BLUE OCEAN STRATEGY SIMULATION INTRODUCTION TO ROUND BLUE-3 Theory by W. CHAN KIM & RENEE MAUBORGNE Design and Development by

Breaking away from the competition again I will first briefly introduce the STRATX Company.

YOUR BLUE OCEAN IS TURNING RED Round Blue-3 starts in Year 47 and is 3 year long Your offering is beginning to be imitated by new entrants to your Blue Ocean Your competitors will experience the same adoption curve for their products: Their initial sales are likely to be low but will be increasing over time 20/04/2017 © STRATX

BREAKING AWAY FROM THE COMPETITION AGAIN The Executive team goes back to the field to explore the 6 Paths to see how they could extend their strategic profile This time, they are concentrating on Service and Delivery Many successful Blue Ocean strategies have been created by investigating Delivery and/or Service 20/04/2017 © STRATX

MORE BACKGROUND ON DELIVERY All competitors distribute through the same distributors. No flagship stores; no direct supply on internet For fear of creating resistance from their existing distributors Informed Salespersons Manufacturers play an active role in developing the training material for distributors Not every distributor does a good job of educating their salespeople Demonstration consoles are seldom used and poorly maintained Manufacturers are reluctant to provide demonstration models of their latest consoles Deals and Price Promotions Main mechanisms for moving products Distributors get agreement from manufacturers to contribute to special deals Number and Complexity of Bundles Manufacturers provide ‘bundles’ – a combination of game console, controllers, one or two games and perhaps an accessory or two Many different bundle configurations to serve the exact needs of many different sub-segments. No differentiation exists in regard to delivery 20/04/2017 © STRATX

MORE BACKGROUND ON SERVICES Warranty Offer Warranties of 1 to 2 years are standard in the industry Extended Warranty & Manufacturer's Insurance Offer Customers may purchase an extended warranty as well as accidental damage insurance Some distributors prefer to offer these additional services themselves to enjoy the full margin for this business Loyalty Card and Rewards Manufacturers have a loyalty card system; quite expensive and complex to administer Some distributors have a system whereby people can return used games for credits and use these credits towards buying a new game, or buying a used one Ease of Repair Faulty equipment are usually returned to the distributor from whom it was purchased Repaired consoles are normally returned in 3 to 6 weeks, sometimes longer If the console was not registered, a repair charge is made No differentiation exists in regard to services 20/04/2017 © STRATX

SERVICE AND DELIVERY MINI CASES I will first briefly introduce the STRATX Company.

DELL COMPUTERS 20/04/2017 © STRATX

THE ERRC GRID FOR DELL COMPUTER COSTS Eliminate Raise VALUE Sales intermediaries Vendor integration Customer services Reduce Create R&D Mass PC customization All their ERRC actions were geared towards improving the service and delivery experience while reducing costs on the product platform Product range Factory direct delivery Factory inventory 20/04/2017 © STRATX

BUYER UTILITY MAP FOR PC INDUSTRY Dell Other hardware manufacturers Dell

VIRGIN ATLANTIC

THE ERRC GRID FOR VIRGIN ATLANTIC COSTS Eliminate Raise VALUE First class category Business class comfort (longer, wider seats) Capital asset management In-flight and clubhouse services Reduce Create Number of routes Ground transportation services Above industry offering in business class comfort and ground transportation services to and from the airport are the two main reasons people travel on Virgin Atlantic. Focusing on these two offerings, they reduced costs by reducing and eliminating everything else. Just like NTT DoCoMo, the planes were just a means to deliver their services. Leased planes eliminated the need to purchase or manage large fleets of capital assets Outsourced maintenance means you only purchase the services for the duration of need Traditional TV advertising

YOUR ROLE OVER THE NEXT YEARS I will first briefly introduce the STRATX Company.

YOUR ROLE IS TO ASSIST THE EXECUTIVE TEAM TO EXTEND YOUR BLUE OCEAN OFFERING Read and debate the outcome of the second Visual Exploration conducted by the Executive Team Extend your Strategy Canvas along Service and/or Delivery dimensions to create a leap in value your Blue Ocean offering Decide on how to allocate your total budget across: Your Red Ocean product Your Blue Ocean offering Any Corporate Projects you decide may be vital in making your new Service/Delivery strategy succeed Make decisions to market your Blue Ocean offering, including price, production, marketing and geographical expansion 20/04/2017 © STRATX

SECOND VISUAL EXPLORATION Read the transcript of the conversation that took place when the Executive Team met after having conducted the second Visual Exploration Document available in the “Visual Exploration” section Two Paths offer the most insight on how you can break away from the competition again and extend your strategic profile. Path 4: Looking Across Complementary Product and Service Offerings which yielded new insights regarding Services Path 5: Looking Across the Functional and Emotional Appeal for Buyers which yielded new insights regarding Delivery. Take sufficient time to debate and understand what the Visual Exploration is telling you in terms of how you can rotate the creation of Blue Oceans between Product, Service and Delivery platforms In term of the age of these noncustomers, the Executive Team has done the estimation on the right 20/04/2017 © STRATX

A LIST OF POTENTIAL SERVICE AND DELIVERY COMPETING FACTORS IS OFFERED FROM WHICH YOU CAN CHOOSE Ability to Swap Games Ability to Trade-in Console After Sales Help and Advice Ease of Repair Extended Warranty Loyalty Card and Rewards Manufacturer's Insurance Offer Speed of Providing Patches Warranty Offer Ability to buy from a catalogue Deals and Price Promotions Dedicated Stores Direct Sales on the Internet Distribution Matching my Lifestyle Easy Guide to Online Services Entertainment Assistant Friendly Salespersons Gaming Cafes Informed Salespersons Local Sales and Service Number and Complexity of Bundles Trial and Return Existing competing factors (Eliminate, Reduce, Raise) Potential new value factors (Create)

STEP 1 – SERVICE / DELIVERY ERRC GRID Use the Strategy Canvas wizard to extend your Strategy Canvas The wizard will only show the Service and Delivery competing factors You can no longer upgrade your Blue Ocean offering along Product factors 20/04/2017 © STRATX

STEP 2 – DRAWING THE SERVICE / DELIVERY STRATEGY CANVAS Use the Strategy Canvas wizard to extend your Strategy Canvas. The wizard will only show the Service and Delivery competing factors. You can no longer upgrade your Blue Ocean offering along Product factors. 20/04/2017 © STRATX

MAKING DECISIONS Once you have decided how to extend your offering with Service and/or Delivery factors, you will have to make the same decisions as during Rounds Blue-1 and Blue-2. Production Price Marketing Expenditure Degree of Geographic Expansion Which Corporate Projects may be needed to support your Blue Ocean offering Financial decisions regarding investment budget allocation and keeping within budget limitations Each of these decisions is explained in details in Introduction to Round Blue-1 20/04/2017 © STRATX 19

BLUE OCEAN DECISIONS FORM 20/04/2017 © STRATX 20

FOUR NEW CORPORATE PROJECTS ARE AVAILABLE IN ROUND BLUE-3 Radically upgrading Leadership and Service in the Customer Contact Centre Project aimed at creating a dramatic change in Contact Centre performance through attending to both the processes, the motivation of the staff and the quality of leadership – all of which, when improved, are mutually reinforcing. Full impact expected to be achieved within two Rounds. Project considered vital for the execution of the Blue Ocean Service Strategy. Hiring Expert Trainers to Train Distributors’ Salespeople Blue Buddies’ trainers to train Distributor employees on the shop floor so that they are able to answer in depth questions about the concerns and worries of potential customers, especially those who would normally not be shopping for a game console. Project considered vital for the execution of the Blue Ocean Delivery Strategy. 20/04/2017 © STRATX

FOUR NEW CORPORATE PROJECTS ARE AVAILABLE IN ROUND BLUE-3 (CONT’D) Hiring the Top Team from a Regional Specialist Luxury Goods Retailer Blue Buddies does not have the expertise within the organization to create their own specialist stores. This project involves searching for and attracting a team who know each other well and who have been successful in creating high traffic through specialist stores. Full impact expected to be achieved within two Rounds. Project considered vital for the development of dedicated stores. Hiring a Team Experienced in Developing and Managing a Fast Food Franchise Blue Buddies does not have the expertise within the organization to create Gaming Cafes This project involves searching for and attracting a team who know each other well and who have been successful in developing and managing a fast food franchise. Project considered vital for the development of Gaming Cafes. 20/04/2017 © STRATX