Crystal Hill
Stephen Lechtenberg
Anand McGee
Allison Purtell
Jason Torres
Reconstruct Market Boundaries
 Challenge: Successfully identify, out of the
possibilities that exist, commercially compelling
blue ocean opportunities
Six Paths Framework:
 Clear patters for creating blue oceans
 They have general applicability across industry
sectors, and they lead companies into the corridor
of commercially viable blue ocean ideas
 These paths challenge the fundamental
assumptions underlying many companies
strategies
Six Fundamental Assumptions:
Keep companies trapped in Red Oceans
 Define their industry similarly and focus on being the best
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within it
Look at their industries through the lens of generally
accepted strategic groups, and strive to stand out in the
strategic group they are in
Focus on the same buyer group, whether it’s the purchaser,
user, or influencer
Define the scope of the products and services offered by
their industry similarly
Accept their industry’s functional and emotional
orientation
Focus on the same point in time-and often on current
competitive threats-in formulating strategy
Path 1:Look Across Alternative
Industries
 Companies compete not only with the other
companies in its own industry but also with companies
in those other industries that produce alternative
products or services.
 Alternatives are broader than substitutes
-Example: Starbucks
 Substitutes: House Blend, French Blend, Latin American
Blends, Asian Pacific Blends, etc.
 Alternatives: Tazo Teas for Coffee
Path 1: Look Across Alternative
Industries, cont.
 In making every purchase decision, buyers implicitly
weigh alternatives, often unconsciously
 Sellers rarely think consciously about how their
customers make trade-offs across alternative
industries
 Space between alternative industries provides
opportunities for value innovation
 By focusing on the key factors that lead buyers to trade
across alternative industries and eliminating or
reducing everything else, you can create a blue ocean
of new market space
Examples: Companies Looking
Across Alternative Industries
 Home Depot:
 Offer the expertise of professional home contractors at
markedly lower prices than hardware stores
 By delivering the decisive advantages of both alternative
industries, and eliminating or reducing everything else,
they have transformed the ordinary homeowners into
do-it-yourselfers
 Southwest Airlines:
 Concentrated on driving as the alternative to flying,
provided the speed of air travel at the price of car travel
Examples cont: Starbucks
 Starbucks looked across alternative industries and
entered the markets of:
 Ice-Cream
 CD’s, books
 Drinkware-cups, mugs, tumblers
 Instant Coffee
 Brewing Equipment
Path 2: Look Across Strategic
Groups Within Industries
 Figure out which factors determine customers to trade
up or down from one group to another
 Examples:
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
Ralph Lauren
Lexus
Curves For Women
 Women trade up or down between:
 At home exercise programs

More convenient, but easy to get distracted
 High end health clubs
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Lots of men, expensive, inconvenient
 Developed new concept
 Women only, more locations, smaller buildings, cheap
to join and manage.
Path 3: Look Across the Chain
of Buyers
 Purchasers, users, and influencers
 Companies usually focus on a single buyer group
 Create blue ocean by shifting buyer group
 Novo Nordisk
 From insulin producers to diabetic care company
 Starbucks
 Selling coffee beans to grocery stores
PATH 4: Look Across Complementary
Product & Service Offerings
 Most products and services are affected by other
products or services
 Many companies fail to notice this
 The key is to define a solution buyers seek when they
choose a product or service
 A simple way to do this is to think about what happens
 Before
 During
 After
NABI
 Hungarian bus company that applied Path 4 to U.S.
transit bus industry
 Competition competed on offering the lowest
purchase price for buses
 But,
 Designs outdated
 Delivery times were late
 Quality was low
NABI
 Discovered it was costs that came after initial bus was
purchased
 Maintenance over it’s 12 year cycle
 Repairs after accidents
 Fuel usage
 Wear and tear
 Rusting
 Rising demand for cleaner air
NABI Finds Total Solution
 Normally made of steel
 Heavy
 Corrosive
 Hard to replace parts after accidents
 NABI adopted fiberglass when making it’s buses
 Solution that killed 5 birds with one stone
Fiberglass Buses
 Cut costs by being corrosion free
 Light weight cut fuel consumption and emissions
 After accidents they didn’t have to replace a whole
panel rather they could cut the damaged area and
replace it
 Lighter weight also meant lower powered engines and
fewer axles which cut costs
 And gave more space inside the bus
Now we must ask ourselves
 Context of how our product or service is used
 What happens before, during and after the product or
service is used
 How to eliminate problem areas through a
complementary product or service offering
Path 5: Look Across Functional or
Emotional Appeal to Buyers
 Emotionally Oriented
 Add price without enhancing functionality .
 Functionally Oriented
 Blend commodity products with life by adding emotion.
 Examples:
 Swatch, The Body Shop, Quick Beauty House
Quick Beauty House
 Created a Blue Ocean in the Japanese barbershop
industry.
 Shift from emotional to highly functional
 Eliminated the time and cost of getting a haircut
 Re-defined the Japanese barbershop industry.
Cemex
 The world’s third largest cement producer.
 Created a blue ocean by shifting from functional to
emotional.
 Mexico’s poor didn’t have enough money to purchase
building materials.
Patrimonio Hoy
 Created around the traditional Mexican system of
tandas.
 Example:
 Ten individuals contribute 100 pesos per week for 10
weeks. Lots are drawn to see who wins the 1,000 pesos.
Each individual wins one time only.
 Patrimonio Hoy works in the same way.
Functional Orientation
 Service Industries
 Direct Line Group has done away with traditional
brokers.
 Eliminating emotional orientation
 Vanguard Group, Charles Schwab
Path 6: Look Across Time
 What companies tend to do:
 Focus on same point in time
 Passive actions
 Projecting trend itself
 External Threats
 What companies need to do:
 Look into time
 Don’t predict future
 How the trend will bring Value
Assessing Trends
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Three principles:
The trends must be decisive to your business
2) They must be irreversible
3) They must have a clear trajectory
1)
-Impact on your business
-Work back from conclusion
-Ex: EU, iTunes, Cisco, CNN, Sex and the City
Conceiving New Market Space
 Think across conventional Boundaries
 Don’t rely on trial/error, predicting, intuition
 Engage in structured process
 Questions?