BLUE OCEAN STARTEGY

PREPARED BY
MUGAMBIKAI ANBALAGAN MPP172017
AEZRUN NATASHA KHARIL MPP171140
The Book and the Authors

© JOHN ABBOTT © JOHN ABBOTT

Prof Chan Kim Prof Renee

Mauborgne
 Accolades
• Over 2 million copies sold

Translated into over 41 foreign

languages – a world record
Taught as the major theory of strategy at
leading business schools
Gives insights to CEOs, Executives,
Heads of State and Prime Ministers
 New Market Space
• Red oceans and blue oceans make up market
universe
• Red oceans: all industries in existence
• = known market space
• Blue oceans: all industries not in existence
• = unknown market space
 Red Oceans vs. Blue Oceans
• Red oceans
– Industry boundaries defined and accepted
– Competitive rules of game known
– Companies try to outperform rivals; cutthroat competition
– As market space gets crowded, prospects for profit and growth
reduced
– Products become commodities
– Red ocean strategy is a market-competing strategy
• Blue oceans
– Undefined market space, demand creation, opportunity for
highly profitable growth
– Most are created from within red oceans by expanding existing
industry boundaries
– Rules of game waiting to be set
– Competition irrelevant
– Blue ocean strategy is a market-creating strategy
 The Rising Imperative of
Creating Blue Oceans
• Supply is exceeding demand in most industries
• global competition is intensifying
• Problems:
– Accelerated commodization of products and services
– Increasing price wars
– Shrinking profit margins
• Red oceans becoming bloodier, need to be
concerned with creating blue oceans
 The Continuing Creation
of Blue Oceans
• Blue oceans have been around for some time; a
feature of business life
• Industries never stand still, constantly evolving
• Significant expansion of blue oceans over years
• So why the focus on red ocean strategy?
– Corporate strategy influenced by military strategy
– Need to create new market space that is uncontested
The Impact of Creating Blue Oceans
 From Company and Industry
to Strategic Move
• Are there lasting visionary companies that
continuously outperform the market and create
blue oceans?
• Found success of these model companies was a
result of industry sector performance, not
companies themselves
• Strategic move used as unit of analysis (rather
than company or industry)
• Strategic move: the set of managerial actions and
decisions involved in making a major market-
creating business offering
 Value Innovation: The
Cornerstone of Blue Ocean Strategy
• Creators of blue oceans
follow value innovation
• Value Innovation
– Equal emphasis on value
and innovation
– Defies value-cost trade-off
of competition-based
strategy
– Successful value
innovation:
• Drives down costs while
driving up buyers’ value
• Uses a whole-system
approach
• Follows reconstructionist
view
 Red Ocean Vs. Blue Ocean
• Compete in existing • Create uncontested
market space market space
• Beat the competition • Make the competition
irrelevant
• Exploit existing demand
• Create and capture new
• Make the value-cost demand
trade-off • Break the value-cost
• Align the whole system trade-off
of a firm’s activities • Align the whole system of
with its strategic choice a firm’s activities in
of differentiation or low pursuit of differentiation
cost and low cost
 Formulating and Executing
Blue Ocean Strategy
• Six Principles of Blue Ocean Strategy
– Reconstruct market boundaries
– Focus on the big picture, not the numbers
– Reach beyond existing demand
– Get the strategic sequence right
– Overcome key organizational hurtles
– Build execution into strategy
• The remaining chapters will give you the
principles and generalized frameworks to succeed
in blue oceans
 Take Aways

• Red ocean strategy is a market-competing

strategy, while blue ocean strategy is a
market-creating strategy
• As red oceans are becoming bloodier, we need
to create more blue oceans
• “The only way to beat the competition is to
stop trying to beat the competition!”
 The Six Principles of Blue Ocean Strategy
This figure highlights the six principles driving the successful formulation and
execution of blue ocean strategy and the risks that these principles attenuate.

Formulation Principles Risk factor each principle

attenuates
Reconstruct market boundaries Search risk
Focus on the big picture, not the Planning risk
numbers Scale risk
Reach beyond existing demand Business model risk
Get the strategic sequence right

Evaluation principles Risk factor each principle

attenuates
Overcome key organizational hurdles Organizational risk
Build execution into strategy Management risk
 Points of view

•Business often look at the industry from a structuralist

(supply) point of view

•What if we looked at the industry from a

reconstructionist (demand) point of view?

–Market boundaries are not viewed as given, but could be

reconstructed to unlock new demand
 Generic Strategies vs.
Value Innovation
Red Ocean Strategy Blue Ocean (VI) Strategy

High High

V1 D
• V1

Quality Quality

• LC

Low Low
High C1 Low High C1 Low
Cost Cost

Structuralist Reconstructionist
Four Actions to create a Blue Ocean
Raise
What factors should
be raised well beyond
the industry
standard?

Eliminate Create
What factors should What factors should be
be eliminated that created that the
the industry has taken industry has never
for granted? offered?

Reduce
What factors should
be reduced well
below the industry
standard?
 BLUE OCEAN LEADERSHIP
• Blue ocean leadership, in contrast, is action-based, just as strategy is.
• focuses on what acts and activities leaders need to do to provide a leap
in motivation and business results driven by people, not on who they
need to be

• “Blue ocean leadership focuses on what leaders need to do,not

on who they need to be, which is far easier to change and has a
direct impact on performance.”
 THE AIMS
The development of a compelling leadership profile grounded in
actions
• to observe, measure, and are directly linked to
performance.This difference in emphasis has an important
consequence for the time
• resources needed to bring about a change for high
performance.
http://news.gallup.com/businessjournal/182228/managers-engaged-jobs.aspx
Four pillars of BOL(BLUE OCEAN LEADERSHIP)

Pursue high
impact leadership
Distribute acts and activities
leadership across at low cost
Connect different
leadership to management level
See Your market reality by
Leadership Reality engaging people(
DEVELOP PROFILES
See Your Leadership Reality

https://www.blueoceanstrategy.com/blog/how-to-see-
your-current-leadership-reality/
 ELIMINATE
ERRC • Stigma – school for the ‘rejects’
CREATE
Excellent work culture –
• Corruption
(Develop Profiles) • Poor work culture
school ethos
New School’s vision
• Non-productive activities .e.g loitering Conducive working &
in canteen during class time learning environment
• Practice of teachers not entering class Team work & team spirit
• Ineffective teaching and learning Reward and recognition
RAISE
ELIMINATE RAISE • Overall discipline
system
Parents-Teachers Association
• Quality of teaching and learning Smart partnership with
• Awareness of their mission as teachers Technical Education Dept.
• Morale & motivation of teachers , Schools Inspectorate, State
non-academic staff and students Education Dept. District
REDUCE Education Office & local
REDUCE CREATE School & office politics leaders and community.
Discipline problems ( teachers . staff and
students )
Resistance to change
 Distribute Leadership (CREATE ORG. CHART)
• Select to-be Leadership Profiles:
• Generate two to three to-be diagrams for every level in the
organization

Senior Management Middle Management Frontlines

• Then organize an event where employees vote on their most

admired diagram
 Pursue high impact leadership acts and
activities at low cost
• Institutionalize new Leadership Practices: These canvases must
becomes a concrete part of the organization, communicated to
all leaders, hanged in offices, development plans should all
reflect it.
• The high impact refers to achieving high motivation and
engagement of people to drive the business@task
• Low cost refers to a lower investment of time by leaders, which
is their most expensive and limted sources.
 The Difference between Conventional
Leadership and Blue Ocean Leadership
Traditional leadership Blue ocean leadership
• Focus on the values, qualities and behavioural styles that • Focus on what acts and activities leaders need to
make for good leadership under the assumption that these undertake to boost their teams’ motivation and business
ultimately translate into high performance. results, not on who leaders need to be.
• Tend to be quite generic and are often detached from • Connect leaders’ actions closely to market realities by
what organizations stand for in the eyes of their customers having the people who face market realities define what
and the market results their people are expected to leadership practices hold them back and what leadership
achieve. actions would enable them to thrive and best serve
• Focus mostly on the executive and senior levels of customers and other key stakeholders.
• organizations. • Distribute leadership across all three management levels
because outstanding organizational performance often
• Invest extra time for leadership practices added on to
comes down to the motivation and actions of middle and
people’s regular work.
frontline
• Pursue high impact leadership acts and activities at low
cost by focusing as much on what leaders need to
eliminate and reduce in what they do as on what they
need to raise and