Blue Ocean Strategy Summary
by Parker · 72 things on Twos
- We need to always be changing because the industry is continuously evolving
- The way to beat the competition is to not try to beat the competition. Focus on creating a leap in value for the customers
- Focus on value + innovation. Value without innovation leads to incremental improvements, which don't help you stand out in the marketplace. Innovation without value tends to be technology-driven, market pioneering, or futuristic, often shooting beyond what buyers are ready to accept and pay for
- This makes me believe we are in a great position. The technology is not overly advanced, like a separate tablet, and the value of "things" is easier to record, organize, and maintain
- Red Ocean strategy:
- Competing in an existing market space
- Focusing on beating the competition
- Exploiting an existing demand
- Focused on the value-cost trade-off
- Blue Ocean strategy:
- Creating an uncontested market space
- Making the competition irrelevant
- Creating and capturing a new demand
- Focusing on differentiation and low cost
- Extensive customer research is not the path to blue oceans. Customers are too focused on products and services that an industry currently offers
- Four actions framework:
- Eliminate: Which of the factors that the industry takes for granted should be eliminated?
- Reduce: Which factors should be reduced well below the industry’s standard?
- Document customization
- Raise: Which factors should be raised well above the industry’s standard?
- Speed and efficiency to organize information
- Create: Which factors should be created that the industry has never offered?
- Finer grained control of our information
- 3 complementary qualities:
- Focus (value + innovation)
- Divergence (from the competition and the existing market space)
- A compelling tagline (deliver a clear message that is truthful, or customers will lose trust and interest)
- Alternatives: products or services that have different functions and forms but the same purpose
- Challenging the industry’s conventional wisdom about which buyer group to target will lead to the discovery of new blue oceans. By looking across buyer groups, companies can gain new insights into how to redesign their value curves to focus on new buyers
- The key is to define the total solution buyers seek when they choose a product or service.
- What happens before, during, and after your product is used?
- What is the context in which your product or service is used?
- What are the pain points?
- How can you eliminate these pain points through a complementary product or service offering?
- Functional industries (aka Note-taking) can give products new life by adding emotion to stimulate new demand
- What elements can be added to make it emotional?
- Look to the future:
- What trends have a high probability of impacting your industry, are irreversible, and are evolving in a clear trajectory?
- How will these trends impact your industry?
- Given this, how can you open up unprecedented customer utility?
- If a company’s strategic profile does not clearly reveal its focus, divergence, and compelling tagline, it will likely be muddled, undifferentiated, and hard to communicate. It is also likely to be costly to execute
- Talk to potential users and watch them in action. Observe the distinctive advantages of alternative products and services
- Instead of concentrating on customers, look to noncustomers. Instead of focusing on customer differences, build on powerful commonalities in what buyers value
- To reach beyond existing demand, think:
- Noncustomers before customers
- Commonalities before differences
- Desegmentation before pursuing finer segmentation
- The Sequence of Blue Ocean Strategy:
- Buyer utility:
- Does your offering unlock exceptional utility?
- Is there a compelling reason for the mass of people to buy it?
- Unless the technology makes buyers’ lives dramatically simpler, more convenient, more productive, less risky, or more fun and fashionable, it will not attract the masses no matter how many awards it wins
- Does the product require training or expert assistance?
- How effective are the product's features and functions?
- Does the product or service deliver far more power or options than required by the average user? Is it overcharged with bells and whistles?
- The Six Utility Levers:
- Customer productivity
- Simplicity
- Convenience
- Risk
- Fun and image
- Environmental friendliness
- Price:
- Is your price easily accessible to the mass of buyers?
- To a buyer, the value of a product or service may be closely tied to the total number of people using it
- Brand building increasingly relies heavily on word-of-mouth recommendations spreading rapidly through our networked society
- Cost:
- Can you attain your cost target to profit at your strategic price?
- Adoption:
- What are the adoption hurdles in actualizing your business idea? Are you addressing them up front?
- People remember and respond most effectively to what they see and experience: “Seeing is believing.”
- There is no substitute for meeting and listening to dissatisfied customers directly