Blue Oceans and Other BIG Strategic Ideas

What You Will LearnBecome familiar with concepts behind Blue Ocean StrategyLearn what MPI has done to apply Blue Ocean concepts to your associationLearn about net creation and open innovationFormulate ideas on how you might be able to apply these ideas to your own work

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.

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

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)

The phrase Blue oceans is new, but the concept is not. Think of what industries existed in 1900.

Take 3 minutesAt your table, brainstorm a list of industries that have emerged since then.

Some of them might beautomotives, aviation, health care, plastics, DVDs, computers, personal entertainment devices (iPods, for example).

All of these industries created new market space.

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.

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.

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.

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.

Graph of Value Innovation

Case study: Cirque du SoleilOther circuses focused on:Benchmarking the competitionHigh-profile stars, which increased costs but who were largely unknown to the general publicTraditional venueTraditional audiences

Case study: Cirque du SoleilCirque du Soleil focused on:Creation of a hybrid between the circus and the theatreRetention of the symbolic and glamorous aspects of circus, such as the tent and the more breathtaking aspects, such as acrobatsIncorporation of more comfort, sophistication, elegance and theatrical plots; this brought not only the richness of theatre but a whole new demographic of customersIt looked across market boundaries and created new ones.

The Strategy CanvasCaptures the current state of play in the market by detailing the factors players compete on in product, service and deliveryFor 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

Chart1

558

551

881

771

871

881

6610

6710

4510

Quails Gate

Mission Hill

Yellowtail

Competetive Factors

Ranking Scale

Possible Wine Canvas

Sheet1

WinePriceImageagingcomplexityprestigediverse portfolioeasy to drinkaccessibleFun

Quails Gate558788664

Mission Hill558778675

Yellowtail811111101010

Sheet1

Quails Gate

Mission Hill

Yellowtail

Competetive Factors

Ranking Scale

Possible Wine Canvas

Sheet2

Sheet3

The Strategy CanvasEach 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

Example of a Strategy CanvasBlue Ocean Space

The Strategy CanvasTo differentiate yourself in the market place, you must focus on alternatives and non-customers to re-define the marketplaceFor 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?

Case Study: [yellowtail]Casella saw that most US consumers preferred beer, spirits and pre-packaged cocktails to wineConsumers saw wine as a turn-off due toIt was pretentiousThe taste was too complexIt could be intimidating

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 drinkersHad a less complex, sweeter and smooth tasteWas easy to select as it did not focus on prestige, aging, etc.They eliminated all factors that the wine industry had long competed on

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?

3 Characteristics of a Good StrategyIt is focused; it is not diffused across all potential aspects of the marketThe shape of the value curve diverges from any potential competitorsIt has a compelling tagline

Your Strategy CanvasAt 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?

Creation Nets and Open InnovationOpen 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 resourcesNetworks of creation, or Creation Nets are an extension of this concept

Creation NetsInvolve 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 everybodyWilliam C. Taylor, Founder of Fast Company

The Positive PressFor 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 periodsGreater access to intellectual resourcesGreater access to new and different technologiesAbility to tap into knowledge across traditional knowledge boundaries and industriesCreative breakthroughs

The Negative PressTrust can be hard to establishConcerns about proprietary informationLarge groups of people working to innovate together can be hard to controlConflict among participants increases the more people involvedDifferent tolerances for costUncertainty on how to create valueLoss of confidence in own abilities

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

Net Creation at WorkDevelopment 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 settingWilliam C. Taylor, Mavericks at Work

Net Creation SummaryJust because you are in charge doesnt mean you need to have all the answersJust because people dont work for you doesnt mean that they cant work with youbut you have to invite themNo one is as smart as everyoneIt is about the architecture of participation (Tom OReilly, OReilly Media)

Personal Creation NetworksFind 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

*Have a bottle of regular wine and a bottle of [yellowtail] to pass around.