Blue Ocean. Strategy. How to Create Uncontested Market Space and. Make the Competition Irrelevant. W. Chan Kim. Renée Mauborgne. HARVARD BUSINESS . PDF Drive is your search engine for PDF files. As of today we have Blue ocean strategy: how to create uncontested market space and make the competition. Download the blue ocean strategy summary PDF. Click the link above to read the key concepts and everything you want to know about the blue ocean strategy.

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Visi Pramudia BLUE OCEAN STRATEGY. How to Create Uncontested Market Space and. Make the Competition Irrelevant. •A diagnostic tool for building a compelling BOS. •It capture the current state of play in the known market space. •Allow us to understand: Where the competition . Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne. Competing in overcrowded industries is no way to sustain high performance. The real opportunity.

Although there is an inevitability to having to compete in crowded markets, there are too many advantages to avoiding this situation to ignore the possibility of looking for blue space. In an already contested market, there is a natural cap in place on the potential of your business.

Even if you are able to carve out a respectable share of business for yourself, it is highly unlikely that you will rocket to the top of the business world in an already competitive space. The prices and profit margins are largely set before you even arrive, meaning your ceiling is relatively low. While doing so is obviously a great challenge, the rewards can be many.

Creating New Demand

There are new markets being created all the time by the innovation of new products and services, and the businesses that are on the cutting edge of these markets tend to be some of the largest in the world. Organizations willing to go into untested territories are taking a big gamble, but that gamble sometimes pays off in a huge way. Finding Open Space Of course, locating the opportunity to create a blue ocean for your business is going to be the biggest challenge of all.

There are four points that are presented within this book that will help you look for blue oceans around the edges of your business market. The first point has to do with raising the quality of one factor or another as compared to industry standard. In other words, you could create a blue ocean by offering a product that is of a significantly higher quality than anything else currently offered within the industry.

Perhaps you will use more advanced technology, or better materials, to develop an amazing product that grabs the attention of consumers.

By rising above and establishing a new level, you will be playing in a market all your own. Many industries have barriers or characteristics that simply do not need to be in place. Often, these are issues that were once relevant, but are no longer a problem thanks to developments in technology. If you can eliminate unnecessary parts of the business model within your organization, you could find a way into an open space that leaves you competing at a low price or on a faster timeline.

This is the opposite of the idea of raising the level of a product or service within the industry that you compete. Fun and image — no recent brand has epitomized cool like Apple, cultivated through deliberate marketing, status as premium products, and adoption by cultural influencers.

The Philips CD-i was a CD player pitched as a novel all-in-one device, combining an audio player, game console, educational media, and internet features.

Superficially the customer value came from combining multiple devices in a relatively affordable machine. In reality, hardware value often comes from the software ecosystem running on the hardware. CD-i, created as a media player and thus underpowered, never got traction among game or software developers.

It was a terrible game machine, and it was a terrible PC. Furthermore, its complexity actually impeded customer value, making setup and training more difficult. From Exceptional Utility to Strategic Pricing A typical approach to pricing is to start with a premium price to attract early adopters, then gradually drop prices to attract mainstream customers.

Blue Ocean Strategy argues that you must set a price that will capture the mass of target downloaders from the very beginning, for these reasons: In many industries, fixed costs have increased and marginal costs decreased. Therefore, pricing to capture more users will help maximize profits. Many products benefit from network effects, where the value of the service scales with the number of users. Marketplaces like site and Uber are examples. Lowering the price for mass adoption accelerates the flywheel.

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Fast followers may imitate your strategy quickly once you prove early success. With more funding and more aggressive expansion, competitors may take the lead. Strategic prices help earn reputation and brand immediately to build a defensible position.

How do you actually set your price? Blue Ocean Strategy suggests researching pricing for major alternatives to your product, creating a price range or corridor that will attract the most customers, then setting a price within the corridor depending on your defensibility. Establishing the Price Corridor Start by gathering alternatives to your product.

Some alternatives will look different but achieve the same function. Horse carriages and Model T both carry people places; parents making lunch serve the same function as school cafeterias. Other alternatives will have different forms and function, but the same objective.

Movies and restaurants have different functions, but their objectives are to have an entertaining night out. Southwest Airlines considered cheap car travel their alternative. For instance, pricing at a luxury level may increase value per customer, but this may not compensate for a drop in volume. The range of prices that will earn the most total revenue is your price corridor.

Specify a Price Level within the Price Corridor Now that you have a price range, where specifically you situate in this range depends on your defensibility through IP or competencies. You should price on the lower range if these factors apply: Your product has little legal protection through patents or copyright Your product has no exclusive assets or capabilities Your product has high fixed costs and low marginal costs Your product benefits from network effects Your cost structure benefits from economy of scale If your product is not defensible and you price too high, your blue ocean may initially capture good profits, but fast followers will be attracted by the ocean and compete away the profits.

For instance, Southwest Airlines had a new idea direct flights between secondary airports but low IP defensibility and no exclusive assets. It priced on the budget end, using car travel as its main alternative. NTT DoCoMo priced its monthly subscription fee at the price of a magazine, in the range of impulse downloading. From Strategic Pricing to Target Costing Once you have your strategic price, decide what profit margin you want, and arrive at your target cost.

Blue Ocean Strategy argues that you must not let costs dictate prices, nor should you lower utility to match costs. Doing either will jeopardize mass adoption and downloader utility, respectively.

Take these approaches to reducing cost: A focused strategic profile: blue oceans should naturally focus on several factors and strip out unnecessary factors.

Cirque du Soleil eliminated animals and star performers. Streamline operations: reduce expenses for high-cost, low-value-add services. Outsource support to call centers. Change locations from cities to suburbs. Reduce the number of parts or steps needed in manufacturing.

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Change materials, like Swatch from metal to plastic. Partner: offload production and distribution activities to capable partners.

This effectively lowers fixed costs and increases marginal costs. Partnering also spurs competition to lower prices to win your contract. IKEA outsources manufacturing and materials. Change the pricing model of the industry. This changes the form of your target price to attract more customers. A pricing innovation in your industry is often standard in another industry. Consider going from paid to freemium, like many software services.

From Utilty, Price, and Cost to Adoption Since your company has stakeholders used to the status quo, changing your strategy may provoke them.

Handling their concerns is a first barrier to adopting your blue ocean strategy. Employees They fear for their jobs and responsibilities. Prepare them for change and allow changes in roles to the extent possible.

Business Partners They fear disrupting an existing profitable relationship. Communicate how changing the strategy will increase profits further. General Public Anticipate common objections to your strategy and proactively message to own the conversation.

Monsanto could have educated on the safety of GMOs and utility to lower food costs, and pushed for labeling. Part 3 of this Blue Ocean Strategy summary will go much more into detail on handling the people side of implementation. Are there compelling reasons to download your offering?

Price Is your price easily accessible to the target mass of downloaders? Cost Does your cost structure meet the target cost? Adoption Have you addressed adoption hurdles up front? Philips CD-i is an example. Pricing was low — the monthly fee was the same as a magazine, putting it in impulsive download territory.

Adoption — it partnered with handset manufacturers to stay ahead of competitors and attracted content providers onto the network. Part Three: Executing Blue Ocean Strategy The final section of this Blue Ocean Strategy summary covers the common hurdles of executing your blue ocean idea, particularly in terms of breaking status quo bias and securing worker relations. Chapter 7: Overcome Key Organizational Hurdles Organizations undergoing a strategic shift face four hurdles: Cognitive — recognizing the need for change Limited resources Motivation — inspiring real action Politics The conventional wisdom on changing an organization is to deploy strength proportional to the size of the change needed.

To get a big change, mobilize massive effort. Blue Ocean Strategy argues for a more targeted method, to focus your limited resources on the areas of greatest disproportionate leverage. To illustrate this, the book uses the example of Bill Bratton, NYPD police chief who transformed New York City from a cesspool of crime to widespread safety within a few years. Instead, make people see the reality firsthand.

Make them touch, see, and feel the problem so they can come to their own conclusions about the need for change Bratton forced top brass to ride the subway everyday to see the graffiti, gangs, and aggressive beggars firsthand.

In a previous role, he opposed a decision to download smaller, more efficient squad cars. Bratton invited his general manager for a tour of his squad, picking him up in one of the smaller cars. After two hours of driving, with little legroom up front and Bratton struggling with his police gear, the manager conceded. Larger cars were ordered.

Meet dissatisfied customers directly. But residents were still dissatisfied, and Bratton forced chiefs to meet with customers citizens.

The police learned citizens felt harassed by minor offenses like graffiti and drunkards. This prompted an overhaul of police priorities. Resource Hurdle An organization in need of strategic change often has a resource shortfall. In response, managers often curtail their ambitions or fight for resources. Instead, consider finding areas of greatest leverage. Reallocate to hot spots and away from cold spots Where are your resources getting the highest value per dollar and the lowest?

Focus resources on the areas with highest impact. Bratton wanted to keep subways safe, but staffing every station and car was untenable. Analysis showed that most crimes occurred on only a few stations and lines. He reallocated officers to these areas, where they had a disproportionately large impact on crime metrics.

Bratton reallocated more staff to narcotics and gave them round-the-clock coverage. A cold spot — area of great inefficiency — was booking criminals at the station, requiring 16 hours of officer time per criminal. This freed up manpower to conduct more patrolling. Horse trade — match complementary resource needs between teams.

Blue Ocean Strategy

When resources are low, departments tend to claw whatever resources they can get. This leads to inefficiencies where two departments each crave something the other has. Another department had the opposite problem. By facilitating this trade, he gained credibility with both departments. Ask your teams what resources they need.

Then redistribute resources so everyone wins. Motivational Hurdle Your team needs to understand the need for a change and how to accomplish it. Often managers rely on top-down communication on grand visions. Instead, once again find the areas of greatest leverage.

Find kingpins, the key influencers in the org. If you win over the kingpins, the people they influence will come aboard too. Bratton focused on his 76 precinct heads, each of whom managed police officers. Place kingpins in a fishbowl. Influencers are watched by many, and so their behavior needs to be transparent.

They need to be held accountable for executing the new strategy. Precinct heads were required to justify increases or decreases in performance and share their plans. Public exposure causes social pressure to perform, since no manager wants to let down other managers or be shamed publicly.

It prevents behind-the-door excuses, like blaming other managers for their shortcomings.While doing so is obviously a great challenge, the rewards can be many. In which stage are the biggest blocks to customer productivity? The prices and profit margins are largely set before you even arrive, meaning your ceiling is relatively low.

Like this summary? Monsanto could have educated on the safety of GMOs and utility to lower food costs, and pushed for labeling.

If you win over the kingpins, the people they influence will come aboard too. It clearly had massive customer value — free music.

Make them touch, see, and feel the problem so they can come to their own conclusions about the need for change Bratton forced top brass to ride the subway everyday to see the graffiti, gangs, and aggressive beggars firsthand. Communicate how changing the strategy will increase profits further. However, it failed sales expectations.