Blue Ocean Strategy, BOS

-> IDEA: market is like an ocean and all companies are fishes. The one that have similar size eat each other.

• Is considered the alternative/ complementary approach to Porter’s.

Introduction:

-> Models are not necessarily fast creatively.

-> We have to find an approach to stimulate strtegic innovation.

 ❓How can we define strategic innovation?

• Competitive Advantage;
• Business Model: structure and model to develop the strategy;
• Innovatinv strategy: find new sources of competitive advantage. If the BM is strategy execution & we want to execute strategy innovation => We have to change our business model.

History:

• 2004 first article of BOS;
• 2005 become a book;

Characteristics:

• Look for the new markets/ industries, existing competitors not relevant;
• AIM at developing products/ value propositions targeted to the largest possible audience;
• Mainly VISUAL APPROACH to stimulate crativity
• Focus on some “simple” tools to support the identification of potential innovation

Types of Oceans:

RED OCEANS:

-> DEF: all the industries in existence today- the known market space.

• Clear market boundaries;
• Rules are defined and accepted;
• Every company try to grab a greater share of existing demand.

BLUE OCEANS:

-> DEF: all the industries not in existence today – the unknown market space, untainted by competition.

• Demand is created.

-> Create an uncontested market space and make the competition irrilevant => You are enjoing monopoly return.

-> E.g. when the first iphone was released was not a phone, was something else in a blue ocean.

• Try to capture a new demand;
• Riconfiguration of the existing market;

Origins:

• Can rise to completely new industry (like eBay);
• Is created from within a red ocean when a company alters the boundaries of an existing industry (as Cirque du Soleil did with the circus industry)
• It’s not about technological innovation: blue ocean creators link the underlaying technology to what buyers value.

Implementation of the process:

1.Strategic Cureves, As-Is:

-> In the first step we have to evaluate the “as-is” market situation with the As-Is Value Curve.

• Rappresent the competition from existing competitors.

-> DEF AS-IS VALUE CURVES: rappresent the intensity of the competitors for things customers are looking for.

1. Define the market, the industry Clients.

E.g. Car market.

1. Identification of the value attributes within the industry: Deifne what are the char looking for a car? There are lot’s of element to looking for. E.g.
   • Price;
   • Safety;
   • Performance (fuel efficiency);
   • Reliability;
   • Desing

VALUE ATTRIBUTES: are that things that customers are looking for in the market.

-> Important features:

	-> They need to have a financial or managerial impact (e.g. dedicated time, focus, …) on the Company; E.g. not “brand” but “marketing above the line”
	-> Clients have to assign a value to the attribute; Not an internal factor, but a perceived benefit E.g. not “know-how” but “tailor made solutions”

-> Furtermore:

1. Valide for the whole industry;
2. Limited in number (e.g. < 8) to enable proper focalization;
3. Clear, simple, but also sufficiently specific (e.g. not “quality” but “quality of the product related to the packaging”);
4. Gullible by the actions of a company.

3. Identification and positioning of the strategic group: Define competitors:

INTENSITY LEVEL of OFFER (1-5): try to position exisiting competitiors that are in the market.

4. The curve come from defining the dots.

Red-dashed curve: competitors;

Green-continuing curve: our company.

-> Quantitive analysis by listening multiple voices:

1. Employees of the company;
2. Sentiment analysis of customers;

-> We don’t need to have it accurate;

-> POV: rappresenting customers. Based on the customer, how competitor are based respect us.

2.Brainstorming, Through BOS:

-> In this stage we try to find new innovation paths and customer intrested in these

• Supporting our attempt to find something new.

2.1) 6 innovation Paths:

-> DEF: model telling us that if we want to innovate we can’t look only to our business area, but somewhere else.

📌Enahance strategice “lateral thinking”.

• STRATEGIC GROUP: group of strategical competitors;

-> Find clusters and ask yourself if i can reshuffle things or if I can find something intresting for them.

• BUYER GROUP:

-> We can find o create a new segmentation

• PRODUCT/ SERVICE OFFERING:

COMPLEMENTAR: increasing value of your offer. E.g.: coffy and croissant, together are increasing the value.

• FUNCTIONAL-EMOTIONAL:

-> Are about the functional or emotional characteristics of a product.

-> You can rebalance these two categories to change the feeling that customer have about the products;

Realization:

INDUSTRY:	Which are the industries that satisfy the same needs or complementary needs? On which features does the company need to focus, in order to get closer to these other sectors?
STRATEGIC GROUPS	Which are the drivers that bring the clients to the decision of buying our products/ services  or to “differently” satsfy the same need?
BUYER GROUPS	On which buyer groups does the current market focus? Direct clients or clients’client? Which type of values can be created, by a shift of the purchase decision?
SCOPE OF PRODUCT/ SERVICE OFFERING	How does the product/ service fit in the adoption experience of the customer? What happens before and after the usage? Is it possible to add complementary products/ services? Is it possible to shift the focus towards the service or towards the product?
FUNCTIONAL/ EMOTIONAL ORIENTATION	If the competition is concentrated on the functional (emotional) appeal, which emotional (functional) elements could be integrated?
LOOK ACROSS TIME	Which trend will most probably hit the sector? What does the endless exrtapolation of this trend imply? How is it possible to exploit this trend?

2.2) Non-Clients’ Framework:

-> Companies want to focus on the the segment of client called “non-client”: are that client that are not, already, your client.

• Following the idea that company has to find new ocean (BLU one) even new clients.
• Rappresent the new demand.

• SOON-TO-BE NON-CLIENTS: currently buying a car, but could be frustrated or not happy about the product and are searching another solution.
• HINDERED NON-CLIENTS: are customer who never though to buy a car because there are adoption barriers;
• UNEXPLORED NON-CLIENTS: people who never even thouth to buy a car because create pollution. -> Electrical one.

3.Re-Creating the Value Curves:

-> Once defined the characteristics (innovation, values, clients) of the new market, we try to understand how move from the hold industry to the new one.

3.1) The “4 Action” framework:

-> We know what are the sources

• ELIMINATE old value attributes that don’t fit anymore with the market.
• REDUCE value attributes that are important, because they improve the value, but not so much

-> Usually key resources.

• INCREASE/ INCREASE:
• CREATE: new things that are created;

3.2) Profitable Growth Equation:

• VALUE INNOVATION: created in the region where a company’s actions faborabiliy affect both cost structure and its value proporisition to buyers;
• COST SAVINGS: made by eliminating and reducing the factors an industry competes on;
• BUYER VALUE: lifted by raising and creating elements the industry has never offered;
• OVER TIME & COSTS are reduced further as scale economies kick in due to the high sales volumes that superior value generate.

4.New Blue Ocean, Strategy:

-> We have to create the new market.

4.1) To-Be Calue Curves (and tag-lines):

• The two curves has the same shape => This because in R.O. companies have the same structure, same competitive advantage.

-> AS-IS is the red curve;

-> TO-BE is the blue curve.

-> If we touch the 5 line => the things are too complicated, we are overshooting.

• DIVERGING from the redonws: red curves have the same shape, the blue is unique;
• LEAD to asking new questions.
• Don’t OVERSHOOTING: create something that people don’t want.

📌Is more difficult eliminate old things than create new one, because people are hard to change.

4.2) Three test for a good Value Curve

-> Connecting the dots of the Blue Ocean and Strategy Analysis:

There is a difference bwtween analysis of competition and competitors;

COMPETITION ANALYSIS: level of external forces in an integrated view, we use the 5 forces’ porter model to define them.

• Evaluation of intensity of the aggregated competitive forces of the market.
• Supporting you to undestand if competition, as whole, is a strength or weaknesses.

COMPETITIOR ANALYSIS: this competitor is strong here and we bare.

->Blue Ocean Strategy models Are a Glorified SWOT;

-> Introduction to enterpreneural strategy;