Blue Ocean Strategy

Under the guidance of competition-based strategic thinking, companies often choose between "differentiation" and "cost leadership" strategies, but the pursuit of differentiation implies a corresponding increase in costs, and cost leadership orientation limits the ability of companies to obtain Profitability. As more and more firms compete for limited market share and profits (playing a zero-sum game in a given market), there is less and less room for profitable growth regardless of whether a firm adopts a "differentiation" or "cost leadership" strategy. Blue Ocean Strategy, as opposed to the above strategies, is a leap from focusing on and keeping up with what the competition is doing to providing value to the buyer.

The paradox that many companies face is that the more they focus on dealing with their competitors, trying to match and beat them, the more they look like their competitors. This is the origin of homogenization.

For a long time, the traditional circus industry took some elements for granted and never questioned their importance. Cirque du Soleil cuts out these elements, retains the necessary thrills and spills, and strings together an otherwise unrelated show with a theme or story line, with unique music and lighting, so that the show is elegant because it adds an artistic flavor and a far-reaching context. Its ticket price is several times higher than that of a traditional circus show, yet it is accessible to most adult audiences who are used to watching theater performances.

The value curve is a fundamental part of the strategy map, graphically depicting the relative strengths and weaknesses of a company's performance in each element of industrial competition.

The elements of the value curve that need to be updated:

1) What are the elements that the industry takes for granted that need to be eliminated?

2) Which elements should be reduced below industry standards?

3) Which elements should be increased above industry standards?

4) What elements never before existed in the industry need to be created?

Among other things, new elements are often borrowed from other-selective industries (where users go to B when they don't go to A), e.g., Cirque du Soleil borrows art and themes from theater; Yellow Tail Wine borrows easy-drinking, easy-to-choose, and fun-adventurous from young, fat-house beverages; and Southwest Airlines borrows frequent, point-to-point, non-stop flights from motorcoach travel.

1) NetJets looks at the innovation that comes with other-option service:

Corporate business travelers, who often choose between airline shuttles and dedicated flights because they want to be free of lines, security, and transfers, as well as save on costs, have been creative in offering a third other-option service, offering each customer 1/16th of ownership of the aircraft, with the entire plane with the NetJets has created a third option by offering each customer 1/16th of the ownership of the aircraft, sharing the entire aircraft with 15 other customers***, thus combining the advantages of the original two options.

2) Novo Nordisk's innovation in crossing the buyer chain:

All insulin manufacturers are oriented towards doctors trying to provide purer insulin, with purity as the only measure. Novo Nordisk turned its attention to the patient and realized that it was cumbersome for the patient to inject insulin, and pioneered the development of easier insulin injection tools (Novo pens, Novo needle syringes, and Novo Injectors) that still rule the market today.

Market research rarely sheds new light on the question of what appeals to customers, because customers expect exactly what the industry teaches them, and when they fill out questionnaires, they parrot back: what the industry gives them, they ask for more of, and they want it cheaper.

A useful exercise is to plot the composition of a company's existing and planned business on a Pioneer-Migrant-Status Quo orientation map.

Pioneers: Provide unprecedented value, with a value curve that is very different from that of the competition, and are the most powerful source of profitable growth.

The Status Quo: The value curve is essentially the same as the industry curve, and is a "me too" type of business that has little growth potential, but is usually the money maker of the moment.

Migrators: In between, they take the elements of the value curve a step further, offering more to the customer at a cheaper price, without changing the basic shape of the value curve.

Three levels of non-customers:

Level 1: hovering on the border of your market, ready to abandon ship and go "quasi-non-customers". For example, only to go to the restaurant lunch workers → fresh, healthy, affordable, fast, can take away the sandwich fast food.

Level 2: "Rejecting non-customers" who intentionally avoid your market. Ineffective, disliked outdoor advertising on traditional means of transportation due to a quick glance → Outdoor advertising on urban public **** facilities (e.g. bus stops) where you have fragmented time to browse.

Tier 3: The "unexplored non-customer" who is far from your market. These are the people whose needs and the business opportunities associated with them are always taken for granted as belonging to other markets.

Once you've found your blue ocean product, scarcity (how easy it is to imitate) determines pricing. Difficulty to imitate is based on two factors: protection through patents or copyrights, and exclusive assets (e.g., expensive manufacturing equipment) or core competency barriers (e.g., proprietary design capabilities) that prevent competition.

Moving from the formulation side to the execution side of the Blue Ocean strategy involves passing the following Blue Ocean Creativity Index tests in turn:

1) Do your products and services have outstanding utility? Is there a compelling reason for the buyer to make the purchase?

2) Is your pricing easily affordable to the buying public? (Note: this is not about underpricing, but strategic pricing, using the price of non-customer alternatives as a reference)

3) To achieve this pricing, can your cost structure meet your target cost?

4) Have you addressed the barriers to acceptance by employees, business partners, and the public from the beginning?

1) Cognitive barriers: employees are so caught up in the familiar and comfortable red ocean status quo that they don't see the importance of significant change.

2) Resource barriers: limited resources and budgets, a common problem in business.

3) Motivational barriers: lack of motivated employees, discouraged and demoralized.

4) Political obstacles: opposition from powerful internal and external vested interests.

Three strategic propositions are critical to the success of the strategy:

1) Value proposition: develop a product or service that appeals to and convinces the buyer.

2) The profit proposition: create a business model that allows the organization to profit from that business.

3) The people proposition: in addition, the people who work for and with the business need to be inspired to execute the strategy.

Example: Comic Relief

Value proposition: Traditional fundraisers use sad or gruesome images to inspire negative emotions such as guilt and pity to get people to donate. Comic Relief, on the other hand, uses comedy shows to get people to forget about pity, do funny things, donate a little bit of money (which Comic Relief values and recognizes, no matter how small), and make a difference in the world.

The profit proposition: instead of spending time and money on lavish donation dinners, writing proposals to apply for funds from governments and foundations, and opening charity stores, the company uses existing high street retail outlets, from supermarkets to fashion stores, to sell its little red noses. On Red Nose Day, donations from ordinary people add up.

The people idea: to let everyone have a bit of fun, rather than making support a burden or a sacrifice.

Mimicry barriers:

1. Alignment barriers: aligning value, profit, and people propositions, as in Chapter 9, creates daunting barriers to sustainability.

2. Cognitive barriers: the belief that a certain blue ocean behavior has no future, such as Zhang Chaoyang's QQ.

3. Organizational barriers: imitation will result in significant organizational changes and benefit cuts. Technical barriers are also categorized in which means that you have to build a technical team that has never existed before.

4, brand barriers: imitation will conflict with the existing brand image, and the imitator won the customer's mind.

5, natural barriers: the area of Brussels can not support a second super theater.

6. Cost barriers: Wal-Mart's huge economies of scale in purchasing have made it difficult for other companies to retreat.

7. Social barriers: the more online users there are on Twitter/WeChat, the greater the overall appeal to the general public, and the more reluctant people are to switch to potential imitators.

8. Legal barriers: Patents and legal licenses give value innovators franchise rights.

For blue oceans with shallow barriers, a new round of value innovation should be initiated when competitors' value curves are about to overlap with their own, so as to get rid of competition again.

Such as Saleforce, at the very beginning of the distinction between the traditional CRM suite of expensive prices, complex installation, not easy to use, spend money on maintenance, the launch of a network-based CRM solution -- to provide the core functionality, the user can sign up for instant use, the use of a reliable, convenient, anytime, anywhere networking Access, and low price, so it captured the small and medium-sized enterprises of these traditional CRM non-customers. As the number of entrants grew, Saleforce launched Force.com (a cloud-based add-on application development platform) and AppExchange (an online marketplace for application software), enabling users to inexpensively access a variety of tailored applications and realize value upgrades; and Chatter (a private social networking application service), allowing corporate colleagues to sign up for a reliable, easy-to-use, anytime, anywhere network access, and inexpensively, capturing SMBs, the non-customers of traditional CRMs. Chatter (a private enterprise social networking application service) enables colleagues to send and receive information and track updates in real time, solving the headache of information fragmentation in traditional CRM and realizing the extension of value.

The automobile industry: luxury goods for the rich → Ford Model T (one color, one model, durable and easy to repair, cheap) → General Motors comfortable and fashionable cars of various styles and colors → small, energy-efficient Japanese cars (while the three American giants were fighting with each other) → Chrysler's mini-van (this kind of car is exactly the kind of car that the American-style nuclear family needs, plus bicycles, dogs, and other necessities). that evolved into the sport utility vehicle SUVs of the 1990s).

The computer industry: TMC's expensive, hard-to-use, constantly-maintained tabulators → CTR's rent-to-own tabulators → IBM's business computers → Apple's plastic-cased PCs with keyboards, power supplies, graphic displays, and software → Compaq's MVP PC servers, which were designed for the most commonly used files and printers*** - enjoyment → Dell's cheap, customer-direct Speedposts. Dell's cheap, direct-sold, speedy computers → Apple's flat-screen touch-screen computer, the iPad.

Cinema industry: theaters based on live entertainment performances → nickelodeon theaters (benches + screens + cheap workers' areas, most Americans belonged to the working class at the beginning of the 20th century while live theaters were geared toward the elite of society) → movie palaces (high-end environments + longer movies, pushing movies into the rising middle and upper class) → multiplexes (solves the risk that customers won't come if the film is bad and can dynamically adjust) → megaplexes (with the popularity of TV and multiplexes being split smaller and smaller, movies lost their unique advantage, thus optimizing the screen (24 screens), seating (stadium style rows that don't block the back rows), sound, and lighting).