1. Blue Ocean Strategy Book Review
Meghan Davidson
Berklye Dominguez
Justin Pickard
Michael Simpson
Justin Vargas

2. Cirque du Soleil Canada’s Largest Cultural Exports
Created by Guy Laliberte in 1984
Global champion of the circus industry
Circus/Theatre Hybrid

3. Red/Blue Ocean Comparison
Represents all the industries in existence today.
The known market
Industry boundaries are defined and accepted, and the competitive rules of the game are known
Competition-based
Represents all the industries NOT in existence today
The unknown market
It is defines by untapped market space, demand creation, and the opportunity for highly profitable growth
Innovation-based
Unlimited busniess opportunities
Red Ocean
Blue Ocean

4. Why create Blue Oceans?

5. Value Innovation The cornerstone of Blue Ocean Strategy.
Focuses on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space.
Occurs by aligning innovation with utility, price and cost positions.

6. Value Innovation

7. Blue Oceans vs. Red Oceans
Create uncontested market space
Make the competition irrelevant
Create and capture new demand
Break the value-cost trade-off
Align the whole system of a firm’s activities in pursuit of differentiation and low-cost
Compete in existing market space
Beat the competition
Exploit existing demand
Make the value-cost trade-off
Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost
Blue Ocean
Red Ocean

8. Analytical Tools and Framework
Chapter 2
Analytical Tools and Framework

9. Analytical Tools and Frameworks
Strategy Canvas
Strategy canvas is both a diagnostic and an action framework for building a compelling blue ocean strategy. It serves two purposes:
Captures current state of play in the known market space
Captures the offering level that buyers receive across these competitive factors
The value curve is a graphic depiction of a company’s relative performance across its industry’s factors on competition.

10. Four Actions Framework

11. Eliminate-Reduce-Raise-Create Grid
It pushes them to simultaneously pursue differentiation and low cost to break the value-cost trade off.
It immediately flags companies that are focused only on raising and creating and thereby lifting the cost structure and often overengineering products and services - a common plight in many companies.
It is easily understood by managers at any level, creating a high level of engagement in its application.
Because completing the grid is a challenging task, it drives companies to robustly scrutinize every factor the industry competes on, making them discover the range of implicit assumptions the make unconsciously in competing.

12. ERRC Grid

13. Characteristics of a Good Strategy
Focus
A firm does not diffuse its efforts across all key factors of competition
Divergence
Diverge from the other players
Compelling Tagline
Strategic profile is clear; a fun simple to follow slogan
Ex: Nike: Just do it!

14. Ch.3-Reconstruct Market Boundaries
Reconstruct market boundaries to break from the competition and create blue oceans
Successfully identify blue ocean opportunities that exist
Six Path Framework pattern for creating blue oceans

15. Path 1 & Path 2
A company not only competes with other firms in their industry but also with companies in those other industries that produce alternative products or services
Ex: NetJets and airlines
Blue Oceans can be unlocked by looking at groups of companies within an industry that pursue a similar strategy
Path 1: Look Across Alternative Industries
Path 2: Look Across Strategic Groups within Industries

16. Path 3 & Path 4
The purchasers who pay for the product or service may differ from the actual users, and in some cases there are important influencers as well.
Untapped value is often hidden in complementary products and services
Services in products have been traditionally defined
Ex: Phillips and British Teakettle
Path 3: Look Across the Chain of Buyers
Path 4: Look Across Complementary Product & Service offering

17. Path 5 & Path 6
Competition in industry based on rational and emotional appeal
Companies who challenge appeals can find new market space
Ex: Quick Beauty House and haircuts
All industries are subject to external trends that affect business over time, and looking at trends with right perspective can show you blue ocean opportunities
Path 5: Look Across Functional or Emotional Appeal to Buyers
Path 6: Look Across Time

18. Ch.4-Focusing on the Big Picture, Not the Numbers
Focusing on the big picture and not numbers is key to mitigating risk
Drawing your strategy canvas is important to identifying the key factors of competition
Four Steps of visualizing strategy is important to unlock people’s creativity

19. Step 1 & Step 2
Compare your business with your competitors by drawing your “as is” strategy canvas
See where your strategy needs to change
Go into field to explore the six paths to create blue ocean
Observe the distinct advantages and alternatives products and services
See which factors you should eliminate, create, or change
Step 1: Visual Awakening
Step 2: Visual Exploration

20. Step 3 & Step 4
Draw your “to be” strategy canvas based on insights from field observations
Get feedback on alternative strategy canvases from customers, competitors customers, and non customers
Use feedback to build the best “to be” future strategy
Distribute your before and after strategic profiles on one page for easy comparison
Support only those projects and operational moves that allow your company to close the gaps to actualize the new strategy
Step 3: Visual Strategy Fair
Step 4: Visual Communication

21. Ch.4-Focusing on the Big Picture, Not the Numbers Cont.
Visualizing strategy at the corporate level
Using the Strategy Canvas
Using the Pioneer-Migrator-Settler Map
Overcoming the limitations of strategic planning
Should be creative driven, and more motivational , invoke willing commitment,

22. Reach Beyond Existing Demand

23. Three tiers of noncustomers
First tiers noncustomers
These are “soon to be” customers
Pret A Manger is a British fast food company who located a growing number of first tier noncustomers.

24. Three tiers cont. Third tier noncustomers
Second tier noncustomers
These are “refusing” noncustomers. Customers either find the offering unacceptable of beyond their means.
JCDecaux example
Third tier noncustomers
These are “unexplored” noncustomers.
Teeth whitening example

25. Get the Strategic Sequence Right

26. Ch.6 cont. From Strategic Pricing to Target Costing
Testing for exceptional Utility
From Exceptional Utility to Strategic Pricing
Step 1: Identify the Price Corridor of the Mass
Step 2: Specify a Level Within the Price Corridor
From Strategic Pricing to Target Costing

27. Ch. 6 cont. The Blue Ocean Idea Index
From Utility, Price, and Cost to Adaptation
Employees
Business Partners
The General Public
The Blue Ocean Idea Index

28. Chapter 7
Overcome Key Organizational Hurdles

29. Tipping Point Leadership
There are four hurdles managers face once a blue ocean company has developed. These hurdles are cognitive, limited resources, motivation, and politics.
Tipping point leadership is necessary to overcome these hurdles.
This style of leadership allows you to overcome these four hurdles at low cost and fast while winning employees’ support in executing a break from the status quo.
Bill Bratton of the NYPD

30. Break Through the Cognitive Hurdle
Tipping point leaders make people aware of the need for a strategic shift and instead of relying on numbers to break through the cognitive hurdle, they make people experience the need for change in two ways:
Ride the “electric sewer”
Meet with disgruntled customers

31. Jump the Resource Hurdle
After organization members realize the need for change, then leaders are faced on the problem of limited resources.
Tipping point leaders concentrate on multiplying the value of the resources they have. There are three factors of disproportionate influence that leaders can use:
Redistribute resources to your hot spots
Redirect resources from your cold spots
Engage in horse trading

32. Jump the Motivational Hurdle
Then there is the need to execute blue ocean strategy by motivating employees and doing all this with limited resources.
Follow three factors of disproportionate influence in motivating employees:
Zoom in on kingpins
Place kingpins in a fishbowl
Atomize to get the organization to change itself

33. Knock Over the Political Hurdle
It is impossible to escape organizational politics in corporate and public life.
In order to overcome these political forces, focus on three disproportionate influence factors:
Secure a consigliere on your top management team
Leverage your angels
Silence your devils

34. Chapter 8
Build Execution Into Strategy

35. The Power of Fair Process
The sixth principle of blue ocean strategy is in order to build people’s trust and commitment and inspire their voluntary cooperation, companies need to include execution into strategy from the start.
Poor processes can ruin strategy execution.
When procedural justice was exercised, people were more satisfied with the outcome and their commitment.

36. The Three E Principles of Fair Process
Three mutually reinforcing elements define fair process and all members of a corporation look to these. They are:
Engagement
Explanation
Expectation clarity

37. Intellectual and Emotional Recognition
Fair process matters to individuals’ emotional and intellectual recognition.
It is important for people to feel recognized for their ideas and thoughts, and then they want to share more of their knowledge and give more of their efforts.
On the other hand, if fair process is violated, people don’t feel the need to give effort, expand ideas and knowledge, or listen to others’ insights.

38. Fair Process and Blue Ocean Strategy
Voluntary cooperation, commitment, and trust are intangible capital.
People’s confidence in one another is higher when they have trust.
With commitment, people are willing to give up their own interests for the better interest of the company.
Companies that have successfully executed a blue ocean strategy say it would have been possible without these things.

39. Chapter 9: Conclusion: The Sustainability and Renewal of Blue Ocean Strategy
Once a company creates a blue ocean, sooner or later imitators will follow
As the original company and the early imitators succeed and expand the blue ocean, more companies will jump in.
This raises the question: when should a company reach out to create another blue ocean

40. Barriers to Imitation
A blue ocean strategy brings with it considerable barriers to imitation
Blue ocean strategy may conflict with other companies’ brand image -- ex: The Body Shop
Natural monopoly -- ex: Kinepolis
Patents or legal permits block imitation
High volume leads to rapid cost advantage for the value innovator, discouraging followers from entering the market --ex: Wal-Mart
Network externalities discourage imitation --ex: eBay
Imitation often requires significant political, operational and cultural changes --ex: southwest airlines
Companies that value-innovate earn brand buzz and a loyal customer following that tends to shun imitators -- ex: Microsoft

41. Barriers to Imitation cont.
As you can see the barriers are high and that is why we have seldom rapid imitation of the blue ocean strategy
Also blue ocean strategy is a system approach that requires not only getting each strategic element right but also aligning them in an integral system to deliver value innovation
Therefore, imitating a system is not easy

42. When to Value-Innovate Again
Eventually almost every blue ocean strategy will be imitated
You need to stay away from trying to compete with the new competition or over time your value curve will begin to converge with your competition
To avoid competing, you need to monitor value curves on the strategy canvas---it alerts you to reach out for another blue ocean when your value curve begins to converge with those of the competition, and prevents you from starting a new blue ocean when there is still a huge profit to be collected

43. When to Value-Innovate Again
As rivalry intensifies, bloody competition commences and the ocean will turn red
As competitors value curve converges toward yours, you should begin reaching out for another value innovation to create a new blue ocean

44. conclusion
The six principle of blue ocean strategy should serve as essential pointers for every company thinking about its future strategy if it aspires to lead the increasingly overcrowded business world
Companies should go beyond competing for share to creating blue oceans and how to make competition irrelevant