Blue Ocean Strategy Chapter 1 Team 2 ● Danielle Zamora, Ashleigh Wright, Blair Barnhill, Marshall Lester, Lucas Raney, Michael Greene

Overview Blue and Red Oceans The Continuing Creation and Impact of Blue Oceans From Company and Industry to Strategic Move Value Innovation Formulating & Executing Blue Ocean Strategy

Blue Oceans Blue Ocean Strategy is the idea or view that market boundaries and industry structure are not given and can be reconstructed. A market is not specifically defined and always open to change. For example: Cirque du Soleil had to come up with a new way to reinvent the circus. Targeted a new audience that made the previous competition irrelevant.

New Market Space Brings forth the idea that “the only way to beat the competition is to stop trying to beat the competition.” Red Ocean All industries in existence - Known Market Space Competitive rules of the game are already known Only way to get ahead is to outperform competitor Market Space crowds and prospects for profits and growth reduce Blue Ocean Untapped Markets Competition is irrelevant Largely uncharted Risky but chance of high profit and growth

Blue Ocean Strategy in Today’s World Uber Taxi cabs around since 1897 Different variations of the service but Uber brought a whole new platform to the market. Instead of the same rules that had been in place for so many years Uber changed the structure of the service.

The Continuing Creation of Blue Oceans New Blue Oceans are always being created Hundreds of new industries created in the past century How many will exist in the next 50 years? Preparation for new industries US Census movement from old SIC system to new NAICS system in 1997 Despite this, most businesses still launch into Red Oceans “To focus on the red ocean is to accept the key constraining factors of war--limited terrain and the need to beat the enemy to succeed”

The Impact of Creating Blue Oceans Study monitored 108 businesses 86% were business line expansions, yet were 62% of the total group’s revenue and 39% of profits 14% of launches into Blue Oceans 38% of total revenues and 61% of total profits Blue Oceans are more profitable!

Current Blue Ocean: 3D Printing Totally new market based on original principals of 2D printing First prototype made in 1986, many versions today Only came into more frequent use Despite many entrants and innovations new to this market, the space is still relatively uncontested Many Blue Oceans to be had in this area--almost every entrant to the market presents something new Technology improving at a rapid pace--there is extreme room for growth

From Company and Industry to Strategic Move How can a company break out of the red ocean of bloody competition and create a blue ocean? Is there a systematic approach to achieve this and thereby sustain high performance?

From Company and Industry to Strategic Move Initial step was to define the basic unit of analysis for research To understand the roots of high performance, the business literature typically uses the company as the basic unit of analysis This brings up the question; are there lasting excellent or visionary companies that continuously outperform the market and repeatedly create blue oceans?

From Company and Industry to Strategic Move Best selling book In Search of Excellence Published twenty years ago Within five years of its publication, a number of the model firms surveyed in the book had fallen as industry leaders

From Company and Industry to Strategic Move Best selling book Built to Last Sought out the successful habits of visionary companies To avoid the pitfalls of In Search of Excellence the survey period was expanded to the entire lifespan of the companies Analysis was limited to firms more than 40 years old Upon closer examination it was revealed that some of the companies spotlighted in Built to Last had deficiencies As illustrated in the recent book Creative Destruction, much of the success attributed to the companies was the result of industry sector performance rather than the companies themselves.

From Company and Industry to Strategic Move For example: Hewlett-Packard (HP), which was highlighted in Build to Last, outperformed the market over the long term, but in reality so did the entire computer- hardware industry. In actuality, HP did not even outperform the competition within the industry.

From Company and Industry to Strategic Move So, if there is no perpetually high-performing company, and the same company can see its highs and lows; it appears that the company is not the appropriate unit of analysis in exploring the roots of high performance. Since new market space can be created in a sector and generate strong, profitable growth, than industry can not be used as the unit of analysis.

From Company and Industry to Strategic Move Studies show that the best unit of analysis for explaining blue oceans and sustained high performance is the strategic move. A strategic move is the set of managerial actions and decisions involved in making a major market-creating business offering. For example: Compaq, which was acquired by HP in 2001, might be seen as an unsuccessful company. However, the blue ocean strategic moves made by Compaq created the server industry, and unlocked a multibillion-dollar market space in computing.

From Company and Industry to Strategic Move The best strategic moves create blue oceans and profitability. They can open and capture new market space. There is no evidence of a perpetually excellent company or industry. Whether it is Ford in 1908 with the model T, GM in 1924 with cars style to appeal to the emotions, or CNN in 1980 with 24/7 real-time news, the approach to strategy creating blue oceans is consistent over time regardless of industry.

Value Innovation: The Cornerstone What is value innovation? A strategy that blue ocean companies take on Create new ideas Creates a new competition and makes the old competition irrelevant Why is it important? Differentiation from other companies Creates new market place Puts the company in the blue ocean

Value Innovation: The Cornerstone Value innovation is the strategy that kept the blue ocean winners and losers separate from each other Example: Cirque du Soleil and soft drink industry (coke, cola, pepsi)

Value Innovation: The Cornerstone Cirque du Soleil chose to improve their quality. Looking across market boundaries at alternatives can help generate ideas. They still look for ways to drive cost down while driving value up.

Value Innovation: The Cornerstone Value innovation is about more than just creativity. It is based on a strategy to form the entire company into something more desirable to the customers of the market. Red Ocean Strategy-is strictly competition based and assumes that there are conditions in an industry that are boundaries for all companies to compete in. Blue Ocean Strategy-believes that there are few if not zero boundaries that cannot be pushed in the industry.

Value Innovation: The Cornerstone Mercedes-Benz followed the strategy of Cirque du Soleil. Focused solely on customer service until that improved. Found the best quality models. Took into account that customer satisfaction was the source for all revenues.

Formulating & Executing Blue Ocean Strategy How can companies… Maximize Opportunities Minimize Risk...simultaneously?

Principles for Successful Formulation of BOS 1. Reconstruct market boundaries 2. Focus on the big picture 3. Reach beyond existing demand 4. Get the strategic sequence right

Reconstruct Market Boundaries: Ch. 3 Make competition irrelevant Focus on looking across different paths Reduce search risk

Focus on the Big Picture: Ch. 4 Create value innovation Alternative to number crunching Use a visualization approach Reduce planning risk

Reach Beyond Existing Demand: Ch. 5 Aggregate Demand Build on powerful commonalities across non-customers Maximize size of Blue Ocean to create new demand Minimize scale risk

Get the Strategic Sequence Right: Ch. 6 Provide a leap in value to buyers Build a viable business model Make sure you and your customers win as you create new business terrain Minimize business model risk

Principles That Drive Effective Execution of BOS 1. Overcome key organizational hurdles: Ch. 7 a. tipping point leadership b. reduces organizational risk c. jump hurdles in spite of limited time and resources 1. Build execution into strategy: Ch. 8 a. motivate people to act on and execute blue ocean strategy b. fair process c. reduces management risk

Conclusion Red Oceans are important because many ideas that power Blue Oceans come from past and present markets. The goal is to drive cost down while driving customer satisfaction up. Innovations are a constant, so Blue Oceans can always be created, and often be made very profitable. Strategic moves create Blue Oceans and lead to high performance.

References Kim, W. C., & Mauborgne, R. (2005). Blue ocean strategy: How to create uncontested market space and make the competition irrelevant. Boston, MA: Harvard Business School Press. What Is 3D Printing?. Retrieved from Barnatt, Christopher. (2016, January 30). 3D Printing. Retrieved from Zwilling, Martin. "6 Steps To Refocus Your Business On Customer Delight." Forbes. Forbes, 11 Feb Web. 14 Feb