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How to Create Uncontested Market Space and Make the Competition Irrelevant
Introduction to BOS BOS Tools : Strategy Canvas & E.R.R.C. Awakening : As-Is Strategy Canvas Exploration : Reconstruct Market Boundaries Strategizing : To-Be Strategy Canvas Actualization : Identify actions to actualize the strategies Conclusion
Facilitators : Yip Khai Biau (ymike27@hotmail.com) & Lieu Yoke Sun
All Rights Reserved KB Yip/YS Lieu
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Objectives
Develop understanding of Blue Ocean Tool Sets and how to apply them effectively
Perform As-Is Analysis to Compare Current Strategy of XYZ vs Competitors Explore Pathways to Breakaway from Market Boundaries to look for Bigger Playing Field Brainstorm and Agree on the To-Be Strategy for XYZ
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History & Background Defining Red & Blue Ocean Six Principles of BOS Reach Beyond Existing Demand Value Innovation
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First Tier: Soon-to-be noncustomers who are on the edge of your market, waiting to jump ship
Third Tier
Yourlu B Market
cean eO
Second Tier: Refusing noncustomers who consciously choose against your market.
Third Tier: Unexplored non customers who are in markets distant from yours.
Traditional Wine : An elite, refined image in packaging with heavy use of wine terminology. Aging quality. Prestige of a vineyard and its legacy. Complexity and sophistication of a wines taste, such as tannins and oak. A diverse range of wines to cover all varieties of grapes & consumer preferences
[yellow tail] : No jargon.Simple and nontraditional label. Aging is not important. Vibrant and fun. Sweeter and easier to drink. Only one Red (Shiraz) and one White (Chardonnay).
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Third Tier
Third Tier
Red Wine X
[yellow tail] created a Blue Ocean by making its wine more appealing to the bigger population
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Circus X
Circus X
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Example [Nintendo]
Electronic Game Industry Nintendo Wii
Nintendo created a Blue Ocean by reducing the complexity, add the ease of use and fun!
Everyone Else
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Value innovation places equal emphasis on value and innovation. Value innovation is a new way of thinking about and executing strategy that results in the creation of a blue ocean. The creation of blue oceans is about driving costs down while simultaneously driving value up for buyers.
Cost
Value Innovation
Buyer Value
Back
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Value Curves
Mid
Competitor 2
Competing Factors
Factors that the industry competes & invests, also potential areas where customer value could be created.
Offering Level
Graphical Representation of Strategy + Big Picture View + Landscape Scanning + Relative Positioning vs. Competitors
All Rights Reserved KB Yip/YS Lieu
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4 Actions Framework
Strategically Reduce Cost
Reduce
Which factors should be reduced well below the industry's standard?
Eliminate
Which of the factors that the industry takes for granted should be eliminated?
Raise
Which factors should be raised well above the industry's
Create
Which factors should be created that the industry has never offered?
Strategically Invest in
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Reduce
Create
Back
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4.5 4 3.5 3
Offering Level
Mid
2.5 2 1.5 1
Competitors XYZ
Low
0.5 0
ng di an Br
/C le y st fe Li
re ltu u
Back
All Rights Reserved KB Yip/YS Lieu
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Red Ocean
Across Complementary Scope of Products & Services Across Functional Emotional Orientation Across Time
Blue Ocean
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Alternatives include products or services that have different functions and forms but the same purpose.
Commercial Airline
Corporate Jet
Commercial Airlines
Corporate Jet
Not P2P Bad High Travel Time Security Concern High Cost
50 hrs/yr
Create
High
Low Price
Deadhead costs
Ease of travel
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Price of Coach & Speed of Flight P2P Direct Flight No Frill User Pay Budget Travel Package
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Raise
Quality of Safety Point to Point Direct Flight
Reduce
Air Fare Capital Stopover time Staffing (ground and air)
High
Create
Web Registration Express Boarding Budget Hotel
Air Asia
Offering Level
Land Transportation
Low
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Red Ocean
Across Complementary Scope of Products & Services Across Functional Emotional Orientation Across Time
Blue Ocean
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Strategic Groups Groups of companies within an industry that pursue a similar strategy. E.g., Automobiles Luxury (Mercedes, BMW), Economical (Toyota, Proton).
Traditional Health Club Home Exercise
Womanly Fun
Good
Expensive. Bad Not easily accessible. Complicated. Lack of Privacy Low motivation
High
Curve s
Low
Price
Amenit ies
Workout Equipment
Workout Time
A vailabilt y of instructors
Convenience
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No Frill Cheap - Pay For What You Use! Optional Add-ons: Limited service, basic Low on price, high on personality Walk in
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Red Ocean
Across Complementary Scope of Products & Services Across Functional Emotional Orientation Across Time
Blue Ocean
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There is a chain of buyers who are directly or indirectly involved in the buying decision. Purchasers pay for the product or service
Users use the product or service Influencers influence the decision in the purchase
Corporate Jet Example : Novo Nordick - from insulin producer to a diabetes care company
Traditionally
Now
Prescribe
Request
Better Medicine
Better Pricing
Easy To Use
Insulin Industry
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No Unpleasant Feeling
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Nintendo outsold Sony and Microsoft 6:1. Cant keep product on shelves!
Gam e Industry
e G s ic ph ra s ic ys Ph y Pa C i ty ex pl om ie ov M G am ry ra ib L se fU o c ra te In n Fu ic ag M d an
Low
ic Pr
e in nl
se Ea
up ro G n/ io t
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Red Ocean
Across Complementary Scope of Products & Services Across Functional Emotional Orientation Across Time
Blue Ocean
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Define the total solution buyers seek when they choose a product or service. Think about what happens before, during, and after your product is used. Corporate Jet
Example :
Traditional : Buses made from Steel Low Initial Price Less Space More Fuel
High
High
Purchase
Delivery
Use
Disposal
Low
High
NABI
Low Initial purchase price Corrosion Maintenance cost Fuel consumption Environmental friendliness Aesthetic design Customer friendliness
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Before
During
After
Go to Coffee Shop Read the Book Book Signing Buy DVD, Games, Gift
Book Selection
Immediate Enjoyment!
Carrying bag
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Conventional EMS
Mass Production Logistics VI Part Sourcing & Production Inventory Control Prototyping
Mass Production
Prototyping
Design
Sourcing Design
Foxconn
Othe r EM Se s
Low
ti t iv e en
ss hn ec T
g olo
y Pr
e oc
ss D
y er l iv e
ua
li ty a ti c n lI te g
t ra
io
Co
st
Co
pe
r Ve
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Red Ocean
Across Complementary Scope of Products & Services Across Functional Emotional Orientation Across Time
Blue Ocean
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Functional
Emotional
Hot Towels Message Tea/Coffee Special Hair /Skin Treatments $27 - $45
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Certification
Low Fee Low Recognition of Education Quality Conventional Education System Many Environmental Constraints Local Market
Branches in UK, Africa & China Collaboration w other Universities 6000 students from 90 countries Vibrant, multicultural and international
Open Education
System
Free & Creative
Environment
Diverse Student Base Fun Learning Exposure Global Classroom Encourage Entrepreneurship Academic Exchange
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Raise
Globalization Competition Asian Culture Creative Thinking Flexibility Culture Exposure Entrepreneurship
High
Fo re ig n
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Red Ocean
Across Complementary Scope of Products & Services Across Functional Emotional Orientation Across Time
Blue Ocean
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Across Time
BOS Example iTune
Apple teamed up with major Music & Picture Companies Sell Individual song / entire album 30 sec free listening Strategically price
1999
2003
iTunes had sold > 4 billion songs 20 million songs on Dec 25, 2007
2008
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Across Time
BOS Example :
A video sharing website for upload, view and share video clips User can post video 'responses' and subscribe to content feeds Created in mid-February 2005 by three former PayPal employees Uses Adobe Flash technology to display a wide variety of usergenerated video content Acquired by Google in Nov 2006 for $1.6B
As of Apr 2008, hosting 83.4 million videos and 3.75 million user channels > 100 million videos were being watched every day
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Raise
Web space allotted per user
Reduce
Uploading / downloading time
Create
Ease of Use technology FLV technology Ready-made website Social networking Video tags & Search
High YouTube
d ee N
fo
L TM H r
d oa nl w do
r pe
e ad -m
te
w et
ce pa bs e W
s Ea
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Longevity Medicine
Innovation Economy
Next Workforce
Strategic Group
Focuses on competitive position within Looks across strategic groups strategic group within industries Focuses on better serving the buyer group Focuses on maximizing the value of product and service offerings within the bounds of its industry Focuses on improving price performance within the functional emotional orientation of its industry Redefines the industry buyer group
Buyer Group
Functional-Emotional FunctionalOrientation
Time
Focuses on adapting to external trends Participates in shaping external as they occur trends over time
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Prayer Service
Functional to Emotional
Notifying Friend & Relatives Thank You Cards Memory Lane Video & Slideshow
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ea ra n
Po l lu
ra ng ar
Ce m
Se rv
m pe
Ta
Pr
fA pp
ay ou t
is t ic a
Pr ic
So ph
el lL
St af
ne
St o
Fu n
W hi te
Co
te d
ePr
er al
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High
4.5 4
Competitors
Offering Level
3.5 3
Mid
2.5 2 1.5 1
XYZ
Low
0.5 0
Fe
Competing Factors
Divergent Factor
Description
Reduce
Raise
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Fee Competencies
Institutional Recognition
Industrial Linkage
Facilitators
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1. Focus
2. Divergence
Barriers to Imitation
Economies of Scale
High volume generated by a value innovation leads to rapid cost advantages
1st to Market
When a company offers a leap in value, it rapidly earns brand buzz and a loyal following in the marketplace
Natural Monopoly
Size of market does not make sense to support another player Back
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Compare your business with your competitors' by drawing your As Is Strategy Canvas
Go into the field to explore the six paths to creating blue oceans
Draw your To Be Strategy Canvas based on insights from field observations Get feedback on alternative strategy canvases from customers, competitors customers and non customers
Distribute your before- and-after strategic profiles on one page for easy comparison Support only those projects and operational moves that allow your company close the gaps to actualize the new strategy
Use feedback to build the best 'to be' future strategy Back
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Cost
Price
Utility
Adoption
Buyer Utility
Price
Cost
Adoption Hurdles
Can you attain your cost target to profit at your strategic price?
What are adoption hurdles in actualizing your business idea? Are you addressing them up front?
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2 Delivery
the product delivered? How difficult to install the new product? Do buyers have to arrange delivery themselves?
3 Use
Training or expertise assistance required? Easy to store when not in used? How effective are features and functions?
6 Disposal
Create waste items?
Supplement Maintenance
Need other products to make it work? Require external maintenance? How easy to maintain and upgrade?
Simplicity
Convenience
How costly?
Risk
Environmental Friendliness
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HR V.I.
Customer Productivity
Purchase
Simplicity
Insourcing
Convenience
Risk
Global Guru
Environmental Friendliness
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Strategic Pricing
Conventional Test water with price insensitive customers. Drop price over time to attract mainstream buyers. BOS Strategic Pricing Start with Pricing to capture Mass Market. Why ? Volume gives Economy of Scale. E.g., Microsoft Windows XP. All or Nothing. E.g., eBay. Lack of Excludability would give rise to Free-Riding. E.g., Air Asia, OldTown. An offerings reputation must be earned from Day One => Buyers cant refuse.
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High degree of legal and resource protection Difficult to Imitate (E.g., Dyson) Some degree of legal and resource protection Low degree of legal protection Easy to Imitate (E.g., Air Asia)
Mid-level pricing
Low -lev el p
ricin g
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Partnering
1500 partners over 50 countries
Pricing Innovation
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Cognitive Hurdle
Resource Hurdle
Motivational Hurdle
Political Hurdle
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Motivational
Focus on kingpins the key influencers Fishbowl management of kingpins
- Kingpins actions and inactions are made as transparent to others as are fish in a bowl of water
Who are your kingpings ? What review/metrics do you use ? How do we breakdown the 3 differentiators into sizeable chunks?
Bring those in denial to feel the pain and meet the customers
Atomization
- Break down overall strategic objective into bite sized chunks; different levels understand their goal
Resource
Where are XYZs Hot spots and Cold spots ? Revenue vs Resource ? Beside headcounts, what other resources can you trade ? Meeting room ? Hot spots
- Low resources input but high potential performance gains
Political
Leveraging angels
- Angels = those who have the most to gain from the strategic shift
Who will align the most with XYZ ? Who will fight with XYZ ? What can you lobby to become your Godfather ?
Cold spots
- Activities that have high resource input but low performance impact - Redistribute resources to hot spots from cold spots
Silencing devils
- Devils = those who have the most to lose from it
Horse trading
- Swap resources around to where it is needed
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Trust &Commitment
I feel my opinion counts.
Volunteer Cooperation
Ill go beyond the call of duty.
Exceeds Expectation
Self-Initiated
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Barriers to Imitation
Economies of Scale
High volume generated by a value innovation leads to rapid cost advantages
1st to Market
When a company offers a leap in value, it rapidly earns brand buzz and a loyal following in the marketplace
Natural Monopoly
Size of market does not make sense to support another player Back
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Acknowledgement
Professor Kim and Mauborgne for enlightening us with such a great book. You All, for being such a wonderful audience !
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Back Up
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A company must master its traditional markets using conventional strategic planning tools. - It will always be important to swim successfully in the red ocean by out competing rivals. Red oceans will always matter and will always be a fact of business life. - But to focus on the red ocean is therefore to accept the key constraining factors of war- limited terrain and the need to beat an enemy to succeed and to deny the distinctive strength of the business world: the capacity to create new market space that is uncontested.
2.
But to sustain high performance, companies must create their own blue oceans, and make the competition irrelevant! - But blue oceans are largely uncharted a) no analytic fireworks to guide its creation and implementation, b) no principles to effectively manage risk, c) therefore too risky for managers to pursue. The book provides practical examples and guides to create blue oceans.
All Rights Reserved KB Yip/YS Lieu
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