Blue Ocean Strategy

1. Blue Ocean Strategy How to create uncontested market space and make the competition irrelevant Kim & Mauborgne Jason Monserrrate Institute of Management, Nirma University

2. Two worlds …

3. Two worlds …

4. Researching the History ofBlue Ocean Creation • Data: 150 blue ocean creations, more than 30 industries, over 100 years (1880-2000) • hotel, cinema, retailing, airline, energy, computer, broadcasting, home construction, automobile, steel manufacturing, chemicals, cosmetics, software, etc. • Variables considered: industrial, organizational, strategic variables © Kim & Mauborgne 2006

5. Look back 100 years… These were not there: Automobiles Music recording Aviation Petrochemicals Pharmaceuticals +++ Look back 30 years.. These did not exist: Mutual funds Cell phones Home videos Bio technology +++

6. People assume that everything that is going to be invented must have been invented already. But it hasn’t. If you believe human wants and needs are infinite, then there are infinite industries to be created, infinite businesses to be started, and the only limiting factor is human imagination.

7. BOS Logic: Reconstruct market boundaries Head-to-Head Competition Boundaries of Competition Creating New Market Space

8. BOS Logic: The Core Principles Reconstruct Market Boundaries … overcome believes. Reach beyond existing Demand … go for uncontested space. VI COST VI Get the strategic sequence right … value [innovation] first. VALUE

9. BOS Logic: Reach beyond existing demand Noncostumer Core Customer Soon-to-be-NC Refusing Customer

10. BOS Logic: Get the Strategic Sequence right Buyer utility Is there exceptional buyer utility in your business idea? No  Rethink YES Price Is your price easily accessible to the mass of buyers? No  Rethink YES Cost Can you attain your cost target to profit at your strategic price? No  Rethink YES Adoption What are the adoption hurdles in actualizing your business idea? Are you addressing them up front? No  Rethink YES A commercially viable Blue Ocean Strategy

11. Create Raise Eliminate Reduce Cirque du Soleil Multiple Productions Theme Artistic Music & Dance Refined Viewing Environment The Strategy Canvas of Cirque du Soleil hi Ringling Brothers offering level Smaller Regional Circus lo Multiple Show Arenas Animal Shows Price Thrills & Danger Unique Venue Fun & Humor Aisle Concessions Star Performers © Kim & Mauborgne 2006

12. The Future of Management Gary Hamel

13. Why Management Innovation Matters • Rapidly accelerating pace of change. • Deregulation: de-scaling effects of technology • Partial control over new value webs and eco systems: de-verticalization, disintermediation, outsourcing • Digitization: threat to intellectual property • Internet: increasing bargaining power of customer. • Shrinking strategy life cycles. • Plummeting communication costs, globalization: ultra low cost competitors.

14. The Innovation Stack Product/ Service Innovation Management Innovation Strategic Innovation Operational Innovation

15. Management Innovation in Action • Whole Foods Market • W L Gore & Associates • Google • Radically horizontal structure • Freedom & accountability • Trust • Equity • No bosses, but plenty of leaders • Focused, but no core business • A chance to change the world

16. Imagining the Future of Management • The outsider’s advantage • Questioning our inheritance: time to re-examine heirloom beliefs • Temporary truths • SEMCO • Workers choose their own work hours • No internal audit staff • Employees set their own salaries • No policies governing employees travel • Self interest, not the company’s, should be their foremost priority

17. Embracing New Principles • Life -> Variety • Experimentation beats planning • Markets -> Flexibility • Markets more dynamic than hierarchies • Democracy -> Activism • Leaders are accountable to the governed • Cities -> Serendipity • Diversity begets creativity

18. Building the Future of ManagementForging Management 2.0 • The Courage to Lead • An inescapable conversation • A focus on causes, not symptoms. • Permission to hack • Commit to revolutionary goals, but take evolutionary steps. • Lets question conventional wisdom…

19. By: Dhaval Thakker

20. Conventional perception of business • Profit making. • Grow or die. • Diversify • “Satisfy” Shareholders

21. How they were classified as small giants? • They had a business which was scalable. • They had an opportunity of having global expansion. • They had a chance to go public. • They had got offers of takeover But THEY DENIED….!

22. The Small Giants • Small revenues • Big vision • Great customer responsiveness • Better employee involvement • Close knit with the community where they operates.

23. The success mantra of small giants…. • To preserve the mojo • What’s mojo? • A “culture of intimacy”.(The 70$ issue,the Goltz Group) • Close ties to their communities • Personal, one-on-one relationships with customers and suppliers • As a business grows, it becomes harder and harder to keep these elements in place, so consequently the “Small Giants” chose to keep “bigness” out of their business equation.

24. Some example • Union Square Hospitality.(We Won’t Expand beyond 5 minutes of reach) • Anchor Microbrewery: Quality is paramount (Bottom line isn’t) • Reell corp.(No compromise with ethics.) • Silema Dress designer: One Woman Company! • Clifbar: The no selling out strategy. • Butler Construction Co (Even if client is big like Target we don’t change the rules for them.) • CitiStorage (Innovation is not game of only big players)

25. Takeaways • Growth is not necessary for sustenance of business, focus on customer needs is. • Small can survive and grow in spite of big competitors. • Innovation can be done by anyone. • Shareholders are not the key stakeholders of company, employees, customers & community are.

26. Book Review on WHO SAYS ELEPHANTS CAN’T DANCE ? Preeti Agrawal

27. The Challenge : To bring IBM back from the brink of insolvency to lead the computer business once again. • In 1956, Watson Jr. introduced System/360, Windows OS of its era for 3 decades. Declining sales of System/360 Mainframes. • R&D unit of IBM was very efficient, but the new technologies would have cannibalized Mainframes, or it required to be sold to other competitors. • Competitors : Microsoft, Intel. • Lumbering size of IBM. • Insular corporate culture and Complacency.

28. The biggest challenge was to change the culture- the mindset and instinct of hundreds of thousands of people who had grown up in an undeniably successful company, but one that had for decades been immune to normal competitive and economic forces. It was like taking a lion raised for all of its life in captivity and suddenly teaching it to survive in the jungle.

29. Communication DURING CRISIS: The author believes in the public acknowledgement of the crisis. If employees do not believe a crisis exists, they will not make the sacrifices that are necessary to change. WAKING UP THE LEADERSHIP TEAM: He showed photos of some of their top competitors to the employees. Quoted one of the competitor Larry Ellison “IBM ? We don’t even think about those guys anymore. They’re not dead, but they’re irrelavant.”

30. From the lessons learned : Focus. When the going gets tough in the base business, companies try their luck in new business. Superb execution. Building measurable targets and holding people accountable for them. Accountability must be demanded, and when it is not met, changes must be made quickly. Leadership is personal It is about visibility – with customers, suppliers, and business partners. They don’t leave to others the delivery of bad news. They treat every employee as someone who deserves to understand what’s going in the enterprise.

31. ELEPHANTS CAN DANCE Big matters. Size can be leveraged. Breadth and depth allow for greater investment, greater risk taking, and longer patience for future payoff. “It is not a question of whether elephants can prevail over ants. It’s a question of whether a particular elephant can dance. If it can, the ants must leave the dance floor”.