Getting the Strategic Sequence Right Blue Ocean Strategy, Chapter 6 Paul Shirley Jonathan McLaurin Marsha Swink

The Fourth Principle of Blue Ocean Strategy Build a robust business model to ensure that you make a healthy profit on your blue ocean idea The Strategy Sequence ▫Buyer utility ▫Price ▫Cost ▫Adoption

Buyer utility Is there exceptional buyer utility in your business idea ? Price Is your price easily accessibly to the mass of buyers? Cost No- Rethink Revenue side of the business model Yes

Cost Can you attain your cost target to profit at your strategic price? Adoption What are the adoption hurdles in actualizing your business idea? Are you addressing them up front? No- Rethink Yes Viable Blue Ocean Idea

Buyer Utility Don’t get caught in the trap! Use the Buyer Utility Map

PurchaseDeliveryUseSupplementsMaintenanceDisposal Customer productivity Simplicity Convenience Risk Fun and Image Environmental Friendliness Buyer Utility Map The Six Stages of the Buyer Experience Cycle The Six Utility Levers

PurchaseDeliveryUseSupplementsMaintenanceDisposal Customer productivity X Simplicity XX Convenience XX Risk Fun and Image X Environmental Friendliness Buyer Utility Map-Wholesale Store The Six Stages of the Buyer Experience Cycle The Six Utility Levers

Blue Ocean Strategic Pricing Want and Compelling Ability to Pay ▫Finding the Right Price Excludability ▫Originators or Followers-Imitators Combine with Exceptional Utility

The Price Corridor of the Mass Step 1- Identify the Price Corridor 1.Same Form- Same Products or Services. 2.Different Form, Same Function- Different look, but same use. 3. Different Form and Function- Completely different, but same overall objective.

The Price Corridor of the Mass Step 2- Price level within the price corridor ▫Upper-level Pricing- Many Patents and Asset protection ▫Mid-level Pricing- Fewer patents and Asset safe- guards ▫Lower-level Pricing- With out patent protection. Costco- Volume brings cost advantages

Target Costing-The Profit Side Price Minus Costing- To arrive at a desired profit. Working Backwards to arrive at the Target Cost. ▫Support the necessities and still make a profit. Three Levers to achieve the Target Cost.

Lever One - Streamlining and Cost Innovations Most effective and efficient ways of achieving the same task Outsourcing, simplifying, choosing locations Unconventional means of production.

Lever Two - Partnering Using other’s expertise ▫Averret Trucking for Inbound and Outbound shipping Acquisitions Vertical and Horizontal Integration

Lever Three – Pricing Innovation Changing the Price Model ▫If all else fails, change it! Using other industry’s price models. Buying-Leasing-Renting

Main Stakeholders EducateKeys Employees Business Partners General Public Open discussion for why Set clear expectations Explain its merits Need voices of shareholders to be heard No surprises

Blue Ocean Idea Index Costco’s Car Wash UtilityIs there exceptional utility? Are there compelling reasons to buy your offering? + PriceIs your price easily accessible to the mass of buyers? + CostDoes your cost structure meet the target cost? + AdoptionHave you addressed adoption hurdles up front? +/-

What’s Next After Passing BOI Index Shift gears to execution 5 th principle of BOS Overcoming key organizational hurdles

Take Aways Utility Map If all else fails, change your price model BOI Index