Kristy Strong, John White, Andrew Maale
The Right Strategic Sequence
 Buyer Utility: Is there a
compelling reason for people to
buy it?
 Park the idea or rethink it
 Setting the right strategic price:
Is your offering priced to attract
the mass of target buyers so they
are compelled to pay?
 Securing profit brings us to cost:
Can you produce your offering at
target cost and still earn profit
margin?
 Adoption hurdles: What are the
hurdles in rolling out your idea?
 Are you addressing them up
front?
Testing for Exceptional Utility
 Is there Exceptional Buyer Utility in your Business Idea
 Need for Buyer Utility
 Phillips’ CD-i
 Bleeding-Edge Technology ≠ Bleeding-Edge Utility
 Value Innovation ≠ Technology Innovation
 Expressly Assess Where and How the new product or
service will change buyers’ lives
Buyer Utility Map (figure)
Buyer Utility Map (explanation)
 Applying the Right Perspective
 Outlines all the Utility Levers companies can pull to
deliver Utility as well as different experiences Buyers
can have
 Managers can identify the full range of utility
propositions that a product or service can offer
Buyer Experience Cycle (figure)
Buyer Experience Cycle
(Explanation)
 Ask Questions about each 6 steps
 Purchase
 Delivery
 Use
 Supplements
 Maintenance
 Disposal
 UPS Buyer Experiences Applied
Six Utility Levers
 What blocks does your
proposed product fill?
 Using this tool, you can
see how and whether
your proposed product
creates untapped utility
for customers
 If your product fills
spaces as other players,
chances are you have not
tapped a Blue Ocean
Model-T Ford Example
From Exceptional Utility to
Strategic Pricing
 Ensures that buyers not only will want to buy your
offering but will also have the ability to pay for it.
 Many companies test the waters of a new product by
targeting price-insensitive customers.
 It is important to know from the start what price will
quickly capture the mass of target buyers.
 Companies are discovering that volume generates higher
returns than it used to.
 Value of a product may be closely tied to the total
number of people using it.

Network externalities-sell millions at once, or nothing at all.
Free Riding
 The use of a rival good by one firm precludes its use by
another.
 Use of a nonrival good by one firm does not limit its
use by another.
 Excludability is a function both of the nature of the
good and of the legal system.
The Price Corridor of the Mass
Step 1
 Identify the Price Corridor of the Mass
 Look at other products with in the same industry.
 Compare it to different products offered by nontraditional competitors.
 Different form, same function
 Model T vs. horse drawn carriages.
 Different form and function, same objective.
 Bars vs. restaurants vs. movies.
Step 2
 Specify a level within the Price Corridor.
 Determines how high a price they can afford to set
without bringing in competition.
 Degree to which the product is protected legally.
 Degree to which the company owns exclusive asset or
core capability.
From Strategic Pricing to Target
Costing
 Price-minus costing, not cost-plus pricing.
 To hit the cost target, companies have 3 principal
levers
 Streamlining and cost innovations
 Partnering
 Changing the pricing model of the industry.
Streamlining and Cost Innovations
 Streamlining operations
 You can shorten the number of parts or steps used in
production by shifting the way things are made.
 Introducing cost innovations from
 Manufacturing
 Distribution
Partnering
 Many companies mistakenly try to carry out all the
production and distribution activities themselves.
 Partnering allows a company to leverage other
companies expertise and economies of scale.
 Can be faster and cheaper.
Changing the Pricing Model
“Pricing Innovation”
 Sometimes no amount of streamlining or partnering
will make it possible for a company to hit its target
cost.
 Blockbuster changed their model from selling to
renting.
 Equity Interest
 HP trades high-powered servers to Silicon Valley startups for a share of their revenue.
The profit model
From Utility, Price, and Cost to
Adoption
 Educate the fearful
 3 main stakeholders
 Employees
 Business partners
 General public
Employees
 Communicate the threats of the idea
 Work with them to find ways to defuse the threats
 “Get the right people on the bus”
Business partners
 Discuss the issues with the partners
 Convince them what they have more to gain by
cooperating
 And what there is to compensate from lost revenue
General Public
 By educating the public, you can help your company
by avoiding any activist groups
 Let them know you have included them and that they
have a voice
 No surprises
Blue Ocean Idea Index
 Yet Another Test to form an integral whole to ensure
commercial success
 Examples to Illustrate this Test
 Phillips CD-I
 Motorola Iriduim
 DoCoMo i-mode Japan
Illustration of Blue Ocean Idea
Index
Phillips CD-i
Motorola Iridium
DoCoMo i-mode Japan
What next?
 After passing the Blue Ocean Idea Index test, the
company can shift from Blue Ocean Strategy to
Execution
 How do you bring an Organization with you to execute
this strategy even though it represents a different
departure from the past?
 Answer: Overcoming key organizational hurdles—
Tomorrow’s BOS presentation