Blue Ocean Strategy

1. Blue OceanStrategy W. Chan Kim, Renée Mauborgne

2. Strategy as Competition • The competitive arena is a given • Industry structure (five forces, supply and demand characteristics) shapes … • … buyers and sellers conduct (strategies and implementation) which … • determines performance (competitive advantage) • Differentiation and low cost are a tradeoff

3. “Red Oceans” • Industry boundaries defined, accepted • Dimensions of competition well established • Companies compete along the same dimensions for the same customers • Over time, strategies and products converge, competition intensifies, profits and growth wane

4. “Blue Oceans” • Undefined industry and market space! • Demand is latent – even customers don’t know that they want _______ • No competition! • Tremendous profit potential

5. Pause for Thought • Can insight be taught? • Can opportunities for quantum “breakthroughs” be analytically identified? • Can vision be summoned on demand? • Why are people like Steven Jobs so rare?

6. Blue Ocean StrategyW. Chan Kim, Renée MauborgneHarvard Business Review, October 2004 • “The creation of blue oceans … is very much a product of strategy, and as such, is very much a result of managerial actions.” • Not usually a technological breakthrough; not necessarily a whole new industry.

7. “Blue Ocean” Strategy • Industry / market space can be “reconstructed” to create “blue oceans” of new unserved demand • Reorient attention from competitors to alternatives, from consumers to non-customers! • Strive to reduce company costs and increase value to buyers!

8. “Strategy Canvas” &“Value Curves” • Strategy canvas • Dimensions of competition on the horizontal axis • Level of company’s offering on the vertical axis (high / low) • “Value curve” is a plot of a company’s relative position on this “canvas”

9. Four Action framework • Eliminate! factors that the industry takes as given dimensions of competition • Create new dimensions of competition • Reduce offering on some dimensions well below industry average • Increase offering on some dimensions well above industry average

10. A Blue Ocean Value Curve • A sound value curve must • have Focus – consistency, logic • Diverge from the industry norm • Strategy is about being different (Porter) • Have a “compelling tag line” – an identifying feature • Strategy makes an organization comprehensible (Mintzberg)

11. Classic Blue Ocean Strategies • Model T Ford – Assembly line technology made cars affordable for a mass market. • Nintento Wii – brought millions of new customers (even senior citizens) into the market for video games. • Cirque du Soleil – created a new form of hybrid, upscale entertainment

12. What’s the next big Blue Ocean strategy?