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Slide 2: Is your company in a red or blue ocean?
Slide 3: Count the your number of times you answer ’yes’ to the following questions:
Slide 4: 1. Is your company facing heightened competition from domestic and international rivals? 2. Do your sales people increasingly argue they need to offer deeper and deeper price discounts to make sales? 3. Are you finding your need to advertise more to get noticed in the marketplace, yet the impact of these efforts keeps falling?
Slide 5: 4. Is your company focused more on cost cutting, quality control, and brand management at the expense of growth, innovation, and brand creation? 5. Do you blame your slow growth on your market? 6. Do you see outsourcing to low cost companies or countries as a principal prerequisite to regain competitiveness?
Slide 6: 7. Are mergers and acquisitions the principal means your company sees to grow? 8. Is it easier to get funding for efforts to follow your competitor than it is to get funding for breaking away from competition? 9. Is commoditization of offerings a frequent worry of your company? 10. List your key competitive factors and then those of your competitors. Are they highly similar?
Slide 7: If you answered ’yes’ to 6-10 out of those questions, you are in a red ocean.
Slide 8: If you answered ’yes’ to 1-5 out of those questions, you are in a blue ocean.
Slide 9: Red Ocean Compete in existing markets Blue Ocean Create a new market
Slide 10: Red Ocean Compete in existing markets Beat the competition Blue Ocean Create a new market Avoid the competition
Slide 11: Red Ocean Compete in existing markets Beat the competition Exploit existing demands Blue Ocean Create a new market Avoid the competition Explore new demands
Slide 12: Red Ocean Compete in existing markets Beat the competition Exploit existing demands Customer value or low cost Blue Ocean Create a new market Avoid the competition Explore new demands Customer value and low cost
Slide 13: Red Ocean Compete in existing markets Beat the competition Exploit existing demands Customer value or low cost Differentiation or low cost Blue Ocean Create a new market Avoid the competition Explore new demands Customer value and low cost Differentiation and low cost
Slide 14: Sounds like yet another management fad, doesn’t it?
Slide 15: The question remains: What should we do on Monday?
Slide 16: The Strategy Canvas will help us to find new markets and thereby avoid competition.
Slide 17: Start with mapping up the different performance parameters that matter in your industry.
Slide 18: For example: in the camera industry you’ll find price, image quality, design, compatibility, weight etc.
Slide 19: Try to make an (unbiased) plot of how your company performs along your key dimensions. And also try to plot where your competitors have positioned themselves.
Slide 20: You will end up with something like this. 10 9 8 7 6 5 4 3 2 1 0 Price Factor Factor Factor Factor Factor Factor 2 3 4 5 6 7 Our products Competitor 1 Competitor 2
Slide 21: Now you have a pretty good idea about what the competitive climate looks like…
Slide 22: If your line intersects with those of your competitors to a large extent - you are in a red ocean. Eat or be eaten.
Slide 23: Now it’s time to find a way out of that place…
Slide 24: … This is done with the ERIC framework…
Slide 25: ERIC stands for Eliminate, Reduce, Increase and Create.
Slide 26: Basically, you eliminate some performance dimensions, reduce others, increase some and who knows, maybe create some new ones as well. 10 9 8 7 6 5 4 3 2 1 0 Price Factor Factor Factor Factor Factor Factor 2 3 4 5 6 7 Our products Competitor 1 Competitor 2
Slide 27: By doing so, you do not try to compete with others, you look for ways of avoid competition.
Slide 28: You change the value proposition, and by doing so, you will be able to find new customers, who are not served yet by the industry.
Slide 29: And thus, you’ll find a blue ocean.
Slide 30: Show us a better example than this one!
Slide 31: We’ll take a look at the radio industry…
Slide 32: Analogue radios were big and beautiful…
Slide 33: ”At the dearest place in Your Home….”
Slide 34: ’If You want good sound - Ask for Radiola’
Slide 35: best sound quality!’ ’The
Slide 36: n fo now ’K goo r it s nd’ sou d
Slide 37: So, the established Radio companies focused on sound, sound and sound…
Slide 38: Transistor radios, on the other hand, had very different performance dimensions.
Slide 39: They were smaller, cheaper, had a worse sound quality and were portable.
Slide 40: Now let’s compare them by using the strategy canvas.
Slide 41: 10 9 8 7 6 5 4 3 2 1 0 Price Design Sound quality Size Portability Analogue radios Transistor radios This is my (unbiased) interpretation.
Slide 42: Now you have to find some customers…
Slide 43: What about young people, who can’t afford a nice, big and clumsy furniture radio?
Slide 44: They’d love to bring the radio along to the beach.
Slide 45: Home transistor No wires Big loudspeaker Cheap to use Quality An ideal, portable, ’second radio’ and for your summer house
Slide 46: What about a radio to have in the car?
Slide 47: A ’travel radio’?
Slide 48: Sony, Grundig and Luxor among others targeted non-consumers and created a huge market!
Slide 49: While the analogue companies were trapped in a red ocean, focusing on sound.
Slide 50: Some estimates suggest that there are 7 billion transistor radios in use today.
Slide 51: This kind of opportunities can be identified when trying to avoid competition, instead of fighting it.
Slide 52: Good luck on Monday!
Slide 53: Sources W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy, 2005. Lecture by Bengt Järrehult at Chalmers 2009-02-19
Slide 54: Image attributions Crocodile photos by Thomas Hordern. Radio and landscape images taken by Christian Sandström
Slide 55: Christian Sandström is a PhD student at Chalmers University of Technology in Gothenburg, Sweden. He writes and speaks about disruptive innovation and technological change. www.christiansandstrom.org christian.sandstrom at chalmers.se