Archive for March, 2010

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.