C H A P T E R 1
Creating Blue Oceans
This book seeks to address this imbalance by laying out a methodology to support our thesis. Here we present the principles and analytical frameworks to succeed in blue oceans.
Chapter 2 introduces the analytical tools and frameworks that are essential for creating and capturing blue oceans. Although supplementary tools are introduced in other chapters as needed, these basic analytics are used throughout the book. Companies can make proactive changes in industry or market fundamentals through the purposeful application of these blue ocean tools and frameworks, which are grounded in the issues of both opportunity and risk. Subsequent chapters introduce the principles that drive the successful formulation and implementation of blue ocean strategy and explain how they, along with the analytics, are applied in action. There are four guiding principles for the successful formulation of blue ocean strategy. Chapters 3 to 6 address these in turn.
Chapter 3 identifies the paths by which you can systematically create uncontested market space across diverse industry domains, hence attenuating search risk. It teaches you how to make the competition irrelevant by looking across the six conventional boundaries of competition to open up commercially important blue oceans. The six paths focus on looking across alternative industries, across strategic groups, across buyer groups, across complementary product and service offerings, across the functional-emotional orientation of an industry, and even across time.
Chapter 4 shows how to design a company’s strategic planning process to go beyond incremental improvements to create value innovations. It presents an alternative to the existing strategic planning process, which is often criticized as a number-crunching exercise that keeps companies locked into making incremental improvements. This principle tackles planning risk. Using a visualizing approach that drives you to focus on the big picture rather than to be submerged in numbers and jargon, this chapter proposes a four-step planning process whereby you can build a strategy that creates and captures blue ocean opportunities.
Chapter 5 shows how to maximize the size of a blue ocean. To create the greatest market of new demand, this chapter challenges the conventional practice of aiming for finer segmentation to better meet existing customer preferences. This practice often results in increasingly small target markets. Instead, this chapter shows you how to aggregate demand, not by focusing on the differences that separate customers but by building on the powerful commonalities across noncustomers to maximize the size of the blue ocean being created and new demand being unlocked, hence minimizing scale risk.
Chapter 6 lays out the design of a strategy that allows you not only to provide a leap in value to the mass of buyers but also to build a viable business model to produce and maintain profitable growth for itself. It shows you how to ensure that your company builds a business model that profits from the blue ocean it is creating. It addresses business model risk. The chapter articulates the sequence in which you should create a strategy to ensure that both you and your customers win as you create new business terrain. Such a strategy follows the sequence of utility, price, cost, and adoption.
Chapters 7 and 8 turn to the principles that drive effective execution of blue ocean strategy. Specifically, chapter 7 introduces what we call tipping point leadership. Tipping point leadership shows managers how to mobilize an organization to overcome the key organizational hurdles that block the implementation of a blue ocean strategy. It deals with organizational risk. It lays out how leaders and managers alike can surmount the cognitive, resource, motivational, and political hurdles in spite of limited time and resources in executing blue ocean strategy.
Chapter 8 argues for the integration of execution into strategy making, thus motivating peopleto act on and execute a blue ocean strategy in a sustained way deep in an organization. This chapter introduces what we call fair process. Because a blue ocean strategy perforce represents a departure from the status quo, this chapter shows how fair process facilitates both strategy making and execution by mobilizing people for the voluntary cooperation needed to execute blue ocean strategy. It deals with management risk associated with people’s attitudes and behaviors.
And Chapter 9 discusses the dynamic aspects of blue ocean strategy the issues of sustainability and renewal.
The Six Principles of Blue Ocean Strategy
Formulation principles Risk factor each principle attenuates
Reconstruct market boundaries ↓ Search risk
Focus on the big picture, not the numbers ↓ Planning risk
Reach beyond existing demand ↓ Scale risk
Get the strategic sequence right ↓ Business model risk
Execution principles Risk factor each principle attenuates
Overcome key organizational hurdles ↓ Organizational risk
Build execution into strategy ↓ Management risk
- The cornerstone of blue ocean strategy is value inovation, use both differentiation and low cost.
- you can see the relationship among differentiation, low cost and value inovation at page 16.
- inovation will be remained to be core of strategy.
- central void is not only five potter power and thrre generic strategy but excecutive must be brave to learn from the failure and to see revolution.
- the effectiveness of blue ocean strategy is about risk minimization and not about risk taking.