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

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

3. 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
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4. 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
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5. 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
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6. 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
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7. SERVICE AND DELIVERY MINI CASES
I will first briefly introduce the STRATX Company.

8. DELL COMPUTERS
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9. 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
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10. BUYER UTILITY MAP FOR PC INDUSTRY
Dell
Other hardware
manufacturers
Dell

11. VIRGIN ATLANTIC

12. 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

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

14. 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
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15. 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
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16. 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)

17. 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
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18. 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.
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19. 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
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20. BLUE OCEAN DECISIONS FORM
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21. 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.
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22. 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.
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