1. Red Ocean Versus Blue Ocean Strategy
1.1. Red Ocean Versus Blue Ocean Strategy
1.1.1. Red oceans are all the industries in existence today
1.1.1.1. – the known market space, where industry boundaries are defined and companies try to outperform their rivals to grab a greater share of the existing market. Cutthroat competition turns the ocean bloody red. Hence, the term ‘red’ oceans.
1.1.2. Blue oceans denote all the industries not in existence today
1.1.2.1. – the unknown market space, unexplored and untainted by competition. Like the ‘blue’ ocean, it is vast, deep and powerful –in terms of opportunity and profitable growth.
1.1.3. The chart summarizes the distinct characteristics of competing in red oceans (Red Ocean Strategy) versus creating a blue ocean (Blue Ocean Strategy).
2. 6 Paths Frame Work
2.1. 6 Paths Frame Work
2.1.1. To win in the future companies need to stop trying to beat the competition.
2.1.2. 1 Look across alternative industries
2.1.2.1. 1. Identify the major problems or needs that your industry’s offering or your target industry’s offering solves or addresses from the buyers’point of view.
2.1.2.2. 2. Next ask, What alternative industries solve the same problems or address similar needs for buyers? Here we encourage people to role-play and ask, “If I were the buyer, what other alternative industries would I consider before even deciding to patronize our industry?”That helps people shift from a supply to a demand perspective.
2.1.2.3. 3. Among these alternative industries, which capture the greatest catchment of customers? Focus here. Interview buyers from each relevant alternative industry. These are your non customers.
2.1.2.4. 4. Probe why buyers traded across your industry or target industry and this (these) alternative(s), including what they see as the chief negatives of the industry they rejected and the chief positives of the alternative industry they choose
2.1.2.5. 5. Record all the key insights gained. A recording template for each path can be downloaded for free at
2.1.2.6. Red Ocean Lens
2.1.2.6.1. Focus on rivals in your industry
2.1.2.7. Blue Ocean Lens
2.1.2.7.1. Look across alternative industry
2.1.3. 2 Look across strategic groups within industry
2.1.3.1. 1. Identify the strategic groups in your industry or target industry
2.1.3.2. 2. Focus on the two largest strategic groups
2.1.3.3. 3. Interview buyers from each group Probe why buyers traded up for one strategic group or traded down for the other. Focus on identifying the distinguishing factors that led users of each strategic to patronize it over the others. Ask the sane people what they saw as dominant negative or turn-off of the strategic group they rejected
2.1.3.4. 4. Record all the key insights gained, noting specifically the reasons buyers offer to explain their decisions.
2.1.3.5. Red Ocean Lens:
2.1.3.5.1. Focus on your competitive position within a strategic group
2.1.3.6. Blue Ocean Lens:
2.1.3.6.1. Look across strategic groups within your industry or target industry
2.1.4. 3 Redefine the industry buyer group
2.1.4.1. Identify the chain of buyers - users, purchasers, and influencers - in your industry or target industry.
2.1.4.2. Identify the main buyer group your industry or target industry currently focuses on. Then shift your focus to those the industry has largely ignored
2.1.4.3. 3. Interview buyers from the"untargeted" buyer groups. Probe for their different definitions of value. Drill down to the biggest blocks to utility and costs the industry currently imposes on them.
2.1.4.4. 4. Record the insights from each "untargeted" group and group like-minded responses together.
2.1.4.5. Red Ocean Lens
2.1.4.5.1. Focus on better serving the existing buyer group of the industry
2.1.4.6. Blue Ocean Lens
2.1.4.6.1. Look across the chain of buyers and redefine the industry buyer group
2.1.5. 4 Look across the complementary product and service offerings
2.1.5.1. 1. Look at the real context in which your offering is used by identifying what happens before, during and after its use.
2.1.5.2. 2. Observe buyers as they actually use your product or service. In recording the insights gained, group insights you uncovered so that patterns in the frequency or criticality of observed blocks to utility can be discerned.
2.1.5.3. 3. Use the buyer utility map and the non customers tool to guide your observations.
2.1.5.4. 4. Record all insights gained.
2.1.5.5. Red Ocean Lens
2.1.5.5.1. Focus on maximizing the value of the product or service offering as defined by your industry
2.1.5.6. Blue Ocean Lens
2.1.5.6.1. Look across the total solution buyers seek to understand the complementary products and services that enhance or detract from your offering's value
2.1.6. 5 Rethink the functional emotional orientation of it's industry
2.1.6.1. Red Ocean Lens
2.1.6.1.1. Focus on improving price-performance within the functional -emotional orientation of your industry
2.1.6.2. Blue Ocean
2.1.6.2.1. Rethink the functional-emotional orientation of your industry or target industry
2.1.6.3. 1. Identify the industry's current orientation. Is it predominantly functional or emotional?
2.1.6.4. 2. Listen to customers and noncustomers characterize your industry and target industry. Probe the top characteristics that reflect why they see it as functional or emotional.
2.1.6.5. 3. Look for commonalities across their responses and group like-minded comments.
2.1.6.6. 4. Explore what the offering would look like if you flipped the orientation.
2.1.6.7. 5. Record all insights gained.
2.1.7. 6 Participate in Shaping External Trends Over Time
2.1.7.1. 1. Identify the 3 to 5 trends that are seen as having a decisive impact on your industry or target industry. Give people the option of doing secondary research online to complete this.
2.1.7.2. 2. Discuss and assess the relevance of these trends to your industry. Focus on those that are commonly seen to decisively impact your industry or target industry.
2.1.7.3. 3. Discuss and assess the extent to which each trend is irreversible.
2.1.7.4. 4. Discuss and assess whether each of the trends is evolving along a clear trajectory.
2.1.7.5. 5. Lis the implications of all the trends that are decisive to your industry, irreversible, and evolving in a clear direction. Detail how each will change what buyers value and how that would impact your business model over time. 6. Record all insights gained.
2.1.7.6. Red Ocean Lens
2.1.7.6.1. Focus on adapting to external trends as they occur
2.1.7.7. Blue Ocean
2.1.7.7.1. Participate in shaping external trends that decisively impact your industry or target industry
3. Strategy Canvas
3.1. The strategy canvas allows your organization to see in one simple picture all the factors an industry competes on and invests in
3.1.1. The horizontal axis on the strategy canvas captures the range of factors that an industry competes on and invests in, while the vertical axis captures the offering level that buyers receive across all of these key competing factors.
3.1.2. A value curve or strategic profile is the graphic depiction of a company’s relative performance across its industry’s factors of competition.
3.1.3. The strategy canvas allows your organization to see in one simple picture all the factors an industry competes on and invests in, what buyers receive, and what the strategic profiles of the major players are.
3.1.4. It exposes just how similar the players’ strategies look to buyers and reveals how they drive the industry toward the red ocean. Importantly, it creates a commonly owned baseline for change.
3.1.5. The strategy canvas serves two purposes:
3.1.6. It captures the current state of play in the known market space, which allows users to clearly see the factors that an industry competes on and invests in, what buyers receive, and what the strategic profiles of the major players are.
3.1.7. It propels users to action by reorienting their focus from competitors to alternatives and from customers to noncustomers of the industry and allows you to visualize how a blue ocean strategic move breaks away from the existing red ocean reality.
3.2. İmportant example with four actions frame work
3.2.1. Example
4. Tipping Point Leadership
4.1. Tipping point leadership developed by W. Chan Kim and Renée Mauborgne, by contrast, takes a reverse course. To change the mass it focuses on transforming the extremes: the people, acts, and activities that exercise a disproportionate influence on performance. By transforming the extremes, tipping point leaders are able to change the core fast and at low cost to execute their new strategy.
4.1.1. Hence, contrary to conventional wisdom, mounting a massive challenge is not about putting forth an equally massive response where performance gains are achieved by proportional investments in time and resources. Rather, it is about conserving resources and cutting time by focusing on identifying and then leveraging the factors of disproportionate influence in an organization.
4.1.2. By single-mindedly focusing on points of disproportionate influence, tipping point leadership helps managers topple the four hurdles to strategy execution quickly and at a low cost by answering the following questions:
4.1.2.1. What factors or acts exercise a disproportionately positive influence on breaking the status quo?
4.1.2.2. On getting the maximum bang out of each buck of resources?
4.1.2.3. On motivating key players to aggressively move forward with change?
4.1.2.4. And on knocking down political roadblocks that often trip up even the best strategies?
5. Four Actions Framework
5.1. To break the trade-off between differentiation and low cost in creating a new value curve, the framework poses four key questions
6. ERRC Grid
6.1. This analytic tool complements the Four Actions Framework. It pushes companies not only to ask the questions posed in the Four Actions Framework but also to act on all four to create a new value curve (or strategic profile), which is essential to unlocking a new blue ocean.
6.1.1. The grid gives companies four immediate benefits:
6.1.1.1. It pushes them to simultaneously pursue differentiation and low cost to break the value-cost trade off.
6.1.1.2. It immediately flags companies that are focused only on raising and creating, thereby lifting the cost structure and often over-engineering products and services – a common plight for many companies.
6.1.1.3. It is easily understood by managers at any level, creating a high degree of engagement in its application.
6.1.1.4. Because completing the grid is a challenging task, it drives companies to thoroughly scrutinize every factor the industry competes on, helping them discover the range of implicit assumptions they unconsciously make in competing.
7. Three Tiers of Noncustomers
7.1. o grow their share of a market, companies strive to retain and expand their existing customer base.
7.1.1. Although the universe of noncustomers typically offers blue ocean opportunities, few companies have keen insight into who noncustomers are and how to unlock them.
7.1.2. To convert this huge latent demand into real demand in the form of new customers, companies need to deepen their understanding of the universe of noncustomers.
7.1.3. The first tier of noncustomers is closest to the current market, sitting just on the edge.
7.1.3.1. They are buyers who minimally purchase an industry’s offering out of necessity but are mentally noncustomers of the industry.
7.1.4. The second tier of noncustomers is people who refuse to use an industry’s offering.
7.1.4.1. These are buyers who have seen the current offering as an option to fulfill their needs but have decided against participating.
7.1.5. The third tier of noncustomers is farthest from the market. They are noncustomers who have never considered the market’s offering as an option.
7.1.6. By focusing on key commonalities across these noncustomers and existing customers, companies can understand how to pull them into their new market.
8. Blue Ocean Shift
8.1. Three Key Components of a Successful Blueocean shift
8.1.1. şşsl
8.2. A Growth Model of Market-Creating Strategy
8.2.1. Three ways of pursuing market-creating strategy
8.3. How Humannes is Built in the Process
8.3.1. How Humannes is Built in the Process
8.4. Overview of the Blue Ocean Shift PRocess
8.4.1. Overview of the Blue Ocean Shift Process
8.4.1.1. STEP 1: Get Started
8.4.1.1.1. Step 1 helps you to choose the right place to start your blue ocean initiative by guiding you towards focusing on areas that are most suitable, so that your zone of transformation is not too ambitious, in light of the organizational constraints you may face.
8.4.1.1.2. Construct the right team
8.4.1.1.3. Pioneer-Migrator -Settler Map
8.4.1.2. STEP 2: Understand Where You Are Now
8.4.1.2.1. Step 2 inspires a natural wake-up call in the team and the wider organization about the current state of play and creates real alignment and a collective will to make a shift by building a clear picture of the current competitive landscape.
8.4.1.2.2. Strategy Canvas
8.4.1.3. STEP 3: Imagine Where You Could Be
8.4.1.3.1. Step 3 helps you to start to make the shift from what is to what could be by identifying specific pain points and unlocking unprecedented value for buyers. It helps you beak away from conceiving too narrowly of whom an industry’s customers are by exploring the total demand landscape outside the current industry’s understanding.
8.4.1.3.2. Buyer Utility Map
8.4.1.4. STEP 4: Find How You Get There
8.4.1.4.1. Step 4 shows you how to create commercially compelling new market space by redefining the playing field of strategy as well as how to formulate them into well-constructed strategies.
8.4.1.4.2. The Six Paths Frame Work
8.4.1.5. STEP 5: Make Your Move
8.4.1.5.1. Step 5 guides you towards deciding on which blue ocean move to pursue by enabling a fair process that consolidates people’s commitment to, and support for, the chosen move, culminating in alignment that allows top management to select the right option to move forward with.
8.4.1.5.2. Finalize the move by formalizing your big picture business model that delivers a win for both buyers and you
8.5. 12 moves
8.5.1. Overview of the Blue Ocean Shift Process
9. Value innovation
9.1. The Simultaneous Pursuit of Differentiation and low cost
9.1.1. Value Innovation is the simultaneous pursuit of differentiation and low cost, creating a leap in value for both buyers and the company. Value to buyers comes from the offering’s utility minus its price, and because the value to the company is generated from the offering’s price minus its cost, value innovation is achieved only when the whole system of utility, price, and cost is aligned.
9.1.2. Break the value-cost trade-off by answering the following questions:
9.1.2.1. Which of the factors that the industry takes for granted should be eliminated?
9.1.2.2. Which factors should be reduced well below the industry’s standard?
9.1.2.3. What factors should be raised well above the industry’s standard?
9.1.2.4. What factors should be created that the industry has never offered?
10. Pioneer Migrator Settler Map
10.1. These are a company’s blue ocean strategic moves, and are the most powerful sources of profitable growth. They are the only ones with a mass following of customers.
10.1.1. Settlers are defined as me-too businesses
10.1.2. migrators are business offerings better than most in the marketplace
10.1.3. pioneers are the businesses that offer unprecedented value
11. Buyer Utility Map
11.1. A buyer’s experience can usually be broken into a cycle of six stages, running more or less sequentially from purchase to disposal.
11.1.1. Utility levers: Cutting across the stages of the buyer’s experience are what we call utility levers – the ways in which companies unlock utility for their customers.
11.1.2. By locating a new offering on one of the spaces of the buyer utility map, managers can clearly see how, and whether, the new idea creates a different utility proposition from existing offerings but also removes the biggest blocks to utility that stand in the way of converting noncustomers into customers.
11.1.3. In our experience, managers all too often focus on delivering more of the same stage of the buyer’s experience.
11.1.4. This approach may be reasonable in emerging industries, where there is plenty of room for improving a company’s utility proposition.
11.1.5. But in many existing industries, this approach is unlikely to produce a market-shaping blue ocean strategy.
11.2. The Buyer Experience Cycle
11.2.1. The Buyer Experience Cycle
11.2.2. Purchase
11.2.2.1. How long does it take to find the product you need?
11.2.2.2. Is the place of purchase attractive and accessible?
11.2.2.3. How secure is the transaction environment?
11.2.2.4. How rapidly can you make a purchase?
11.2.3. Delivery
11.2.3.1. How long does it take to get the product delivered?
11.2.3.2. How different is it to unpack and install the new product?
11.2.3.3. Do buyers have to arrange delivery themselves?
11.2.3.4. If yes, how costly and how difficult is this?
11.2.4. Use
11.2.4.1. Does the product require training or expert assistance?
11.2.4.2. Is the product easy to store when not in use?
11.2.4.3. How effective are the products features and functions?
11.2.4.4. Does the product or service deliver far more power or options than required by the average user? Is it over-charged with bells and whistles?
11.2.5. Supplements
11.2.5.1. Do you need other products and services to make this product work?
11.2.5.2. If so, how costly are they?
11.2.5.3. How much time do they take?
11.2.5.4. How much pain do they cause?
11.2.6. Maintenance
11.2.6.1. Does the product require external maintenance?
11.2.6.2. How easy is it to upgrade and maintain the product?
11.2.6.3. How costly is maintenance?
11.2.7. Disposal
11.2.7.1. Does use of the product create waste items?
11.2.7.2. How easy is it to dispose of the product?
11.2.7.3. Are there legal or environmental issues in disposing of the product safely?
11.3. What Each Utility Lever Means
11.3.1. The first is productivity, that is, anything to do with efficiency – less time, effort, and/or money – in fulfilling buyers’ needs.
11.3.2. Then we have simplicity, which is anything that eliminates or minimizes complexity or hassle.
11.3.3. Convenience is about when and where you want something, like 24/7, 365 days a year.
11.3.4. Risk reduction might include financial, physical and reputational risk.
11.3.5. Fun and image are things like the look, feel and attitude the offering conveys.
11.3.6. And last, environmental friendliness is about how green your product or service is, and what this might mean for buyers.
12. Sequence of Creating a Blue Ocean
12.1. SQUENCE
12.1.1. Companies need to build their blue ocean strategy in the sequence of buyer utility, price, cost, and adoption.
12.1.2. This allows them to build a viable business model and ensure that a company profits from the blue ocean it is creating.
12.1.3. W. Chan Kim and Renée Mauborgne argue that with an understanding of the right strategic sequence and of how to assess blue ocean ideas against the key criteria in that sequence, companies can dramatically reduce business model risk and ensure that both the company and its customers win as it creates new business terrain.
12.1.4. The starting point is buyer utility.
12.1.5. First
12.1.5.1. Does your offering unlock exceptional utility? Is there a compelling reason for the mass of people to buy it?
12.1.6. Second
12.1.6.1. is your offering priced to attract the mass of target buyers so that they have a compelling ability to pay for your offering? If it is not, they cannot buy it. Nor will the offering create irresistible market buzz.
12.1.7. These first two steps address the revenue side of a company’s business model.
12.1.8. They ensure that you create a leap in net buyer value.
12.1.9. To secure the profit side you need to assess the third element: cost.
12.1.10. The cost side of a company’s business model ensures that it creates a leap in value for itself in the form of profit—that is, the price of the offering minus the cost of production.
12.1.11. The key question here is: Can you produce your offering at the target cost and still earn a healthy profit margin?
12.1.12. You should not let costs drive prices. Nor should you scale down utility because high costs block your ability to profit at the strategic price.
12.1.13. When the target cost cannot be met, you must either forgo the idea because the blue ocean won’t be profitable, or you must innovate your business model to hit the target cost.
12.1.14. The last step in the sequence is to address adoption hurdles.
12.1.15. What are the adoption hurdles in rolling out your idea? Have you addressed these up front? The formulation of blue ocean strategy is complete only when you can address adoption hurdles in the beginning to ensure the successful actualization of your idea.
13. Four Hurdles to Strategy Execution
13.1. Once a company has developed a blue ocean strategy with a profitable business model, the next challenge is strategy execution.
13.1.1. The Cognitive Hurdle: Waking employees up to the need for a strategic shift. Red oceans may not be the paths to future profitable growth, but they may have served the organization well historically, so why rock the boat?
13.1.2. The Resource Hurdle: It is assumed that the greater the shift in strategy, the greater the resources it requires for execution.
13.1.3. The Motivational Hurdle: How do you motivate key players to move fast and tenaciously to carry out a break from the status quo?
13.1.4. The Political Hurdle: As one manager put it, “In our organization you get shot down before you stand up.”
14. Price Corridor of the Mass
14.1. s a tool managers can use to determine the right price to unlock the mass of target buyers.
14.1.1. Step One:
14.1.1.1. Identify the price corridor of the mass.
14.1.1.2. Three alternative product/service types:
14.1.1.3. Same Form Different Form, Same Function Different Form and Function, Same Objective
14.1.2. Step Two:
14.1.2.1. Specify a price level within the price corridor.
14.1.2.2. Size of circle is proportional to number
14.1.2.3. of buyers that product/service attracts
14.1.3. To set the strategic price, first identify the price corridor of the target mass, that is, the price range that attracts the mass of target buyers.
14.1.4. Key to determining the strategic price is for managers to understand the price sensitivities of buyers who will be comparing the new offering with a host of very different-looking products and services offered outside the group of traditional competitors.
14.1.5. For example, buyers can choose between several movie theaters, but they can also decide to go to restaurants and bars. Managers should consider two categories of products/services that are beyond an industry’s boundaries in identifying the price corridor of the mass: products and services that take different forms but perform the same function, and products and services that have different forms and functions but serve the same objective.
14.1.6. Next, determine how high or low the strategic price should be set within the corridor without inviting imitation from competition.
14.1.7. A company must consider two sets of factors: the level of legal and resource protection the new offering has to block imitation, and secondly the degree to which the company owns some exclusive asset or core capability that can also block imitation.
14.1.8. The higher the level of protection against imitation, the higher the strategic price can be within the price range that still attracts the mass of target buyers. For example, if the product or service has strong patents and hard-to-imitate service capabilities one can use upper-boundary strategic pricing to attract the mass of buyers.
14.1.9. On the other hand, if a manager is uncertain about their patent and asset protection they should consider pricing somewhere in the middle to lower end of the corridor.
15. Fair Process
15.1. Fair Process
15.1.1. how fair process affects people's attitudes and behavior
15.2. execution process
15.2.1. execution consequences of the presence and absence of fair process
15.3. There are three mutually reinforcing elements that define fair process:
15.3.1. Engagement
15.3.1.1. Engagement means involving individuals in the strategic decisions that affect them by soliciting their input and allowing them to refute the merits of one another’s ideas and assumptions.
15.3.1.2. Engagement communicates management’s respect for individuals and their point of view.
15.3.1.3. The result is better strategic decisions by management and genuine commitment from everyone involved in execution.
15.3.2. Explanation
15.3.2.1. Explanation means that everyone involved and affected should understand why final strategic decisions are made.
15.3.2.2. An explanation of rationale engenders confidence among employees that managers have considered their opinions and have made decisions impartially in the overall interest of the company, even if their own ideas have been rejected. It also serves as a powerful feedback loop to enhance learning.
15.3.3. Expectation Clarity
15.3.3.1. Expectation clarity requires that after a strategy is set, managers clearly state the new rules of the game.
15.3.3.2. Although the expectations may be demanding, employees know up front the standards by which their work will be judged and the consequences of failure.
15.3.3.3. When people clearly understand expectations, political jockeying and favoritism are minimized, and people can focus on executing the strategy rapidly.
16. Important Materials
16.1. Blue Ocean Idea Index (BOI Index)
16.1.1. BOI Index
16.2. Market Dynamics of Value Innovation
16.2.1. Market Dynamics of Value Innovation
16.2.2. From perfect competition to monopolist practice
16.2.3. From perfect competition to monopolist practice blue ocean
16.3. Profit and Growth Consequences of Creating Blue Oceans
16.3.1. Profit and Growth Consequences of Creating Blue Oceans
16.4. The Six Principles of Blue Ocean Strategy
16.4.1. Formulation Principles
16.4.1.1. 1. Reconstruct market boundaries.
16.4.1.1.1. Search risk
16.4.1.2. 2. Focus on the big picture, not the numbers.
16.4.1.2.1. Planning risk
16.4.1.3. 3. Reach beyond existing demand.
16.4.1.3.1. Scale risk
16.4.1.4. 4. Get the strategic sequence right.
16.4.1.4.1. Business model risk
16.4.2. Execution Principles
16.4.2.1. 5. Overcome key organizational hurdles.
16.4.2.1.1. Organizational Risk
16.4.2.2. 6. Build execution into strategy.
16.4.2.2.1. Management Risk
16.5. Four Steps of Visualizing Strategy
16.5.1. Four Steps of Visualizing Strategy
16.6. Profit Model of Blue Ocean Strategy
16.6.1. Profit Model of Blue Ocean Strategy
16.6.2. Profit Model of Blue Ocean Strategy
16.7. Imitation barriers to Blue Ocean Strategy
16.7.1. Imitation barriers to Blue Ocean Strategy
16.8. A different tool
16.8.1. Cirque du Soleil's BLUE OCEAN STRATEGY: One-page Story of How Cirque …