Getting the Strategic Sequence
Right
Blue Ocean Strategy, Chapter 6
Paul Shirley
Jonathan McLaurin
Marsha Swink
The Fourth Principle of Blue Ocean
Strategy
• Build a robust business model to ensure that you
make a healthy profit on your blue ocean idea
• The Strategy Sequence
▫
▫
▫
▫
Buyer utility
Price
Cost
Adoption
Buyer utility
Is there exceptional
buyer utility in your
business idea?
No- Rethink
Yes
Revenue side of the
business model
Price
Is your price easily
accessibly to the
mass of buyers?
Yes
Cost
No- Rethink
Cost
Can you attain your
cost target to profit
at your strategic
price?
No- Rethink
Yes
Adoption
What are the
adoption hurdles in
actualizing your
business idea?
Are you addressing
them up front?
Yes
Viable Blue
Ocean Idea
No- Rethink
Buyer Utility
• Don’t get caught in the trap!
• Use the Buyer Utility Map
Buyer Utility Map
The Six Stages of the Buyer Experience Cycle
Purchase
The Six Utility Levers
Customer
productivity
Simplicity
Convenience
Risk
Fun and Image
Environmental
Friendliness
Delivery
Use
Supplements
Maintenance
Disposal
Buyer Utility Map-Wholesale Store
The Six Stages of the Buyer Experience Cycle
The Six Utility Levers
Purchase
Delivery
Customer
productivity
X
Simplicity
X
X
Convenience
X
X
Risk
Fun and Image
Environmental
Friendliness
X
Use
Supplements
Maintenance
Disposal
Blue Ocean Strategic Pricing
• Want and Compelling Ability to Pay
▫ Finding the Right Price
• Excludability
▫ Originators or Followers-Imitators
• Combine with Exceptional Utility
The Price Corridor of the Mass
• Step 1- Identify the Price Corridor
1. Same Form- Same Products or Services.
2. Different Form, Same Function- Different look,
but same use.
3. Different Form and Function- Completely
different, but same overall objective.
The Price Corridor of the Mass
• Step 2- Price level within the price corridor
▫ Upper-level Pricing- Many Patents and Asset
protection
▫ Mid-level Pricing- Fewer patents and Asset safeguards
▫ Lower-level Pricing- With out patent protection.
Costco- Volume brings cost advantages
Target Costing-The Profit Side
• Price Minus Costing- To arrive at a desired
profit.
• Working Backwards to arrive at the Target Cost.
▫ Support the necessities and still make a profit.
• Three Levers to achieve the Target Cost.
Lever One - Streamlining and Cost
Innovations
• Most effective and efficient ways of achieving the
same task
• Outsourcing, simplifying, choosing locations
• Unconventional means of production.
Lever Two - Partnering
• Using other’s expertise
▫ Averret Trucking for Inbound and Outbound
shipping
• Acquisitions
• Vertical and Horizontal Integration
Lever Three – Pricing Innovation
• Changing the Price Model
▫ If all else fails, change it!
• Using other industry’s price models.
• Buying-Leasing-Renting
Main Stakeholders
Educate
Keys
• Employees
• Open discussion for why
• Set clear expectations
• Business Partners
• Explain its merits
• General Public
• Need voices of shareholders to
be heard
• No surprises
Blue Ocean Idea Index
Costco’s
Car Wash
Utility
Is there exceptional utility? Are there
compelling reasons to buy your offering?
+
Price
Is your price easily accessible to the mass of
buyers?
+
Cost
Does your cost structure meet the target
cost?
+
Adoption Have you addressed adoption hurdles up
front?
+/-
What’s Next
After Passing BOI Index
• Shift gears to execution
• 5th principle of BOS
Overcoming key organizational hurdles
Take Aways
• Utility Map
• If all else fails, change your price model
• BOI Index