Contents

Where Learning Never Stops

Why this book?

Trend of Globalisation

Red Oceans vs Blue Oceans

BLUE OCEAN STRATEGY
Value Innovation

Buyer Loyalty Stages

Reach beyond existing demand - 3 tiers of Non-customers

Reconstruct Market Boundaries - 6 Paths Framework

Analytical Tools & Framework

Case studies
Presented by : Dr. Dominic Lau Hoe Chai - Symphony Orchestra
Date : 27 May 2009 - Wii Nintendo

The Four Steps of Visualizing Strategy

The Sequence of Blue Ocean Strategy

Breakdown of the Red Ocean & into Blue Ocean

Professor Kim’s Citation - Conclusion

Q&A
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Why this book? 41 Languages

• Harvard Business School Press

• Translated into 41 languages
• Sold over one million copies
• International best seller

W. Chan Kim & Renée Mauborgne

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Trend of Globalisation The Rising Imperative of

creating Blue Oceans

• The world is flat
Accelerated Technological Advances

• Commodity competition
Increasing numbers of Industries
supply function demand function
Supply exceeds Demand
• The rise of China and India presents huge cost
The Trend towards Globalization
challenges
Information on products & prices becomes instantly & globally available
available

Niche markets and havens for monopoly continue to disappear

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COMMODITY
RED OCEANS

• Customer could not differentiate. • All industries existing today

• Boundary of industry
• Like a Commodity.
- Defined & Accepted
• Similar Features or Functions. • Clear Competitive Rules
• Compete with rivals. - Outperform rivals
- Get more customers
- Prospect the profit
• The Competition turns the water bloody

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RED OCEANS Bloody Red Ocean

Imitation Quality
Product Protection

Price Cost

Open
Service Market

Monopoly patent possession

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BLUE OCEANS BLUE OCEANS

• Not exist in today Blue
The term is new
• Unknown market space Ocean
But the existence is not
• Rules  Automotive
- Create the demand, not fight over  Music Recording
- Break through the industry boundary  Aviation
 Petrolchemical
 Health care

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The Profit and Growth Consequences of Red Ocean versus Blue Ocean Strategy
Creating Blue Oceans

Red Ocean Strategy Blue Ocean Strategy

Business Launch 86％
86％ 14％
14％ Compete in existing market place Create uncontested market
space
Beat the competition Make the competition
Revenue Impact 62％
62％ 38％
38％ irrelevant
Exploit existing demand Create and capture demand
Make the value-cost trade-off Break the value-cost trade-off
Profit Impact 39％
39％ 61％
61％ Align the whole system of a firm’s Align the whole system of a
activities with its strategic choice firm’s activities in pursuit of
Launches with red oceans Launches with blue oceans of differentiation or low cost differentiation and low cost

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A Firm’s Assumptions are either

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TRUE or FALSE
Value Innovation
Common sense
Uncommon sense
• Strategic move that allows a company to
create blue ocean.
• Offers buyers a huge leap in VALUE & that
will give rise to NEW MARKET.

Uncommon nonsense Common nonsense

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Value Innovation
• Value without Innovation
- Tends to focus on value creation

High Profit Growth
- Improve value but is not sufficient to make your


standout in the market place Value High Demand

Value Up
• Innovation without value Innovation
Cost Down
- Tends to be technology driven, market
pioneering
- Always shooting beyond what buyers are ready
to accept & pay for it.

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Value Innovation: The Cornerstone of

Value Innovation Blue Ocean Strategy

Buyer are ready to accept & pay for it Eliminate

Alignment of ： Reduce Alignment of
 Utility
Innovation  Price
 Cost Activities
Utility Raise
Create
Price
Cost
The Simultaneous Pursuit of Differentiation and Low Cost
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 Value Improvement vs
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Malaysian Airlines adopts to

Value Innovation Value Innovation

Value Improvement Value Innovation

Cost Value Creation
Quality New Business Development
Best Practice Skillful Thinking
Follow Orthodoxies New Idea Creation
Efficiency Exploration
Brand Management Brand Creation

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Blue Ocean – Unit of Analysis Innovation Research Report

• 1880 – 2000 (over 100 years)

X Company or Industry • 30 Industries
Hotel, Cinema, Retail, Airlines, Steel,
 Strategic Move Energy, Computers, Broadcasting,
Construction, Automotive…
Automotive…

150 Strategic Moves

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Buyer Loyalty Stages Buyer Loyalty Stages

Red Ocean Blue Ocean

Loyalty
Loyalty
Fans Friends Customers Prospect Suspect 2nd tier 3rd tier
Fans Friends Customers Prospect Suspect 2nd tier 3rd tier (1st tier non- non-
(1st tier non- non- non- customer customer
non- customer customer customer)
customer)

i) Identify the buyer pain-points

ii) Reconstruct the boundaries

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The Three Tiers of

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Value Innovation
Non-customers

Third Tier
“Unexplored” non-customers who are
in markets distant from yours

Second Tier
“Refusing” non-customers
who consciously choose
against your market

First Tier
“Soon-to-be” non-
customers who are on the
edge of your market
waiting to jump ship

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Where Learning Never Stops Where Learning Never Stops
Reach beyond existing demand is a
Value Innovation another key component of achieving
value innovation

“Unexplored”
Unexplored”
non--customers
non

“Hindered”
Hindered” non-
non-
customers
Third
“Soon-
Soon-to-
to-be”
be” Tier The three tiers of
non-
non-customers Second
Tier non customers
Your First
Market Tier

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First Tier, “Soon-to-be” non- CASE STUDY : PRET A MANGER

customers

 Investigate unsatisfaction
causes (“Why?”)
 Meet with disgruntled
customers and listen to their • Business : British Fast Food Chain
concerns • Customer : Professionals in European City Centers principally
First
Your Tier frequented restaurants for lunch (sit down restaurants offered a
Market  Find key commonalities across
nice meal and setting)
needs and desires
• 1st Tier Non-Customer :
 Explore other competitors’ - Professionals did not have time for sit-down meal.
“soon-to-be” customers - Professionals looking for healthy food.
- Professionals looking for reasonable price
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CASE STUDY : PRET A MANGER Second Tier, “hindered”

non-customers
• Commonalities :
 Eliminate access barriers so
1. Fast Lunch
enabling customers to enter the
2. Fresh & healthy
market
3. Reasonable price
• Offers :
Economic (e.g. lack of credit)
1. Speed (browse-pickup-pay-leave), faster than restaurant and fast food Second
Tier
Functional (e.g. lack of user-
(queue-order-pay-wait-receive-sit)
friendliness)
2. 30 types of quality sandwiches made fresh everyday from the finest Your
ingredients. Market
Education (e.g. lack of training)
3. Reasonable price ($4 - $6)

Geographical (e.g. lack of
• Results :
dense distribution channels)
 Sells more than 25 million sandwiches a year
 130 stores in UK
 Opened stores in New York and Hong Kong
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Third Tier, “unexplored”

non-customers
The Six Conventional Boundaries of Competition

Third Tier  Remove long-held Industry

assumption on Strategic Group
customers’ needs and From Buyer Group To
behavior Competing Creating
Scope of product & service Across
Your within offering
Market
Functional-emotional
orientation of an industry
Time

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 Path 1 : Look Across Path 1 : Look Across Alternative
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Alternative Industries Industries

Malaysian Case
• Alternatives are broader than substitutes Studies
• Substitutes
 Products or services that have different forms
but offer the same functionality.
 Eg. Personal Finances (financial software
package, hire an Accountant, use pencil and
paper).
• Alternative
Scenic Garden
 Products or services that have different
functions and forms but the same purpose.
 Eg. Cirque du Soleil (circus industry)
Video clip Pet Memorial Garden

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Path 2 : Look Across Strategic Path 2 : Look Across Strategic

Groups within Industries Groups within Industries
Malaysian Case
Studies
• Case Study : Curves (Women’s fitness Company)
• Two Strategic Groups
1. Traditional Health Clubs
2. Home Exercise Programs

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 Path 3 : Look Across the Path 3 : Look Across the Chain
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Chain of Buyers of Buyers

Malaysian Case
• Chain of Buyers Studies

1.Purchasers
2.Users
3.Influencers
• Case Study : Novo Nordisk (Danish Insulin
producer)
• Products :
 Novo Pen
 Novo Let
 Innovo

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Path 3 : Look Across the Chain of Path 4 : Look Across Complementary

Buyers Product and Service Offerings

• Think about what happens before, during and after your product is Malaysian Case
used.
Studies
• Case Study : NABI (Hungarian Bus Company)
• Bus Industry
- Offer the lowest purchase price
- Design Outdated
- Late delivery times
- Low quality
- Life cycle of bus : 12 years
• Issues
- Maintenance of running the bus over 12 years life cycle
- Repairs after traffic accidents, fuel usage, wear & tear
- Parts frequently needed to be replaced due to bus heavy weight
- Steels – heavy, corrosive and hard to repair after accidents

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Path 4 : Look Across Complementary Path 4 : Look Across Complementary

Product and Service Offerings Product and Service Offerings

• NABI
Steel Fiberglass

White Ladies Services

Family Treasure Box

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Path 4 : Look Across Complementary Path 5 : Look Across Functional or

Product and Service Offerings Emotional Appeal to Buyers

• Case Study : SWATCH (Functional c

Emotional)
: Body Shop (Emotional c
Functional)
: QB House (Emotional c
Functional)

Taoist Prayer Service

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Path 5 : Look Across Functional or Path 5 : Look Across Functional or

Emotional Appeal to Buyers Emotional Appeal to Buyers

Message to Heaven

Peace Garden for the Honourables/VIPs

Honourables/VIPs

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Path 5 : Look Across Functional or

Emotional Appeal to Buyers
Path 6 : Look Across Time
Malaysian Case
• Trend with change value to customers and impact the Studies
company’s business model
• Trends :
 Decisive
 Irreversible
 Clear Trajectory
• Case Study :
 CNN – created the 1st real time 24 hours global news
network (Globalization)
 HBO – Sex and the City (Trend of increasingly urban
and successful women who struggle to find love and
marry later in life)

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Path 6 : Look Across Time Path 6 : Look Across Time

Awarded the first license to convert agricultural land

into burial land and developed the 1st Memorial Park in Malaysia

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Analytical Tools & Framework
Path 1
Look across alternative The Four Actions Framework
industries
Path 6 Path 2
Look across
Reduce
Participates In shaping
Strategic group Which factors should be
External trends reduced well below the
Over time In your industry
Focusing on industry’s standard?
Rivals within
Focusing on Focus on
your industry
Adapting to Better serving
External trends your strategic
As they occur group Eliminate Create
Which of the factors that A New Which factors should be
Focusing on Focusing on the industry takes for Value created that the industry
Positioning within granted should be has never offered?
Focusing on Better serving Curve
Functional-emotional eliminated?
Orientation of Maximizing Industry’s Buyer
industry Value of product Group
Or service Path 3
Path 5 Redefining the
Look across the Industry buyer
Functional-emotional Path 4 Group Raise
Appeal to buyers Look across Complementary Which factors should be
Product or service raised well above the
offerings industry’s standard?

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Andre Rieu’s clip

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Wii Nintendo Wii Nintendo

See the video clips…

Clip 1

Clip 2

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 The Four Steps of Visualizing
Where Learning Never Stops Where Learning Never Stops

The Sequence of Blue Ocean Strategy

Strategy Buyer Utility
Is there any exceptional buyer
utility in your business idea?
No, Rethink

1. Visual 2. Visual 3. Visual Strategy 4. Visual Yes

Awakening Exploration Fair Communication Price
Is your price easily accessible to No, Rethink
是
the mass of buyers?
• Compare your business • Go into the field to • Draw your “to-be” • Distribute your before-
with your competitors by explore the six paths to strategy canvas based on and-after strategic Yes
drawing your “as is” creating blue oceans. insights from field profiles on one page for Cost
strategy canvas. observations easy comparison.
Can you attain your cost target to
• Observe the distinctive profit at your strategic price? No, Rethink
• See where your strategy advantages of alternative • Get feedback on • Support only those
needs to change. products and services. alternative strategy projects and operational Yes
canvasses from moves that allow your
Adoption
• See which factors you customers, competitors’ company to close the gap
customers and non- to actualize the new What are the adoption hurdles in actualizing your
should eliminate, create business idea? Are you addressing them up front? No, Rethink
or change. customers strategy.
Yes
• Use feedback to build
A Commercially
the best “to-be” future
strategy
Viable
Blue Ocean Idea
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Breakout of the Red Ocean & Professor Kim’s Citation -

into Blue Ocean – 3 pointers Conclusion
• Make BOS part of company’s DNA just like teaching children how
to ride a bicycle. Its learning & experimentation, cultivate it and
1. Stop benchmarking the competition water it, practice it until it becomes a habit.
• The more you benchmark your competitors, the more you • BOS is not an one time process but a continuous thinking process.
tend to look like them. • Blue Ocean is never ending as blue oceans will eventually turn
red.
2. Stop being content to swim in the Red Ocean • Blue Ocean should not be limited to processes. Think of
cultivating blue ocean people.
3. Don’t count on your customer for growth, look to non- • It’s not enough simply to get out of red oceans of competition
customers. and have uncontested blue oceans to yourself – it must be a
profitable ocean.
• Inward looking companies stay in the red ocean.

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Nine Key Points of Blue Ocean Strategy Blue Ocean Strategy Malaysian Version

1. BOS is the result of a decade long study of 150 strategic moves spanning more than 30
industries over 100 years (1880-2000).
2. BOS is the simultaneous pursuit of differentiation and low cost.
3. The aim of BOS is not to out-perform the competition in the existing industry, but to
create new market space or a blue ocean, thereby making the competition irrelevant.
4. BOS offers a total set of methodologies and tools to create new market space.
5. While innovation has been seen as a random/experimental process where entrepreneurs
and spin-offs are the primary drivers – as argued by Schumpeter and his followers – BOS
offers systematic and reproducible methodologies and processes in pursuit of innovation
by both new and existing firms.
6. BOS frameworks and tools include: strategy canvas, value curve, four actions framework,
six paths, buyer experience cycle, buyer utility map, and blue ocean idea index.
7. These frameworks and tools are designed to be visual in order to not only effectively
build the collective wisdom of the company but also to effectively execute through easy
communication. For Enquiries：Tel: 03-79552633(Laura)
8. BOS covers both strategy formulation and strategy execution.
9. The three key conceptual building blocks of BOS are: value innovation, tipping point Also available at Popular Bookstore 大众书局, Mentor 大将书局
leadership, and fair process.
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Thanks for your participation!

Email :[email protected]
Blog : http://dominic.resources-site.com (free download of presentation notes)
For further details, please visit to our official website at : www.ucsi-bosrc.com
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