BLUE OCEAN STRATEGY. What is this book about?

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1 BLUE OCEAN STRATEGY What is this book about? Blue Ocean Strategy is a book about creating market space which has never been made before. The majority of successful businesses and people have done this. As seen in Purple Cow, you have to not just be good enough but stand out to be the best and attract others attentions. Blue Ocean Strategy is a continuation of that and it shows how markets work and how you can create a niche of people who love what you do- by showing you how to do what you do so differently than others that it is disruptive. Creating New Oceans This chapter starts off by an example of CEO of Cirque Du Soleil. Circuses are a declining industry today. With the advent of technology and opposition to using animals, people are getting less and less interested in what circuses have to offer. The standard was set by Ringling Bros and Barnum and Barley. But why was Cirque Du Soleil successful? This was because instead of competing with those circuses, they created their new space and targeted a new market: business people who would pay two or three times more to see a spectacular show. If they had competed with the others, there would be a lot of fighting to stay on top. Because they entered a new area, they got untapped market space, demand creation, and the opportunity for highly profitable growth. Red Oceans will always matter because that is the way traditional business has been done, and competing in a free market is important. However, it is easier to stay on top by reinventing yourself and playing a game where the rules haven t been set. The chart below proves this.

2 But why are blue oceans so important NOW? This is because with so many businesses cropping up, there is more supply than demand. From the book: While supply is on the rise as global competition intensifies, there is no clear evidence of an increase in demand worldwide, and statistics even point to declining populations in many developed markets. Globalization, improving technology, and the internet have made people more willing to be early adopters. They no longer insist that they use Colgate if Crest is on sale, for example. They are more partial to price than the brand. To overcome this, we must make sure we provide a spectacular experience for people whose price is even lower than that of competitors. We must differentiate ourselves while driving down costs in our business model. Here is a visual: Some Frameworks. Strategy Canvas: captures the current state of play in the known market space as well as captures the offering level that buyers receive across all these key competing factors. The

3 example that they used this with was in the wine market for informed buyers. It s important to note that when you are speaking about customers you should also focus on non-customers and alternatives. What are the reasons they are not buying your product? To fundamentally shift the strategy canvas of an industry, you must begin by reorienting your strategic focus from competitors to alternatives, and from customers to noncustomers of the industry. Aim to restructure the buyer elements to change that. How to do that? One example of a jet which did that is JSF: who took the best things from each of the military branches to create one super jet. They completely obliterated their noncustomers by creating value people couldn t ignore. Look at these questions and then at the chart which shows the tiers of noncustomers. Which of the factors that the industry takes for granted should be eliminated? Which factors should be reduced well below the industry s standard? Which factors should be raised well above the industry s standard? Which factors should be created that the industry has never offered?

4 This is how Casella Wines changed their framework. Look at the one they made for the average consumer and see how this segment valued different things: By looking at these now, they could find exactly why most people weren t gravitating towards wine: because they thought it wasn t fun, difficult to choose and too many varieties. This

5 information is put into a chart below so it could change the business model. Now the company knows exactly what to do to attract new buyers and therefore create a blue ocean. Now, creating blue oceans is good and all, but you don t want to haphazardly and sporadically figure out which venues have the possibility to be blue oceans and which ones do not. The authors of the book identified that they found clear patterns for creating blue oceans. Specifically, they found six basic approaches to remaking market boundaries. 1. Look across alternative industries, not just the ones that you are in. Be flexible and changing, not rigid. 2. Look across strategic groups within industries: example is Curves who competed in the exercise market groups of traditional health clubs and home exercise programs and eliminated everything else. 3. Look Across the Chain of Buyers: How Novo Insulin went from targeting doctors to patients themselves. 4. Look Across Complementary Product and Service Offerings: NABI used fiberglass to make its cost model cheaper and outcompete the rest of the bus market 5. Look Across Functional or Emotional Appeal to Buyers: The Body Shop: eliminated emotional appeal and turned its business functional and no nonsense. 6. Look Across Time: Example is how Apple foresaw the trend of MP3 players and created the ipod.