Blue Oceans and Other BIG Strategic Ideas

What You Will Learn Become familiar with concepts behind Blue Ocean Strategy Become familiar with concepts behind Blue Ocean Strategy Learn what MPI has done to apply Blue Ocean concepts to your association Learn what MPI has done to apply Blue Ocean concepts to your association Learn about net creation and open innovation Learn about net creation and open innovation Formulate ideas on how you might be able to apply these ideas to your own work Formulate ideas on how you might be able to apply these ideas to your own work

Red Oceans represent all industries in existence today. They have defined rules, competitors, and market boundaries. Key words might include competition, price wars, market share, commoditization, benchmarking, strategic positioning, value add.

Blue Oceans represent all industries NOT in existence today. This is undefined market space, otherwise known as OPPORTUNITY. Key words might be value innovation, focus, differentiation, creation of demand, new marketplace

Most blue oceans are created from red ocean companies expanding industry boundaries. For example, Cirque du Soleil or [yellowtail] (more on this in a bit)

The phrase “Blue oceans” is new, but the concept is not. Think of what industries existed in Take 3 minutes… At your table, brainstorm a list of industries that have emerged since then.

Some of them might be… automotives, aviation, health care, plastics, DVDs, computers, personal entertainment devices (iPods, for example). All of these industries created new market space.

The premise is simple: To win in the future, companies must stop competing with each other. The only way to beat the competition is to stop trying to beat the competition.

The business environment in which most business strategy and management has been based on is changing, evolving or disappearing. Some of this change is due to technology. Other reasons might be culture, globalization, speed of new information, or the role of demographics in the workplace.

Value innovation is the “new” strategic logic behind Blue Ocean Strategy. Instead of focussing on beating the competition, you focus on making it irrelevant by creating a leap in value for buyers and creating uncontested market space.

Value innovation only occurs when organizations have aligned innovation with utility, price and costs. The market must be ready to accept the product, meaning that timing is key. The focus is on both differentiation and low cost to provide value to both customers and the organization.

Graph of Value Innovation

Case study: Cirque du Soleil Other circuses focused on: Benchmarking the competition Benchmarking the competition High-profile “stars”, which increased costs but who were largely unknown to the general public High-profile “stars”, which increased costs but who were largely unknown to the general public Traditional venue Traditional venue Traditional audiences Traditional audiences

Case study: Cirque du Soleil Cirque du Soleil focused on:  Creation of a hybrid between the circus and the theatre  Retention of the symbolic and glamorous aspects of circus, such as the tent and the more breathtaking aspects, such as acrobats  Incorporation of more comfort, sophistication, elegance and theatrical plots; this brought not only the richness of theatre but a whole new demographic of customers  It looked across market boundaries and created new ones.

The Strategy Canvas Captures the current state of play in the market by detailing the factors players compete on in product, service and delivery Captures the current state of play in the market by detailing the factors players compete on in product, service and delivery For example, the wine industry competes on price per bottle, refined image in packaging, marketing strategies, aging quality of wine, prestige of vineyard, complexity of taste and diverse product range For example, the wine industry competes on price per bottle, refined image in packaging, marketing strategies, aging quality of wine, prestige of vineyard, complexity of taste and diverse product range

The Strategy Canvas Each factor is plotted on the canvas, with a high score reflecting the level of investment a specific company makes in that factor (for example a high score on price means that the price per bottle is high) Each factor is plotted on the canvas, with a high score reflecting the level of investment a specific company makes in that factor (for example a high score on price means that the price per bottle is high) When you plot all US wineries, they score remarkably similarly When you plot all US wineries, they score remarkably similarly

Example of a Strategy Canvas Blue Ocean Space

The Strategy Canvas To differentiate yourself in the market place, you must focus on alternatives and non-customers to re-define the marketplace To differentiate yourself in the market place, you must focus on alternatives and non-customers to re-define the marketplace For example, Casella Wines looked at the strategy canvas and redefined the question: How do you make a fun and non traditional wine that is easy for everyone to drink? For example, Casella Wines looked at the strategy canvas and redefined the question: How do you make a fun and non traditional wine that is easy for everyone to drink?

Case Study: [yellowtail] Casella saw that most US consumers preferred beer, spirits and pre-packaged cocktails to wine Casella saw that most US consumers preferred beer, spirits and pre-packaged cocktails to wine Consumers saw wine as a turn-off due to Consumers saw wine as a turn-off due to –It was pretentious –The taste was too complex –It could be intimidating

Case Study: [yellowtail] They created a wine that broke out of the red ocean by creating a wine that: They created a wine that broke out of the red ocean by creating a wine that: –Appealed to beer and spirits drinkers by being fun and unpretentious as well as to wine drinkers –Had a less complex, sweeter and smooth taste –Was easy to select as it did not focus on prestige, aging, etc. –They eliminated all factors that the wine industry had long competed on

Four Actions: Eliminate/Reduce/Raise/Create Which of the factors that the industry takes for granted should be eliminated? Which of the factors that the industry takes for granted should be eliminated? Which should be reduced? Which should be reduced? Which should be raised well above standard? Which should be raised well above standard? Which factors should be created that have not existed before? Which factors should be created that have not existed before?

3 Characteristics of a Good Strategy It is focused; it is not diffused across all potential aspects of the market It is focused; it is not diffused across all potential aspects of the market The shape of the value curve diverges from any potential competitors The shape of the value curve diverges from any potential competitors It has a compelling tagline It has a compelling tagline

Your Strategy Canvas At your table, choose an industry one (or more) of you belong to. What industry are you in? What industry are you in? What factors does it traditionally compete on? (i.e. price, amenities, etc.) What factors does it traditionally compete on? (i.e. price, amenities, etc.) Are there any factors that set you apart? Are there any factors that set you apart? Are there any factors that do not add any value and could be dropped? Are there any factors that do not add any value and could be dropped? What could be created to add value? What could be created to add value?

Creation Nets and Open Innovation Open innovation is the concept that by looking beyond your own boundaries, you can gain access to better ideas, knowledge and technology than you could by relying on your own resources Open innovation is the concept that by looking beyond your own boundaries, you can gain access to better ideas, knowledge and technology than you could by relying on your own resources “Networks of creation”, or Creation Nets are an extension of this concept “Networks of creation”, or Creation Nets are an extension of this concept

Creation Nets Involve many – sometimes hundreds or even thousands of people – from diverse backgrounds coming together, often over the internet, to create knowledge, learn best practices, and build on each other’s work. Involve many – sometimes hundreds or even thousands of people – from diverse backgrounds coming together, often over the internet, to create knowledge, learn best practices, and build on each other’s work. “Nobody is as smart as everybody” William C. Taylor, Founder of Fast Company

The Positive Press For companies, creation nets have many advantages: For companies, creation nets have many advantages: –The rapid flow of change in today’s economy makes new knowledge valuable, as opposed to the past where a private knowledge base could give value overlong periods –Greater access to intellectual resources –Greater access to new and different technologies –Ability to tap into knowledge across traditional knowledge boundaries and industries –Creative breakthroughs

The Negative Press Trust can be hard to establish Trust can be hard to establish Concerns about proprietary information Concerns about proprietary information Large groups of people working to innovate together can be hard to control Large groups of people working to innovate together can be hard to control Conflict among participants increases the more people involved Conflict among participants increases the more people involved Different tolerances for cost Different tolerances for cost Uncertainty on how to create value Uncertainty on how to create value Loss of confidence in own abilities Loss of confidence in own abilities

Net Creation at Work Development of iPod was stimulated through a creation net formed by a smaller player in the marketplace, PortalPlayer Development of iPod was stimulated through a creation net formed by a smaller player in the marketplace, PortalPlayer The development of Linux, a computer operating system, was through net creation and involved companies such as IBM, Intel and Hewlett Packard The development of Linux, a computer operating system, was through net creation and involved companies such as IBM, Intel and Hewlett Packard The discovery of gold in an Ontario mine at Goldcorp, today considered the world’s richest mine The discovery of gold in an Ontario mine at Goldcorp, today considered the world’s richest mine

Net Creation at Work Development of the internet itself Development of the internet itself “The world’s most important technology platform relies on ideas and computer code generated largely by a decentralized corps of volunteer programmers, most of whom have never met each other and few of whom work together in any formal setting” William C. Taylor, Mavericks at Work

Net Creation Summary Just because you are in charge doesn’t mean you need to have all the answers Just because you are in charge doesn’t mean you need to have all the answers Just because people don’t work for you doesn’t mean that they can’t work with you…but you have to invite them Just because people don’t work for you doesn’t mean that they can’t work with you…but you have to invite them No one is as smart as everyone No one is as smart as everyone It is about the “architecture of participation” ( Tom O’Reilly, O’Reilly Media ) It is about the “architecture of participation” ( Tom O’Reilly, O’Reilly Media )

Personal Creation Networks Find a partner: How can you utilize this concept either personally or at work? How can you utilize this concept either personally or at work? What technology exists that you can use? What technology exists that you can use? At your table: Share your ideas. Share your ideas. Pick one that you can share with the room Pick one that you can share with the room