“The Times, They are Changing” Finding New “Blue Ocean” Market Space

in Changing Times

Andrea J. Simon PhD

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Marketing Evolution

ChangeMatters !!!

Can you find a Blue Ocean?

Goal is to help you understand the essence of Blue Ocean Strategy

Encourage you to go exploring

Leave with a tool kit to start the process

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Blue Ocean Strategy

W. Chan Kim and Renee Mauborgne

Studied 150 Companies in 50 industries over 100 year horizon

What worked and what didn’t?

And, how do I do it?

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Let’s begin with a little mood musicAndre Rieu

What did you see, feel and think?

Classical Music

Traditional Setting

Dress in classic form

Conductor’s back

Disengaged

Focused on adults

Funeral

Pop Music

Untraditional setting

Colors, fashion

Conductor’s Personality Face First

Totally engaged

Young and Old

Party

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Must have a Real Strategy

A well-defined, integrated, cohesive approach

A clear, simple story

What’s your hook?

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All Strategies Ask…

Which customers or markets?

What distinguishes us?

What value proposition?

Why key processes give us competitive advantage?

What are the human, technological or organizational enablers of the strategy?

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Classic Structured Strategic Thinking

Takes market structure as a given.

Drives you to carve out a position against the competition in the existing market space.

Reel in the competition

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So, How Do You Win?

Grabbing a bigger share of the market is a zero-sum game—

One wins, the other loses.

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Blue Ocean Strategy

Reconstruct the market

Creating demand in market space that does not exist today

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Why Should You?

Studied business launches in 150 companies

86% line extensions with 62% total revenues

39% of total profits

Red Ocean of Competition

14% invested in creating new market space

38% total revenues but a startling

61% of total profits

Blue Ocean of New Market Space

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Want to Swim?

Red Ocean of Bloody Competition?

Blue Ocean of Unmet Demand?

I need that !!!

OR

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Blue Ocean Strategy

Add Value + InnovationMake the Competition IrrelevantChange the “Value-Cost” Trade-offFocus on the NonuserAlign the Entire Organization

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It is All About You!

All about the Strategic Moves people made to solve problems differently.

They saw solutions in different ways. And then made them happen.

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Case Studies Might Help

Skeptical?

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What did these folks see?

(yellow-tail)® wine

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Interesting industry to tackle

About 6,500 wine brands in US.

Ninety-six percent of those wine brands sold less than 100,000 cases in 2002

Only 23 wine brands sold at least 2 million cases each, accounting for 40 percent of a growing market of 245 million cases.

First time they tried to tackle the market (yellow tails’ )® predecessor, the Carramar Estate Label, failed for the Cassella Wine Company

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What to do?

John Soutter and the Cassella family, rethought the industry established keys to the promotion of wine as:

a unique beverage

for the informed wine drinker

worthy of special occasions

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Wine Red Ocean Strategic Canvas

How to make fun and nontraditional wine that’s easy to drink for everyone—particularly non-wine drinkers?

High

Low

Vineyard Prestige and Legacy

Use enological terminology and distinctions in wine communication

PriceAbove-the-line marketing

Aging Quality

Wine Complexity

Budget Wines

Wine Range

Premium Wines

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Went looking for a Blue Ocean

Reconstructured its market strategy to

Turn non-drinkersinto frequent enjoyers.

Only 15% of Americans drank wine-Red Ocean

85% drank other things-Blue Ocean waiting for them

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Which factorsshould be reducedwell below the

industry’s standards

Reduce

A NewValueCurve

Raise

Which factors shouldbe raisedwellabove the

industry’s standard?

Eliminate Create

Which of the factorsthat the industrytakes for granted 

should be eliminated?

Which factorsshould be createdthat the industryhas never offered?

The Four Actions Framework -- ERRC

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For (yellow tail)®…

Eliminate RaiseEnological terminology and distinctionsAging qualitiesAbove-the-line marketing

Price versus budget winesRetail store involvement

Reduce CreateWine complexityWine rangeVineyard prestige

Easy drinkingEase of selectionFun and adventure

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Strategic Canvas (yellow tail)® wines

High

Low

Price

Use of Encological Distinctions

Above-the-line Marketing

Aging Quality

Vineyard Prestige

Wine Complexity

Wine Range

EasyDrinking

Ease of Selection

Fun and Adventure

Strategy Canvas (yellow tail)

(yellow tail)Focus

DiversificationTag Line

Premium Wines

Budget Wines

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Results

John Soutter expected to sell 25,000 cases in 2001, the first year (yellow tail)® would hit the market.

Cautious but lucky--the wine sold 9 times as much!

Bold branding

Good product

Very affordable price

Bottles with the fancy kangaroo leapt off the shelf.

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Execution helped

Retailers received the brightly colored branded displays on time and were clearly built into the entire process

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Today, Dominates the American Market

« Dominating the overseas export market, [yellow tail]® is the fastest growing imported wine in US market history. The Shiraz is currently ranked as the No.1 selling 750ml red wine in the USA. The [yellow tail]® Merlot being the No. 1 selling Merlot in the USA. Selling more than 300,000 bottles a day, [yellow tail]® is now regarded as a global phenomenon. »

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Others?

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Today new stories coming out

Shimano—Coasting Bike for non-bikers

Wii—gaming for non-game players

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Pattern Here

Concept Targeted Nonusers

Alternatives

Andre Rieu Non-concert goers/younger people

Rock, pop, jazz everything but classical music

Yellow Tail Non-wine drinkers Beer/hard liquorFord Non-car drivers HorsesSouthwest Non-fliers Drove distancesCurves Women who did not

work outGold’s Gym or in-home equipment

American Girl Girls but not the dolls

Video games/no time with mom

Cirque Du Soleil Adults—non-circus goers

Theater, dance, circuses for kids

Wii Non-gamers Lots of optionsShimano Coasting Bike

Non-bikers Lots of options

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EAC/Integrated Power Solutions

A Battery Design and Manufacturing Company

“We were OEM’s–Original Equipment Manufacturer in the battery creation business”

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Strategic Canvas Process

Beginning of the process they thought what mattered to the customer was:

Vertically Integrated

Battery design experts

Global Manufacturer

Good Customer Service, responsive to solving problems

Good supplier relationships

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Not of much importance

Branding

Financial stability

Charger capabilities

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Their Strategic Canvas

5-High tg/am

sb/jd tg/jd tg/am/jr tg/am/jr jr

3-Medium jr am am/jr sb/jd sb/jd sb

tg/ am/ jr/jd tg/jr/sb/jd tg/am/jr/sb jr

1- Low sb jd tg/am/jd tg/am/sb/jd

Vertical

Integration

Battery

Expertise/

Experience

Charger

Expertise

Wholly Owned

Global

Manufacturing

Customer

Service

Supplier

Relationships

Financial

Stability

CM

relationships Branding

Summary Strategic Canvas

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How they saw their competitors

What they thought about their competition along the same attributes that they thought were important to their own customers.

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Took them out to the field

Found a whole different set of issues for their customers and nonusers among their customers

Speed to marketInnovative ideas about mobile power solutionsStay on top of the battery power industry—what was happening that could help them? Teach them about rechargeable power.Give them a competitive edge.Longer, stronger, lighter power solutions.

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For EAC…

Eliminate RaiseFocus on only disposable batteriesActing like an order taker

Integrated Power SolutionsSpeedCompetitive AdvantageTechnical AdvantageProactive leadership and consultative services

Reduce CreateConcern with pricingConcern with reactive customer service Focus on Vertical Integration

Charger CapabilitiesInnovationBranding

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Now they Visualized a Blue Ocean

5-High tg/am

sb/jd tg/jd tg/am/jr tg/am/jr jr

3-Medium jr am am/jr sb/jd sb/jd sb

tg/ am/ jr/jd tg/jr/sb/jd tg/am/jr/sb jr

1- Low sb jd tg/am/jd tg/am/sb/jd

Vertical

Integration

Battery

Expertise/

Experience

Charger

Expertise

Wholly

Owned

Global

Manufactur

ing

Customer

Service

Supplier

Relationship

s

Financial

Stability

CM

relationship

s Branding

speed to

market

help

them be

cutting

edge

innovative

(game

boy)

Customer-

centric

needs

technical

talent

needs

state of

the art

information

n

Summary Strategic Canvas

Customer

Needs/Desires

Change the Focus, Differentiation and the Brand•Tag line: Lighter, Longer Power Solutions •What we do: Batteries and Chargers and Ideas and Solutions

What are you investing in? Not investing in?

What is on the bottom of your canvas? What do you and your industry invest in—or use to?

What could be on your canvas but isn’t?Marketing

Fun

Environmental benefits

Easy to use/to buy

Less complex

Innovation

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What could be on the bottom of yours?

Would you look just like your competitors?Do you have a focus or are you all over the canvas?What are potential customers using instead of your industry?

High

Low

Vineyard Prestige and Legacy

Use enological terminology and distinctions in wine communication

PriceAbove-the-line marketing

Aging Quality

Wine Complexity

Budget Wines

Wine Range

Premium Wines

Let’s think about your Strategic Canvas

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High

Low

PRICE

Strategy Canvas -- Your Company

INDUSTRY ATTRIBUTES YOU ARE INVESTING IN

Would you look just like your competitors?Do you have a focus or are you all over the canvas?What are potential customers using instead of your industry?

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Maybe you see yourself as the low price distributor

Do you know what you are focused on and investing in?Are these the things that you are investing in?Are you investing in the things that matter to customers?

High

Low

PriceCustomer Service

Full line of products

Good inventory

Excellent sales people

Above the line marketing

Online strategy

Maybe you are the premium distributor

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High

Low

PriceCustomer Service

Full line of products

Good inventory

Excellent sales people

Above the line marketing

Online strategy

Or are you the premium distributor?Are you innovative and using the Internet ?Are you investing in the things that matter to customers?

Maybe there are other things

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Maybe you are going out and listening to the end user?Maybe there are things you can do to address their headaches?Hit those levers to make it easier for them?

High

Low

PriceCustomer Service

Full line of products

Good inventory

Excellent sales people

Online conversations Innovation

Ease of use

Simple to buy

Make them more profits

Let me share a story with you

A company who did this in your industry

Wanted to add value but in an innovative way

Went out and listened to users and nonusers, customers and noncustomers

Did a Blue Ocean Strategy without even calling it that

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Techline Snap Track

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Culture of Techline

Belief that adding value in an innovative way is exactly what they should be investing in—strategic canvas would be high in innovation

Went out exploring to listen to customers and non-customers

Went back and found ways to re-think what was being done, improve buyer’s utility:

Make it easier to get the job done

Make it better ROI—faster and simplerCreated demand in an entirely new market space

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What did they do?

Looked across industriesApplied a Lego-model to electrical fittings

Thought about time in a new wayWhat use to take hours takes seconds

From a buyer’s useMore safely, more productively, more fun

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What came out was very Blue Ocean

Snap Track was developed in response to repeated requests for a complete industrial cable tray system designed for the limited width requirements of instrumentation data cable.

Snap Track has been designed to provide the ease of installation and the economy of wire basket tray while retaining the stability and inherently superior cable protection of traditional raceway. Our philosophy is simple – the purpose of a cable tray system is to support and “Protect the Cable”.

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HOW DO I DO THIS?Ok, so I am interested…

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Visual Awakening

Take your management team through a Visual Awakening• What does your industry invest in?

• What do you invest in?

• What could you invest in to create a Blue Ocean and open up new market space?

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High

Low

Industry Attributes

Strategy Canvas -- Your Company

Let’s Go Exploring…

Get out of the office

Go into the fieldTake a camera

Take a video camera

Spend a day with a customer

Listen to nonusers—don’t ask them

Take an anthropologist

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Headaches? Go-Arounds?

What could you see that would add value in an innovative way?

Six Levers to improve Buyer’s UtilityMake Buying Easier?Use Simpler?

Reduce the Risks?

Make Them More Productive?

More Environmentally Friendly?

Make it Fun, and Adventure

Buyer Experience Cycle

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1.

Purchase

2.

Delivery

3.

Use

4.

Supplements

5.

Maintenance

6.

Disposal

Customer Productivity

Simplicity

Convenience

Risk

Fun and Image

Environmental friendliness

The Six Stages of the Buyer Experience Cycle

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Third Tier

Second Tier

Who am I looking for?

Nonusers The first tier minimally buy an industry’s offering out of necessity.The second tier refuse to use your industries offerings. The third tier never thought of your market’s offerings as an option.

Your BOS Market

First Tier

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Where are they? Shift your Focus

Kim & Mauborgne 2005

Industry

Strategic group

Buyer group

Scope of product or service offering

Functional-emotional orientation of an

industry

Time

Blue Ocean Across

these

Red Ocean

Stuck within

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Once you are done, what next?

Draw your “To Be” CanvasVisualize some ideas about new solutions

Get feedback on alternative strategy

Use feedback to build the best “to be” future strategy

High

Low

Industry Attributes

Strategy Canvas -- Your Company

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Go ExploringWhere do I find my Blue Ocean Opportunity?

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Time for to get out of the office

“ If you want to understand how a lion hunts, don’t go to the zoo. Go to the Jungle.” (Kevin Roberts, Saatchi & Saatchi)

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Please, don’t ask them what they need

Henry Ford’s quote:“If I had asked people how I could improve their transportation they would have told me to make their horses go faster.”

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What are you trying to do?

Blue Ocean Strategic Theory Add Value + InnovationMake the Competition IrrelevantChange the “Value-Cost” Trade-offFocus on the NonuserAlign the Entire Organization

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Why Should I Find My Blue Ocean?

Because it could open up an entirely new opportunity for you!

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This copy of our presentation today was created to help you take these tools and apply them to your own company. The goal is to discover your company’s own Blue Ocean with new ideas, new market space, new customers and new demand. Please let us know how your exploring goes. We like to help others with case studies. Perhaps you will become a success story we can share as well.

Send us your story to: asimon@simonassociates.netWe would love to continue our discussions. Feel free to Skype us andrea.j.simon or connect however you like.

Simon Associates Management Consultants1905 Hunter Brook RoadYorktown Heights, NY 10598www.simonassociates.netasimon@simonassociates.netPhone 914-245-1641Cell 914-261-1631