Turn back the clock Which industries did not exist? 100 years 50 years

You may ask what Cirque du Soleil has to do with Blue Ocean BUSINESS STRATEGIES….If you have been a cirque du soleil show, you know it is like nothing like a traditional circus OR a traditional theater experience. And that is why they are a )click) good example of Blue Ocean Strategy…..

Cirque du Soleil Blue Ocean Strategy Creating Uncontested Market Space and Making the Competition Irrelevant An that is exactly why Cirque du Soleil has everything to do with Blue Oceans…. Blue Ocean Strategy Cirque du Soleil

Red Ocean Strategy Blue Ocean Strategy Cirque du Soleil broke the best practice rule of the circus industry, achieving both differentiation and low cost by reconstructing elements across existing industry boundaries.In the red ocean, differentiation costs because firms compete with the same best-practice rule. Here, the strategic choices for firms are to pursue either differentiation or low cost. In the reconstructionist world, however, the strategic aim is to create new best-practice rules by breaking the existing value cost trade-off and thereby creating a blue ocean. (For more discussions on this, see appendix B, “Value Innovation: A Reconstructionist View of Strategy.”) elements across existing industry boundaries.

Summary of Blue Ocean Strategy New Market Space Continuing Creation of Blue Oceans Impact of Creating Blue Oceans Rising Imperative of Creating Blue Oceans From Company and Industry to Strategic Move Value Innovation Formulating and Executing Blue Oceans Create Uncontested Market Space Make the Competition Irrelevant

Continuing Creation of Blue Oceans New Market Space Creating Blue Oceans Is Consistent Across Time Regardless of Industry Ford’s 1908 Model T CNN 1980 Real-Time News 24/7 2002 Apple’s ipod 1970 The First Mouse We studied more than one hundred fifty strategic moves made from 1880 to 2000 in more than thirty industries, and we closely examined the relevant business players in each of these events. Industries ranged from hotels, the cinema, retail, airlines, energy, computers, broadcasting, and construction to automobiles and steel. We analyzed not only winning business players who created blue oceans but also their less successful competitors.study shows that the strategic move, and not the company or the industry, is the right unit of analysis for explaining the creation of blue oceans and sustained high performance Continuing Creation of Blue Oceans

Impact of Creating Blue Oceans

Rising Imperative of Creating Blue Oceans Driving forces include: Technological advances & improved industrial productivity Unprecedented array of products and services available Supply exceeds demand Globalization, niche markets and monopolies disappear 20th century strategy and management approach waning

Formulating and Executing Blue Oceans

From Company and Industry to Strategic Move Value Innovation, Blue Oceans Cornerstone Cost savings are made by eliminating and reducing the factors an industry competes on. Buyer value is lifted by raising and creating elements the industry has never offered. Over time, costs are reduced further as scale economies kick in due to the high sales volumes that superior value generates. By offering unprecedented utility, Cirque du Soleil has created a blue ocean and has invented a new form of live entertainment, one that is markedly different from both traditional circus and theater. At the same time, by eliminating many of the most costly elements of the circus, it has dramatically reduced its cost structure, achieving both differentiation and low cost. Le Cirque strategically priced its tickets against those of the theater, lifting the price point of the circus industry by several multiples while still pricing its productions to capture the mass of adult customers, who were used to theater prices. As shown in figure 1-2, the creation of blue oceans is about driving costs down while simultaneously driving value up for buyers. This is how a leap in value for both the company and its buyers is achieved. Because buyer value comes from the utility and price that the company offers to buyers and because the value to the company is generated from price and its cost structure, value innovation is achieved only when the whole system of the company’s utility, price, and cost activities is properly aligned. It is this whole-system approach that makes the creation of blue oceans a sustainable strategy. Blue ocean strategy integrates the range of a firm’s functional and operational activities.

The Paradox of strategy The very language of strategy is deeply imbued with military references - chief executive "officers" in "headquarters,“ "troops" on the "front lines." Described this way, strategy is all about red ocean competition. It is about confronting an opponent and driving him off a battlefield of limited territory. Blue ocean strategy, by contrast, is about doing business where there is no competitor. It is about creating new land, not dividing up existing land.

The Simultaneous Pursuit of Differentiation and Low Cost A blue ocean is created in the region where a company's actions favorably affect both its cost structure and its value proposition to buyers. Cost savings are made from eliminating and reducing the factors an industry competes on. Buyer value is lifted by raising and creating elements the industry has never offered. Over time, costs are reduced further as scale economies kick in, due to the high sales volumes that superior value generates. The Simultaneous Pursuit of Differentiation and Low Cost

The Book and the Authors Prof Renee Mauborgne © JOHN ABBOTT Prof Chan Kim

Accolades Over 2 million copies sold Translated into over 41 foreign languages – a world record Taught as the major theory of strategy at leading business schools Gives insights to CEOs, Executives, Heads of State and Prime Ministers

What is the Blue Ocean? High profit growth at low risk Industries not in existence today Untapped market demand Unknown market space

Summary Conventional Logic Blue Ocean Logic Industry Assumption Industry conditions are given Industry condition can be shaped. Strategic Focus Build competitive advantages to beat the competition. Create a quantum leap in buyer value to dominate the market. Customers Retain and expand the customer base through further segmentation and customization. Think in terms of embracing customer differences. Go for the mass of buyers and willingly let some existing customers go. Think in terms of embracing key customer value commonalities.

Summary Conventional Logic Blue Ocean Logic Assets & Capabilities Think in terms of a company’s existing assets and capabilities. Build on what it has. Think free from a company’s existing assets and capabilities. Ask, what if we start anew? Product/ Service offerings Think in terms of products/services offered by the industry. Seek to maximize the value of these offerings. Think in terms of buyers’ solution even if that transcends the industry. Seek to solve buyers’ major bottlenecks/chief compromises in using the products/services of the industry.

Four Actions to create a Blue Ocean What factors should be raised well beyond the industry standard? Raise What factors should be eliminated that the industry has taken for granted? Eliminate What factors should be created that the industry has never offered? Create What factors should be reduced well below the industry standard? Reduce