Blue Ocean Strategy: Analytical Tools & Frameworks

1. Blue Ocean Strategy: Analytical Tools & Frameworks September 16, 2010 Presented by: Lana Grimes, Andrei Gololobov, & Laura McMannis

2. Analytical Tools & Frameworks • Essential for development of blue ocean strategy • Systematic & actionable as competing in red waters • Ensure risk minimization

3. How do you break out of red ocean to make competition irrelevant? • How do you open up and capture a blue ocean of uncontested market space?

4. The Strategy Canvas • Central to value innovation & creation of blue oceans • Diagnostic & action framework

6. Purpose of Strategy Canvas • Captures the current state of play in the known market space • Competition investing • Competition factors • Received by customers • Reorients strategic focus • Competitors Alternatives • Customers Noncustomers

7. THE FOUR ACTIONS FRAMEWORK

8. THE FOUR ACTIONS FRAMEWORK“QUESTION BY QUESTION” • Which factors that the industry takes for granted should be eliminated? • Factors which your industry has long competed on • Factors of competition intended for a Red Ocean Strategy. • Factors which we take for granted but no longer have any value

9. Which factors should be reduced well below the industry standard? • Factors which are pushing to hard to stay competitive but yield little or no gain over the competition • High development costs but little or no profit • Which factors should be raised well above the industry standard? • Eliminate compromises your industry forces consumers to make

10. Which factors should be created that the industry has never offered • Find a new source of value for the customer • Shift demand and/or create new demand • Shift strategic pricing in the industry

11. APPLICATION TO A REAL-WORLD EXAMPLE: CASELLA WINES • Wine market stagnant in the US • Few people knew how to understand and appreciate the complexity of wines • Competing wine yards all marketed on fineness, quality, and prestige • Narrow target market: difficult to understand for the average consumer

12. Expansive range of wines made it difficult for consumers to choose • Stereotyped by the general public as a formal upper-class drink • The average consumer was used to something more “drinkable” like beer or cocktails

13. THE FOUR ACTIONS FRAMEWORKAPPLIED TO CASELLA WINES • Which factors that the industry takes for granted should be eliminated? • Promotional campaign • Aging qualities • Ecological terminology and distinctions (What does tannins, oak, and complexity mean to the average consumer?)

14. Which factors should be reduced well below the industry standard? • Wine complexity • Wine range (no complicated array of choices) • Vineyard prestige (Red Ocean marketing) • Which factors should be raised well above the industry standard? • Price kept above the price of budget wines • Budget wine drinkers moved up

15. Which factors should be created that the industry has never offered? • Create a wine that is fun and easy to drink • Only two variants create make selection easy • Labeling sets wine as a fun and informal drink, appealing to more potential consumers

16. ELIMINATE-REDUCE-RAISE-CREATE GRID

17. ELIMINATE-REDUCE-RAISE-CREATE GRID • Pushes companies to differentiate and reduce costs, breaking the value-cost trade off. • Checks companies which decide to focus on only creating new products without reducing costs • Easy to understand • Every factor is scrutinized leading the company to discover implied assumptions made unconsciously in competition

18. ELIMINATE-REDUCE-RAISE-CREATE GRID: APPLIED TO CASELLA WINES

19. Three characteristics of Good Strategy • Focus • Divergence • Tagline

20. Why are these characteristics important? • What will the companies achieve by adhering to these principles?

21. Southwest: • Focus on friendly service, speed, and frequent point-to-point flights • Divergence: Uniqueness of the value curve • Compelling tagline: “The speed of a plane at the price of a car – whenever you need it.”

22. Johnson & Johnson • Competes in various categories of healthcare industry • Tries to achieve divergence through constant pursuit of innovation and the leading edge medical knowledge • Compelling tagline: “The Family Company”

23. Marketing strategies and consumer demographics • General consumer • Medical professionals

24. Innovation • Staying ahead of the game: Inimitability and sustainable advantage • Technology S-Curve • Ethics codes

25. Takeaways • Strategy Canvas has two purposes: • Captures the current state of play in the known market space: where competition is currently investing and the factors that the industry competes on. • Calls for action by reorienting your focus from competitors to alternatives and from customers to noncustomers of the industry. • Marketing: • By reinventing wine, Casella Wines created a whole new target market in addition to widening the existing market for wines. • The Four Actions Framework and the Eliminate-Reduce-Raise-Create Grid are almost a straight-forward step-by-step strategy which offers an answer to all four parts of the Marketing Mix. • Importance of staying focused: • Remember what the product that company delivers is all about. What is the utility to the customer? Do not lose sight of self by trying to differentiate from competitors. Strive to achieve uniqueness.