BLUE OCEAN STRATEGY

Agenda

1) Why do we need Analytical Tools and Frameworks?

2) The Strategy Canvas
3) The Four Actions Framework
4) What makes a Good Strategy?
5) Take Away
6) Q&A

2
Why Do We Need Tools, Frameworks…?

▪ Mere understanding of the concept isn’t enough

▪ We need actionable, systematic, data-driven, fact
based approach
▪ Tools and frameworks guide, sustain action and help
validate execution
▪ Helps minimize planning/execution risk and stay on
course.

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T h e S t r a t e g y Ca v a s

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1: The Strategy Canvas

▪ A model with which you can compare products or companies

▪ Diagnostic and Action Framework for building a compelling blue
ocean strategy:
▪ Captures the current state of play in the known market space
▪ Understand where the competition is currently investing
▪ On what does the industry currently compete on:
• Products
• Services
• Delivery
▪ What customers receive from the existing competitive offerings on the market
▪ Shows how a company can change its focus to separate itself from
the competition and attract/convert non customers into its
customers.
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The Strategy Canvas: Example 1

▪ Horizontal axis: Most important parameters for the specific product/company

▪ Vertical axis: Indicates whether this value is high or low for the company being investigated
▪ A high score means that a company offers buyers more, and hence invests more
▪ Compare two Smartphones:

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Example 2: Netflix/OTT Vs. Traditional TV

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The Strategy Canvas: Uses

▪ Helps you identify the Read Ocean mindset and reset

▪ Don’t try to outcompete by offering a little more for a
little less
▪ Reorient strategic focus from competitors to
alternatives and from existing customers to non-
customers of the industry
▪ To pursue value and cost, resist the old logic of
benchmarking competitors in the existing field and then
choosing between differentiation and cost leadership
▪ Reconstruct buyer value elements that reside across
the industry boundaries
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T h e 4- ACT I OS
Framework

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3: The Four Actions Framework

▪ Helps create a new value curve

▪ Break the trade-off between differentiation and low cost
▪ Challenge industry’s strategic logic and business model through
four key questions:

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The Four Actions Framework

Increase Customers

+ new source of value

+ new demand

Competition
- Eliminate factors
-Eliminate compromise
- Reduce Overdesign

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The Four Actions Framework: Example

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The Four Actions Framework: Example

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The Four Actions Framework: Example

Eliminate Raised

Reduced Created

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Three Characteristics of
a Good Strategy

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Character 1: Focus

▪ Identify key factors of competition

▪ EX. Quality, speed, price, innovation…..
▪ Choose one factor
▪ Focus on that one factor, and make it excel

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Character 2: Divergence

▪ Break out of the common competing Techniques:

e.g., price war, that virtually killed Telecom
▪ Revolutionize the industry: e.g., Low cost Airlines
in India
▪ Make changes to the way things done in the
industry: e.g., IPL vs Ranji
▪ By applying the four actions of eliminating,
reducing, raising, and creating, they differentiate
their profiles from the industry’s average profile
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Character 3: Compelling Tagline

▪ A good strategy has a clear-cut and compelling

tagline.
▪ “The speed of a plane at the price of a car—whenever you
need it.” - Southwest Airlines
▪ A good tagline must not only deliver a clear message
but also advertise an offering truthfully. E.g, Quality,
speed, price, innovation…..
▪ Ooze positivity: unlike “Seldom Fails” – Solidaire TV
▪ Tagline should be: Short and Clear, Truthful, Updated. E.g.,
Rhytify: Build it Right

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Re a d i g t h e Co r e Va l u e s

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Summary: Reading the Value Curves

The strategy canvas enables companies to see the future in the present. To achieve this, companies must
understand how to read value curves.

▪A Blue Ocean Strategy: Diagnostic and Action Framework for building a compelling blue
ocean strategy.
▪Create your own identity and value- focus, divergence, and a compelling tagline
▪A company caught in the Red Ocean: Act on the Four Actions Framework to create a new
value curve
▪Over delivery without payback: Focus on one key competitive factor and use divergence to
differentiate yourself from the industry.
▪An Incoherent Strategy: Understanding the value curve can reveal strategic information
that can help a company gain market share and become a winner in their industry
▪Strategic Contradictions: Avoid zero sum game (Feature rich website with slow response)
▪An Internally Driven Company: Analyzing the language of the strategy canvas helps a
company understand how far it is from creating industry demand.

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Whendid anyonelast watch a
circus?

Whatdoes a circus do?

Howbig can a newcircus get?

 Revenue ~ 1 billion (FY
2018)

Number 4900 / 50
of countries
employee
s

26 (1984) years versus 100+ years of Ringling Bros. and Barnum

& Bailey

Circus of the Sun

❏ Circa 1984: a one time Accordion player, stilt-walker,
and fire eater, Guy Laliberté - the CEO

❏ Started by a group of street performers

❏ Industry attractiveness - highly ?

❏ Potential for growth: ? Analysts

❏ Alternative forms of urban entertainment - Playstation

etc.

❏ Use of animals in circuses by animal rights groups

At what cost, for what price

1. Competition in the
industry

2. Potential for new entrants

into the industry

3. Power of
suppliers
4. Power of
customers
5. Threat of substitute
products
❏ Customers - Children ? Mature and Corporate

❏ Competitors: Ringling Bros. and Barnum & Bailey

?

❏ Realized no competition is key to survival

❏ Created a new “market” and then “grew” it

❏ Industry attractiveness - ?

❏ Potential for growth: ? Analysts

❏ Alternative forms of urban entertainment -

Playstation etc.
❏ Stop competing, stop trying to stop competition

❏ RO V/s BO: Competition-centric versus “care a damn”

❏ Expand existing boundaries and create new spaces

❏ Create the rules of the game rather than observe and

follow

❏ Traditional strategy focus: competition - military style

❏ BO: have existed all along: time travel back what

existed 20 / 30 / 50 years … NAICS (1997 revision -
North America Industry Classification Standard)
But why bother about BO now, at this time?

❏ Demand / Supply situation for most

industries

❏ Tech takeover

❏ Tech percolation

❏ Learning, awareness and financial risk

taking

❏ Globalization

❏ Population Growth?
Hallmark of BO winners versus
losers:

❏Industry

❏Company

❏Strategy made the difference

❏ Value innovation is key

Innovation versus Value Innovation

Making the competition irrelevant by creating a leap in

value for buyers and your company, thereby opening up
new and uncontested market space

Value without innovation - incremental Innovation

without value - for what sake

For winners, how these made a difference:

a)bleeding-edge technology
b)timing for market entry
Innovation versus successful Value Innovation

What usually is the most spectacular failure of market pioneers and tech
innovators ?
Innovation versus Value Innovation: Cirque du Soleil

❏Created a new experience: circus + theater + broadway + ballet

with original and assorted music

❏You sure heard the lion roar, but ...

❏No two-three ring avenues, just one avenue?

❏No “one for all” shows

❏Premium, sophisticated, intellectual, storytelling entertainment

Luna Petunia is a Canadian-
American animated television
series produced by Cirque du
Soleil Media with Saban Capital
Group and BrainPower Studio

The series premiered on Netflix on

December 9, 2016

It follows the adventures of a little

girl
named Luna Petunia who plays in
a dreamland where she learns
make
how tothe impossible
possible
Imagine a school where every
day you get to learn cool
acrobatics, test your strength
and flexibility, clown around,
and sing your heart out!

Add to that intriguing

mysteries, a book filled with
circus secrets, and an amulet
with unknown powers and
unforeseen consequences and

you have BIG TOP ACADEMY,

a
TV show
(2018)
[Link]
Owck
[Link]
[Link]
 The village with too many poor had a genius come
along ...

Please remember:

Red oceans represent all the industries in existence

today
This is the known market space

Blue oceans denote all the industries not in

existence today
This is the unknown market space
THE FIRST PRINCIPLE: reconstruct market
boundaries to break from
the competition and create blue oceans

➢The inevitable search risk:

○ how to successfully
identify commercially
compelling
blue ocean opportunities
○ where to start looking in the haystack of
possibilities
○ Or can managers
afford to be
riverboat gamblers
betting their strategy on intuition or random
 The right questions to ask

1. Are there any systematic patterns for reconstructing

market boundaries to create blue oceans?

2. If are any, do these apply cross-

there sector:
consumer goods, from
to industrial products, to
finance and services, to telecoms and IT,
to pharmaceuticals and B2B?
How Organizational Boundaries a.k.a. Red Oceans Form

[Link] industry based on similarity, focus on being best

within
[Link] inclusivity to a generally accepted strategic groups
(such as luxury automobiles, economy cars, and family
vehicles), and striving to be best within
[Link] on the same buyer group, be it the purchaser (as in
the office equipment industry), the user (as in the clothing
industry), or the influencer (as in the pharmaceutical
industry)
[Link] the scope of the products and services offered
similarly to others in the industry
[Link] their industry’s functional or emotional orientation
[Link] on the same point in time
 Look Across Alternative Industries

➢ Realistic competition: intra-industry or inter-

industry

○ Alternatives

○ Substitutes

■ Products or services, of any shape or form

■ Complex decision making: often subconscious

 NTT DoCoMo: i-
mode
➢ NTT: the biggest telecom success in Japan since the 80s
➢ NTT DoCoMo launched i-mode, 1999
○ Changed the way people communicate and access
information in Japan
➢ Market scenario
○ New competitors
○ Price competition
○ Technological race
○ Rising costs
○ Falling ARPU

Look Across Alternative

Industries
 NTT DoCoMo: i-
mode
➢ NTT DoCoMo’s insight into creating a blue ocean came by
thinking about why people trade-across the alternatives of
mobile phones and the Internet
➢ NTT DoCoMo asked, What are the distinctive strengths of the
Internet over cell phones, and vice versa?
○ What were killer apps: e-mail, simple information
(such as news, weather forecasts, and a telephone
directory), and entertainment (including games, events,
and music entertainment)
○ Downside: the far higher price of computer hardware, an
overload of information, the nuisance of dialing up to go
online, and the fear of giving credit card information

Look Across Alternative Industries

Look Across Alternative
Industries
And how
did that
help Japan?

Look
Across
Alternative
Industries
Look Across Strategic Groups Within Industries

➢ Look across strategic groups. The term refers to a group of

companies within an industry that pursue a similar strategy.

➢ Strategic groups can generally be ranked in a rough hierarchical

order built on two dimensions: price and performance
○ Each jump in price tends to bring a corresponding jump in
some dimensions of performance
➢ Most companies focus on improving their competitive position
within a strategic group. E.g. Mercedes, BMW, and Jaguar, for
example, focus on outcompeting one another
➢ Neither strategic group, however, pays much heed to what the
other is doing because from a supply point of view they do not
seem to be competing
Look Across Strategic Groups Within
Industries
Look Across Strategic Groups Within
Industries
 Curves has
eliminated all the
aspects of the
traditional health
club that are of little
interest to the broad
mass of women.
Gone are the
profusion of special
machines, food,
spa, pool, and even
locker rooms, which
have been replaced
by a few curtained
off changing areas

Look Across Strategic Groups Within

Look Across the Chain of Buyers

➢ Most industry players usually converge around a common

definition of who the target buyer is
➢ In reality, though, there is a chain of “buyers” who are directly or
indirectly involved in the buying decision
○ Purchaser
○ User
○ Influencer
■ All three above may or may not overlap
■ May perceive value differently
● Corporate purchase office versus corporate user
● Retailer may value a manufacturer’s just-in-time
stock replenishment and innovative financing, end
user values functionality and value offered by the
product
 Look Across the Chain of Buyers

➢ Individual companies in an industry often target different

customer segments—for example, large versus small
customers. But an industry typically converges on a
single buyer group

➢ The pharmaceutical industry, for example, focuses

overridingly on influencers: doctors. The office equipment
industry focuses heavily on purchasers: corporate
purchasing departments

➢ Sometimes there is a strong economic rationale for this

focus. But often it is the result of industry practices that
have never been questioned
Look Across the Chain of
Look Across Complementary Product and Service Offerings

➢ Few products and services are used in a vacuum

○ Other products and services affect their value
➢ in most industries, rivals converge within the bounds of their
industry’s product and service offerings
○ What does no parking at a movie theater tell?
○ What does no baby sitting or play tell?
➢ Untapped value is often hidden in complementary products
and services
➢ The key is to define the total solution buyers seek when they
choose a product or service. A simple way to do so is to think
about what happens before, during, and after your product is
used
Look Across Complementary Product and Service
Offerings
Look Across Complementary Product and Service
Offerings
 Look Across Functional or Emotional Appeal to Buyers

Competition in an industry tends to converge not only on an

accepted notion of the scope of its products and services but also
on one of two possible bases of appeal

Some industries compete principally on price and function largely on

calculations of utility; their appeal is rational

Other industries compete largely on feelings; their appeal is

emotional. Yet the appeal of most products or services is rarely
intrinsically one or the other

Industries have trained customers in what to expect. When

surveyed, they echo back: more of the same for less. When
companies are willing to challenge the functional-emotional
orientation of their industry, they often find new market space - does
that ring a tune?
 Look Across Time

All industries are subject to external trends that affect their

businesses over time. Think of the rapid rise of the Internet or
the global movement toward protecting the environment.

Looking at these trends with the right perspective can show you
how to create blue ocean opportunities.

Most companies adapt incrementally and somewhat passively

as events unfold, they pace their own actions to keep up with
the development of the trends they’re tracking

But key insights into blue ocean strategy rarely come from
projecting the trend itself
Eco-friendly

Work from home

Data is key

Entertainment

Home security

….
 Focus on the Big
Picture
This is the second principle for creating
blue oceans

It is all about vision, ability to see big

first

Too many organizations are too lost in an ocean of

detail, to even begin to realize their potential
European Financial
Services
Recipe keyingredient: begin with...

Have you
developed the
vision for “the
end”?
Can you see “a
happy ending”
as yet?
Recipe keyingredient: howmuch
of ...

the way to “the

end” are you
able to see?
What is your
“first step”
going to be - in
which
direction?
Recipe keyingredient: howmany
of ...

… the dots
are you
able to
connect …
as yet?
Recipe keyingredient: visualize
it

In your
head
… first
…
Then
people
may see
it some
day ...
 What if youdon’t still have the
clarity?

What willyou
 Whereis?
Howmuchtime
…?

Gap
analysis
Recipe keyingredient: self-navigation
“seeing the big picture
means seeing the
whole. The ability to
comprehend the
context of the matter.
The system that is at
work.”
Developing The Vision

➢ Think wide, deep, see beyond, learn to empathize

➢ Learn to promote free wheeling fear free discussions free

of feelings, be an effective communicator

➢ 7W’s, develop the habit of researching and self-verifying

from primary data. Use secondary data with sparing care

➢ Be an open and active listener, encourage inclusivity

➢ Be tolerant of difference of opinions, learn to ignore what

must be ignored as petty
Developing The Vision

➢ Think high level items first, then flesh out details for
each item

➢ Don’t select the first solution that comes to your mind

➢ Neither the second one

➢ Think about all who may be affected, who are the

stakeholders

➢ Think about the risks involved, be an avid learner

➢ Seek to be cross functional and specialist in as many

as you can

Don’t miss the wood for the trees

You identified the value innovation space

You created the strategy canvas

Your change management plan is ready to

be communicated

And then you stumble across this ...

Compared to Red Ocean Strategy, Blue
Ocean Strategy represents a significant
departure from the status quo

That raises the bar on execution

Managers say the challenge is steep and

the degree for each of the hurdles varies
Four Hurdles In the Way

The first hurdle is cognitive: waking up

People are happy in their comfort zones, so why rock the boat

The second hurdle is limited resources, often resources are

cut and not raised

The third hurdle is motivation: the speed of change

required is directly proportional to how motivated people are

The final hurdle is politics:in meetings, do people get shot

down before they even stand up?
Organizations must abandon perceived wisdom on
effecting change

Conventional wisdom asserts that greater the change,

more are the resources and time required

However, tipping point leadership is required to

overcome these four hurdles fast and at a low cost
[Link]
[Link]
NYPD - in the early 1990s NYC was veering towards anarchy
-Murders were all time high
-Muggings, mafia, vigilantes and armed robberies filled daily headlines
-The budget was frozen
Bill Bratton was appointed police commissioner, 1994

Social scientists had concluded, after monitoring increasing crime for 3

decades, crime was impervious to police intervention
The citizens of New York City were crying out

Miserable pay, dangerous working conditions, long hours, and little

hope of advancement in a tenure promotion system, morale among
NYPD’s thirty six thousand officers was at rock bottom - not to mention
budget cuts, dilapidated equipment, corruption and politics

Overall, the list was losing hope with criminals having a field day
Yet, in less than two years

Without an increase in budget

Bratton turned NYC into the safest large city in the US Public confidence in

NYPD increased from 37 to 73% Crime across all categories fell

to about half

Policemen reported much higher job satisfaction and motivation

Even after Bratton departed (1996), the crime rate continued to

fall

Thus, very impressively, the changes outlasted the leader …

The kind of hurdles Brettan faced, even Jack Welch
at GE can only begin to imagine

The so little time The speed of change The depth of change

The effectiveness of change

Is all by itself a performance hardly ever seen in a long time

...
Disproportionate Influence Factors

People, acts and activities that exercise a disproportionate

influence on performance

Breaking Through The Cognitive Hurdle

How fast are you able to turn people up for taking up

change?
Ride the Electric Sewer

Only 3 percent of the major crimes

happened on subway

So who would pay any heed?

The small car purchase at MBTA

(Massachusetts Bay Transportation
Authority)

Meet Disgruntled Customers

Motivation

Find amenable influence leaders

Place kingpins in a fishbowl Turn Resource Allocation

change into easy bite-sizes What are the hot spots?

Leverage angels, silence devils, get What are the cold spots?
the top management team a consigliere Trade up spare or unused
on