Lecture Notes: Blue Ocean Strategy

Introduction

• Business competition is inevitable across industries.
• To dominate the market, the book "The Blue Ocean Strategy" is essential.
• The book is recommended for entrepreneurs to study meticulously like a textbook.

Concept of Blue Ocean vs. Red Ocean

• Blue Ocean:
  • Represents untapped market spaces.
  • No competition and undefined rules.
  • Offers abundant opportunities for profitable growth.
• Red Ocean:
  • Highly competitive and saturated markets.
  • Companies compete to capture existing demand.
  • High competition leads to reduced profits and growth.

Market Study Findings

• Research analyzed 108 companies:
  • 86% improved existing products in existing markets, earning 39% of profits.
  • 14% created new markets (Blue Oceans), earning 61% of profits.

Strategy Focus

• Value Innovation:
  • Provide higher value at lower cost.
  • Does not mean increased costs; it's a shift in strategic thinking.
• Example: Casella Wines (Yellowtail):
  • Used Strategy Canvas and Four Actions Framework: Eliminate, Reduce, Raise, Create.

Four Actions Framework Explained

1. Eliminate: Remove unnecessary factors in the industry.
2. Reduce: Lower aspects below industry standards.
3. Raise: Enhance aspects above industry standards.
4. Create: Innovate new factors that the industry never offered.

Case Studies

• Casella Wines:
  • Eliminated complexity and aging in wine production.
  • Reduced wine range to two types.
  • Raised label simplicity and pricing moderately.
  • Created a wine for non-traditional wine drinkers.

Six Paths Framework

1. Look Across Functional or Emotional Appeal:
   • Shift between functional (usefulness) and emotional (experience) appeals.
   • Examples: Starbucks (functional to emotional), QB House (emotional to functional).
2. Look Across Alternate Industries:
   • Find innovation by examining substitutes in different industries.
   • Examples: NetJets (private jet vs. commercial airlines), Ford (assembly line idea from slaughterhouses).
3. Look Across Complementary Product/Service Offerings:
   • Consider entire customer experience (before, during, after product use).
   • Example: Philips Electronics (tap water issue in tea kettles).
4. Look Across Strategy Groups:
   • Combine strategies from different market segments.
   • Example: Toyota's Lexus (luxury features at economy prices).
5. Look Across Chain of Buyers:
   • Target different buyer groups.
   • Example: Novo Nordisk's NovoPen (shift focus from doctors to patients).
6. Look Across Time:
   • Anticipate and leverage industry trends.
   • Example: Netflix and the rise of internet streaming.

Conclusion

• Blue Ocean Strategy focuses on creating new market space, making competition irrelevant.
• Entrepreneurs should consider these frameworks to find blue ocean opportunities.
• Recommended further reading: "Who, not How" for improving productivity and income.