blue-ocean-strategy-summary4461

By:W.ChanKim&ReneeMauborgneSummaryby:JesseStarmerCOM459ValueInnovationValueinnovationiscreatedintheregionwhereacompany’sactionsfavorablyaffectbothitscoststructureanditsvaluepropositiontobuyers.Costsavingsaremadebyeliminatingandreducingthefactorsanindustrycompeteson.Buyervalueisliftedbyraisingandcreatingelementstheindustryhasneveroffered.Overtime,costsarereducedfurtherasscaleeconomieskickinduetothehighsalesvolumesthatsuperiorvaluegenerates.CostsBuyerValueValueInnovationValueInnovationRedOceanVersusBlueOceanStartegyIntheredocean,differentiationcostsbecausefirmscompetewiththesamebest-practiceprinciple.Here,thestrategicchoicesforfirmsaretopursueeitherdifferentiationorlowcost.Inthereconstructionistworld,however,thestrategicaimistocreatenewbest-practicerulesbybreakingtheexistingvalue-costtrade-offandtherebycreatingblueocean.RedOceanStrategyBlueOceanStrategyCompeteinexistingmarketspace.Createuncontestedmarketspace.Beatthecompetition.Makethecompetitionirrelevant.Exploitexistingdemand.Createandcapturenewdemand.Makethevalue-costtrade-off.Breakthevalue-costtrade-off.Alignthewholesystemofafirm’sactivitieswithitsstrategicchoiceofdifferentiationorlowcost.Alignthewholesystemofafirm’sactivitiesinpursuitofdifferentiationandlowcost.RedOceanVersusBlueOceanStrategyRedOceanStrategyBlueOceanStrategyTheSixPrinciplesofBlueOceanStrategyFormulationPrinciplesRiskfactoreachprincipleattenuatesReconstructmarketboundariesFocusonthebigpicture,notthenumbersReachbeyondexistingdemandGetthestrategicsequencerightSearchriskPlanningriskScaleriskBusinessmodelriskEvaluationprinciplesRiskfactoreachprincipleattenuatesOvercomekeyorganizationalhurdlesBuildexecutionintostrategyOrganizationalriskManagementriskThisfigurehighlightsthesixprinciplesdrivingthesuccessfulformulationandexecutionofblueoceanstrategyandtherisksthattheseprinciplesattenuate.TheSixPrinciplesofBlueOceanStrategyFormulationPrinciplesRiskfactoreachprincipleattenuatesEvaluationprinciplesRiskfactoreachprincipleattenuatesStrategyCanvasThestrategycanvasisbothadiagnosticandanactionframeworkforbuildingacompellingblueoceanstrategy.Itcapturesthecurrentstateofplayintheknownmarketspace.Thisallowsyoutounderstandwherethecompetitioniscurrentlyinvesting,thefactorstheindustrycurrentlycompetesoninproducts,service,anddelivery,andwhatcustomersreceivefromtheexistingcompetitiveofferingsonthemarket.Thehorizontalaxiscapturestherangeoffactorstheindustrycompetesonaninvestsin.Theverticalaxiscapturestheofferinglevelthatbuyersreceiveacrossallthesekeycompetingfactors.Thevaluecurvethenprovidesagraphicdepictionofacompany’srelativeperformanceacrossitsindustry’sfactorsofcompetition.HighLowPriceUseofenologicalterminologyAbove-the-linemarketingAgingqualityVineyardprestigeandlegacyWinecomplexityWinerangeStrategyCanvasHighLowFourActionsFramework+Eliminate/Reduce/Raise/CreateGridThefouractionsframeworkoffersantechniquethatbreaksthetrade-offbetweendifferentiationandlowcostandtocreateanewvaluecurve.Itanswersthefourkeyquestionsofwhatindustrytakesforgrantedandneedstobeeliminated;whatfactorsneedtobereducedbelowindustrystandards;whatfactorsneedtoberaisedaboveindustrystandards;andwhatshouldbecreatedthattheindustryhasneveroffered.Theeliminate-reduce-raise-creategridpushescompaniesnotonlytoaskallfourquestionsinthefouractionsframeworkbutalsotoactonallfourtocreateanewvaluecurve.Bydrivingcompaniestofillinthegridwiththeactionsofeliminating,reducing,raising,andcreating,thegridprovidesfourimmediatebenefits:itpushesthemtosimultaneouslypursuedifferentiationandlowcosts;identifiescompanieswhoareonlyraisingandcreatingtherebyraisingcosts;makesiteasierformanagerstounderstandandcomply;anditdrivescompaniestoscrutinizeeveryfactortheindustrycompeteson.EliminateEnologicalterminologyanddistinctionsAgingqualitiesAbove-the-linemarketingRaisePriceversusbudgetwinesRetailStoreinvolvementReduceWinecomplexityWinerangeVineyardprestigeCreateEasydrinkingEaseofselectionFunandadventureANewValueCurveReduceEliminateCreateRaiseWhichfactorsshouldbereducedwellbelowindustrystandards?Whichfactorsshouldbecreatedthattheindustryhasneveroffered?Whichfactorsshouldberaisedwellabovetheindustry’sstandard?Whichofthefactorsthattheindustrytakesforgrantedshouldbeeliminated?FourActionsFramework+Eliminate/Reduce/Raise/CreateGridFourActionsFrameworkANewValueCurveReduceEliminateCreateRaiseEliminateRaiseReduceCreateTheEliminate-Reduce-Raise-CreateGridFourStepsofVisualizingStrategyThefourstepsofvisualizingstrategybuildsonthesixpathsofcreatingblueoceansandinvolvesalotofvisualstimulationinordertounlockpeople’screativity.Thefourstepsincludevisualawakening,visualexploration,visualstrategyfair,andvisualcommunication.1.VisualAwakening2.VisualExploration3.VisualStrategyFair4.VisualCommunication•Compareyourbusinesswithyourcompetitors’bydrawingyour“asis”strategycanvas.•Seewhereyourstrategyneedstochange•Gointothefieldtoexplorethesixpathstocreatingblueoceans.•Observethedistinctiveadvantagesofalternativeproductsandservices.•Seewhichfactorsyoushouldeliminate,create,orchange.•Drawyour“tobe”strategycan