Blue Ocean Strategy and Market Innovation Insights
Discover the transformative power of Blue Ocean Strategy in creating uncontested market spaces, beating competition, and driving innovation for business growth. Dive into strategies, growth models, and success components for market-creating breakthroughs. Explore market-driven vs. market-driving approaches and the impact on revenue and profit. Uncover the essentials of transitioning from market competition to market creation for sustained success.
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Presentation Transcript
Source: Source: Blue Ocean SHIFT, Beyond Competing Blue Ocean SHIFT, Beyond Competing By: W. Chan Kim & Renee Mauborgne & & From Market Driven to Market Driving From Market Driven to Market Driving By Nirmalya Kumar, IMD, Lausanne Lisa Scheer, University of Missouri, Columbia Philip Kotler, J.L.Kellogg Graduate School of Management, Northwestern University
The Profit and Growth Consequences of Creating Blue Oceans The Profit and Growth Consequences of Creating Blue Oceans Business Launch14% Revenue Impact38% Profit Impact 61% Launches within red oceans Launches for creating blue oceans
BLUE OCEAN STRATEGY Red Ocean Versus Blue Ocean Strategy Red Ocean Strategy Blue Ocean Strategy Companies in existing market space Create uncontested market space Beat the competition Make the competition irrelevant Exploit existing demand Create and capture new demand Make the value-cost trade-off Break the value-cost trade-off Align the whole system of firm s activities with its strategic choice of differentiation or low cost. Align the whole system of the firm s activities in pursuit of differentiation and low cost.
The Pioneer-Migrator-Settler map of a Consumer Appliance Company
Creating a healthy balance portfolio: The case of the consumer appliance company
The Buyer Utility map of Electric Home French Fry Makers: Pre- Groupe SEB s ActiFry
Value Innovation: The Cornerstone of Blue Ocean Strategy . Costs Value Innovation Buyer Value The Simultaneous Pursuit of Differentiation and Low Cost
Graphs depicting the U.S. Auto Industrys Profit Pool and the PC Industry s Profit Pool have been sourced from the HBR article Profit Pools: A Fresh Look at Strategy , authored by Orit Gadiesh and James L. Gilbert
The U.S. Auto Industrys Profit Pool 25% O P E R A T I N G 20 15 10 M A R G I N 5 0 New car dealers Auto loans Auto insurance Auto 100% 0 Used car dealers Gasoline manufacturing Auto rental Leasing Service repair Warranty Aftermarket parts SHARE OF INDUSTRY REVENUE
The PC Industrys Profit Pool 40% O P E R A T I N G 30 20 M A R G I N 10 0 100% 0 Other components Software Peripherals Services Personal computers Microprocessors SHARE OF INDUSTRY REVENUE
Relational Objectives Inter Inter- -Organizational Cooperation Objectives Organizational Cooperation Objectives Relational Objectives Leveraging Resources Integrating Activities Aligning Positions LEARNING LENDING LUMPING LINKING LEANING LOBBYING The objective is to exchange knowledge and skills If a firm can not make full use of own resources it can be attractive to lend them to others Relationships where products/ services are exchanged Firms bring similar activities together to gain economies of scale Firms get together to improve their bargaining position vis- - vis other industry actors Firms cooperate with one another to gain a stronger position vis- - vis contextual actors
II. Competition and Cooperation Dealing with the Paradox Dealing with the Paradox Inter- Inter- organizational Cooperation The act of working together with each other, where two or more organizations goals are mutually beneficial organizational Competition The act of working against each other, where two or more organizations goals are mutually exclusive
III. Network Level Strategy Overview Overview DISCRETE ORGANIZATION PERSPECTIVE EMBEDDED ORGANIZATION PERSPECTIVE Competition over cooperation Cooperation over competition Independence Interdependence Discrete organizations (atomistic) Embedded organizations (networked) Distinct & defended boundaries Fuzzy & open boundaries Close & structural relations Arm s length & transactional relations Mainly zero-sum (win/lose) Mainly positive sum (win/win) Bargaining power & calculation Trust & reciprocity No network level strategy Network level strategy Temporary coalitions (tactic) Durable partnerships (strategic) Limited, well-defined, contract-based Broad, open, relationship-based
