Blue Ocean Strategy

Curves built on the decisive advantages of two strategic groups in the U.S. fitness industry- traditional health clubs and home exercise programs- and eliminated or reduced everything else. (57)

In reality, though, there is a chain of “buyers” who are directly or indirectly involved in the buying decision. The purchasers who pay for the product or service may differ from the actual users, and in some cases there are important influencers as well. Individual companies in an industry often target different customer segments…But an industry typically converges on a single buyer group…Sometimes there is a strong economic rationale for this focus. But often it is the result of industry practices that have never been questioned. (61)

Cemex’s answer to this dilemma came in 1998 with its launch of the Patrimonio Hoy program, which shifted the orientation of cement from a functional product to the gift of dreams…At the foundation of Patrimonio Hoy was the traditional Mexican system of tandas, a traditional community savings scheme. (73)

New Market Spaces (79)

Industry – look across alternative industries

Strategic group – look across strategic groups

Buyer group – redefine

Scope of product or service offering – look across complementary product and service offerings

Functional-emotional orientation – rethink orientation

Time – respond to future circumstances given existing trends

Think of a typical strategic plan. It starts with a lengthy description of current industry conditions and the competitive situation. Next is a discussion of how to increase market share, capture new segments, or cut costs, followed by an outline of numerous goals and initiatives. The process usually culminates in the preparation of a large document culled from a mishmash of data provided by people from various parts of the organization who often have conflicting agendas and poor communication…If you ask companies to present their proposed strategies in no more than a few slides, it is not surprising that few clear or compelling strategies are articulated. (82)

The strategic profile with high blue ocean potential has three complementary qualities: focus, divergence, and a compelling tagline. If a company’s strategic profile does not clearly reveal those qualities, its strategy will likely be muddled, undifferentiated, and hard to communicate. (83)

Visualizing Strategy

Visual Awakening – strategy canvas

Visual Exploration – observe the field

Visual Strategy Fair – create new strategy canvases, get feedback

Visual Communication – Distribute the selected strategy canvas, focus efforts to actuate it

A company should never outsource its eyes…Great strategic insights like Bloomberg’s are less the product of genius than of getting into the field and challenging the boundaries of competition…You should not only talk to these people but also watch them in action. (88)

Revenue, profitability, market share, and customer satisfaction are all measures of a company’s current position…Chief executives should instead use value and innovation as the important parameters for managing their portfolio of businesses. (97)

This gave it the idea to provide street furniture, including maintenance and upkeep, free to municipalities. JCDecaux figured that as long as the revenue generated from selling ad space exceeded the costs of providing and maintaining the furniture at an attractive profit margin, the company would be on a trajectory of strong, profitable growth. (108)

Companies need to build their blue ocean strategy in the sequence of buyer utility, price, cost, and adoption. (117)

Buyer Utility Map – To test for exceptional utility, companies should check whether their offering has removed the greatest blocks to utility across the entire buyer experience cycle for customers and non-customers. (121)

In which stage are the biggest blocks to customer productivity, simplicity, convenience, risk, fun and image, and environmental friendliness? (124)

When exceptional utility is combined with strategic pricing, imitation is discouraged. (127)

A good way to look outside industry boundaries is to list products and services that fall into two categories: those that take different forms but perform the same function, and those that take different forms and functions but share the same over-arching objective. (128)

Graphically plot the price and volume of these alternatives…The price bandwidth that captures the largest groups of target buyers is the price corridor of the mass…The key here is not to pursue pricing against the competition but rather to pursue pricing against substitutes and alternatives across industries. (130)

To maximize the profit potential of a blue ocean idea, a company should start with the strategic price and then deduct its desired profit margin from the price to arrive at the target cost. Here, price-minus costing, and not cost-plus pricing, is essential if you are to arrive at a cost structure that is both profitable and hard for potential followers to match. (131)

Beyond streamlining operations and introducing cost innovations, a second lever companies can pull to meet their target cost is partnering. (133)

SAP went a step further and also partnered with leading consulting firms, such as Capgemini and Accenture, to gain a global sales force overnight at no extra cost. (134)

The aim if not to compromise on the strategic price but to hit the target through a new price model. We call this pricing innovation. Remember, however, that what is a pricing innovation for one industry is often a standard pricing model in another. (135)

Before plowing forward and investing in the new idea, the company must first overcome such fears by educating the fearful. (137)

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