Blue Ocean Strategy: Renew Blue Oceans

1. Blue Ocean Strategy: Renew Blue Oceans Group 2 10:00 AM Emilye Webb Maddie Campbell Christian Todd

2. When should a company create another blue ocean? • Creating Blue Oceans are not static achievements, they are dynamic processes • Once a company creates a blue ocean and is known, imitators soon appear • As a company and its early imitators succeed and expand the blue ocean, more companies are always trying to join them and eventually the ocean turns red

3. Barriers to Imitation There are 4 barriers: • The Alignment Barrier - aligns value, profit, and people • The Cognitive and Organizational Barrier - requires significant organizational changes, value innovation doesn't make sense to company's logic • The Brand Barrier - may conflict with other companies’ brand image, companies that value-innovate earn brand buzz and a loyal customer following that tends to shun imitators • The Economic and Legal Barrier - natural monopoly, high volume leads to rapid cost advantage, network externalities discourage imitation, patents or legal permits block imitation

4. Renewal at the Individual Business Level • To avoid the trap of competing, RENEWAL is needed. • When a businesses value curve begins to converge with competition, it alerts the business to reach out for another blue ocean. • Value curve also keeps a business from pursuing another blue ocean when profit is still huge in its current offering.

6. Example of Renewal Process: • Salesforce.com made several strategic moves to renew its blue ocean in the CRM (customer relationship management) industry. • Has maintained undisputed market leadership in the blue ocean for about 15 years. • Competition has urged to dislodge, but they stay ahead by value-innovating.

7. Continued: • In 2001, salesforce.com innovated the CRM software industry, making the traditional packaged software irrelevant. • Competitors, over time, hopped in to profit in this market. • To deepen their blue ocean and venture away from competition, salesforce.com created “Chatter,” a social networking service. • This has allowed Salesforce.com to expand the size of the blue ocean and maintain a gap between their value curve and their competitions value curve.

8. Renewal at the Corporate Business Level • For companies with a diverse portfolio of business offerings, the renewal of their businesses should be monitored with a corporate perspective. • A pioneer-migrator-settler (PMS) map is best used for tracking this. • Pioneers • A company’s value innovations • Offers unprecedented value • Most powerful sources of profitable growth • Migrators • Represent value creation • Generally offer improved value but not innovative value • Settlers (me to business) • Will not generally contribute much to a company’s future growth

9. Apple’s PMS Map

10. Apple’s PMS continued... • In order to maximize growth prospects, there needs to be a balance between pioneers for future growth and migrator and settlers for cash flow at any given point in time. • Throughout time pioneers become migrators and then eventually turn into settlers as imitations begin and intensify. • The Apple Store is considered a blue ocean in the retail industry but is not plotted due to the sales already being accounted for in the existing products. • Apple has maintained strong profitable growth by keeping a successful balance even when their pioneers lost status

11. Blue and Red Oceans • Companies with a diverse business portfolio will always need to swim in both red and blue oceans at any given time and be able to succeed in both oceans at the corporate level. • Therefore applying competition-based principles of red ocean strategies are also needed. • When IPod began to be imitated, Apple rapidly launched a range of IPod variants at various price points. • Expanded it’s oceans therefore capturing more profits. • By the time the IPod’s blue ocean was crowded with competition, Apple introduced another blue by introducing the IPhone. • Red and blue ocean strategies are complementary strategic perspectives and each serve different and important purposes.