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Blue Ocean Chapter 6 Get the Strategic Sequence Right

Blue Ocean Chapter 6 Get the Strategic Sequence Right. Bess Luker Alicia Estrada Ryan Dupriest Taylor Watts Mamie Dupre. The fourth Principle of Blue Ocean Strategy. Get the strategic sequence right Fleshing out Validating blue ocean ideas. The Right Strategic Sequence.

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Blue Ocean Chapter 6 Get the Strategic Sequence Right

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  1. Blue OceanChapter 6Get the Strategic Sequence Right Bess Luker Alicia Estrada Ryan Dupriest Taylor Watts Mamie Dupre

  2. The fourth Principle of Blue Ocean Strategy • Get the strategic sequence right • Fleshing out • Validating blue ocean ideas

  3. The Right Strategic Sequence

  4. Testing for Exceptional Utility • Fail to deliver exceptional value • Philips’ CD-I • “Imagination Machine” • Video machine • Music System • Game Player • Teaching Tool • LACKED ATTRACTIVE SOFTWARE TITLES

  5. The Trap • Bills and whistles of the new technology • Bleeding-edge technology is equivalent to bleeding-edge utility

  6. Getting around the Trap • Create a strategic profile • Assess where and how the new product/service will change the lives of its buyers • Less a function of its technical possibilities and more a function of its utility to buyers

  7. The Buyer Utility Map

  8. Buyer Experience Cycle

  9. The six stages of the buyer experience cycle • Utility Levers • Simplicity • Fun and Image • Environmental Friendliness

  10. Testing for Exceptional Utility • Removed the greatest blocks to utility • The thirty-six spaces

  11. Testing for Exceptional Utility (continue) • Convenience in the use phase • Risk in the maintenance phase

  12. From Exceptional Utility to Strategic Pricing • Set the right strategic price • Buyers will want to buy your offering • A compelling ability to pay for it • Many companies take reverse course • Testing the waters • Over time they drop prices ro attract mainstream buyers

  13. Two Reasons for this Change • Volume generates higher returns than it used to • Knowledge intensive • Value of a product/service • Ex. eBay • Network externalities

  14. Free Riding • Rival good • Non-rival good • Excludability • Strategic Pricing

  15. Step 1: Identify the Price Corridor of the Mass • Setting price • Products and Services in two categories • Different form, same function • Different form and function, same objective

  16. Step 2: Specify a level Within the Price Corridor • How High the Price • Two principal Factors: • Degree to which the product is protected by patents • Degree to which the company owns some exclusive asset or core capability • Upper Boundary Strategic Pricing • Mid-to-lower-boundary strategic pricing • Price Corridor of the mass

  17. The Price Corridor of the Mass

  18. From Strategic Pricing to Target Costing • Target costing is the next step in the strategic sequence, addresses the profit side of the business model • Start with strategic price then deduct its desired profit margin from the price to get to the target price • Price-minus cost and not cost-plus pricing • Essential if you arrive at a cost structure that is both profitable and hard for potential follower to match

  19. Pricing to Cost (continue) • If companies give in to the tempting route of either bumping up the strategic price or cutting back of utility they are not on the path to lucrative blue waters

  20. Three principal levers • To hit the cost target • First: streamlining operations and introducing cost innovations from manufacturing to distribution • High cost low value added activities in your value chain be significantly eliminated reduce of outsource • Second: partnering • Secure needed capabilities fast and effectively while dropping their cost structure

  21. Three principal levers(continue) • Third: changing the pricing model of the industry • If the cost of the market is to high find another way to make your product easier for customers to get your product

  22. Profit Model of Blue Ocean Strategy

  23. From Utility, Price, and Cost to Adoption • Three main stakeholders: • Employees • Business Partners • General Public • Before moving forward and investing in the new idea, the company must first overcome such fears by educating

  24. Employees • Failure to address concerns of employees about a new business idea can be expensive • Before going public communicate so employees are aware • Work with employees to find ways to make everything less confusing

  25. Business Partners • Partners who fear that their revenue streams or market position are threaten • Be open to discussion • Let executives convince on positives

  26. General Public • If the idea is very new and innovative it can effect the public not just the company • Educate public of benefits • Encourage open discussion

  27. Blue Ocean Idea Index

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