Blue Ocean Strategy Lecture
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1/6/2010
Blue Ocean Strategy
Blue Ocean Strategy (BOS)
“Go where profits and growth are – and where competition isn’t.” Kim & Mauborgne
1
1/6/2010
The Profit and Growth Consequences of Creating Blue Oceans
What is Blue Ocean Strategy?
• •
The simultaneous pursuit of differentiation and low cost The aim of BOS is:
§
§ §
Not to out-perform the competition in the existing industry (a red ocean), But to create new market space (a blue ocean), Thereby making the competition irrelevant
2
1/6/2010
Red Versus Blue
Red Ocean Strategy Compete in existing market Beat the competition Exploit existing demand Make the value-cost trade-off Blue Ocean Strategy Create uncontested market space Make the competition irrelevant Create and capture new demand Break the value-cost trade-off
Align the whole system of a company’s activities with its strategic choice of differentiation or low cost
Align the whole system of a company’s activities in pursuit of differentiation and low cost
Examples of BOS
3
1/6/2010
Key Concepts of BOS
• •
The key conceptual building blocks of BOS are:
§ §
Value innovation Fair process
BOS requires organizations to develop and align the three strategy propositions:
§ § §
Value proposition Profit proposition People proposition
Value Innovation: Four Actions Framework (ERRC)
4
1/6/2010
Criteria for Effective ERRC
• • •
Cost reduction and elimination efforts should focus on nonstrategic activities.
§
Manual document processing
Important investment affecting organizational performance should not be eliminated.
§
Investment in human capital development
Value creation efforts should focus on core competencies improvement.
§ §
Investment in research support Investment in classroom equipments in order to improve learning experience
How Fair Process Affects People’s Attitudes and Behavior
Strategy Formulation Process Attitudes
Fair Process Engagement...
Blue Ocean Strategy
Blue Ocean Strategy (BOS)
“Go where profits and growth are – and where competition isn’t.” Kim & Mauborgne
1
1/6/2010
The Profit and Growth Consequences of Creating Blue Oceans
What is Blue Ocean Strategy?
• •
The simultaneous pursuit of differentiation and low cost The aim of BOS is:
§
§ §
Not to out-perform the competition in the existing industry (a red ocean), But to create new market space (a blue ocean), Thereby making the competition irrelevant
2
1/6/2010
Red Versus Blue
Red Ocean Strategy Compete in existing market Beat the competition Exploit existing demand Make the value-cost trade-off Blue Ocean Strategy Create uncontested market space Make the competition irrelevant Create and capture new demand Break the value-cost trade-off
Align the whole system of a company’s activities with its strategic choice of differentiation or low cost
Align the whole system of a company’s activities in pursuit of differentiation and low cost
Examples of BOS
3
1/6/2010
Key Concepts of BOS
• •
The key conceptual building blocks of BOS are:
§ §
Value innovation Fair process
BOS requires organizations to develop and align the three strategy propositions:
§ § §
Value proposition Profit proposition People proposition
Value Innovation: Four Actions Framework (ERRC)
4
1/6/2010
Criteria for Effective ERRC
• • •
Cost reduction and elimination efforts should focus on nonstrategic activities.
§
Manual document processing
Important investment affecting organizational performance should not be eliminated.
§
Investment in human capital development
Value creation efforts should focus on core competencies improvement.
§ §
Investment in research support Investment in classroom equipments in order to improve learning experience
How Fair Process Affects People’s Attitudes and Behavior
Strategy Formulation Process Attitudes
Fair Process Engagement...