Blue Oceans and Other BIG Strategic Ideas

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Blue Oceans and Other BIG Strategic Ideas
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What You Will Learn

• Become familiar with concepts behind Blue Ocean
  Strategy
• Learn what MPI has done to apply Blue Ocean
  concepts to your association
• Learn about net creation and open innovation
• Formulate ideas on how you might be able to apply
  these ideas to your own work

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• Red Oceans represent all industries in existence
  today.
• They have defined rules, competitors, and market
  boundaries.
• Key words might include competition, price wars,
  market share, commoditization, benchmarking,
  strategic positioning, value add.

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• Blue Oceans represent all industries
• NOT
• in existence today.
• This is undefined market space, otherwise known
  as OPPORTUNITY.
• Key words might be value innovation, focus,
  differentiation, creation of demand, new
  marketplace

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• Most blue oceans are created from red ocean
  companies expanding industry boundaries.
• For example, Cirque du Soleil or yellowtail
• (more on this in a bit)

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• The phrase Blue oceans is new, but the concept
  is not. Think of what industries existed in
  1900.
• Take 3 minutes
• At your table, brainstorm a list of industries
  that have emerged since then.

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• Some of them might be
• automotives, aviation, health care, plastics,
  DVDs, computers, personal entertainment devices
  (iPods, for example).
• All of these industries created
• new market space.

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• The premise is simple
• To win in the future, companies must stop
  competing with each other.
• The only way to beat the competition is to stop
  trying to beat the competition.

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• The business environment in which most business
  strategy and management has been based on is
  changing, evolving or disappearing.
• Some of this change is due to technology. Other
  reasons might be culture, globalization, speed of
  new information, or the role of demographics in
  the workplace.

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• Value innovation is the new strategic logic
  behind Blue Ocean Strategy.
• Instead of focussing on beating the competition,
  you focus on making it irrelevant by creating a
  leap in value for buyers and creating uncontested
  market space.

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• Value innovation only occurs when organizations
  have aligned innovation with utility, price and
  costs.
• The market must be ready to accept the product,
  meaning that timing is key.
• The focus is on both differentiation and low cost
  to provide value to both customers and the
  organization.

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Graph of Value Innovation
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Case study Cirque du Soleil

• Other circuses focused on
• Benchmarking the competition
• High-profile stars, which increased costs but
  who were largely unknown to the general public
• Traditional venue
• Traditional audiences

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Case study Cirque du Soleil

• Cirque du Soleil focused on
• Creation of a hybrid between the circus and the
  theatre
• Retention of the symbolic and glamorous aspects
  of circus, such as the tent and the more
  breathtaking aspects, such as acrobats
• Incorporation of more comfort, sophistication,
  elegance and theatrical plots this brought not
  only the richness of theatre but a whole new
  demographic of customers
• It looked across market boundaries and created
  new ones.

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The Strategy Canvas

• Captures the current state of play in the market
  by detailing the factors players compete on in
  product, service and delivery
• For example, the wine industry competes on price
  per bottle, refined image in packaging, marketing
  strategies, aging quality of wine, prestige of
  vineyard, complexity of taste and diverse product
  range

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The Strategy Canvas

• Each factor is plotted on the canvas, with a high
  score reflecting the level of investment a
  specific company makes in that factor (for
  example a high score on price means that the
  price per bottle is high)
• When you plot all US wineries, they score
  remarkably similarly

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Example of a Strategy Canvas
Blue Ocean Space
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The Strategy Canvas

• To differentiate yourself in the market place,
  you must focus on alternatives and non-customers
  to re-define the marketplace
• For example, Casella Wines looked at the strategy
  canvas and redefined the question How do you
  make a fun and non traditional wine that is easy
  for everyone to drink?

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Case Study yellowtail

• Casella saw that most US consumers preferred
  beer, spirits and pre-packaged cocktails to wine
• Consumers saw wine as a turn-off due to
• It was pretentious
• The taste was too complex
• It could be intimidating

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Case Study yellowtail

• They created a wine that broke out of the red
  ocean by creating a wine that
• Appealed to beer and spirits drinkers by being
  fun and unpretentious as well as to wine drinkers
• Had a less complex, sweeter and smooth taste
• Was easy to select as it did not focus on
  prestige, aging, etc.
• They eliminated all factors that the wine
  industry had long competed on

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Four Actions Eliminate/Reduce/Raise/Create

• Which of the factors that the industry takes for
  granted should be eliminated?
• Which should be reduced?
• Which should be raised well above standard?
• Which factors should be created that have not
  existed before?

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3 Characteristics of a Good Strategy

• It is focused it is not diffused across all
  potential aspects of the market
• The shape of the value curve diverges from any
  potential competitors
• It has a compelling tagline

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Your Strategy Canvas

• At your table, choose an industry one (or more)
  of you belong to.
• What industry are you in?
• What factors does it traditionally compete on?
  (i.e. price, amenities, etc.)
• Are there any factors that set you apart?
• Are there any factors that do not add any value
  and could be dropped?
• What could be created to add value?

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Creation Nets and Open Innovation

• Open innovation is the concept that by looking
  beyond your own boundaries, you can gain access
  to better ideas, knowledge and technology than
  you could by relying on your own resources
• Networks of creation, or Creation Nets are an
  extension of this concept

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Creation Nets

• Involve many sometimes hundreds or even
  thousands of people from diverse backgrounds
  coming together, often over the internet, to
  create knowledge, learn best practices, and build
  on each others work.
• Nobody is as smart as everybody
• William C. Taylor, Founder of Fast Company

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The Positive Press

• For companies, creation nets have many
  advantages
• The rapid flow of change in todays economy makes
  new knowledge valuable, as opposed to the past
  where a private knowledge base could give value
  overlong periods
• Greater access to intellectual resources
• Greater access to new and different technologies
• Ability to tap into knowledge across traditional
  knowledge boundaries and industries
• Creative breakthroughs

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The Negative Press

• Trust can be hard to establish
• Concerns about proprietary information
• Large groups of people working to innovate
  together can be hard to control
• Conflict among participants increases the more
  people involved
• Different tolerances for cost
• Uncertainty on how to create value
• Loss of confidence in own abilities

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Net Creation at Work

• Development of iPod was stimulated through a
  creation net formed by a smaller player in the
  marketplace, PortalPlayer
• The development of Linux, a computer operating
  system, was through net creation and involved
  companies such as IBM, Intel and Hewlett Packard
• The discovery of gold in an Ontario mine at
  Goldcorp, today considered the worlds richest
  mine

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Net Creation at Work

• Development of the internet itself
• The worlds most important technology platform
  relies on ideas and computer code generated
  largely by a decentralized corps of volunteer
  programmers, most of whom have never met each
  other and few of whom work together in any formal
  setting
• William C. Taylor, Mavericks at Work

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Net Creation Summary

• Just because you are in charge doesnt mean you
  need to have all the answers
• Just because people dont work for you doesnt
  mean that they cant work with youbut you have
  to invite them
• No one is as smart as everyone
• It is about the architecture of participation
  (Tom OReilly, OReilly Media)

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Personal Creation Networks

• Find a partner
• How can you utilize this concept either
  personally or at work?
• What technology exists that you can use?
• At your table
• Share your ideas.
• Pick one that you can share with the room