Blue Ocean Strategy.. part 3

Blue Ocean Strategy Summarizing Chapters 7-9

 

Four Hurdles

  • Cognitive – an organization wedded to the status quo
  • Resource – Limited resources
  • Motivational – Unmotivated staff
  • Political – Opposition from powerful vested interests

Tipping point leadership builds on the reality check, that for every business in the market there are people, acts, and activities that influence on its performance disproportionately
It allows you to overcome the four hurdles efficiently and at a low cost

Aim towards fundamental changes by building beliefs and energies of masses to create an epidemic movement towards an idea. Concentration is the key to unlocking an epidemic movement.

Three Types Overview
Hot spots – low input, high gain
Cold spots – high input, low impact. In every or- ganization, hot spots and cold spots typically Horse trading – trading excess for another excess to fill gaps

Place Kingpins in a Fishbowl – Based on transparency, inclusion, fair process then Atomize to get the organization to change

Build Execution into Strategy

  • Embrace new strategy willingly
    • People must be aligned with the strategy
    • Culture of trust and commitment should exist
  • Involve front lines in creation of strategy
  • Build execution into strategy from the start
  • Fair process in making and executing of strategy
    • everyone has an input in the process
    • Inspire voluntary cooperation

Fair Process – Intellectual and Emotional Recognition Theory
Recognition for intellectual, builds willingness to share their knowledge
Intangible capital –  praise employees who show

  • Commitment
  • Trust
  • Voluntary cooperation

Companies with intangible capital perform better and have quality in their execution at low costs

The Three E Principles of Fair Process

  • Engagement – involving individuals in strategic decisions
  • Explanation – why final strategic decisions are made
  • Clarity of expectation – clearly communicate the new rules and procedures

The Sustainability and Renewal of Blue Ocean Strategy
Barriers to Imitation

  • Value innovation
  • Brand image conflict
  • Natural monopoly
  • Copyrights, patents
  • High volume generated
  • Network externalities
  • Leap in value

When to Value-Innovate Again

  • Monitor value curves – strategy canvas
  • Hold on for profit from current setup
  • Operational improvements and Expansion
  • Reach out for another blue ocean

Blue Ocean Strategy.. part2

Blue Ocean Strategy Summarizing Chapters 4-6

Focussing on the big picture instead of numbers and drawing the strategy canvas. A robust strategic planning process is required to distinguish a blue ocean from red oceans.

Four Steps of Visualizing Strategy

  • Visual Awakening – comparison with competitors
  • Visual Exploration – six paths to create blue ocean
  • Visual Strategy Fair – feedback to build future strategy
  • Visual Communication – close gap towards new strategy

The company should support operational moves that allow company to close the gap and actualize the new strategy

An exercise valuable for entrepreneurs who want to see future performance, testing the growth potential of businesses plot the company’s current and planned portfolios on pioneer-migrator-settler (PMS) map.

PMS map

  • settlers – me-too businesses
  • migrators – business offerings better than marketplace
  • pioneers – mass following of customers

To reach beyond existing demand, maximize the size of blue ocean. Need to look into noncustomers and focus on building powerful overlapping commonalities in what buyers value.

The three tier of non customers

  • Frist tier ‘soon to be’ non-customers – on the edge of the market.
  • Second tier ‘refusing’ non-customers – choose against your market.
  • Third tier ‘unexplored’ non-customers – in markets distant from yours

Sequence of blue strategy

  • Buyer utility – exceptional in this business idea?
    • Six stages of buyer experience cycle – Purchase, Delivery, Use, Supplements, Maintenance, Disposal
  • Price – easily accesbile to masses?
    • Identify price corridor of the mass and specify price level within the corridor
  • Cost – attain cost target to profit at strategic price?
    • Streamlining and cost innovation & Partnering – Price innovation
  • Adoption – adoption hurdles in actualizing idea?
    • Employees, business partners, general public

And finally the commercially viable blue ocean idea

To ensure commercial success blue ocean strategy must be built in the sequence of

  • utility
  • price
  • cost
  • adoption

The blue ocean idea (BOI) index provides a test of this system and helps blue ocean companies to move further ahead from the formulation side of the strategy to its execution.

Blue Ocean Strategy.. part1

Blue Ocean Strategy Summarizing Chapters 1-3

Chapter 1 introduces the concept of creating a Blue Ocean, the new market space. It describes Red ocean and Blue ocean markets, those that exist in known market space and those that do not respectively. Citing examples of successful companies like Cirque du Soleil, the authors determine the path to success is to begin by not competing.

Most blue oceans are created from within the red oceans to expand existing boundaries. Although seen as too risky to be pursued, the book focuses on the practical frameworks and analytics to creating of a blue ocean.

Significant observations point out that analyzing the strategic move explains the creation of blue oceans. Patterns which create blue oceans and achieve high performance are the set of managerial actions and decisions involved in making a major market-creating business offering is referred to as the strategic move.
The strategic logic called value innovation focuses on making competition irrelevant and by creating a major favorable decision in value for buyers and the company. Aligning innovation with utility, price and cost positions new and uncontested market space is opened for creating blue ocean. Hence the focus is on a simple mantra of driving costs down and simultaneously driving value up for buyers.
Coming forth to build an innovation strategy that envelops an entire blue ocean and a re-constructionist view which widens market boundaries and industry structure and reconstructs the values in an industry. The idea is to make market boundaries focus on the big picture not values and to reach beyond the existing demand. Effective blue ocean strategy should lead to risk minimization and for that the strategy canvas offers a diagnostic and an action framework for building a compelling blue ocean strategy.
A fundamental change in an industry should begin by moving the strategic focus from competitors to innovative alternatives, and from customers to non-customers. For a new value curve, the four action framework offers guidelines to create blue ocean by eliminating the factors of industry that are taken for granted, reduction below industry’s standard, raised above industry standard and to create/offer innovative service. Hence pushing the companies to act on all four and create a new value curve by pursuing differentiation and lower costs. Being understood by managers it helps create a high level of engagement in its application and as completing the grid becomes a challenge, every factor is scrutinized and the company realizes it struggle for competition, leading them on a path of discovery to creating a blue ocean. As the authors cite examples the three complimentary qualities to the value curve for a blue ocean strategy are focus, divergence and a driven tagline. These qualities fulfill the strategy of a blue ocean company making it approachable, differentiated and affordable for both the user and company itself. The company is now on the right track with opportunity maximizing and risk minimizing path to creating a blue ocean.
To conclude the main principle of blue ocean strategy is to reconstruct the market boundaries and break from competition and with an innovation strategy develop value innovation.