How do we currently view the future?
Through theRear View Mirror of historic data?
Or with a Fortune Teller?
How can we help firms anticipate the future?
Innovation Life Cycle
Innovator/ Entrepreneur creates a new
concept / product / process
Major Trend A consistent
pattern of events - all firms
invest in criticalsuccess factors
Evidence of use by leaders
A pattern is
emerging
Introduction of new CMs
Fad Innovation Major Trend Fact of Life
CM = Competitive Method
Co-alignment Principle
Macro-economic environmental forces• > Potential impacts• > Emerging trends• > Strategic choices• > Firm structure• > Focused innovation & NPD• > Competitive advantage
The PESTLE analysis
The PESTLE analysis is a tool to think about an industry’s external environment (what’s in the news) that will be a force for change in the industry, and takes in the:•Political environment
• such as structures and processes of government•Economic environment
• including types of business activities and companies; also includes the financial environment
•Social environment• including cultural factors
•Technological environment• including innovation levels and protection of intellectual property
Legal environment• pro or anti-business laws
•Ecological environment• includes environmental protection and climate change
Visioning the future
• http://www.nowandnext.com/• http://www.wfs.org/futurist• http://www.blueoceanstrategy.com/
• http://vimeo.com/21191249
Answer
All examples of business that were Blue Oceans-•Novel•Reframed or created demand•Launched amidst little or no competition•Created or co-created industries.
An antidote to Porter?
Red Oceans Red Oceans andand Blue OceansBlue Oceans
Crowded, existing markets
NEW STRATEGIC SPACE,
UNCHARTERED
Creating Blue Oceans
• Red Oceans• All industries in existence today
(known market space)
• Blue Oceans • All industries not in existence today
(unknown market space)
New Market Space
Red Oceans•Fairly good understanding of how to compete in Red Oceans e.g. 5F, Pestel etc.
Blue Oceans•Little academic guidance on how to create them
Comparison
Red Oceans•Compete in existing market space•Beat competition•Meet existing demand•Make the value-cost trade-off.•Aim for differentiation or cost lead
Blue Oceans•Create and locate new market space.•Make the competition irrelevant.•Create, capture and point out new demand.•Break the value-cost trade-off.•Align the whole system of firm's operations towards differentiation and low cost.
The Impact of Creating Blue Oceans
• In the Kim and Mauborgne study of the launches of 108 companies
• 86% = line extensions (or Red Oceans)
• However, these only accounted for • 62% of total revenues and 39% of total profits
• The other 14% of launches were aimed at creating Blue Oceans
• accounted for 38% of revenue and 61% of total profit
Move to an emphasis on strategy
• The company • not the correct starting point for Blue Oceans.
• Blue Oceans • focus on the strategic initiatives rather than
company or industry tradition.
• The book • focuses on 150 strategic moves made from 1880
to 2000 in various industries.
• Blue Oceans found in: • new and existing firms• attractive and unattractive industries• private and public sector.
Value Innovation: Key to Blue Ocean Strategy
• Value creation improves value to customer but does not make firm stand out.
• Innovation alone does not create demand• Value innovation occurs only when companies
align innovation with utility, price, and cost positions
Value innovation:• Makes the competition irrelevant• Creates a step-change in value over competition and
for customers• Opens up new and uncontested market space and
segments
Three Levels of Customers
1st
2nd
3rd
There is a universe of non-There is a universe of non-customers which can be customers which can be made into customers via made into customers via blue oceaning.blue oceaning.
1st tier: “Soon-to-be” non-1st tier: “Soon-to-be” non-customerscustomers
2nd tier: “Refusing” 2nd tier: “Refusing” non-customersnon-customers
3rd tier: “Unexplored” 3rd tier: “Unexplored” non-customers i.e. new non-customers i.e. new segmentssegments
3rd
Cirque du Soleil
• Cirque du Soleil achieved rapid growth in a declining industry
• Cirque du Soleil created uncontested new market space that made the competition irrelevant
Cirque du Soleil
• Cirque du Soleil provide both the fun and thrill of a circus and the intellectual sophistication of a show.
• Because of this, Cirque du Soleil appealed to both circus customers and noncustomers (theatre-goers).