support only those projects and operational moves that allow your company
to close the gap to actualize the new strategy
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4. GET THE STRATEGIC SEQUENCE RIGHTThe Sequence of Blue Ocean Strategy
BUYER UTILITYIs there exceptionalbuyer utility in your
business idea?
PRICEIs your price easilyaccessible to the
mass of buyers?
COSTCan you attain
your cost target toprofit at your
strategic price?
ADOPTIONWhat are the
adoption hurdles inactualizing yourbusiness idea?
A COMMERCIALLYVIABLE BLUE OCEAN
IDEA
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EXECUTING BLUE OCEAN STRATEGY
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5. OVERCOME KEY ORGANIZATIONAL
HURDLES
Zoom in Kingpins (KeyInfluencers)
Place kingpins on afishbowl
Atomize to get theorganization to changeitself
Secure a consigliere onyour top managementteam
Leverage your angelsand silence your devils
Redistribute resources toyour Hot Spots
Redirect your resourcesfrom your Cold Spots
Engage in Horse Trading
Ride the Electric Sewer
Meet with disgruntledcustomers
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6. BUILD EXECUTION INTO STRATEGY
Fair Process- Engagement, Explanation, Expectation Clarity
STRATEGY FORMULATION PROCESS
Trust and Commitment- I feel opinion counts
ATTITUDES
Voluntary Cooperation- Ill go beyond the call of duty
BEHAVIOR
Exceeds Expectation- self initiated
STRATEGY EXECUTION
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How Blue is Your Strategy?
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A Case Study About Smart Pen
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Introduction
This presentation covers how Smart Selling usedBlue Ocean Strategy so as to create a sustainable
business for Smartpen Australia.
This version of the presentation includesexplanation of the core components of Blue
Ocean Strategy.
Certain images within this presentation areowned by UCSIBOSRC and Blue
Ocean Strategy.
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Background Livescribe
The Pulse Smartpen was launched in 2007 inthe US
http://www.livescribe.com
The Pulse Smartpen is a computer in a pen. Itcaptures audio and synchronises this to what
you are writing.
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Background Livescribe
Smartpen p is an Australian business thatsells the Livescribe Pulse Smartpen.
Smartpen was the first reseller to offerLivescribe for sale in Australia.
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The Problem
The competition arrived shortly afterSmartpen launched online sales. It wasannounced that the Pulse Smartpen
would also be sold through Officeworks Officeworks are a national retail office
supplies chain similar to Staples
Officeworks could spend more on above theline marketing and could outdiscount
Officeworks had the retail presence to bettercapture impulse buyers
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The Solution
Smartpen wasnt in a position to compete ontraditional red ocean terms
Going head to head wasnt an option. They
wouldve destroyed us K. Palmer Sales Manager Smartpen
Smart Selling suggested using Blue Ocean
Strategy focusing on value innovation ratherthan head to head competition
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The Solution
The Pulse Smartpen had significant hiddenpotential the question for Smartpen waswhether they could tap into that potential
Dont Compete with Rivals, Make Them Irrelevant
www.blueoceanstrategy.com
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Blue Ocean Strategy & Value
Innovation
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The Importance of Value
Innovation Focusing on value innovation is central to
what Smartpen sought to achieve.
Save costs by eliminating and/or reducingthe barriers for noncustomers
Lift value by raising or creating elements theindustry has not offered
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Using Blue Ocean Strategy
Smart Selling worked with Smartpenthrough the core Strategy steps:
1. Visual Awakening
2. Visual Awareness
3. Socializing the Strategy (Strategy Fair)
4. Execution of the Strategy
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Step 1 Visual Awakening
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Step 1 Create an AsIs
Strategy Canvas The strategy canvas gy is both a diagnosticand an action framework.
It captures the current state of play
Its also used to create the ToBe canvas
Looking at the current market we created anAsIs strategy canvas.
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Step 1 Visual Awakening
The AsIs strategy canvas looked like this
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What Does This Tell Us?
Smartpen had little opportunity todifferentiate
Officeworks controlled the factors that couldmost damage Smartpens ability to remain inthe market
Retail Location
Above the line advertising
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Step 2 Visual Exploration
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Visual Exploration Six
Paths Analysis As Smart pen transitioned into the Exploration stage,time was spent on the Six Paths Analysis looking acrossalternate industries, groups, products and services
This analysis identified: Apple stores how they harness desire and
enthusiasm.
In business, who spends a lot of time taking notes or
minutes?
How do the sub groups of educators work and
communicate
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Step 2 Visual ExplorationFrom this study we identified a number of new customer segments
(see diagram).
Our focus shifted to what barriers existed for these noncustomer
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What Did We Hear from
NonCustomers? What does it do? I work in a small rural school. How do we buy
one?
This is my job. Will it help?
Can I use the pen to create mini tutorials formy students?
I work with students from nonEnglishspeaking backgrounds; how will this help?
Will it work with this third party application?
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Step 3 Visual Awareness
ERRC GridOur field research led us to develop the following FourAction Framework
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Step 3 Visual Strategy
Creation
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Visual Strategy Creation
ToBe CanvasThrough a series of iterations a To Be Strategy Canvas was developed
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The Strategy Fair
The ToBe Strategy gy Canvas wassuccessfully validated with all stakeholders.
Executing the strategy involved two things:
1. Changes to the core Smartpen site
2. Development and execution of a social media
strategy
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Creating the Blue Ocean
The Blue Ocean for noncustomers was in thesocial sphere using social technologies toremove the barriers for these noncustomers
so they could become customers
To do this, Smartpen focused on a socialmedia strategy that would allow it to connect
with these noncustomers
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Blue Ocean Strategy & Social
Media At the core of the strategy were principles that included:1. Listening initially passive but soon conversational
listening
2. Be in their social space go out to their worlds andcontribute.
3. Help everyone even if they didnt purchase fromSmartpen help them anyway
4. Encourage Innovation encourage users to innovate;Crowd source how and where the product could bedeveloped
5. Be Patient being social builds loyalty. It wont
happen overnight but it will happen
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Social Media StrategyThis is one way of looking at the strategy
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Social Media Listen and
Learn Goal Listen to the community and learnfrom them
Strategy
1. We use tools like Google Alerts, Twitter, andScout Labs to listen to the conversation
2. Scout Labs has proven more effective as
we can track sentiment
3. Twitter search is good for Twitter specifictraffic
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Social Media Engage.
Dialogue Goal Go into the social world and engageStrategy
1. We contribute advice and knowledge inspecific social networks and forums
2. Be very diligent about not trying to sell
3. If we cant meet their immediate need sendthem to where they can (i.e. the enemy)
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Social Media Encourage
Innovation Goal Capture innovative uses of theLivescribe Smartpen
Strategy
1. By engaging with users we capture examplesof howthe Smartpen is being used
2. Twitter, the blog, and Facebook attract users
who want to share ideas and experiences
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Summary
Smartpen needed to compete against amajor legacy retailer for sales of theLivescribe Pulse Smartpen
Solution:
1. Smartpen used Blue Ocean Strategy toidentify noncustomers and the barriers that
prevented them becoming customers.2. Social Media provided the means to capture
these noncustomers and create a blue ocean
outcome
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Source:W. Chan Kim (Author) and Renee Mauborgne (Author), Blue Ocean Strategy, HBSPublication
www.study Marketing.org
http://www.study/http://www.study/http://www.study/