Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Blue Ocean Strategy (BOS)
zaini@utm.my
http://www.utm.my/vc
www.utm.my Inspiring Creative & Innovative Minds
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Prof. W. Chan Kim
Renée Mauborgne
● W. Chan Kim is Co-Director of the INSEAD Blue Ocean Strategy Institute and The Boston
●
Consulting Group Bruce D. Henderson Chair Professor of Strategy and International
Management at INSEAD. Prior to joining INSEAD, he was a professor at the University of
Michigan Business School, USA. He has served as a board member as well as an advisor for a
number of multinational corporations in Europe, the U.S. and Pacific Asia. He is an advisory
member for the European Union and serves as an Advisor to Malaysian Government.
Kim is a Fellow of the World Economic Forum. His Harvard Business Review articles, coauthored with Renée Mauborgne, are worldwide bestsellers and have sold over half a million
reprints. Their Value Innovation and Fair Process articles were selected as among the best
classic articles ever published in Harvard Business Review. They have co--authored articles in
The Wall Street Journal, The Wall Street Journal Europe, The New York Times, The Financial
www.utm.my Inspiring Creative & Innovative Minds
2
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Blue Ocean Strategy? …
● BOS is the simultaneous pursuit of differentiation and low cost.
● 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.
● 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 blue oceans by
both new and existing firms.
● 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.
www.utm.my Inspiring Creative & Innovative Minds
3
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
… Blue Ocean Strategy?
● BOS frameworks and tools are designed to be visual in order to not only
●
●
●
●
effectively build the collective wisdom of the company but also allow for
effective strategy execution through easy communication.
BOS covers both strategy formulation and strategy execution.
The three key conceptual building blocks of BOS are: value innovation,
tipping point leadership, and fair process.
While competitive strategy is a structuralist theory of strategy where
structure shapes strategy, BOS is a reconstructionist theory of strategy
where strategy shapes structure.
As an integrated approach to strategy at the system level, BOS requires
organizations to develop and align the three strategy propositions: value
proposition, profit proposition and people proposition.
www.utm.my Inspiring Creative & Innovative Minds
4
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Page 7
www.utm.my Inspiring Creative & Innovative Minds
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Value Innovation
The cornerstone of Blue Ocean Strategy
Instead of focusing on beating competition, you focus on making
the competition irrelevant by creating a leap in value for buyers
and your company, thereby opening up new and uncontested
market space (pp. 12)
www.utm.my Inspiring Creative & Innovative Minds
6
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Page 16
www.utm.my Inspiring Creative & Innovative Minds
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Red Ocean vs Blue Ocean Strategy
RED OCEAN STRATEGY
BLUE OCEAN STRATEGY
Compete in the existing market
space
Create uncontested market space
Beat the competition
Make the competition irrelevant
Exploit existing demand
Create and capture new demand
Make the value-cost trade-off
Break the value-cost trade-off
Align the whole system of a firm’s
activities with its strategic choice
of differentiation or low cost
Align the whole system of a firm’s
activities in pursuit of
differentiation and low cost
www.utm.my Inspiring Creative & Innovative Minds
8
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
The six principles of BOS
FORMULATON PRINCIPLES
RISK FACTOR EACH
PRINCIPLE ATTENUATES




↓ Search risk
↓ Planning risk
↓ Scale risk
↓ Business model risk
Reconstruct market boundaries
Focus on the big picture, not the numbers
Reach beyond existing demand
Get the strategic sequence right
EXECUTION PRINCIPLES
RISK FACTOR EACH
PRINCIPLE ATTENUATES
 Overcome key organizational hurdles
 Build execution into strategy
↓ Organizational risk
↓ Management risk
www.utm.my Inspiring Creative & Innovative Minds
9
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Analytical tools and frameworks
● The strategy canvas
● The four actions framework
● The eliminate-reduce-raise-create grid
● Value curves
www.utm.my Inspiring Creative & Innovative Minds
10
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Page 26
www.utm.my Inspiring Creative & Innovative Minds
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Page 29
www.utm.my Inspiring Creative & Innovative Minds
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Yellow
tail?
Page 32
www.utm.my Inspiring Creative & Innovative Minds
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Eliminate-reduce-raise-create grid: The case of (yellow tail)
ELIMINATE
RAISE
 Enological terminology and distinctions
 Aging qualities
 Above-the-line marketing
 Price vs. budget wines
 Retail store involvement
REDUCE
CREATE
 Wine complexity
 Wine range
 Vineyard prestige
 Easy drinking
 Ease of selection
 Fun and adventure
www.utm.my Inspiring Creative & Innovative Minds
14
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Eliminate-reduce-raise-create grid: The case of Cirque du Soleil
ELIMINATE
RAISE




Star performers
Animal show
Aisle concession sales
Multiple show arenas
 Unique venue
REDUCE
CREATE
 Fun and humor
 Thrill and danger




Theme
Refined environment
Multiple productions
Artistic music and dance
www.utm.my Inspiring Creative & Innovative Minds
15
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Page 38
www.utm.my Inspiring Creative & Innovative Minds
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Reconstruct market boundaries
● Look across alternative industries
● Look across strategic groups within industries
● Look across the chain of buyers
● Look across complimentary product and services
offerings
● Look across functional or emotional appeal to buyers
● Look across time
www.utm.my Inspiring Creative & Innovative Minds
17
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Page 53
www.utm.my Inspiring Creative & Innovative Minds
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Page 59
www.utm.my Inspiring Creative & Innovative Minds
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Page 67
www.utm.my Inspiring Creative & Innovative Minds
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Page 72
www.utm.my Inspiring Creative & Innovative Minds
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
From head-to-head competition to Blue Ocean creation
Head-to-head competition
Blue Ocean Creation
Industry
Focus on rivals within the industry
Look across alternative
industries
Strategic group
Focus on competitive position
within strategic group
Look across strategic groups
within industry
Buyer group
Focus on better serving the buyer
group
Redefine the industry buyer
group
Scope of product Focus on maximizing the value of
or service offering product and service offering within
the bounds of its industry
Look across to complementary
product and service offerings
Functionalemotional
orientation
Focus on improving price
performance within the functionalemotional orientation of its industry
Rethink the functionalemotional orientation of its
industry
Time
Focus on adapting to external trends Participates in shaping external
as they occur
trends over time
www.utm.my Inspiring Creative & Innovative Minds
22
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
FIGURE 4-4
Page 92
www.utm.my Inspiring Creative & Innovative Minds
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Page 104
www.utm.my Inspiring Creative & Innovative Minds
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Page 118
www.utm.my Inspiring Creative & Innovative Minds
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Page 121
www.utm.my Inspiring Creative & Innovative Minds
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Page 128
www.utm.my Inspiring Creative & Innovative Minds
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
Page 136
www.utm.my Inspiring Creative & Innovative Minds
Blue Ocean Strategy
Leadership Discourse. 21 Oct 2011
To-do-list?
● Develop the canvas strategy of global higher
education sector?
● Develop the canvas strategy of higher education
sector in Malaysia?
● Develop the canvas strategy in your respective
sectors (water, energy, transportation etc)?
● Develop the Four Action Framework for UTM
www.utm.my Inspiring Creative & Innovative Minds
29