Winning with

Blue Ocean Strategy

Presented by: Dr. Dominic Lau

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 Content

Why this book?

Trend of Globalisation

Red Oceans

Blue Oceans

Value Innovation

3 tiers of Non-customers

6 Paths Framework to create Blue Ocean

Analytical Tools & Framework

Case study
-Yellow Tail
-Southwest Airlines
-Symphony Orchestra
-Wii Nintendo

The Four Steps of Visualizing Strategy

BOS Model for Malaysian Industry

Breakdown of the Red Ocean & into Blue Ocean

Professor Kim’s Citation

Nine Key Points of BOS

Q&A 2
 Why this book?

• Harvard Business School Press

• Translated into 39 languages
• Sold over one million copies
• International best seller

W. Chan Kim & Renée Mauborgne

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39 Languages

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 Trend of Globalisation
• The world is flat
• Commodity competition
supply function demand function
• The rise of China and India presents huge
cost challenges

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 COMMODITY
• Customer could not differentiate.
• Like a Commodity.
• Similar Features or Functions.
• Compete with rivals.

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 RED OCEANS
• All industries existing today
• Boundary of industry
- Defined & Accepted
• Clear Competitive Rules
- Outperform rivals
- Get more customers
- Prospect the profit
• The Competition turns the water bloody
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 BLUE OCEANS
• Not exist in today
• Unknown market space
• Rules
- Create the demand, not fight over
- Break through the industry boundary

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The Profit and Growth Consequences
of Creating Blue Oceans

Business Launch 86％ 14％

Revenue Impact 62％ 38％

Profit Impact 39％ 61％

Launches with red oceans Launches with blue oceans

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 Red Ocean versus Blue Ocean Strategy

Red Ocean Strategy Blue Ocean Strategy

Compete in existing market place Create uncontested market

space
Beat the competition Make the competition
irrelevant
Exploit existing demand Create and capture demand
Make the value-cost trade-off Break the value-cost trade-off
Align the whole system of a film’s Align the whole system of a
activities with its strategic choice film’s activities in pursuit of
of differentiation or low cost differentiation and low cost

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Advantages of BLUE OCEAN thinking

• COMPETING in Red Ocean

- Overcrowded industries
- NO WAY to sustain high performance
• CREATE Blue Ocean
- NEW Market
- Uncontested market space

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 Value Innovation

• Strategic move that allows a company to

create blue ocean.
• Offers buyers a huge leap in VALUE & that
will give rise to NEW MARKET.

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 Value Innovation
• Value without Innovation
- Tends to focus on value creation
- Improve value but is not sufficient to make your
standout in the market place
• Innovation without value
- Tends to be technology driven, market pioneering
- Always shooting beyond what buyers are ready to
accept & pay for it.

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Profit
Value
Growth
Innovation
Money Making

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Value Innovation: The Cornerstone
of Blue Ocean Strategy

The Simultaneous Pursuit of

Differentiation and Low Cost

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Innovation Research Report

• 1880 – 2000 (over 100 years)

• 30 participants & 150 Industries

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• Traditional Strategy

Productivity = Competitive Edge

• Blue Ocean Strategy

- New Market
- New Customer Demand
- Undiscovered market

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The Three Tiers of
Non-customers

Third Tier

Second Tier

First Tier
Your Market
 The Three Tiers of
Non-customers
• First Tier of Non-customer
- “Soon to be” category
- Minimally use the current market offerings
- Search for something better
- Closet to your market.
- Minimally purchase an industry’s offering out of
necessity.

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CASE STUDY : PRET A MANGER

• Business : British Fast Food Chain

• Customer : Professionals in European City Centers
principally frequented restaurants for lunch (sit
down restaurants offered a nice meal and setting)
• 1st Tier Non-Customer :
- Professionals did not have time for sit-down meal.
- Professionals looking for healthy food.
- Professionals looking for reasonable price.
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CASE STUDY : PRET A MANGER
• Commonalities :
1. Fast Lunch
2. Fresh & healthy
3. Reasonable price
• Offers :
1. Speed (browse-pickup-pay-leave), faster than restaurant
and fast food (queue-order-pay-wait-receive-sit)
2. 30 types of quality sandwiches made fresh everyday from
the finest ingredients.
3. Reasonable price ($4 - $6)
• Results :
 Sells more than 25 million sandwiches a year
 130 stores in UK
 Opened stores in New York and Hong Kong 21
 The Three Tiers of
Non-customers

• Second Tier of Non-customer

- “Refusing” category
- Do not use or cannot afford to use the current
market offerings
- The offerings unacceptable or beyond their means
- Refuse to use your industry’s offerings.
- Aware your industry’s offering but voted against
them.

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 The Three Tiers of
Non-customers

• Third Tier of Non-customer

- “Unexplored” category
- Farthest from your market.
- Non-customers who have never though of your
market offerings.

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 The Six Conventional Boundaries of Competition

Industry
Strategic Group
From Buyer Group To
Competing Creating
Scope of product & service
within Across
offering
Functional-emotional
orientation of an industry
Time

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 Path 1 : Look Across Alternative
Industries
• Alternatives are broader than substitutes Malaysian
• Substitutes Case Studies

 Products or services that have different

forms but offer the same functionality.
 Eg. Personal Finances (financial software
package, hire an Accountant, use pencil
and paper).
• Alternative
 Products or services that have different
functions and forms but the same purpose.
 Eg. Cinemas versus restaurants

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Path 1 : Look Across Alternative
Industries

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 Path 2 : Look Across Strategic
Groups within Industries
• Case Study : Curves (Women’s fitness Malaysian
Company) Case Studies
• Two Strategic Groups
1. Traditional Health Clubs
2. Home Exercise Programs

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Path 2 : Look Across Strategic
Groups within Industries

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 Path 3 : Look Across the Chain
of Buyers
• Chain of Buyers Malaysian
1.Purchases Case Studies

2.Users
3.Influences
• Case Study : Novo Nordisk (Danish
Insulin producer)
• Products :
 Novo Pen
 Novo Let
 Innovo

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Path 3 : Look Across the Chain
of Buyers

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Path 3 : Look Across the Chain
of Buyers

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 Path 4 : Look Across Complementary
Product and Service Offerings
• Think about what happens before, during and after
your product is used.
Malaysian
• Case Study : NABI (Hungarian Bus Company)
Case Studies
• Bus Industry
- Offer the lowest purchase price
- Design Outdated
- Late delivery times
- Low quality
- Life cycle of bus : 12 years
• Issues
- Maintenance of running the bus over 12 years life cycle
- Repairs after traffic accidents, fuel usage, wear & tear
- Parts frequently needed to be replaced due to bus
heavy weight
- Steels – heavy, corrosive and hard to repair after
accidents

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 Path 4 : Look Across Complementary
Product and Service Offerings

• NABI
Steel Fiberglass

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Path 4 : Look Across Complementary
Product and Service Offerings

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 Path 5 : Look Across Functional or
Emotional Appeal to Buyers
• Case Study : SWATCH (Functional Emotional)
c

: Body Shop (Emotional Functional)

c

: QB House (Emotional Functional)

c

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 Path 5 : Look Across Functional or
Emotional Appeal to Buyers
Malaysian Case Studies

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Path 5 : Look Across Functional or
Emotional Appeal to Buyers

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Path 5 : Look Across Functional or
Emotional Appeal to Buyers

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 Path 6 : Look Across Time
• Trend with change value to customers Malaysian
and impact the company’s business Case Studies
model
• Trends :
 Decisive
 Irreversible
 Clear Trajectory
• Case Study :
 CNN – created the 1st real time 24 hours
global news network (Globalization)
 HBO – Sex and the City (Trend of
increasingly urban and successful
women who struggle to find love and
marry later in life) 39
Path 6 : Look Across Time

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Analytical Tools & Framework
The Four Actions Framework
Reduce
Which factors should be
reduced well below the
industry’s standard?

Eliminate Create
Which of the factors that A New Which factors should be
the industry takes for Value created that the
granted should be industry has never
eliminated? Curve
offered?

Raise
Which factors should be
raised well above the
industry’s standard?
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Analytical Tools & Framework
Strategy Canvas

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 CASE STUDY : YELLOW TAIL
• Industry : Wine
• Customer : Wine Drinker
• Customer Requirements:
- Price
- Use of enological terminology and distinctions in wine
communication
- Above the line marketing
- Aging quality
- Vineyard prestige and legacy
- Wine complexity
- Wine range
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The Strategy Canvas of the US
Wine Industry in the late 1990s

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The Strategy Canvas of
[Yellow Tail]

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Eliminate-Reduce-Raise-Create
Grid : The Case of [yellow tail]

Eliminate Raise
• Enological terminology and • Price versus budget
distinctions wines
• Aging qualities • Retail store involvement
• Above-the-line marketing

Reduce Create
• Wine complexity • Easy drinking
• Wine range • Ease of selection
• Vineyard prestige • Fun and adventure

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 CASE STUDY : SOUTHWEST
AIRLINES
• Industry : Airline
• Customer : Affordable passengers
• Customer Requirements:
- Price
- Meals
- Lounges
- Seating class choices
- Hub connectivity

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The Strategy Canvas of
[Southwest Airlines]

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 3 Characteristics of Good Strategy
[Southwest Airlines]
• FOCUS
- Friendly service, speed and frequent point to point
departures.
• Divergence
- Pioneered point to point travel between midsize
cities.
• Compelling Tagline
- The speed of a plane at the price of a car -
whenever u need it.

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gÜtw|à|ÉÇtÄ fçÅÑ{ÉÇç bÜv{xáàÜt

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`ÉwxÜÇ fçÅÑ{ÉÇç bÜv{xáàÜt

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Wii Nintendo

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Wii Nintendo

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 The Four Steps of Visualizing
Strategy
1. Visual 2. Visual 3. Visual 4. Visual
Awakening Exploration Strategy Fair Communication

• Compare your • Go into the field to • Draw your “to-be” • Distribute your before-
business with your explore the six paths to strategy canvas based and-after strategic
competitors by drawing creating blue oceans. on insights from field profiles on one page for
your “as is” strategy observations easy comparison.
canvas. • Observe the distinctive
advantages of • Get feedback on • Support only those
• See where your alternative products and alternative strategy projects and operational
strategy needs to services. canvasses from moves that allow your
change. customers, competitors’ company to close the
• See which factors you customers and non- gap to actualize the new
should eliminate, create customers strategy.
or change.
• Use feedback to build
the best “to-be” future
strategy

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BOS MODEL for Malaysian
Industries
INPUT BOS PROCESS OUTPUT

4M
Company Core S W 4
Business Actions
O T Frame New Value
work
New Product Promotion
PEST
Customer
Requirements Good Strategy
Non-Customer 1. Focus
Strategy Canvas 2. Divergence
Requirements
3. Compelling Tag
Competitors
Profile

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 Breakout of the Red Ocean &
into Blue Ocean – 3 pointers
1. Stop benchmarking the competition
• The more you benchmark your competitors, the
more you tend to look like them.
2. Stop being content to swim in the Red Ocean
3. Don’t count on your customer for growth, look to
non-customers.

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 Professor Kim’s Citation -
Conclusion
• Make BOS part of company’s DNA just like teaching children
how to ride a bicycle. Its learning & experimentation,
cultivate it and water it, practice it until it becomes a habit.
• BOS is not a one time process but a continuous thinking
process.
• Blue Ocean is never ending as blue oceans will eventually
turn red.
• Blue Ocean should not be limited to processes. Think of
cultivating blue ocean people.
• It’s not enough simply to get out of red oceans of
competition and have uncontested blue oceans to yourself –
it must be a profitable ocean.
• Inward looking companies stay in the red ocean.
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 Nine Key Points of Blue Ocean Strategy

1. BOS is the result of a decade-long study of 150 strategic moves spanning more
than 30 industries over 100 years (1880-2000).
2. BOS is the simultaneous pursuit of differentiation and low cost.
3. The aim of BOS is not to out-perform the competition in the existing industry, but
to create new market space or a blue ocean, thereby making the competition
irrelevant.
4. BOS offers a total set of methodologies and tools to create new market space.
5. While innovation has been seen as a random/experimental process where
entrepreneurs and spin-offs are the primary drivers – as argued by Schumpeter
and his followers – BOS offers systematic and reproducible methodologies and
processes in pursuit of innovation by both new and existing firms.
6. BOS frameworks and tools include: strategy canvas, value curve, four actions
framework, six paths, buyer experience cycle, buyer utility map, and blue ocean
idea index.
7. These frameworks and tools are designed to be visual in order to not only
effectively build the collective wisdom of the company but also to effectively
execute through easy communication.
8. BOS covers both strategy formulation and strategy execution.
9. The three key conceptual building blocks of BOS are: value innovation, tipping
point leadership, and fair process.

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Blue Ocean Strategy Malaysian Version

For Enquiries：Tel: 03-79552633(Laura)

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Thank you for your participation!
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