Archive for the ‘Blue Ocean Strategy Concepts’ Category

Blue Ocean Strategy is a systematic process for making the competition irrelevant through the simultaneous pursuit of differentiation and low cost. Blue Ocean Strategy tools and frameworks include the strategy canvas, value curve, four actions framework, six paths framework, buyer experience cycle, buyer utility map and the blue ocean index. The three key conceptual building blocks of Blue Ocean Strategy are value innovation, tipping point leadership and fair process. As an integrated approach to strategy Blue Ocean Strategy requires organizations to develop and align the three strategy propositions: value proposition, profit proposition and people proposition.  

“Organizational politics is an inescapable reality of corporate and public life,” Co-authors W. Chan Kim and Renee Mauborgne include in their best-selling book Blue Ocean Strategy.

To overcome hurdles like politics within an organization companies must challenge conventional wisdom. What Kim and Maugborgne refer to as Tipping Point Leadership in order to change the mass, organizations need to focus on the extremes – people, acts, and activities that exercise a disproportionate influence on performance to achieve a strategic shift fast at a low cost.

It is essential for tipping point leaders, despite if a company has reached the tipping point of execution, to focus on disproportionate influence factors as there will be resistance to change due to power interests.

These influences include leveraging angels, silencing devils, and getting a consigliere on their top management team. Angels are those who have the most to gain from the strategic shift. Devils are those who have the most to lose from it. And a consigliere is a politically adept but highly respected insider who knows in advance all the land mines, including who will fight you and who will support you.

Kim and Mauborgne write the more likely change becomes, the more fiercely and vocally these negative influencers- both internal and external- will fight to protect their positions, and their resistance can seriously damage and even derail the strategy execution process.

Blue Ocean Strategy is a systematic process for making the competition irrelevant through the simultaneous pursuit of differentiation and low cost. Blue Ocean Strategy tools and frameworks include the strategy canvas, value curve, four actions framework, six paths framework, buyer experience cycle, buyer utility map and the blue ocean index. The three key conceptual building blocks of Blue Ocean Strategy are value innovation, tipping point leadership and fair process. As an integrated approach to strategy Blue Ocean Strategy requires organizations to develop and align the three strategy propositions: value proposition, profit proposition and people proposition.  

Innovation vs. Blue Ocean Strategy

Random vs. Systematic

Entrepreneur vs. Pattern

Trial and Error – Learn from Failure vs. Theory and Methodologies

Opportunities and Risk Come Together vs. Risk Minimization with Opportunity and Maximization

DNA/Culture vs. Analytical Frameworks

Units of Experimentation/ Subsystem Approach vs. Systems Strategic Alignment

Blue Ocean Strategy is a systematic process for making the competition irrelevant through the simultaneous pursuit of differentiation and low cost. Blue Ocean Strategy tools and frameworks include the strategy canvas, value curve, four actions framework, six paths framework, buyer experience cycle, buyer utility map and the blue ocean index. The three key conceptual building blocks of Blue Ocean Strategy are value innovation, tipping point leadership and fair process. As an integrated approach to strategy Blue Ocean Strategy requires organizations to develop and align the three strategy propositions: value proposition, profit proposition and people proposition.  

Red ocean strategy assumes that an industry’s structural conditions are given and that firms are forced to compete within a finite market space. Taking market structure as given, companies are driven to try to carve out a defensible position against the competition in the existing industry terrain. To sustain themselves in the marketplace, practitioners of red ocean strategy focus on building advantages over the competition, usually by assessing what competitors do and striving to do it better. Here, grabbing a bigger share of the market is seen as a zero-sum game in which one company’s gain is achieved at another company’s loss. Hence, competition, the supply side of the equation, becomes the defining variable of strategy.

Such strategic thinking leads firms to divide industries into attractive and unattractive ones and to decide accordingly whether or not to enter. After it is in an industry, a firm chooses a distinctive cost or differentiation position. Here, cost and value are seen as trade-offs. Because the total profit level of the industry is also determined exogenously by structural factors, firms principally seek to capture and redistribute wealth instead of creating wealth. They focus on dividing up the red ocean, where growth is increasingly limited. Under blue ocean strategy, however, the strategic challenge looks very different. Recognizing that structure and market boundaries exist only in managers’ minds, practitioners who hold this view do not let existing market structures limit their thinking. To them, extra demand is out there, largely untapped. The crux of the problem is how to create it. This, in turn, requires a shift of attention from supply to demand, from a focus on competing to a focus on value innovation—that is, the creation of innovative value to unlock new demand. This is achieved via the simultaneous pursuit of differentiation and low-cost.  Under blue ocean strategy, there is scarcely an attractive or unattractive industry per se because the level of industry attractiveness can be altered through companies’ conscientious efforts. As market structure is changed by breaking the value/cost tradeoff, so are the rules of the game. Competition in the old game is therefore rendered irrelevant. By expanding the demand side of the economy new wealth is created. Such a strategy therefore allows firms to largely play a non–zero-sum game, with high payoff possibilities.

Above all, blue ocean strategy is about risk minimization and not about risk taking. Of course, there is no such thing as a riskless strategy. Any strategy, whether red or blue, will always involve risk. Nonetheless, when it comes to venturing beyond the red ocean to create and capture blue oceans there are six key risks companies face: search risk, planning risk, scope risk, business model risk, organizational risk, and management risk. The first four risks revolve around strategy formulation, and the latter two around strategy execution. 

Blue Ocean Strategy is a systematic process for making the competition irrelevant through the simultaneous pursuit of differentiation and low cost. Blue Ocean Strategy tools and frameworks include the strategy canvas, value curve, four actions framework, six paths framework, buyer experience cycle, buyer utility map and the blue ocean index. The three key conceptual building blocks of Blue Ocean Strategy are value innovation, tipping point leadership and fair process. As an integrated approach to strategy Blue Ocean Strategy requires organizations to develop and align the three strategy propositions: value proposition, profit proposition and people proposition.  

The book outlines the four-step strategy visualization process any company or organization can apply to break out of the red ocean. The first step is Visual Awakening. At this stage executives are asked to draw their “As Is” strategy canvas – a visual representation of their company’s strategy vis-à-vis the competition.  This brings home the need for change. It serves as a forceful wake-up call for companies to challenge their existing strategies.  

The next step is what we call the Visual Exploration. Here managers go into the field to explore the Six Paths to new market space creation. Here executives observe the distinct differences of alternative products and services and see which factors should be eliminated, created or changed in the company’s offerings.  The penultimate step is the Visual Strategy Fair. Here executives begin to draw their “To Be” Strategy Canvas based on insights from the market exploration observations and test these ideas with customers, noncustomers, and lost customers.  After refining the “To Be” strategy canvas, the last step is to communicate it in a way that can be easily understood by any employee. This step is called Visual Communication.

Blue Ocean Strategy is a systematic process for making the competition irrelevant through the simultaneous pursuit of differentiation and low cost. Blue Ocean Strategy tools and frameworks include the strategy canvas, value curve, four actions framework, six paths framework, buyer experience cycle, buyer utility map and the blue ocean index. The three key conceptual building blocks of Blue Ocean Strategy are value innovation, tipping point leadership and fair process. As an integrated approach to strategy Blue Ocean Strategy requires organizations to develop and align the three strategy propositions: value proposition, profit proposition and people proposition.  

When a company value innovates, the competition is rendered irrelevant. However, it is extremely important to understand what constitutes value innovation. Value innovation is the simultaneous pursuit of differentiation and low cost. A company pursues value innovation by aligning its: value proposition (utility minus price), creating an offer that delivers a leap in buyer utility at the right price for mass of target buyers; profit proposition (price minus cost), creating a leap in value for the company itself by making a tidy profit; and people proposition, practicing fair process and building execution into strategy formulation.

Value Innovation is about challenging assumptions about strategy, redefining market boundaries and making the competition irrelevant rather than competing on established ground. It is geared towards creating new market space and encompasses a company’s entire system of activities.

A common misconception is that value innovation equals value creation. But value innovation means much more than marginal improvements. Importantly, value innovation defies one of the most commonly accepted dogmas of competition-based strategy – the value-cost tradeoff.   It is conventionally believed that companies can either create greater value to customers at a higher cost or create reasonable value at a lower cost. Here strategy is seen as making a choice between differentiation and low cost. In contrast, value innovation involves the simultaneous pursuit of differentiation and low cost.  Value innovation is the cornerstone of blue ocean strategy. 

Blue Ocean Strategy is a systematic process for making the competition irrelevant through the simultaneous pursuit of differentiation and low cost. Blue Ocean Strategy tools and frameworks include the strategy canvas, value curve, four actions framework, six paths framework, buyer experience cycle, buyer utility map and the blue ocean index. The three key conceptual building blocks of Blue Ocean Strategy are value innovation, tipping point leadership and fair process. As an integrated approach to strategy Blue Ocean Strategy requires organizations to develop and align the three strategy propositions: value proposition, profit proposition and people proposition.  

Each of the six principles in Blue Ocean Strategy expressly addresses how to mitigate each of these risks. The first blue ocean principle - reconstruct market boundaries - addresses the search risk of how to successfully identify, out of the haystack of possibilities that exist, commercially compelling blue ocean opportunities. The second principle - focus on the big picture, not the numbers - tackles how to mitigate the planning risk of investing lots of effort and lots of time but delivering only tactical red ocean moves. The third principle - reach beyond existing demand – addresses the scope risk of aggregating the greatest demand for a new offering. The fourth principle - get the strategic sequence right – addresses how to build a robust business model to ensure that you make a healthy profit on your blue ocean idea, thereby mitigating business model risk. The fifth principle - overcome key organizational hurdles – tackles how to knock over organizational hurdles in executing a blue ocean strategy addressing organizational risk. The sixth principle - build execution into strategy – tackles how to motivate people to execute blue ocean strategy to the best of their abilities, overcoming management risk.

Hence, as much as blue ocean strategy is about maximizing opportunities it is also about minimizing risk. That is why blue ocean strategy speaks the language of executives. Executives cannot afford to be riverboat gamblers.