Blue Ocean Strategy Innovation Reconsidered. Project Management Institute March 29, 2012 Teri Brown

Transcription

1 Blue Ocean Strategy Innovation Reconsidered Project Management Institute March 29, 2012 Teri Brown 1

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3 Blue Ocean Strategy BOS originated from... Blue Ocean Strategy Professors W. Chan Kim & ReneeMauborgne Go where the profits and growth are - and where competition isn t 3

4 From Red Blue: Blue Ocean Strategy What is (a) Blue Ocean Strategy? 4

5 What is Blue Ocean Strategy? Blue Ocean Strategy BOS is about seeing what everybody else has seen, but thinking what nobody else has thought 5

6 Blue Ocean Strategy A Blue Ocean is High profit growth at low risk Industries not in existence today Untapped market demand Unknown market space 6

7 Blue Ocean Strategy What were they thinking? 7

8 Blue Ocean Strategy BOS... Reconstructs industry boundaries of competition Re-orders and recombines value elements in different markets Renders the old rules of competition irrelevant Enter uncontested market space Focuses on buyer value Customers and noncustomers Is a process rather than a market outcome Follow the logic and sequence of a BOS strategic move Breaks the trade-off between differentiation and low cost Value Innovation 8

9 Blue Ocean Strategy Blue Oceans are NOT New Air Travel Auto industry furniture Coffee shops hotels gaming soft drinks wine Cell phones 9

10 Blue Ocean Strategy Who uses it? Circus, theatre, ballet? Function or affordable fashion statement? A well planed exercise Experience for women 10 The fun, social drink!

11 Blue Ocean Strategy Who Uses it? Facing heightened competition from rivals? Need to offer deeper and deeper price discounts to make sales? The impact of each advertising dollar spent is falling? Is your company focused more on cost cutting, quality control, and brand management at the expense of growth, innovation, and brand creation? Do you see outsourcing to low cost companies or countries as a principal prerequisite to regain competitiveness? Are mergers and acquisitions the principal means your company sees to grow? Is it easier to get funding to match a strategic move made by your competitor than it is to get internal funding to support a strategic move that allows you to break away from the competition? Is commoditization of offerings a frequent worry? Do you blame your slow growth on your market? List your key competitive factors; now list your competition s. Are they largely the same? 11 You are in the RED OCEAN

12 Blue Ocean Strategy How is it different? Red Ocean Strategy Blue Ocean Strategy Compete in existing market space Create uncontested market space Beat the competition Make the competition irrelevant Exploit existing demand Create and capture new demand Make the value-cost trade-off Break the value-cost trade-off 12 Align the whole system of a firm s activities with its strategic choice of differentiation OR low cost Align the whole system of a firm s activities with its strategic choice of differentiation AND low cost

13 A Competitive (Red Ocean) Strategy is... Blue Ocean Strategy Play the same game as all other competitors Fight head to head for a greater share of existing market Try to outcompete rivals to get profits from existing business Accept status quo as a common sense fact of life

14 What is BOS? Blue Ocean Strategy A theory about how to create new demand and highly profitable growth based on VALUE INNOVATION: simultaneous pursuit of differentiation AND low cost A proven, practical set of tools, methods & frameworks to: think and skilfully observe Stimulate strategic dialogue systematically create and execute breakthrough growth strategies Costs Down BOS Value Up Align: Utility Price Cost People 14

15 Blue Ocean Strategy BOS Tools:... Surfacing the opportunities through strategic dialogue 15

16 Blue Ocean Strategy KEY BOS Principles Strategy Formulation Reconstruct Market Boundaries Focus on the big picture not the numbers Reach beyond existing demand Get the sequence right Strategy Execution Overcome key organizational hurdles Build execution into Strategy Mitigating Risk Search Planning Scale Business Model Organizational Risk Management Risk 16

17 Blue Ocean Strategy The Litmus Test: 3 characteristics of a good BOS Strategy Compelling tagline Focus Divergence The shape of the value curve diverges from any potential competitors 17

18 Build Execution into Strategy Blue Ocean Strategy Tipping Point Leadership Overcome Key Organizational Hurdles Cognitive Resource Motivational Political Apply Fair Process: 3E Engage Explain Expect Clarity Provides emotional & intellectual recognition Respect & Dignity Appreciate people for individual worth 18

19 Sustainability & Renewal Blue Ocean Strategy Your pioneering lead is not forever Can your settler ideas be leveraged to add value as migrators? Pioneers (Innovated Value) Migrators (Improved Value) Portfolio of Products / Services Company s direction Current F G F A Planned G Settlers ( Me-Too business) A E B C B E C D D Page 10 19

20 Blue Ocean Strategy Existing State of Play 20

21 The Strategy Canvas Blue Ocean Strategy HIGH LOW Price KCF 1 KCF 2 KCF 3... KCF N Key Competing Factors The Strategy Canvas is both a diagnostic and an action framework for building a compelling Blue Ocean Strategy: The horizontal axis captures the range of factors the industry competes on and invests in The vertical axis captures the offering level that buyers receive across all these key competing factors 21

22 Blue Ocean Strategy The Value Curve as is strategy canvas HIGH LOW Price KCF 1 Competitor A Competitor B KCF 2 KCF 3... KCF N Key Competing Factors The Value Curve is a graphic depiction of a company's relative performance across its industry's value attributes A high score means that buyers receive high value on that attribute, which generally means that a company offers buyers more, and hence invests more, in that factor. In case of price, a high level means a high price 22

23 Blue Ocean Strategy BUYER UTILITY Understanding your Noncustomer Buyer Experience Cycle Buyer Utility Map 23

24 The three tiers of noncustomers Blue Ocean Strategy Your Market First Tier Second Tier Third Tier 24

25 Buyer Blue Ocean Strategy Utility Map 25

26 Six Utility Levers Six Stages of Buyer Experience Cycle Blue Ocean Strategy Purchase Delivery Use Supplements Maintenance Disposal Customer Productivity: In which stage are the biggest blocks to customer productivity? Simplicity: Convenience: Risk: Fun and Image: In which stage are the biggest blocks to simplicity? In which stage are the biggest blocks to convenience? In which stage are the biggest blocks to reducing risks? In which stage are the biggest blocks to fun and image? Environmental Friendliness In which stage are the biggest blocks to environmental friendliness? 26

27 The Six Utility Levers The Buyer Utility Map: Understanding Customers & Non-Customers Pain Points Blue Ocean Strategy Customer productivity Simplicity Convenience Risk Fun & Image The Six Stages of Buyer Experience Cycle Purchase Delivery Use Supplements Maintenance Disposal Pain points Environmental friendliness

28 Blue Ocean Strategy Six Paths Framework 28

29 Six Paths to Blue Ocean Strategy Blue Ocean Strategy The six conventional boundaries of competition From Competing Within Industry Strategic group Buyer group Scope of product or service offering Functional-emotional orientation of an industry To Creating Across Time 29

30 Blue Ocean Strategy Reshaping your Value Curve 30

31 Blue Ocean Strategy Re-shaping your Value Curve 31

32 Blue Ocean Strategy Develop your ERRC Strategy 32

33 Re-Shaping the Value Curve: The Four Actions Framework Blue Ocean Strategy Eliminate Which of the factors that the industry takes for granted should be eliminated? Reduce Which factors should be reduced well below the industry s standard? A New Value Curve Raise Which factors should be raised well above the industry s standard? Create Which factors should be created that the industry has never offered? Costs - Value Innovation + Buyer value 33

34 The ERRC Strategy Canvas Blue Ocean Strategy HIGH LOW Price Eliminate KCF 2 Reduce KCF 4 Raise Create New Value Curve Competitor A Competitor B KCF... KCFs KCF 1 KCF 3 KCF 5 KCF N 34

35 Blue Ocean Strategy Eliminate Reduce Raise Create 35

36 Southwest Airlines Blue Ocean Strategy high medium Average Airline Southwest Airlines speed of plane at the price of a car - whenever you need it. car transport LOW Price meals lounges seat class choices hub connectivity Friendly service speed frequent point to point departures 36

37 Turn the Blue Ocean Strategy competition on its head: Four Steps of Visualization Strategy 37

38 To fully implement BOS requires a structured approach When Blue Ocean Strategy formulation Idea Development & structuring Execution Focus CREATIVITY FEASIBILITY IMPLEMENTATION What Phase 1 Phase 2 Phase 3 How Visual Awakening Visual Exploration Visual Strategy Creation Visual Strategy Fair Idea Development Brainstorming Prototyping/simulatio ns BOS fine-tuning BOI Business model Pilot run Use Tipping Point Leadership principles Use Project Mgmt tools Change Mgmt -Communication -Expectations clarified

39 There is no such thing as a permanently great company, nor a permanently great industry. But there are permanently great strategic moves Prof. Kim & Mauborgne Authors: Blue Ocean Strategy 40

40 Our network Blue Ocean Strategy, Canada Prof Mauborgne Office, US MBA BOS Centre, US Blue Ocean Strategy Initiative Centre, UK Prof Kim Office, FR Kimberly-Clark Blue Ocean Strategy Regional Centre, BR Blue Ocean Strategy Institute, MY For further information contact: Teri Brown

41 So...Where is your Blue Ocean? 42