Blue Ocean Strategy
Book Review
Team 4:
Crystal Hill
Stephen Lechtenberg
Anand McGee
Allison Purtell
Jason Torres
Strategic Move
• Correct unit of analysis for explaining the
creation of blue oceans and sustained high
performance, versus the company or
industry
• Set of managerial actions and decisions
involved in making a major marketcreated business offering
Red Ocean vs. Blue Ocean
Red Oceans – Conventional Approach
• Focus on beating the competition
• Compete in existing market space
• Build a defendable position within the existing industry
• Use competition as a benchmark
• Exploit existing demand
• Choice between differentiation and low cost
- Greater value for customers at a higher cost or a
reasonable value at a lower cost
Blue Oceans – Value Innovation (to capture market)
• Make competition irrelevant
• Create a leap in value for buyers and the company
• Create new a market space
• Pursue both differentiation and low cost
The Strategy Canvas
• Captures current state in known market
space
• Fundamentally shift from focus on
competitors to alternatives and customers
to non customers
• Enables companies to see the future in the
present
• Tells you if you’re drifting into a red ocean
– Time to value innovate
The Four Actions Framework
2. Reduce
Which factors should be
reduced well below the
industry standard?
1. Eliminate
Which factors that the
industry takes for
granted should be
eliminated?
A New Value
Curve
3. Raise
Which factors should be
raised well above the
industry standard?
4. Create
Which factors should be
created that the
industry has not seen
before?
Eliminate-Reduce-Raise-Create
Grid
The Case Of Starbucks
Eliminate
Raise
Underperforming Stores
Education of coffee with
employees
Reduce
Create
Amount of time employees
spend making individual drinks
More loyalty rewards
A “better everyday brew”
Calories in certain specialty
drinks
Challenge Fundamental
Assumptions
Find Blue Oceans by looking at
the six paths of framework:
1.)
2.)
3.)
4.)
5.)
6.)
Look
Look
Look
Look
Look
Look
across
across
across
across
across
across
alternative industries
strategic groups within industries
the chain of buyers
complementary product service offerings
functional of emotional appeal to buyers
time
Think Outside the Box
• Focus on the big picture instead of
numbers.
– Potential blue oceans have focus, divergence,
and a compelling tagline.
• Use Pioneer-Migrator-Settler Map
– Pioneers- unprecedented value, profitable
– Migrators- improved value but not innovative
– Settlers- conform to red oceans
Reaching beyond existing demand
• Looking to non customers
• Finding what buyers value
• 3 tiers of non consumers
– Soon to be customers
– Refusing customers
– Unexplored customers
Get the right strategic sequence
• Building a blue ocean through buyer:
– Utility, price, cost and adoption
• Testing for exceptional utility
• Choosing the right strategic price
• Target costing
• Cost Adoption
Overcoming Key Organizational
Hurdles
• Managers face four hurdles:
– Cognitive: waking employees up to the need
for a strategic shift.
– Limited Resources
– Motivation
– Politics
Tipping Point Leadership in
Action
• Strategy allows you to overcome the four hurdles
• Bill Bratton appointed police chief of New York
• Murder, muggings, mafia hits, armed robberies at an
all time high, department morale at an all time low.
• After two years:
• Felony crime fell 39%
• Murders 50%
• Theft 30%
• Public confidence in NYPD jumped from 37% to
73%
• It was his 5th strategic reversal
Breaking Through the Cognitive
Hurdle
• Ride the “electric sewer” (New York
Subway)
– Showing the worst reality to superiors and
underlings can shift their mindset fast
• Meet with disgruntled Customers
– Boston’s Police District 4
– Determined there was a gap in perceptions
between residents and police.
Jump the Resource Hurdle
• Hot Spots, Cold Spots, and Horse Trading
• Redistribute Resources to Your Hot Spots
• Redirect Resources from your Cold Spots
• Engage in Horse Trading
Jump the Motivational Hurdle
• kingpins, fishbowl management, and
atomization
• Zoom in on all Kingpins
• Place Kingpins in a Fishbowl
• Atomize to Get the Organization to change
itself.
Knock Over the Political Hurdle
• Angels, Devils, and Consigliere
• Secure a Consilgiere on your top
management team
• Leverage your angels and silence your
devils
• Challenge conventional wisdom
The Power of Fair Process
• Imperative to strategy execution
• Must reflect attitude and behavior deep
within the organization
• Trepidation
• Key variable in Blue Ocean Strategy
• People concerned about the actual process
The 3 E’s of Fair Process
• Expectation Clarity
– Standards of Judgement
• Explanation
– Everyone should understand
• Engagement
– Encouraging involvement
Why Fair Process Matters
• People at the front lines care
• Intellectual and Emotional Recognition
Theory
• Blue Oceans:
– Intangible capital
– Building strategy formulation with execution
– Trust and Trust