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Blue Ocean StrategyBook Review
Canada’s Largest Cultural ExportsCreated by Guy Laliberte in 1984
Global champion of the circus industry
Cirque du SoleilSlide3
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
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
Why create Blue Oceans?Slide5
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.
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 costSlide8
Analytical Tools and FrameworkSlide9
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.
Analytical Tools and FrameworksSlide10
Four Actions FrameworkSlide11
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.
A firm does not diffuse its efforts across all key factors of competition
Diverge from the other players
Strategic profile is clear; a fun simple to follow slogan
Ex: Nike: Just do it!
Characteristics of a Good StrategySlide14
Reconstruct market boundaries to break from the competition and create blue oceansSuccessfully identify blue ocean opportunities that exist
Six Path Framework pattern for creating blue oceans
Ch.3-Reconstruct Market BoundariesSlide15
Path 1 & Path 2
Path 1: Look Across Alternative Industries
Path 2: Look Across Strategic Groups within Industries
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
Blue Oceans can be unlocked by looking at groups of companies within an industry that pursue a similar strategySlide16
Path 3 & Path 4
Path 3: Look Across the Chain of Buyers
Path 4: Look Across Complementary Product & Service offering
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 TeakettleSlide17
Path 5 & Path 6
Path 5: Look Across Functional or Emotional Appeal to Buyers
Path 6: Look Across Time
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 opportunitiesSlide18
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
Ch.4-Focusing on the Big Picture, Not the NumbersSlide19
Step 1 & Step 2
Step 1: Visual Awakening
Step 2: Visual Exploration
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 changeSlide20
Step 3 & Step 4
Step 3: Visual Strategy Fair
Step 4: Visual Communication
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 strategySlide21
Visualizing strategy at the corporate levelUsing the Strategy Canvas
Using the Pioneer-
Overcoming the limitations of strategic planning
Should be creative driven, and more motivational , invoke willing commitment,
Ch.4-Focusing on the Big Picture, Not the Numbers Cont.Slide22
Reach Beyond Existing DemandSlide23
First tiers noncustomersThese are “soon to be” customers
A Manger is a British fast food company who located a growing number of first tier noncustomers.
Three tiers of noncustomersSlide24
Second tier noncustomersThese are “refusing” noncustomers. Customers either find the offering unacceptable of beyond their means.
These are “unexplored” noncustomers.
Teeth whitening example
Three tiers cont.Slide25
Get the Strategic Sequence RightSlide26
Testing for exceptional UtilityFrom 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
From Utility, Price, and Cost to AdaptationEmployees
The General Public
The Blue Ocean Idea Index
Ch. 6 cont.Slide28
Overcome Key Organizational HurdlesSlide29
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
Tipping Point LeadershipSlide30
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
Break Through the Cognitive HurdleSlide31
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
Jump the Resource HurdleSlide32
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
Jump the Motivational HurdleSlide33
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
Knock Over the Political HurdleSlide34
Build Execution Into StrategySlide35
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.
The Power of Fair ProcessSlide36
Three mutually reinforcing elements define fair process and all members of a corporation look to these. They are:
The Three E Principles of Fair ProcessSlide37
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.
Intellectual and Emotional RecognitionSlide38
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
Fair Process and Blue Ocean StrategySlide39
Once a company creates a blue ocean, sooner or later imitators will followAs the original company and the early imitators succeed and expand the blue ocean, more companies will jump in.
his raises the question: when should a company reach out to create another blue ocean
Chapter 9: Conclusion: The Sustainability and Renewal of Blue Ocean StrategySlide40
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:
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 airlinesCompanies that value-innovate earn brand buzz and a loyal customer following that tends to shun imitators -- ex: Microsoft
Barriers to ImitationSlide41
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
Barriers to Imitation cont.Slide42
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
When to Value-Innovate AgainSlide43
As rivalry intensifies, bloody competition commences and the ocean will turn redAs competitors value curve converges toward yours, you should begin reaching out for another value innovation to create a new blue ocean
When to Value-Innovate AgainSlide44
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