Blue Ocean
Strategy:
Reconstruct
Market
Boundaries
•Joel
Hand
•Rachel Harless
•Jessica Moore
•Priscilla Cones
•Andrew Merlino
•Clete Donovan
•Amanda Carey
Six Paths Framework
•
Six assumptions which many companies build their
strategies around
•
Keeps companies trapped in red oceans
•
Companies must break these boundaries to form blue
oceans
•
Managers must look across these boundaries
•
Across alternative industries, strategic groups, etc…
Reconstructing Market Boundaries
•
Creating Blue Oceans
•
Reconstruct market boundaries
• Identify the possibilities that exist
• Look at the six paths framework
•
Six paths
•
Six basic approaches to remaking market boundaries
• Leading companies to visible blue ocean ideas
Path 1: Look Across Alternative
Industries
•
Companies compete with their competitors as well as
alternatives to their product or services
•
Substitutes
•
Alternatives
-Example: Coca-Cola
•
•
Substitutes: Pepsi, Dr. Pepper
Alternatives: Tap Water, Freshly squeezed fruit or vegetable juice, Wine,
Milk, Coffee
Path 1: Look Across Alternative
Industries

Buyers implicitly weigh purchasing alternatives, often
unconsciously

Sellers rarely think about how their customers make trade-offs
with alternatives

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
NetJets
•
Successful company using Fractional Jet Ownership as its blue
ocean strategy
•
For only $375,000 (plus pilot, maintenance, and other monthly
costs), a corporation can own one sixteenth share of a $6 million
aircraft
•
Point to point flights
•
Alternative Charters
•
Favorite foods and drinks
Examples: Companies Looking Across
Alternative Industries
•
Home Depot:
•
•
•
Expertise of professional home contractors at markedly lower prices than
hardware stores
They have transformed ordinary homeowners into do-it-yourselfers
Southwest Airlines:
•
Speed of air travel at price of car travel
Coca-Cola
•
Coca-Cola looked across alternative industries and entered the
markets of:
•
•
•
•
Sporting Events
Bowling Alleys
Movie Theaters
Make themselves available to all thirsty consumers
Path 2: Look Across Strategic Groups Within
Industries
•
Unlock Blue Oceans by looking across strategic groups
•
Can be ranked in order by two dimensions:
•
Price and performance
Creating a Blue Ocean
•
Breaking out of a “tunnel vision” focus
•
Understanding factors driving customer’s
decisions to trade up or down from one group to
another
•
Breaking an “oversaturated” market
•
Targeting Strategic Groups
• Traditional health clubs and home exercise programs
• Advantages/Strengths
• Eliminated the rest
•
Not competing directly with other health groups
• Created new Blue Ocean demand
Other Examples:
•
Toyota Lexus
• High quality luxury, but lower prices
•
Sony Walkman
• Inexpensive boom boxes and transistor radios
•
Champion Enterprises
• Prefabricated Houses and on site developers
•
Coca-Cola
Path 3: Look across the chain of
buyers
•
Chain of Buyers
•
Competitors come together on a common definition of a
target buyer
•
There is a chain of buyers
•
Buyers are directly or indirectly involved in the buying
decision
Three Buyer Categories
1. Purchasers
2. Users
3. Influencers
•
Individual companies often target different customer segments
•
-ex: Large vs small customers
•
An industry typically comes together at a single buyer group
•
Such as:
•
Pharmaceutical industry on influencers: doctors
•
Office equipment industry on purchasers: corporate purchasing
department
•
Clothing industry sells predominately to users
When someone challenges industries wisdom
about which buyer group to target can lead to
new ocean discoveries.
Novo Nordisk
•
Danish insulin producer
•
Created blue ocean in insulin industry
•
Changed focus from influencers (doctors) to users
(patients)
•
Created NovoPen, first user friendly insulin delivery solution
•
Novo Nordisk’s blue ocean strategy shifted the industry
landscape.
•
It changed the company from an insulin producer to
diabetes care industry.
Bloomberg
•
Until 1980’s Reuters and Telerate dominated online financial
information industry
•
Reuters and Telerate focused on purchasers (IT managers)
•
Bloomberg redesigned system catered to traders
•
Made a system that was easy to use:
• Keyboards labeled in financial terms
• Two flat panel monitors to see all information
• Built in analytic capability to run “what it” scenarios
Other Industries Blue Ocean
Changes
•
Canon
•
Shifted from corporate purchasers to users
•
Made small desktop copier industry
•
SAP
•
Shifted focus of business application software from functional user to
corporate purchaser
•
Created successful real-time integrated software business
•
Coca Cola focuses heavily on the purchasers and users of the
product.
Path 4: Look Across Complementary
Product and Service Offerings
•
Before, During, After
-Example: Movie theatre/ Babysitting
•
Key: Find the Total Solution
•
Example: Coca-Cola
NABI
•
Rags to Riches- 1 Billion
•
The Highest cost factors= During process
Started a Blue Ocean
•
Adopted Fiberglass
•
“Killed 5 birds with one stone”
•
Raised Customer Service Level
Other Examples
•
The British Teakettle
•
Barnes & Nobles
•
Virgin Entertainment
•
Dyson
Competition in Industries
•
Two bases of appeal: functional/rational, emotional
•
Rarely intrinsically one or the other
•
Challenge orientation of industry
QB House
•
Japanese Barber Shop industry
•
57,000 visitors (1996) to 3.5 million (2002)
•
Created “no-nonsense” haircuts
•
Reduced extra service, time, and costs
•
Improved savings and hygiene
Cemex
•
Cement production industry in Mexico
•
Launched Patrimonio Hoy program
•
Created Supertanda
•
“Sold a dream”
•
Achieved differentiation while cutting costs
•
Increased usage of PET recycling
•
Less energy/resources, preserves fossil fuels
Path 6
•
By looking at external trends with the right perspective,
it can show you how to create blue ocean
opportunities.
•
Key insights into blue ocean strategy arise from
business insights into how the trend will change value
to customers and impact the company’s business
model.
3 Principles that are critical to
assessing trends across time
•
1. Must be decisive to your business
•
2. Must be irreversible
•
3. Must have a clear trajectory
The Euro
•
Has been evolving along a constant trajectory as it has
been replacing Europe’s multiple currencies.
•
It is decisive, irreversible, and clearly developing a
trend in financial services.
•
These are the principles upon which blue oceans can
be created as the European Union continues to
enlarge.
Apple & iTunes
•
Trend of illegally downloading music
•
This trend was underscored by the fast growing demand for MP3
players
•
Apple capitalized on this decisive trend with a clear trajectory by
launching the iTunes online music store in 2003.
•
Partnered with 5 major music companies
•
They created a marketplace where you are legally allowed to only
download the specific songs.
•
•
Broke key customer annoyance
Apple’s iTunes is unlocking a blue ocean in digital music, with the
added advantage of increasing the attractiveness of its already hot
iPod player.
Cisco Systems
•
Cisco Systems created a new market space by thing across
time trends.
•
Started with a decisive and irreversible trend that had a clear
trajectory
• The growing demand for high-speed data exchange
•
Created high-speed value for customers in a seamless
networking environment.
•
80% of all traffic on the Internet goes through Cisco’s
products.
From Head-to-Head Competition to
Blue Ocean Creation
•
Through reconstructing existing market elements
across industry and market boundaries, they will be
able to free themselves from head-to-head competition
in the red ocean.
Relation to Coke
•
Coca Cola continually develops programs that ensure the
creation of social and economic value by fostering the
quality of life of our employees, promoting a culture of
health and well-being, supporting our surrounding
communities and minimizing our operations’ environmental
impact. This relates to the “Functional-emotional
orientation, which under the Blue Ocean Creation, rethinks
the functional-emotional orientation of its industry.