Red and Blue oceans
The market universe is composed of two types of oceans: red oceans and blue oceans
Red oceans
Red oceans are all the industries
in existence today – the known
market space.
Blue oceans
Blue oceans are all the industries
not in existence today – the
unknown market space.
Red and Blue oceans
Why do we call them red oceans?
Cut-throat competition in existing
industries turns the ocean bloody
red. Hence the term
‘red ocean‘
Why do we call them blue
oceans?
Unexplored and untainted by
competition, ‘blue oceans’ are
vast, deep and powerful in terms
of opportunity and growth.
Red Ocean vs. Blue Ocean strategy
Red ocean strategy
 Compete in existing market space
 Beat the competition
 Differentiation or low cost
 Competitive advantage
 Segment existing customers
 Exploit existing demand
Blue ocean strategy
 Create uncontested market space
 Make the competition irrelevant
 Differentiation and low cost
 Value innovation
 Attract noncustomers
 Create and capture new demand
Value Innovation: the cornerstone of blue ocean strategy
Costs
Value
innovation
Buyer Value
The simultaneous pursuit of differentiation and low cost
Why shift from Red to Blue oceans?
 The world is changing and it’s
affecting everything we do
 Supply is overtaking demand in
more and more industries
 The need for creative new
solutions
 The rise of new global/local
players
 A global shift in future demand
and growth
 The influence of the internet and
social networks
How to shift from red to blue oceans?
Three key components of a successful Blue Ocean Shift
Perspective
Roadmap
Confidence
The mindset of a blue
ocean strategist
Market-creating tools and
process along with clear
guidance on how to apply
them
Humanness that builds
people’s confidence at every
level to drive and own the
process
From market competing to market creating
In pursuit of differentiation or
low cost to compete on the existing
productivity frontier of an industry as
depicted by Michael Porter
In pursuit of differentiation and
low cost to open up a new value-cost
frontier
Formulating
Blue Ocean Strategy
Six principles of Blue Ocean strategy
Formulation Principles
1. Reconstruct market boundaries
2. Focus on the big picture, not the
numbers
3. Reach beyond existing demand
4. Get the strategic sequence right
Execution Principles
1. Overcome key organizational
hurdles
2. Build execution into strategy
Reconstruct market boundaries
Head-to-Head Competition
Blue Ocean Creation
Industry
Focuses on rivals within industry
Looks across the alternative industries
Strategic Group
Focuses on competitive position within
strategic group
Looks across strategic group within industry
Buyer Group
Focuses on better serving the buyer
group
Redefines the industry buyer group
Scope of
product or
service offering
maximizing the value of product and
service offering within the bounds of its
industry
Looks across to complimentary product and
service offering
Functionalemotional
orientation
Focuses on improving price performance
within the functional-emotional
orientation of its industry
Rethinks the functional-emotional orientation
of its industry
Time
Focuses on adopting the external trends
as the occur
Participates in shaping external trends overtime
Focus on the Big Picture, not the numbers
Focus on the
Big Picture,
The four steps of
visualizing strategy
not the numbers
 Visual awakening
 Visual exploration
 Visual strategy fair
 Visual communication
Focus on the Big Picture, not the numbers
Visual Awakening
 Compare your business with your
competitors by drawing your ‘as is’
strategy canvas
 See where your strategy needs to
change
Focus on the Big Picture, not the numbers
Visual Exploration
 Go the field to explore the six paths
to create blue ocean
 Observe the distinctive advantages
of alternative products and services
 See which factors you should
eliminate, reduce, raise, and create
Focus on the Big Picture, not the numbers
Visual Strategy Fair
 Draw your ‘to be’ strategy canvas
based on insights from field
observations
 Get feedback on alternative strategy
canvases from customers,
competitors’ customers, and
noncustomers
 Use feedback to build the best ‘ to
be’ future strategy
Focus on the Big Picture, not the numbers
Visual Communication
 Distribute your before-and-after
strategic profiles on one page for
easy comparison
 Support only those projects and
operations moves that allow your
company to close the gap to
actualize the new strategy
Reach beyond existing demand
Your
Market
 First tier: ‘Soon to be’ noncustomers who are the edge of your
market, waiting to jump ship
 Second Tier: ‘Refusing’ noncustomers who consciously choose
against your market
 Third Tier: ‘Unexplored’ noncustomers who are in markets
distant from yours
Get the strategic sequence right
The sequence of blue ocean strategy
No-Rethink
Buyer utility
Price
Is there exceptional buyer
utility in your business
idea?
Is your price easily
accessible to the mass of
buyers?
No-Rethink
No-Rethink
A commercially
viable blue
ocean idea
No-Rethink
Adoption
Yes
What are adoption
hurdles in actualizing
your business idea?
Cost
Yes
Can you attain your cost
target to profit at your
strategic price?
Executing
Blue Ocean Strategy
Six principles of Blue Ocean strategy
Formulation Principles
1. Reconstruct market boundaries
2. Focus on the big picture, not the
numbers
3. Reach beyond existing demand
4. Get the strategic sequence right
Execution Principles
1. Overcome key organizational
hurdles
2. Build execution into strategy
Overcoming Key organizational hurdles
Cognitive
hurdle
Resource
hurdle
Motivational
hurdle
Political
hurdle
Overcoming Key organizational hurdles
Cognitive hurdle
• Ride the ‘electric sewer’
• Meet with disgruntled customers
Resource hurdle
• Redistribute resources to your hot spot
• Redirect resources from your cold spot
• Engage in horse trading
Motivational hurdle
Political hurdle
• Zoom in on key influencers
• Place key influencers on a fishbowl
• Atomize to get the organization to change itself
• Secure a consigliere on your top management team
• Leverage your angels and silence your devils
Build execution into strategy
Fair process of strategy
Strategy formulation process
Attitudes
Fair process
Engagement, Explanation,
Expectation clarity
Trust and commitment
“I feel my opinion counts”
Behaviour
Strategy execution
Voluntary cooperation
“I’ll go beyond the call of
duty”
Exceeds expectations
Self-initiated
Build execution into strategy
The consequences of the presence and absence of fair process in strategy formulation and execution
Fair process
Violation of
fair process
Intellectual and
emotional
recognition
Intellectual and
emotional
indignation
Trust, commitment
and knowledge
sharing
Distrust,
resentment,
knowledge
withholding
Voluntary
cooperation in
strategy execution
Noncooperation
in strategy
execution
Build execution into strategy Value Proposition
The utility buyers receive from an
offering minus the price the pay for it
Profit Proposition
The revenues an organization generates
from an offering minus the cost to
produce an deliver it
People Proposition
The positive motivations and incentives
put in place for the people needed to
support and implement the
strategy
Achieving strategy alignment
Blue Ocean
Strategy Approach
The alignment of the three
strategy propositions in
pursuit of both differentiation
and low cost
Red Ocean Strategy
Approach
The alignment of the strategy
propositions in pursuit of
either differentiation or low
cost
Blue Ocean
Leadership
Blue ocean leadership can unleash the ocean of untapped talent and
employee potential in organizations
Blue Ocean Leadership in essence, can be thought of as a service
that people in an organization either ‘BUY’ or ‘DON’T BUY’
Conventional Leadership
Development Approaches
Blue Ocean Leadership
Focus on the values, qualities and
behavioral styles
Focus on acts and activities leaders
need to undertake
Detached from market results
people are expected to achieve
Leaders’ actions closely connected
to market realities
Focus mostly on the executive and
senior levels
Distribute leadership across three
management levels
Extra time required for leadership
practices
High impact leadership acts and
activities at low cost
Why we need Blue Ocean Leadership?
Disengaged employees cost our business
In a Gallup study of 25,000 executives and employees it was found that:
Why we need Blue Ocean Leadership?
Disengaged employees cost our business
In a Gallup study of 25,000 executives and employees it was found that: