Blue Ocean Strategy: © DKD 25 December 2006 - 3 JANUARY 2007

BLUE OCEAN STRATEGY
A SUMMARY OF THOUGHTS
DKD
25 December 2006 3RD JANUARY 2007
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BLUE OCEAN STRATEGY THE NEW MARKET SPACE

The only way to beat the competition is to stop trying to beat the competition. The only way to beat the competition is to stop trying to beat the competition. RED OCEANS. RED OCEANS.
Known Market Space. Known Market Space. Represent all the industries in existence Represent all the industries in existence today. today. Industry boundaries are defined and Industry boundaries are defined and accepted. Competitive rules of the accepted. Competitive rules of the games are accepted. games are accepted.
BLUE OCEANS. BLUE OCEANS.

Unknown Market Space. Unknown Market Space. Denotes all the industries not in existence Denotes all the industries not in existence today. Largely uncharted. today. Largely uncharted. Defined by untapped market space, Defined by untapped market space, demand creation, and the opportunity demand creation, and the opportunity for highly profitable growth. for highly profitable growth.
Blue Oceans are created well beyond existing industry boundaries. Blue Oceans are created well beyond existing industry boundaries. Most are created within red oceans by expanding existing industry boundaries. Most are created within red oceans by expanding existing industry boundaries. Overriding focus of strategic thinking has been on competition-based red ocean Overriding focus of strategic thinking has been on competition-based red ocean strategies, thus accepting the key constraining factors of war limited terrain and strategies, thus accepting the key constraining factors of war limited terrain and the need to beat the enemy to succeed, and to deny the distinctive strength of the the need to beat the enemy to succeed, and to deny the distinctive strength of the business world i.e. the capacity to create new market space that is uncontested. business world i.e. the capacity to create new market space that is uncontested.
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THE IMPACT OF CREATING BLUE OCEANS

The Profit and Growth Consequences of Creating Blue Oceans The Profit and Growth Consequences of Creating Blue Oceans
BUSINESS LAUNCH REVENUE IMPACT PROFIT IMPACT 39% 39% 62% 62%
86% 14% 86% 14% 38% 38% 61% 61%

Launches for creating Blue Oceans
Launches with Red Oceans
86% of launches were line extensions accounting for 62% of revenues and 29% of 86% of launches were line extensions accounting for 62% of revenues and 29% of profits. profits. 14% of launches were aimed at creating blue oceans and generated 38% of revenues 14% of launches were aimed at creating blue oceans and generated 38% of revenues and 61% of profits. and 61% of profits.
THE RISING IMPERATIVE OF CREATING BLUE OCEANS

DRIVING FORCES DRIVING FORCES
Accelerated Technological Accelerated Technological Advances Improved Advances Improved Industrial Productivity Industrial Productivity Accelerated Accelerated Commoditization of Commoditization of Products & Services Products & Services Increasing Price Wars and Increasing Price Wars and shrinking Profit Margins shrinking Profit Margins
Globalization Trade Globalization Trade Barriers are dismantled Barriers are dismantled
Unprecedented array of Unprecedented array of Products and Services Products and Services
Supply Exceeds Demands Supply Exceeds Demands Instant information on Instant information on products & prices products & prices
Brands are becoming Brands are becoming more similar Increased more similar Increased purchased based upon purchased based upon price price
The business environment in which most strategy and management The business environment in which most strategy and management approaches of the 20th century evolved is increasingly disappearing approaches of the 20th century evolved is increasingly disappearing
FROM COMPANY & INDUSTRY TO STRATEGIC MOVE

Strategic Move is the Right Unit of Analysis for explaining the creation of blue Strategic Move is the Right Unit of Analysis for explaining the creation of blue Oceans and Sustained High Performance. Oceans and Sustained High Performance.
A Strategic Move is the Set of Managerial A Strategic Move is the Set of Managerial Actions and Decisions involved in making Actions and Decisions involved in making aaMajor Market Creating Business Offering Major Market Creating Business Offering Strategic Move Delivers Products and Strategic Move Delivers Products and Services that opened and captured New Services that opened and captured New Market Space, with aasignificance leap in Market Space, with significance leap in Demand Demand
Value Innovation The Cornerstone of Blue Ocean Strategy Value Innovation The Cornerstone of Blue Ocean Strategy
Creators of Blue Oceans did not use the competition as their benchmark. Creators of Blue Oceans did not use the competition as their benchmark. Instead they followed aastrategic logic Value Innovation which places equal Instead they followed strategic logic Value Innovation which places equal emphasis on VALUE & INNOVATION vs. Competition-based Strategy, the value-cost emphasis on VALUE & INNOVATION vs. Competition-based Strategy, the value-cost trade-off. trade-off. Value Innovation occurs when companies align innovation with utility, price and cost Value Innovation occurs when companies align innovation with utility, price and cost positions i.e. pursuing differentiation and low cost simultaneously. positions i.e. pursuing differentiation and low cost simultaneously.
VALUE INNOVATION THE CORNERSTONE OF BLUE OCEAN STRATEGY

Value innovation is created in the region where aacompanys actions favorably effect Value innovation is created in the region where companys actions favorably effect both its cost structure and its value proposition to buyers. both its cost structure and its value proposition to buyers. Cost savings are made by eliminating and reducing the factors an industry and Cost savings are made by eliminating and reducing the factors an industry and competes on. competes on. Buyer value is lifted by raising and creating elements the industry has never offered. Buyer value is lifted by raising and creating elements the industry has never offered. Over time, costs are reduced further as scale economies kick in due to the high Over time, costs are reduced further as scale economies kick in due to the high sales that superior value generates. sales that superior value generates.
COSTS
Value Innovation
BUYER VALUE
Value Innovation is MORE THAN Value Innovation is MORE THAN Innovation. Innovation. Its is about strategy that Its is about strategy that embraces the entire system of aa embraces the entire system of company's activities. company's activities. Value Innovation requires Value Innovation requires companies to orient the whole companies to orient the whole system toward achieving aaLEAP system toward achieving LEAP in VALUE for both buyers and in VALUE for both buyers and themselves. themselves.
The Simultaneous Pursuit of Differentiation and Low Cost

RED OCEAN VS. BLUE OCEAN STRATEGY

RED OCEAN STRATEGY
Compete in Existing Market Space Beat the Competition Exploit Existing Demand Make the Value-Cost Trade-off Align the Whole System of a Firms Activities with its Strategic Choice of Differentiation or Low Cost
BLUE OCEAN STRATGEY

Create Uncontested Market Space Make the Competition Irrelevant Create and Capture New Demand Break the Value-Cost Trade-off Align the Whole System of a Firms Activities in pursuit of Differentiation and Low Cost
In the Reconstructionist World the Strategic aim is to create New BestIn the Reconstructionist World the Strategic aim is to create New BestPractice Rules by breaking the existing Value-Cost Trade-off and thereby Practice Rules by breaking the existing Value-Cost Trade-off and thereby creating Blue Ocean. creating Blue Ocean.
FORMULATING AND EXECUTING BLUE OCEAN STRATEGY

How can Companies systematically Maximize the Opportunities while simultaneously How can Companies systematically Maximize the Opportunities while simultaneously Minimizing the Risks of Formulating and Executing Blue Ocean Strategy? Minimizing the Risks of Formulating and Executing Blue Ocean Strategy? Strategy will always involve both Opportunity and Risk! Strategy will always involve both Opportunity and Risk!
The Six Principles of Blue of Blue Ocean Strategy

FORMULATION PRINCIPLES
1. Reconstruct Market Boundaries 1. Reconstruct Market Boundaries 2. Focus on the Big Picture, not the Numbers 2. Focus on the Big Picture, not the Numbers 3. Reach Beyond Existing Demand 3. Reach Beyond Existing Demand 4. Get the Strategic Sequence Right 4. Get the Strategic Sequence Right
RISK FACTOR FOR EACH PRINCIPLE ATTENUATES

Search Risk Search Risk Planning Risk Planning Risk Scale Risk Scale Risk Business Model Risk Business Model Risk
EXECUTION PRINCIPLES
5. Overcome Key Organizational Hurdles 5. Overcome Key Organizational Hurdles 6. Build Execution into Strategy 6. Build Execution into Strategy
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RISK FACTOR EACH PRINCIPLE ATTENUATES

Organizational Risk Organizational Risk Management Risk Management Risk
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ANALYTICAL TOOLS AND FRAMEWORKS

The Strategy Canvas is both aa Diagnostic and an Action Framework for building a Compelling Blue Ocean Strategy. The Strategy Canvas is both Diagnostic and an Action Framework for building a Compelling Blue Ocean Strategy. Captures the Current State-of-Play in the Known Market Space. Captures the Current State-of-Play in the Known Market Space. Effective Blue Ocean Strategy should be about Risk Minimization and not Risk Taking Effective Blue Ocean Strategy should be about Risk Minimization and not Risk Taking
1. The Strategy Canvas

HIGH Premium Wines [yellow tail]
To set a company on a strong, profitable growth trajectory in the face of these industry conditions, benchmarking against the competitors and trying to out-compete them by offering a little more for a little less will not work. Such a strategy may nudge sales up but will hardly drive a company to open up uncontested market space. Nor is extensive customer research the path to blue oceans.
An illustration of a Strategy Canvas [yellow tail] Wine
THE FOUR ACTION THE FOUR ACTION FRAMEWORK FRAMEWORK QUESTIONS QUESTIONS
1stst Consider eliminating factors that 1 Consider eliminating factors that companies in your industry have long companies in your industry have long competed on No longer have value OR competed on No longer have value OR may detract value. may detract value. 2nd Determine whether products or 2nd Determine whether products or services have been over-designed in the services have been over-designed in the race to match the competition overrace to match the competition overserve the customers, increasing cost serve the customers, increasing cost structure for no gain. structure for no gain. 3rdrd Uncover and eliminate the 3 Uncover and eliminate the compromises your industry forces compromises your industry forces customers to make. customers to make. 4thth Discover entirely new sources of 4 Discover entirely new sources of value for buyers and to creae new value for buyers and to creae new demand and shift the strategic pricing for demand and shift the strategic pricing for the industry. the industry.
Budget Wines
LOW
Price Use of enological terminology Above the line marketing Aging Quality Vineyard prestige and legacy Wine complexity Wine range Easy drinking Fun & Ease of selection adventure
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The Strategy Canvas is both aaDiagnostic and an Action Framework for building aa The Strategy Canvas is both Diagnostic and an Action Framework for building Compelling Blue Ocean Strategy. Captures the Current State-of-Play in the Known Compelling Blue Ocean Strategy. Captures the Current State-of-Play in the Known Market Space. Market Space. Effective Blue Ocean Strategy should be about Risk Minimization and not Risk Taking Effective Blue Ocean Strategy should be about Risk Minimization and not Risk Taking
2. The Eliminate-Reduce-Raise-Create Grid

THE FOUR ACTION FRAMEWORK
2. REDUCE 2. REDUCE Which factors should be Which factors should be reduced well below the reduced well below the industrys standard? industrys standard?
Eliminate-Reduce-RaiseCreate Grid [yellow tai]

ELIMINATE Enological distinctions Aging qualities Above-the-line marketing REDUCE RAISE Price vs. budget wines Retail store involvement CREATE Easy drinking Ease of selection Fun and adventure
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1. ELIMINATE 1. ELIMINATE Which of the factors that Which of the factors that the industry takes for the industry takes for granted should be granted should be eliminated? eliminated?
A New A New Value Value Curve Curve
4. CREATE 4. CREATE Which factors should be Which factors should be created that the industry created that the industry has never offered? has never offered?
3. RAISE 3. RAISE Which factors should be Which factors should be raised well above the the raised well above the the industrys standard? industrys standard?
Wine complexity Wine range Vineyard prestige
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THREE CHARACTERISTICS OF A GOOD STRATEGY COMPLEMENTARY QUALITIES THREE CHARACTERISTICS OF A GOOD STRATEGY COMPLEMENTARY QUALITIES
(1) FOCUS (1) FOCUS (2) DIVERGENCE (2) DIVERGENCE (3) COMPELLING TAGLINE (3) COMPELLING TAGLINE
1. FOCUS The company does not diffuse its efforts across all key areas of competition. The companys 1. FOCUS The company does not diffuse its efforts across all key areas of competition. The companys strategic profile or value curves should clearly show it. strategic profile or value curves should clearly show it. 2. DIVERGENCE The shape of its value curve diverges from the other players, aaresult of not 2. DIVERGENCE The shape of its value curve diverges from the other players, result of not benchmarking competitors but instead looking across alternatives. By applying the Eliminate-Reducebenchmarking competitors but instead looking across alternatives. By applying the Eliminate-ReduceRaise-Create actions, the company should differentiate its profile from the industrys average profile. Raise-Create actions, the company should differentiate its profile from the industrys average profile. 3. TAGLINE The tagline for the strategic profile is clear. Not only does ititdeliver aaclear message but 3. TAGLINE The tagline for the strategic profile is clear. Not only does deliver clear message but also advertise an offering truthfully or else customers will lose trust and interest. also advertise an offering truthfully or else customers will lose trust and interest.
HIGH
Car Transport Southwest Airline Average Airline
Focused Strategic Profile or Value Curves Differentiate (Eliminate-ReduceRaise-Create) Strategic Profiles Compelling Tagline The Speed of a plane at the Price of a Car Whenever You need it Page 11
LOW
PRICE
MEALS
LOUNGES
SEATING HUB CLASS CONNECTIVITY CHOIICES FRIENDLY SERVICE
SPEED
FREQUENT POINT TO POINT DEPARTURE
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READING THE VALUE CURVES READING THE VALUE CURVES
1. The strategy canvas enables companies to see the future in the present. 1. The strategy canvas enables companies to see the future in the present. 2. Embedded in the value curves of an industry is wealth of strategic knowledge on the current status and 2. Embedded in the value curves of an industry is wealth of strategic knowledge on the current status and future of aabusiness. future of business.
st 1. The 11st question the value curve answers is whether a business deserves to be a winner. 1. The question the value curve answers is whether a business deserves to be a winner. 2. Its on the right track when the value curve meets the three criteria focus, divergence, and a compelling tagline. 2. Its on the right track when the value curve meets the three criteria focus, divergence, and a compelling tagline. 3. The three criteria serves as aa litmus test of the commercial viability of the blue ocean ideas. 3. The three criteria serves as litmus test of the commercial viability of the blue ocean ideas.
A Company caught in the Red Ocean

When the Value Curves converges with its competitors.
A companys explicit or implicit strategy tends to be trying to outdo its competition on the basis of cost or quality. This signals slow growth! Does the market share and profitability reflect the investments? To value-innovate, the company must decide which factors to eliminate and reduce not only those to raise and create to construct a divergent Value Curve. Strategy likely based upon independent sub-strategies a reflection of an organization with divisional or functional silos.
Strategic Contradictions
Offering a high level of competing factor whilst ignoring others that support that factor.
Strategic inconsistencies can also be found between the level of the offering and the price.
Over-delivery without Payback

Companys Vale Curves shown to deliver high levels across all factors
An Internally Driven Company

Are Competing Factors stated in terms buyers can understand and value?
The kind of language used in the strategy canvas gives insight as to whether a companys strategic vision is built on an outside-in perspective driven by the demand side OR an inside-out perspective that is operationally driven.
An incoherent strategy
Value Curve with no rhyme or reason
Intersection between the analytic techniques and the six principles of formulating and executing blue oceans that allow companies to break from the competition and unlock uncontested market space.
Six Principles 4 Formulation + 2 Execution

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Strategy Canvas
Eliminate-ReduceRaise-Create Grid
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BLUE OCEAN STRATEGY PRINCIPLE 1 RECONSTRUCT MARKET BOUNDARIES

ATTENUATES SEARCH RISKS
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FORMULATING BLUE OCEAN STRATEGY

1. RECONSTRUCT MARKET BOUNDARIES 1. RECONSTRUCT MARKET BOUNDARIES
st The 11stPrinciple of Blue Ocean Strategy is to reconstruct market boundaries to The Principle of Blue Ocean Strategy is to reconstruct market boundaries to break from the competition and create Blue Oceans. break from the competition and create Blue Oceans. Six basic approaches to remaking market boundaries THE SIX PATHS Six basic approaches to remaking market boundaries THE SIX PATHS FRAMEWORK. FRAMEWORK. These paths have general applicability across industry sectors based upon looking These paths have general applicability across industry sectors based upon looking at familiar data from aanew perspective. at familiar data from new perspective.
These paths challenge he six fundamental assumptions underlying many These paths challenge he six fundamental assumptions underlying many companies strategies. Specifically, companies tend to do the followings: companies strategies. Specifically, companies tend to do the followings: Define their industry similarly and focus on being the best within it. Define their industry similarly and focus on being the best within it. Look at their industries through the lens of generally accepted strategic groups and Look at their industries through the lens of generally accepted strategic groups and strive to stand out in the strategic group they play in. strive to stand out in the strategic group they play in. Focus on the same buyer group, be ititthe purchaser, the user, or the influencer. Focus on the same buyer group, be the purchaser, the user, or the influencer. Define the scope of the products and services offered by their industry similarly. Define the scope of the products and services offered by their industry similarly. Accept their industry's functional or emotional orientation. Accept their industry's functional or emotional orientation. Focus on the same point in time and often on current competitive threats in Focus on the same point in time and often on current competitive threats in formulating strategy. formulating strategy. Need to look across alternative industries, across strategic groups, across buyer Need to look across alternative industries, across strategic groups, across buyer groups, across complementary product and service offerings, across the functionalgroups, across complementary product and service offerings, across the functionalemotional orientation of an industry, and even across time. emotional orientation of an industry, and even across time.

1. RECONSTRUCT MARKET BOUNDARIES 1. RECONSTRUCT MARKET BOUNDARIES
Path 1: Look Across Alternative Industries A company competes not only with the other firms in its own industry but also with companies in other industries that produce alternative products or services. Refers to a group of companies within an industry that pursue similar strategy. In most industries, the fundamental strategic differences among industry players are captured by a small number of strategic groups. Competitors converge around common definition of who the target buyer is. In reality there is a chain of Buyers who are directly or indirectly involved in the buying decision. Few products are used in a vacuum. In most cases, other products and services affect their value. In most industries, rivals converge within the bounds of their industrys product and service offerings. Competition in an industry tends to converge not only on an accepted notion of the scope of its products and services BUT also on one or two possible bases of appeal Rational or Emotional. All industries are subject to external trends that affect their business over time. Most companies adapt incrementally and passively and pace actions to keep up with the development of the trends. Substitutes Products or services that have different form but offer the same functionality or core utility. Alternatives Products or services that have different functions and forms but the same purpose. Most companies focus on improving their competitive position within a strategic group. Understand which factors determine customers decisions to trade up or down from one group to the other.
Path 2: Look Across Strategic Groups within Industries
Path 3: Look Across the Chain of Buyers Path 4: Look Across Complementary Product & Service Offerings Path 5: Look Across Functional or Emotional Appeal to Buyers
Purchasers who pay for the product or service may differ from the actual users, and in some cases there are important influencers as well.
Untapped value is often hidden in complementary products and services. The key is to define the total solution buyers seek. What happens before, during and after a product is used. Emotionally-oriented industries offer many extras that add price without enhancing functionality. Functionally-oriented industries can often infuse commodity products with new life by adding a dose of emotion to stimulate new demand. Key insights arise from business insights into how the trend will change value to customers and impact the company's business model. Three principles- Decisive to the business, Must be Irreversible and Have Clear Trajectory.
Path 8: Look Across Time
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1. RECONSTRUCT MARKET BOUNDARIES CONCEIVING NEW MARKET SPACE 1. RECONSTRUCT MARKET BOUNDARIES CONCEIVING NEW MARKET SPACE
By thinking across conventional boundaries of competition, you can see how to make convention-altering, strategic By thinking across conventional boundaries of competition, you can see how to make convention-altering, strategic moves that construct established market boundaries and create Blue Oceans. moves that construct established market boundaries and create Blue Oceans.
From Head-to-Head Competition to Blue Ocean Creation From Head-to-Head Competition to Blue Ocean Creation
Head-to-Head Competition
INDUSTRY INDUSTRY STRATEGIC STRATEGIC GROUP GROUP BUYER GROUP BUYER GROUP SCOPE OF SCOPE OF PRODUCT OR PRODUCT OR SERVCIES SERVCIES FUNCTIONALFUNCTIONALEMOTIONAL EMOTIONAL ORIENTATION ORIENTATION TIME TIME DKD Focus on rivals within the industry Focus on rivals within the industry Focuses on competitive position Focuses on competitive position within strategic group within strategic group Focuses on better serving the buyer Focuses on better serving the buyer group group Focuses on maximizing the value of Focuses on maximizing the value of product and service offerings within product and service offerings within the bounds of its industry the bounds of its industry Focuses on improving price Focuses on improving price performance within the functionalperformance within the functionalemotional orientation of its industry emotional orientation of its industry Focuses on adapting to external Focuses on adapting to external trends as they occur trends as they occur
Blue Ocean Creation

Looks across alternate industries Looks across alternate industries Looks across strategic groups within the Looks across strategic groups within the industry industry Redefines the industry buyer group Redefines the industry buyer group Looks across to complementary product Looks across to complementary product and service offerings and service offerings Rethinks the functional-emotional Rethinks the functional-emotional orientation of its industry orientation of its industry Participates in shaping external trends over Participates in shaping external trends over time time Page 16
BLUE OCEAN STRATEGY PRINCIPLE 2 FOCUS ON THE BIG PICTURE, NOT THE NUMBERS
ATTENUATES PLANNING RISKS
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2. FOCUS ON THE BIG PICTURE, NOT THE NUMBERS 2. FOCUS ON THE BIG PICTURE, NOT THE NUMBERS
Align your strategic planning process to focus on the BIG PICTURE and apply these ideas in drawing the Companys Strategy Align your strategic planning process to focus on the BIG PICTURE and apply these ideas in drawing the Companys Strategy Canvas to arrive aa Blue Ocean Strategy Canvas to arrive Blue Ocean Strategy
A TYPICAL STRATEGY PLAN

Lengthy description of current industry conditions and the Lengthy description of current industry conditions and the competitive situation competitive situation Discussion of how to increase market share, capture new segments, Discussion of how to increase market share, capture new segments, or cut costs or cut costs Outline of numerous Goals and Initiatives (KPI, BPR) Outline of numerous Goals and Initiatives (KPI, BPR) A full budget including graphs and spreadsheets A full budget including graphs and spreadsheets
BLUE OCEAN STRATEGY PLAN

Draw a strategy Canvas Overall Dynamics of the Industry Draw a strategy Canvas Overall Dynamics of the Industry Visualizes the Companys current Strategic Position Helps Chart Visualizes the Companys current Strategic Position Helps Chart future strategy future strategy 1st: Shows the strategic profile of an industry depicting clearly the 1st: Shows the strategic profile of an industry depicting clearly the factors that affect competition among industry players. factors that affect competition among industry players. 2ndndShows the strategic profile of of current and potential : 2 : Shows the strategic profile of of current and potential competitors, identifying which factors they invest in strategically. competitors, identifying which factors they invest in strategically. Finally: Shows the companys strategic profile or value curve Finally: Shows the companys strategic profile or value curve depicting how it invests in the factors of competition. depicting how it invests in the factors of competition. Happens with Highly Determined Leader OR In a Crisis Happens with Highly Determined Leader OR In a Crisis
Culminates with the preparation of a large document culled from a Culminates with the preparation of a large document culled from a mishmash of data provided by various parts of the organization who mishmash of data provided by various parts of the organization who often have conflicting agendas and poor communication often have conflicting agendas and poor communication
44 STEPS OF VISUALIZING STRATEGY STEPS OF VISUALIZING STRATEGY

VISUAL VISUAL VISUAL VISUAL AWAKENING EXPLORATION AWAKENING EXPLORATION VISUAL VISUAL STRATEGY STRATEGY FAIR FAIR VISUAL VISUAL COMMUNICOMMUNICATION CATION
Spend majority of strategic thinking filling in boxes and running Spend majority of strategic thinking filling in boxes and running numbers instead of developing a clear picture of how to break from numbers instead of developing a clear picture of how to break from the competition the competition
GO AFTER CUSTOMERS & NON-CUSTOMERS GO AFTER CUSTOMERS & NON-CUSTOMERS Revenue, Profitability, Market Share, and Customers Revenue, Profitability, Market Share, and Customers Satisfaction Satisfaction MEASURES ON COMPANYS CURRENT POSITION MEASURES ON COMPANYS CURRENT POSITION Balance between Profitable Growth and Cash-Flow at a given Balance between Profitable Growth and Cash-Flow at a given point in time. point in time.
Most strategic plans dont contain strategy at all but rather a Most strategic plans dont contain strategy at all but rather a smorgasbord of tactics that individually makes sense but collectively smorgasbord of tactics that individually makes sense but collectively dont add up to to a unified, clear direction that sets a company apart dont add up to to a unified, clear direction that sets a company apart let alone makes the competition irrelevant. let alone makes the competition irrelevant.
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44STEPS OF VISUALIZING STRATEGY STEPS OF VISUALIZING STRATEGY

VISUAL VISUAL AWAKENING AWAKENING
Compare your business with Compare your business with your competitors by drawing your competitors by drawing your as is strategy canvas. your as is strategy canvas. Set where your strategy Set where your strategy needs to change needs to change
VISUAL VISUAL EXPLORATION EXPLORATION

Go into the field to explore Go into the field to explore the six paths to creating the six paths to creating blue oceans. blue oceans. Observe the distinctive Observe the distinctive advantages of alternative advantages of alternative products and services. products and services. See which factors you See which factors you should eliminate, create, should eliminate, create, or change. or change.
VISUAL VISUAL STRATEGY STRATEGY FAIR FAIR

Draw your to be strategy Draw your to be strategy canvas based on insights canvas based on insights from field observations.. from field observations.. Get feedback on Get feedback on alternative strategy alternative strategy canvases from customers, canvases from customers, competitors customers, competitors customers, and non-customers. and non-customers. Use feedback to build the Use feedback to build the best to be future best to be future strategy. strategy.
VISUAL VISUAL COMMUNI-CATION COMMUNI-CATION

Distribute your beforeDistribute your beforeand-after strategic profiles and-after strategic profiles on one page for easy on one page for easy comparison. comparison. Support only those Support only those projects and operational projects and operational moves that allow your moves that allow your company to close the company to close the gaps to actualize the new gaps to actualize the new strategy. strategy.
Resolve differences about the Resolve differences about the current state of play current state of play Accept the need for change Accept the need for change
A company should never A company should never outsource its eyes. outsource its eyes. Great strategic insights is the Great strategic insights is the product of getting into the filed product of getting into the filed and challenging the boundaries and challenging the boundaries of competition of competition
Present strategy canvases at a Present strategy canvases at a Visual Strategy Fair Visual Strategy Fair
One page picture showing new One page picture showing new and old strategic profiles so that and old strategic profiles so that every employee could see where every employee could see where the company stood and where it the company stood and where it had to focus its efforts to create a had to focus its efforts to create a compelling future compelling future
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VISUALIZING STRATEGY AT THE CORPORATE LEVEL VISUALIZING STRATEGY AT THE CORPORATE LEVEL
When business units present their strategy canvases to one another, they deepen their understanding of the other When business units present their strategy canvases to one another, they deepen their understanding of the other businesses in the corporate portfolio. businesses in the corporate portfolio. Example: Samsung Electronics has institutionalized the use of the strategy canvas in its key business creation decisions by Example: Samsung Electronics has institutionalized the use of the strategy canvas in its key business creation decisions by establishing the Value Innovation Program (VIP) Centre in 1998. establishing the Value Innovation Program (VIP) Centre in 1998.
USING THE PIONEER-MIGRATOR-SETTLER (PMS) MAP USING THE PIONEER-MIGRATOR-SETTLER (PMS) MAP
AA Companys Pioneers are the businesses that offer unprecedented value. Companys Pioneers are the businesses that offer unprecedented value. Settlers are businesses whose value curves conform to the basic shape of the industrys. Settlers are businesses whose value curves conform to the basic shape of the industrys. The potential of Migrators lies somewhere in between. Such businesses extend the industrys curve by giving customers The potential of Migrators lies somewhere in between. Such businesses extend the industrys curve by giving customers more for less, but they dont alter its basic shape. These businesses offer improved value, but not innovative value. more for less, but they dont alter its basic shape. These businesses offer improved value, but not innovative value. OVERCOMING THE LIMITATIONS OVERCOMING THE LIMITATIONS Strategic Planning should be more about Collective Wisdom building than top-down or bottom-up planning. Strategic Planning should be more about Collective Wisdom building than top-down or bottom-up planning. ItIt should be more conversational than solely documentation driven, should be more about building the big picture than about should be more conversational than solely documentation driven, should be more about building the big picture than about number crunching exercises. number crunching exercises. ItIt should have a creative component instead of being strictly analysis-driven, more motivational, invoking willing commitment, should have a creative component instead of being strictly analysis-driven, more motivational, invoking willing commitment, than bargain driven, producing negotiated commitment. than bargain driven, producing negotiated commitment.
Aristotle pointed out The Soul never thinks without an image Aristotle pointed out The Soul never thinks without an image
BLUE OCEAN STRATEGY PRINCIPLE 3 REACH BEYOND EXISTING DEMAND

ATTENUATES SCALE RISKS
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3. REACH BEYOND EXISTING DEMAND 3. REACH BEYOND EXISTING DEMAND
Companies should challenge two conventional strategy practices: Companies should challenge two conventional strategy practices: 1. Focusing on existing customers 2. The drive for finer segmentation to accommodate buyer differences. 1. Focusing on existing customers 2. The drive for finer segmentation to accommodate buyer differences. Instead of concentrating on customers, need to look at non-customers. Instead of concentrating on customers, need to look at non-customers. Instead of focusing on customer differences, need to build on powerful commonalities in what buyers value. Instead of focusing on customer differences, need to build on powerful commonalities in what buyers value.
THE THREE TIERS OF NON-CUSTOMERS THE THREE TIERS OF NON-CUSTOMERS
First Tier: soon-to-be First Tier: soon-to-be non-customers who non-customers who are on the edge of your are on the edge of your market market Second Tier: Second Tier: Refusing nonRefusing noncustomers who customers who consciously choose consciously choose against your market against your market Third Tier: Third Tier: Unexplored nonUnexplored noncustomers who are in customers who are in markets distant from markets distant from yours. yours.
Your Market
First Tier
2nd Tier
Third Tier
Focus on the Tier that represents the Focus on the Tier that represents the biggest catchments. biggest catchments. But, explore whether there are But, explore whether there are overlapping commonalities across overlapping commonalities across all three tiers of non-customers. all three tiers of non-customers. The natural strategic orientation is The natural strategic orientation is toward retaining existing customers toward retaining existing customers and seeking further segmentation and seeking further segmentation opportunities. This is especially true opportunities. This is especially true in the face of competitive pressures. in the face of competitive pressures. However, we should reach beyond However, we should reach beyond existing demand to non-customers. existing demand to non-customers. IfIf no such opportunities arise, move no such opportunities arise, move on to further exploit differences on to further exploit differences among exist. among exist.
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BLUE OCEAN STRATEGY PRINCIPLE 4 GET THE STRATEGIC SEQUENCE RIGHT

ATTENUATES BUSINESS MODEL RISKS
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4. GET THE STRATEGIC SEQUENCE RIGHT 4. GET THE STRATEGIC SEQUENCE RIGHT
Companies need to build their blue ocean strategy in the sequence of buyer utility, price, cost, and adoption. Companies need to build their blue ocean strategy in the sequence of buyer utility, price, cost, and adoption.
Buyer Utility Buyer Utility

SEQUENCE OF BLUE OCEAN STRATEGY
Is there exceptional Is there exceptional buyer utility in your buyer utility in your business idea? business idea? Yes
ADDRESSING THE REVENUE SIDE OF A COMPANYS BUSINESS MODEL ADDRESSING THE REVENUE SIDE OF A COMPANYS BUSINESS MODEL
No-Rethink
Price Price
Is your price easily Is your price easily accessible to the mass accessible to the mass of buyers? of buyers? Yes No-Rethink
1. The starting point is buyer utility Does your offering unlock exceptional utility? 1. The starting point is buyer utility Does your offering unlock exceptional utility? Is there aa compelling reason for the mass of people to buy it? Is there compelling reason for the mass of people to buy it? 2. Remember aa company does not want to rely solely on price to create demand. Is 2. Remember company does not want to rely solely on price to create demand. Is your offering priced to attract the mass of target buyers so that they have aa your offering priced to attract the mass of target buyers so that they have compelling ability to pay for your offering? compelling ability to pay for your offering? ADDRESSING THE PROFIT SIDE ADDRESSING THE PROFIT SIDE 3. Can you produce your offering at the target cost and still earn aa healthy profit 3. Can you produce your offering at the target cost and still earn healthy profit margin? You should not let costs drive prices, nor should you scale down utility margin? You should not let costs drive prices, nor should you scale down utility because high costs block yor ability to profit at the strategic price. because high costs block yor ability to profit at the strategic price. IT IS THE COMBINATION OF EXCEPTIORNAL UTILITY, STRATEGIC IT IS THE COMBINATION OF EXCEPTIORNAL UTILITY, STRATEGIC PRICING & TARGET COSTING THAT ALLOWS COMPANIES TO ACHIEVE PRICING & TARGET COSTING THAT ALLOWS COMPANIES TO ACHIEVE VALUE INNOVATION. VALUE INNOVATION.
Cost Cost
Can you attain your Can you attain your cost target to profit at cost target to profit at your strategic price? your strategic price? Yes No-Rethink
Adoption Adoption
What are the adoption What are the adoption hurdles in actualizing hurdles in actualizing your business idea? Are your business idea? Are you addressing them you addressing them up-front? up-front? Yes
No-Rethink
ADDRESSING THE ADOPTION HURDLES ADDRESSING THE ADOPTION HURDLES 4. What are the adoption hurdles in rolling out your idea? Have you addressed 4. What are the adoption hurdles in rolling out your idea? Have you addressed these up front? these up front? 25 December 2006 3RD JANUARY 2007 Page 24
A commercially A commercially viable blue viable blue ocean idea ocean idea
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Testing for Exceptional Utility Testing for Exceptional Utility Unless the technology makes buyers lives dramatically simpler, more convenient, more productive, less risky, or more fun and Unless the technology makes buyers lives dramatically simpler, more convenient, more productive, less risky, or more fun and fashionable, itit will not attract the masses no matter how many awards it win. fashionable, will not attract the masses no matter how many awards it win. THE SIX STAGES OF BUYER EXPERIENCE
1 PURCHASE 2 DELIVERY 3 USE 4 5 SUPPLEMENTS MAINTENANCE 6 DISPOSAL
Customer Productivity
How long How long does it take does it take to find? to find? How rapidly How rapidly can you can you make a make a purchase? purchase? Is the place Is the place accessible? accessible?
How long How long does it take does it take to to deliver to to deliver the product? the product? How difficult How difficult to unpack to unpack and install? and install? Do buyers Do buyers have to have to arrange? arrange?
Does the Does the product product require require training? training? Does it Does it require require expert expert assistance? assistance? Effectivenes Effectivenes s of features s of features & functions? & functions? Will Things Will Things Go wrong? Go wrong? Ease of Ease of Warranty? Warranty? Deliver more Deliver more options than options than user user require? require? Availability Availability of user of user manual? manual?
Need other Need other product to product to make it make it work? work? How easy to How easy to obtain? obtain?
Require Require external external maintenance maintenance ? ? How easy to How easy to maintain & maintain & upgrade? upgrade?
Does use of Does use of product product waste waste items? items? How easy to How easy to dispose? dispose?
Simplicity
Outlines all the levers Outlines all the levers companies can pull to companies can pull to deliver exceptional utility to deliver exceptional utility to buyers as well as the buyers as well as the various experiences buyers various experiences buyers can have with aa product or can have with product or service. service. This map allows managers This map allows managers to identify the full range of to identify the full range of utility spaces that aa product utility spaces that product or service can potentially fill. or service can potentially fill. To test for exceptional To test for exceptional utility, companies should utility, companies should check whether their offering check whether their offering has removed the greatest has removed the greatest blocks to utility across the blocks to utility across the entire buyer experience entire buyer experience cycle for customers and cycle for customers and non-customers. non-customers. Page 25
THE SIX UTILITY LEVERS
Convenience
How much How much time do they time do they take? take?
How costly How costly to maintain? to maintain?
How costly How costly to dispose? to dispose?
Risk
How secure How secure is the is the transaction? transaction? Is the place Is the place attractive & attractive & fun? fun? Is purchase Is purchase made in a made in a friendly friendly manner? manner?
How costly How costly and difficult? and difficult?
How costly How costly are they? are they?
Will there be Will there be repeat work? repeat work?
Legal & Legal & Environment Environment al issues? al issues? Will it Will it enhance enhance CSR? CSR?
Fun and Image
Would Would customer be customer be anxious? anxious? Is the Is the packaging packaging user user friendly? friendly?
How much How much pain do they pain do they cause? cause?
Friendly and Friendly and transparent? transparent?
Environmental Friendliness
Will it Will it enhance enhance usability? usability?
Availability Availability of manuals? of manuals?
Does it meet Does it meet standards? standards?
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From Exceptional Utility to Strategic Pricing From Exceptional Utility to Strategic Pricing To secure strong revenue stream for your offering, you must set the right strategic price to ensure that not only will buyers To secure strong revenue stream for your offering, you must set the right strategic price to ensure that not only will buyers would want to buy your offering, but they would also have the compelling ability to pay for it. would want to buy your offering, but they would also have the compelling ability to pay for it. ItIt is also increasingly important to know from the start what price will quickly capture the mass of target buyers. is also increasingly important to know from the start what price will quickly capture the mass of target buyers. THE PRICE CORRIDOR OF THE MASS
Finding the right price for an irresistible offer which may not necessarily be the lower price.
STEP 1: Identify the price corridor of the Mass

Three alternative product/service types
Same Form Different Form Same Function Different Form And Function, Same Objectives
STEP 2: Specify price level within the corridor

Determine how high a price they can afford to Determine how high a price they can afford to set within the corridor without inviting set within the corridor without inviting competition form imitation products or services. competition form imitation products or services.
U
PRICE CORRIDOR OF THE MASS
icing e l pr r lev ppe
High Degree of legal and High Degree of legal and resource protection resource protection Difficult to imitate Difficult to imitate Some Degree of legal and Some Degree of legal and resource protection resource protection Low Degree of legal and Low Degree of legal and resource protection resource protection Easy to imitate Easy to imitate
Mid-level pricing
Low er le vel p ricin g
Size of circle is proportional to number of buyers that product/service attracts
The price bandwidth that captures the largest The price bandwidth that captures the largest groups of target buyers is the price corridor of groups of target buyers is the price corridor of the mass. the mass.
As the nature of goods becomes more As the nature of goods becomes more knowledge intensive, companies bear knowledge intensive, companies bear much more of their costs in product much more of their costs in product development than in manufacturing. development than in manufacturing. To a buyer, the value of a product or To a buyer, the value of a product or service may be closely tied to the total service may be closely tied to the total number of people using it. number of people using it. The rise of knowledge-intensive products The rise of knowledge-intensive products also creates the potential for free riding. also creates the potential for free riding. The cost and risk of developing an The cost and risk of developing an innovative idea are borne by the initiator, innovative idea are borne by the initiator, not the follower. not the follower. The strategic price you set for your The strategic price you set for your offering must not only attract buyers in offering must not only attract buyers in large numbers, but also help to retain large numbers, but also help to retain them. them. Companies would be wise to pursue Companies would be wise to pursue mid-to-lower-boundary strategic pricing mid-to-lower-boundary strategic pricing from the start if the following apply: from the start if the following apply: Blue ocean offering has high fixed Blue ocean offering has high fixed costs and marginal variable costs. costs and marginal variable costs. Their attractiveness depend heavily Their attractiveness depend heavily on network externalities. on network externalities. Their cost structure benefits from Their cost structure benefits from steep economies of scale and scope. steep economies of scale and scope.
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From Strategic Pricing to Target Costing From Strategic Pricing to Target Costing To maximize profit potential of aa blue ocean idea, a company should start with the strategic price and then deduct its desired blue ocean idea, a company should start with the strategic price and then deduct its desired To maximize profit potential of profit margin from the price to arrive at aa target cost. profit margin from the price to arrive at target cost. PROFIT MODEL OF A BLUE OCEAN STRATEGY
The Strategic Price The Strategic Price
Target costing is driven by strategic pricing, and itit is usually aggressive. Target costing is driven by strategic pricing, and is usually aggressive. Part of the challenge of meeting the target cost is addressed in building aa Part of the challenge of meeting the target cost is addressed in building strategic profile that has not only divergence but also focus, which makes aa strategic profile that has not only divergence but also focus, which makes company strip out costs. company strip out costs. Sometimes these reductions are sufficient to hit the cost target, but often Sometimes these reductions are sufficient to hit the cost target, but often they are not. they are not.
The Strategic Price The Strategic Price
The Target Price The Target Price
To hit the cost target, companies have three principle levers To hit the cost target, companies have three principle levers
Streamlining operations and introducing cost innovations from manufacturing to distribution Partnering Form Development, manufacturing to distribution
Streamlining and Streamlining and Cost innovation Cost innovation
Partnership Partnership
Change the price model of the industry pricing innovation
Pricing Innovation Pricing Innovation
What is a pricing innovation in one industry, is often a standard pricing in another industry 25 December 2006 3RD JANUARY 2007 Page 27
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From Utility, Price, and Cost to Adoption From Utility, Price, and Cost to Adoption Even an unbeatable business model may not be enough to guarantee the commercial success of blue ocean idea. ItIt threatens Even an unbeatable business model may not be enough to guarantee the commercial success of blue ocean idea. threatens the status quo, provoke fear and resistance from the companys main stakeholders: its employees, its business partners the status quo, provoke fear and resistance from the companys main stakeholders: its employees, its business partners && the general public. the general public. THE COMPANY MUST EDUCTAE THE FEARFUL THE COMPANY MUST EDUCTAE THE FEARFUL
EMPLOYEES EMPLOYEES
Failure to adequately address the concerns Failure to adequately address the concerns of employees about the impact of a new of employees about the impact of a new business idea on their livelihoods can be business idea on their livelihoods can be expensive. expensive. The company must make a concerted The company must make a concerted effort to c to employees that they are effort to c to employees that they are aware of the threats posed by the aware of the threats posed by the execution of the idea before going public execution of the idea before going public with the idea. with the idea. Companies should work with employees to Companies should work with employees to find ways of defusing the threats so that find ways of defusing the threats so that everyone in the company wins, despite everyone in the company wins, despite shifts in peoples roles, responsibilities and shifts in peoples roles, responsibilities and rewards. rewards.
BUSINESS PARTNERS BUSINESS PARTNERS
THE GENERAL PUBLIC THE GENERAL PUBLIC
Potentially more damaging would be Potentially more damaging would be business partners resistance who fear business partners resistance who fear their revenue streams or market positions their revenue streams or market positions are threatened by a new business idea. are threatened by a new business idea.
Opposition from the public may arise if the Opposition from the public may arise if the new business idea is very new and new business idea is very new and innovative, particularly if it threatens innovative, particularly if it threatens established social or political norms. established social or political norms.
COMPANIES NEED TO EXPLAIN THE MERITS, SET CLEAR EXPECTATIONS FOR ITS RAMIFICATIONS, AND COMPANIES NEED TO EXPLAIN THE MERITS, SET CLEAR EXPECTATIONS FOR ITS RAMIFICATIONS, AND DESCRIBE HOW THE COMPANY WILL ADDRESS THEM. DESCRIBE HOW THE COMPANY WILL ADDRESS THEM. DKD 25 December 2006 3RD JANUARY 2007 Page 28

Blue Ocean Idea (BOI) Index Blue Ocean Idea (BOI) Index Provides aa simple and robust test of the blue ocean strategy system. simple and robust test of the blue ocean strategy system. Provides
YOU NEAREST COMPETITOR INDUSTRY
UTILITY
Is there exceptional utility? Are there compelling reason to buy your offering? Is your price easily accessible to the mass of buyers? Does your cost structure meet the target cost? Have you addressed adoption hurdles upfront?
+ -
+
+
PRICE
COST
ADOPTION
+: There is value innovation +: There is value innovation - -: : No value innovation No value innovation
BLUE OCEAN STRATEGY PRINCIPLE 5 OVERCOME KEY ORGANIZATIONAL HURDLES

ATTENUATES ORGANIZATIONAL RISKS
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EXECUTING BLUE OCEAN STRATEGY

5. OVERCOME KEY ORGANIZATIONAL HURDLES 5. OVERCOME KEY ORGANIZATIONAL HURDLES
Challenge of Execution Challenge of Execution Companies often have aa tough time translating thought into action particularly for blue ocean strategy where it hinges on shift Companies often have tough time translating thought into action particularly for blue ocean strategy where it hinges on shift from convergence to divergence in value curves at lower costs. This raises the execution bar. from convergence to divergence in value curves at lower costs. This raises the execution bar. FOUR EXECUTION HURDLES Waking up employees to the need for a strategic shift.
COGNITIVE
Red Oceans may not be the paths to future profitable growth, but they feel comfortable to people and may have even served an organization well until now, so why rock the boat?
LIMITED RESOURCES
The greater the shift in strategy, the greater it is assumed are the resources needed to execute it! But resources are being cut and not raised!
MOTIVATION
How do you motivate key players to move fast and tenaciously to carry-out a break from the status quo?
POLITICS
Example, In our Organization, you get shot down before you stand up
TO ACHIEVE THIS EFFECTIVELY TO ACHIEVE THIS EFFECTIVELY Companies must abandon perceived wisdom on effecting change. Companies must abandon perceived wisdom on effecting change. Utilize TIPPING POINT LEADERSHIP which allows you to overcome the four hurdles fast and at low cost while winning Utilize TIPPING POINT LEADERSHIP which allows you to overcome the four hurdles fast and at low cost while winning employees backing in executing from the status quo. employees backing in executing from the status quo. DKD 25 December 2006 3RD JANUARY 2007 Page 31

TIPPING POINT LEADERSHIP TIPPING POINT LEADERSHIP Builds on the rarely exploited corporate reality that in every organization, there are people, acts, and activities that exercise Builds on the rarely exploited corporate reality that in every organization, there are people, acts, and activities that exercise disproportionate influence on performance. disproportionate influence on performance. ItIt is about conserving resources and cutting time by focusing on identifying and then leveraging the factors of disproportionate is about conserving resources and cutting time by focusing on identifying and then leveraging the factors of disproportionate influence in an organization. influence in an organization.
Q1: WHAT FACTORS OR ACTS EXERCISE A DISPROPORTIONATELY POSITIVE INFLUENCE ON BREAKING THE STATUS QUO?. Q1: WHAT FACTORS OR ACTS EXERCISE A DISPROPORTIONATELY POSITIVE INFLUENCE ON BREAKING THE STATUS QUO?. Q2: WHAT FACTORS OR ACTS EXERCISE A DISPROPORTIONATELY POSITIVE INFLUENCE ON GETTING THE MAXIMUM BANG OUT OF Q2: WHAT FACTORS OR ACTS EXERCISE A DISPROPORTIONATELY POSITIVE INFLUENCE ON GETTING THE MAXIMUM BANG OUT OF EACH BUCK OF RESOURCES??. EACH BUCK OF RESOURCES??. Q3: WHAT FACTORS OR ACTS EXERCISE A DISPROPORTIONATELY POSITIVE INFLUENCE ON MOTIVATING KEY PLAYERS TO Q3: WHAT FACTORS OR ACTS EXERCISE A DISPROPORTIONATELY POSITIVE INFLUENCE ON MOTIVATING KEY PLAYERS TO AGRESSIVELY MOVE FORWARD ITH CHANGE? AGRESSIVELY MOVE FORWARD ITH CHANGE? Q4: WHAT FACTORS OR ACTS EXERCISE A DISPROPORTIONATELY POSITIVE INFLUENCE ON KNOECKING DOWN POLITICAL Q4: WHAT FACTORS OR ACTS EXERCISE A DISPROPORTIONATELY POSITIVE INFLUENCE ON KNOECKING DOWN POLITICAL ROADBLOCKS THAT OFTEN TRIP UP EVE THE BEST STRATEGIES? ROADBLOCKS THAT OFTEN TRIP UP EVE THE BEST STRATEGIES?
FOUR ORGANIZATIONAL HURDLES TO STATEGY EXECUTION

COGNITIVE HURDLE COGNITIVE HURDLE An organization wedded to An organization wedded to the status quo the status quo
RESOURCES HURDLE RESOURCES HURDLE Limited resources Limited resources
POLITICAL HURDLE POLITICAL HURDLE Opposition from powerful Opposition from powerful vested interests vested interests
MOTIVATIONAL HURDLE MOTIVATIONAL HURDLE Unmotivated staff Unmotivated staff
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PIVOTAL LEVER: DISPROPORTIONATE INFLUENCE FACTORS PIVOTAL LEVER: DISPROPORTIONATE INFLUENCE FACTORS Positive Stimuli reinforces Behavior, Negative Stimuli change Positive Stimuli reinforces Behavior, Negative Stimuli change Attitudes and Behavior. Attitudes and Behavior. The hardest battle is simply to make people aware of the the The hardest battle is simply to make people aware of the the need for strategic shift and to agree on its causes. need for strategic shift and to agree on its causes. Messages communicated through numbers seldom stick with Messages communicated through numbers seldom stick with people. The case for change feels abstract and removed from people. The case for change feels abstract and removed from the sphere of the line managers. the sphere of the line managers. Instead, making people see and experience harsh reality Instead, making people see and experience harsh reality firsthand would make them remember and hence would respond firsthand would make them remember and hence would respond most effectively i.e. seeing is believing. most effectively i.e. seeing is believing. Builds on insight to inspire aa fast change in mindset that is Builds on insight to inspire fast change in mindset that is internally driven of peoples own accord. internally driven of peoples own accord. EXPERIENCE THE NEED FOR CHANGE EXPERIENCE THE NEED FOR CHANGE
1 1 RAPID WAKE RAPID WAKE UP CALL UP CALL Employees must come face-to-face with the worst Employees must come face-to-face with the worst operational problems POOR PERFORMANCE IS operational problems POOR PERFORMANCE IS SHOCKING & INESCAPBLE but ACTIONABLE! SHOCKING & INESCAPBLE but ACTIONABLE! Showing the worst to superiors can also shift their mindset Showing the worst to superiors can also shift their mindset fast! fast! Listen to our most disgruntled customers firsthand dont Listen to our most disgruntled customers firsthand dont rely on market surveys. rely on market surveys. Do you ever wonder why sales dont match your confidence Do you ever wonder why sales dont match your confidence in your product? Do you outsource your eyes and send out in your product? Do you outsource your eyes and send out market research questionnaires? market research questionnaires?
1. BREAK THROUGH THE COGNITIVE HURDLE

COGNITIVE COGNITIVE HURDLE HURDLE An organization An organization wedded to the wedded to the status quo status quo POLITICAL POLITICAL HURDLE HURDLE Opposition from Opposition from powerful vested powerful vested interests interests
RESOURCES RESOURCES HURDLE HURDLE Limited resources Limited resources
MOTIVATIONAL MOTIVATIONAL HURDLE HURDLE Unmotivated staff Unmotivated staff
MAKE PEOPLE EXPERIENCE THE NEED FOR CHANGE!

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2 2 MEET WITH MEET WITH DISGRUNTLED DISGRUNTLED CUSTOMERS CUSTOMERS
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PIVOTAL LEVER: DISPROPORTIONATE INFLUENCE FACTORS PIVOTAL LEVER: DISPROPORTIONATE INFLUENCE FACTORS
2. JUMP THE RESOURCE HURDLE

Concentrate on multiplying the value of the resources. Concentrate on multiplying the value of the resources. Organizations rapidly gain insight into freeing up low-return Organizations rapidly gain insight into freeing up low-return resources and redirecting them to high-impact areas. resources and redirecting them to high-impact areas. Whereas the actions of eliminating and resolving and reducing, Whereas the actions of eliminating and resolving and reducing, cut the costs for the organization, raising certain elements or cut the costs for the organization, raising certain elements or creating required added investments. creating required added investments. However, the overall investment of resources remained more or However, the overall investment of resources remained more or less constant! less constant! MULTIPLY THE VALUE OF AVAILABLE RESOURCES MULTIPLY THE VALUE OF AVAILABLE RESOURCES
1 1 LEVERAGE LEVERAGE HOT SPOTS HOT SPOTS 2 2 OPTIMIZE OPTIMIZE COLD COLD SPOTS SPOTS 3 3 HORSE HORSE TRADING TRADING Activities that have low resource input but high performance Activities that have low resource input but high performance gains. gains. Activities that have high resource input but low performance Activities that have high resource input but low performance impact. impact.
ACQUIRING RESOURCES IS OFTEN A LONG, POLITICALLY CHARGED PROCESS!

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Involve trading your units excess resources in an area and Involve trading your units excess resources in an area and redirecting them to high-impact areas. redirecting them to high-impact areas.
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PIVOTAL LEVER: DISPROPORTIONATE INFLUENCE FACTORS PIVOTAL LEVER: DISPROPORTIONATE INFLUENCE FACTORS Instead of diffusing change efforts widely, instead seek massive Instead of diffusing change efforts widely, instead seek massive concentration. concentration.
3. JUMP THE MOTIVATIONAL HURDLE

You must alert employees to the need for aa strategic shift and You must alert employees to the need for strategic shift and identify how itit can be achieved with limited resources. identify how can be achieved with limited resources. People must not only recognize what needs to be done, but they People must not only recognize what needs to be done, but they must also act on that insight in aa sustained and meaningful way. must also act on that insight in sustained and meaningful way. MOTIVATE MASS OF EMPLOYEES FAST & AT LOW COST MOTIVATE MASS OF EMPLOYEES FAST & AT LOW COST
1 1 LEVERAGE LEVERAGE KINGPINS KINGPINS 2 2 PLACE PLACE KINGPINS in KINGPINS in A A FISHBOWL FISHBOWL 3 3 ATOMIZE TO ATOMIZE TO GET THE GET THE ORGANIZATIO ORGANIZATIO N TO CHANGE N TO CHANGE ITSELF ITSELF Concentrate your efforts on kingpins, the key influencers in Concentrate your efforts on kingpins, the key influencers in the organization. the organization. These are natural leaders who are well-respected and These are natural leaders who are well-respected and persuasive and have the ability to unlock or block access to persuasive and have the ability to unlock or block access to key resources. key resources. Motivating kingpins in a sustained and meaningful way Motivating kingpins in a sustained and meaningful way requires transparency, inclusion and fair process. requires transparency, inclusion and fair process. Through this an intense performance culture would be Through this an intense performance culture would be created in short period of time. created in short period of time. :Fishbowl management offers an opportunity for high :Fishbowl management offers an opportunity for high achievers to gain recognition. achievers to gain recognition. Unless people believe that the strategic challenge is Unless people believe that the strategic challenge is attainable, the change is not likely to succeed. Hence attainable, the change is not likely to succeed. Hence atomization i.e. the framing of the strategic challenge is atomization i.e. the framing of the strategic challenge is crucial. crucial. To make the challenge attainable, break it up into bite-sized To make the challenge attainable, break it up into bite-sized atoms that employees at every level could relate to. atoms that employees at every level could relate to.
EMPLOYEES AT EVERY LEVEL MUST MOVE EN MASSE!

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PIVOTAL LEVER: DISPROPORTIONATE INFLUENCE FACTORS PIVOTAL LEVER: DISPROPORTIONATE INFLUENCE FACTORS Identify your detractors and supporters! Forget the middle and Identify your detractors and supporters! Forget the middle and strive to create aa win-win outcome for both. strive to create win-win outcome for both. Even the best and brightest are regularly eaten alive by politics, Even the best and brightest are regularly eaten alive by politics, intrigue and plotting. There exist powerful vested interests that intrigue and plotting. There exist powerful vested interests that will resist the impending changes. will resist the impending changes. The more likely change becomes, the more fiercely and vocally The more likely change becomes, the more fiercely and vocally these negative influencers both internal & external will fight to these negative influencers both internal & external will fight to protect their positions, and their resistance can seriously damage protect their positions, and their resistance can seriously damage and even derail the strategy execution process. and even derail the strategy execution process. DONT FIGHT ALONE! GET THE HIGHER & WIDER VOICE DONT FIGHT ALONE! GET THE HIGHER & WIDER VOICE TO FIGHT WITH YOU! TO FIGHT WITH YOU!
1 1 SECURE A SECURE A CONSIGLIERE CONSIGLIERE 2 2 LEVERAGE LEVERAGE YOUR YOUR ANGELS ANGELS 3 3 SILENCE SILENCE YOUR DEVILS YOUR DEVILS Most leaders concentrate on building a top management Most leaders concentrate on building a top management team having strong functional skills such as marketing, team having strong functional skills such as marketing, operations, and finance. operations, and finance. Tipping point leaders have the insight to include a Tipping point leaders have the insight to include a consigliere a respected senior insider who are politically consigliere a respected senior insider who are politically adept and who knows the land mines in implementation, adept and who knows the land mines in implementation, including who will fight you and who will support you. including who will fight you and who will support you. Who are my angels? Who will algn with me? Who will win Who are my angels? Who will algn with me? Who will win the most by the strategic shift? the most by the strategic shift? Who are my devils? Who will fight me? Who will lose the Who are my devils? Who will fight me? Who will lose the most by the future blue ocean strategy? most by the future blue ocean strategy?
4. KNOCK OVER THE POLITICAL HURDLE

MOVE QUICKLY! BUILD A BROADER COALITION WITH YOUR ANGELS.

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CHALLENGING CONVENTIONAL WISDOM CHALLENGING CONVENTIONAL WISDOM
CONVENTIONAL WISDOM
Mass of Employees
TIPPING-POINT LEADERSHIP
EXTREMES EXTREMES
Company Theory of organization change rests on transforming the mass. So change efforts are focused on moving the mass, requiring steep resources and long timeframe.
Company To change the mass, focus on the extremes people, acts, and activities that exercise a disproportionate influence on performance to achieve a strategic shift at a low cost.
ItItis never easy to execute aastrategic shift, and doing ititfast with limited resources is even more difficult. is never easy to execute strategic shift, and doing fast with limited resources is even more difficult. By consciously addressing the hurdles to strategy execution and focusing on factors of disproportionate By consciously addressing the hurdles to strategy execution and focusing on factors of disproportionate influence, you can knock them over to actualize aastrategic shift. influence, you can knock them over to actualize strategic shift. Not every challenge requires aaproportionate action. Focus on acts of disproportionate influences. Not every challenge requires proportionate action. Focus on acts of disproportionate influences. This is aacritical leadership component for making blue ocean strategy happen. This is critical leadership component for making blue ocean strategy happen. ItItaligns employees actions with the new strategy. aligns employees actions with the new strategy.
BLUE OCEAN STRATEGY PRINCIPLE 6 BUILD EXECUTION INTO STRATEGY

ATTENUATES MANAGEMENT RISKS
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6. BUILD EXECUTION INTO STRATEGY 6. BUILD EXECUTION INTO STRATEGY
BUILD PEOPLES TRUST && COMMITMENT DEEP IN THE RANKS AND INSPIRE THEIR VOLUNTARY COOPERATION BUILD PEOPLES TRUST COMMITMENT DEEP IN THE RANKS AND INSPIRE THEIR VOLUNTARY COOPERATION Allows companies to minimize the management risk, risk of distrust, and even sabotage. Allows companies to minimize the management risk, risk of distrust, and even sabotage. Companies must reach beyond carrots and sticks. They must reach to fair process in the making and executing of strategy. Companies must reach beyond carrots and sticks. They must reach to fair process in the making and executing of strategy. Fair process is aa key variable that distinguishes successful blue ocean strategic moves from those that failed. Fair process is key variable that distinguishes successful blue ocean strategic moves from those that failed. POOR PROCESS CAN RUIN STRATEGY EXECUTION POOR PROCESS CAN RUIN STRATEGY EXECUTION
THE POWER OF FAIR PROCESS

How fair process affects peoples attitudes and behavior Strategy Formulation Strategy Formulation Process Process Fair Process Fair Process Engagement, Explanation, Expectation Clarity Engagement, Explanation, Expectation Clarity Trust and Commitment Trust and Commitment II feel my opinion counts feel my opinion counts Voluntary Cooperation Voluntary Cooperation Ill go beyond the call of duty Ill go beyond the call of duty Exceeds Expectations Exceeds Expectations Self-initiated Self-initiated 25 December 2006 3RD JANUARY 2007
THE THREE PRINCIPLES THE THREE PRINCIPLES OF FAIR PROCESS OF FAIR PROCESS Three mutually reinforcing Three mutually reinforcing elements that defines fair elements that defines fair process: Engagement, process: Engagement, Explanation and Explanation and Expectation Clarity. Expectation Clarity.
People at the front-line care about People at the front-line care about the proper process as those at the proper process as those at the Top the Top Page 39
Attitudes Attitudes
Behavior Behavior
Strategy Execution Strategy Execution DKD

WHY DOES FAIR PROCESS MATTER? WHY DOES FAIR PROCESS MATTER?
Why does the observance or violation of fair process in strategy making have the power to Why does the observance or violation of fair process in strategy making have the power to make or break aastrategys execution? make or break strategys execution? ItItall comes down to intellectual and emotional recognition. all comes down to intellectual and emotional recognition. EMOTIONALLY, individuals seek recognition of their value as Human Beings, who are EMOTIONALLY, individuals seek recognition of their value as Human Beings, who are treated with full respect and dignity and appreciated for their individual worth regardless of treated with full respect and dignity and appreciated for their individual worth regardless of hierarchical level. hierarchical level. INTELLECTUALY, individuals seek recognition that their ideas are sought after and given INTELLECTUALY, individuals seek recognition that their ideas are sought after and given thoughtful reflection, and that others think enough of their intelligence to explain their thoughtful reflection, and that others think enough of their intelligence to explain their thinking to them. thinking to them.
INTELLECTUAL & EMOTIONAL RECOGNITION THEORY INTELLECTUAL & EMOTIONAL RECOGNITION THEORY
Frederick Herzbergss Theory on Motivation Frederick Herzbergss Theory on Motivation Recognition was found to inspire strong intrinsic motivation, causing people to go beyond Recognition was found to inspire strong intrinsic motivation, causing people to go beyond the call of duty and engage in voluntary cooperation. the call of duty and engage in voluntary cooperation. Trust and cherish the individual as well as aa deep-seated confidence in the individuals Trust and cherish the individual as well as deep-seated confidence in the individuals knowledge, talents and expertise. knowledge, talents and expertise.

EXECUTION CONSEQUENCES OF THE PRESENCE AND ABSENCE OF FAIR PROCESS IN STRATEGY MAKING EXECUTION CONSEQUENCES OF THE PRESENCE AND ABSENCE OF FAIR PROCESS IN STRATEGY MAKING
FAIR FAIR PROCESS PROCESS
Intellectual & Intellectual & Emotional Emotional Recognition Recognition Intellectual & Intellectual & Emotional Emotional Indignation Indignation
Trust and Trust and Commitment Commitment
Voluntary Voluntary Cooperation in Cooperation in Strategy Execution Strategy Execution Refusal to Execute Refusal to Execute Strategy Strategy
VIOLATION OF FAIR VIOLATION OF FAIR PROCESS PROCESS
Distrust and Distrust and Resentment Resentment
FAIR PROCESS & BLUE OCEAN STRATEGY FAIR PROCESS & BLUE OCEAN STRATEGY
Commitment, trust, and voluntary cooperation are not merely attitudes or behaviors. They are Commitment, trust, and voluntary cooperation are not merely attitudes or behaviors. They are INTANGIBLE CAPITAL. INTANGIBLE CAPITAL. When people have trust, they have heightened confidence in one anothers intentions and actions. When people have trust, they have heightened confidence in one anothers intentions and actions. When people have commitment, they are even willing to override personal self-interest in the interests of When people have commitment, they are even willing to override personal self-interest in the interests of the company. the company. Commitment, trust, and voluntary cooperation allows companies to stand apart in the speed, quality, and Commitment, trust, and voluntary cooperation allows companies to stand apart in the speed, quality, and consistency of their execution and to implement strategic shifts fast at aalow cost. consistency of their execution and to implement strategic shifts fast at low cost.
BLUE OCEAN STRATEGY CONCLUSION SUSTAINABILITY & RENEWAL
DKD
Page 42
CONCLUSION THE SUSTAINABILITY AND RENEWAL OF BLUE OCEAN STRATEGY

CREATING BLUE OCEANS IS NOT A STATIC ACHIEVEMENT BUT A DYNAMIC CREATING BLUE OCEANS IS NOT A STATIC ACHIEVEMENT BUT A DYNAMIC PROCESS PROCESS
BARRIERS TO IMITATION A Blue Ocean Strategy brings with ititconsiderable barriers to imitation. BARRIERS TO IMITATION A Blue Ocean Strategy brings with considerable barriers to imitation. Some of these are operational and others are cognitive. Some of these are operational and others are cognitive. A Blue Ocean strategy will go without credible challenges for TEN to FIFTEEN years. A Blue Ocean strategy will go without credible challenges for TEN to FIFTEEN years.
A Value-Innovation move does not make sense based on conventional strategic logic. A Value-Innovation move does not make sense based on conventional strategic logic. Brand image conflict prevents companies from imitating as this would signal an invalidation of Brand image conflict prevents companies from imitating as this would signal an invalidation of current business models. current business models. Natural Monopoly blocks imitation when the size of the market cannot support another player. Natural Monopoly blocks imitation when the size of the market cannot support another player. Patents of Legal Permits. Patents of Legal Permits. The high volume generated by aa value innovation leads to rapid cost advantages. The high volume generated by value innovation leads to rapid cost advantages. Network externalities also block companies from easily and credibly imitating. Network externalities also block companies from easily and credibly imitating. Imitation often requires companies to make substantial changes to their existing business Imitation often requires companies to make substantial changes to their existing business practices. practices. When aa company offers a leap in value, it rapidly earns brand buzz and a loyal following in the When company offers a leap in value, it rapidly earns brand buzz and a loyal following in the market place. market place. CNN CNN THE BODY THE BODY SHOP SHOP KINEPOLIS KINEPOLIS VIAGRA VIAGRA Wal-Mart Wal-Mart E-Bay E-Bay Southwest Southwest Airlines Airlines Intuits Intuits QUICKEN QUICKEN
Blue Ocean Strategy A Systems approach that requires getting the strategic elements right & Blue Ocean Strategy A Systems approach that requires getting the strategic elements right & aligning them in an integral system to deliver value innovation. aligning them in an integral system to deliver value innovation.
CONCLUSION THE SUSTAINABILITY AND RENEWAL OF BLUE OCEAN STRATEGY

WHEN TO VALUE-INNOVATE AGAIN WHEN TO VALUE-INNOVATE AGAIN
To avoid the trap of competing, you need to monitor value curves on the strategy canvas. To avoid the trap of competing, you need to monitor value curves on the strategy canvas. Monitoring Value Curves signals when to value-innovate and when not to. Monitoring Value Curves signals when to value-innovate and when not to. When your Vale Curve begins to converge with the competitors, you need to reach out for another When your Vale Curve begins to converge with the competitors, you need to reach out for another Blue Ocean. Blue Ocean. Do not pursue another blue Do not pursue another blue ocean when your current offering ocean when your current offering is still profitable. is still profitable. IfIfyour companys value curve your companys value curve still has focus, divergence, and aa still has focus, divergence, and compelling tagline. compelling tagline.
THERE IS STILL A HUGE PROFIT STREAM THERE IS STILL A HUGE PROFIT STREAM SHOULD FOCUS ON LENGTHENING, WIDENING & SHOULD FOCUS ON LENGTHENING, WIDENING & DDEPENING YOUR RENT STREAM THOUGH DDEPENING YOUR RENT STREAM THOUGH OPERATIONAL IMPROVEMENTS & GEOGRAPHICAL OPERATIONAL IMPROVEMENTS & GEOGRAPHICAL EXPANSIONTO ACHIEVE MAXIMUM ECONOMIES OF EXPANSIONTO ACHIEVE MAXIMUM ECONOMIES OF SCALE & MARKET COVERAGE. SCALE & MARKET COVERAGE. YOU SHOULD SWIM AS FAR AS POSSIBLE IN THE BLUE YOU SHOULD SWIM AS FAR AS POSSIBLE IN THE BLUE OCEAN, MAKING YOURSELF A MOVINNG TARGET, OCEAN, MAKING YOURSELF A MOVINNG TARGET, DISTANCING YOURSELF FROM THE EARLY IMITATORS DISTANCING YOURSELF FROM THE EARLY IMITATORS & DISCOURAGING THEM IN THE PROCESS. & DISCOURAGING THEM IN THE PROCESS.
Dominate the blue ocean of your Dominate the blue ocean of your imitators for as long as possible. imitators for as long as possible.
Because Blue Oceans have always co-existed with Red Oceans, practical realities demand that Because Blue Oceans have always co-existed with Red Oceans, practical realities demand that companies succeed in BOTH OCEANS and MASTER the STRATEGIES for BOTH. companies succeed in BOTH OCEANS and MASTER the STRATEGIES for BOTH.
BLUE OCEAN STRATEGY CONCLUSION MARKET DYNAMICS
DKD
Page 45
MARKET DYNAMICS OF VALUE-INNOVATION

Capture the mass of target buyers from the outset and Capture the mass of target buyers from the outset and expand the size of the market by offering radically expand the size of the market by offering radically superior value at price points accessible to them. superior value at price points accessible to them. 1. Value innovation radically increases the 1. Value innovation radically increases the appeal of aa product, shifting the demand appeal of product, shifting the demand curve from D1 to D2. curve from D1 to D2. 2. The price is set strategically, shifted from 2. The price is set strategically, shifted from P1 to P2 to capture the mass buyers in the P1 to P2 to capture the mass buyers in the expanded market. expanded market. 3. This increases the quantity sold from Q1 3. This increases the quantity sold from Q1 to Q2 and builds strong brand recognition, to Q2 and builds strong brand recognition, for unprecedented value. for unprecedented value. 5. The company engages in target costing to 5. The company engages in target costing to simultaneously reduce the long-run simultaneously reduce the long-run average cost curve from LRAC1 to average cost curve from LRAC1 to LRAC2 to expand its ability to profit and to LRAC2 to expand its ability to profit and to discourage free riding and imitation. discourage free riding and imitation. Buyers receive aa leap in value, shifting the Buyers receive leap in value, shifting the consumer surplus from axb to eyf. consumer surplus from axb to eyf. 6. The company earns aa leap in profit and 6. The company earns leap in profit and growth, shifting the profit zone from abcd growth, shifting the profit zone from abcd to efgh. to efgh. 7. The rapid brand recognition built by the 7. The rapid brand recognition built by the company as aa result of the unprecedented company as result of the unprecedented value offered in the marketplace, value offered in the marketplace, combined with the simultaneous drive to combined with the simultaneous drive to lower costs, makes the competition lower costs, makes the competition nearly irrelevant, and makes itit hard to nearly irrelevant, and makes hard to catch up, as economies of scale, catch up, as economies of scale, learning and increasing returns kick in. learning and increasing returns kick in.
DEMAND
PRICE
D2 Long-run Average Cost Curve b c D1 f g LRAC1 LRAC2
P1
a d e h
P2
Q1
QUANTITY
Q2
THE EMERGENCE OF A WIN-WIN MARKET DYNAMICS THE EMERGENCE OF A WIN-WIN MARKET DYNAMICS
BLUE OCEAN STRATEGY APLLICATION STRATEGY CANVAS
DKD
Page 47
HIGH
MID
LOW
DKD
INDUSTRY (Worldwide)
1.
Alliances & Consolidation Global Market Safety & Emission Regulations

PROTON
2. 3. 4. Technology and Innovations Level of Investment Return of Investment Margin Levels Platform Engineering Modular Engineering
MSIAN COMPETITOR
5. 6. 7. 8. 9. 10. 1st Tier Suppliers & Vendors 11. Level of Out-sourcing 12. Number of Models 13. Product Life-Cycles 14. Integrated Logistics 15. Integrated Financing 16. Market / Customer Orientation (CSI) 17. Domestic Market Protection
AUTOMOTIVE INDUSTRY STRATEGY CANVAS
25 December 2006 3RD JANUARY 2007 Page 48

18. Brand & Emotion
PROTON STRATEGY CANVAS

Providing Customer-Oriented Products and Ancillary Services that are Providing Customer-Oriented Products and Ancillary Services that are Satisfied through the Integration of Friendly Purchase and Ownership Satisfied through the Integration of Friendly Purchase and Ownership Experience Experience
HIGH (100)
TO-BE
AVERAGE
CURRENT
LOW (0)
TRANSPARENCY
CLARITY OF MISSION OBJECTIVES
PROFITORIENTATION
CUSTOMERORIENTATION
CLARITY OF COMMUNICATION & ENGAGEMENT
COST ORIENTATION
TIME ORIENTATION
TEAMWORK (CROSSFUNCTIONAL TEAMS)
CLARITY OF VISION & STRATEGY
DECISION MAKING & EXECUTION
SENSE OF URGENCY
AUTHORITY
HUMAN CAPITAL DEVELOPMENT
TECHNICAL & ENGINEERING DEVELOPMENT
MANUFACURING CAPABILITY
1 DKD
9 3RD
10
11
12
13
14
15
16
25 December 2006
JANUARY 2007
17 Page 49
NATIONAL CAR
INTERNAL EQUITY
PROTON PRODUCT STRATEGY CANVAS (VALUE-CURVES)

Providing Value / /Customer-Oriented Products Providing Value Customer-Oriented Products
ELIMINATE
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.
RAISE
CLARITY OF VISION & STRATEGY CLARITY OF MISSION OBJECTIVES PROFIT ORIENTATION SENSE OF URGENCY COMMUNICATION CLARITY & ENGAGEMENT COST ORIENTATION TIME ORIENTATION DECISION MAKING & EXECUTION HUMAN CAPITAL DEVELOPMENT TECHNICAL & ENGINEERING DEVELOPMENT MANUFACTURING CAPABILITY
1.
NATIONAL CAR ASSOCIATION
REDUCE
1. 2.
CREATE
CUSTOMER ORIENTATION (VALUE TO CUSTOMER) TEAMWORK (CROSS-FUNCTIONAL TEAMS) Business Growth, Purchasing, Manufacturing & Logistics, Research & Development, Sales & Marketing, General Administration Services, Finance, Product Phase-out and Organization & Value-Added. TRANSPARENCY AUTHORITY INTERNAL EQUITY
3. 4. 5.
DKD
Page 50
LOW (0) HIGH (100)

AVERAGE
1
PRICE
DKD 2
QUALITY
3 4 5
CURRENT
PERFORMANCE & FUN (R&H and STYLING)) ENVIRONMENT & EMISSION
SAFETY FEATURES (CRASH NCAP)
6 7 8 9 10 11 12 13 14 15
VALUE TO CUSTOMER MODEL RANGE MAINTAINABILITY CUSTOMIZATION ERGONOMICS NATIONAL CAR MARGIN VALUE FOR MONEY CONTINUOUS IMPROVEMENT (CC, FL, FMD)

RELIABILITY & WARRANTY (TGW & TCGW)
TO-BE
Page 51

ELIMINATE
1. 2. 3. 4. 5. 6. 7.
RAISE
QUALITY SAFETY FEATURES ENVIRONMENT PERFORMANCE & FUN RELIABILITY (TGW & TCGW) MAINTAINABILITY MARGIN
1. 2.
CUSTOMIZATION NATIONAL CAR IDENTITY
REDUCE
1. 1. 2. VALUE FOR MONEY PRICE (COST) 2. 3. 4.
CREATE
MORE MODEL RANGE (Specifically Low-Cost MPV / Mini-Van) CONTINUOUS IMPROVEMENT (CC, FL, FMC) ERGONOMICS VALUE TO CUSTOMER
DKD
Page 52
LOW
MID
HIGH
DKD
1.
Manufacturing Cost Inventory Cycle
2. 3. 4. 5.
6. 7. 8. 9. 3 Integrated Plants Organization Response Continuous Improvement
MANUFACTURING STRATEGY CANVAS (VALUE-CURVES)
Order to Delivery Manufacturing Process & Product Quality Effective Utilization of Resources Vendor Supply Capability
Providing Manufacturing Services Satisfying Customers through Effective Providing Manufacturing Services Satisfying Customers through Effective Management of Resources Ensuring Sustainable Growth Management of Resources Ensuring Sustainable Growth
10. 2 Amortized Plants 11. Physical Prototyping Facilities 12. Products/Compo nent Reliability 13. Outsourcing (Vendor) Partnerships) 14. Standardization Level
Page 53
15. Integrated Logistics

ELIMINATE
1. 2. 3. 4. 5. 6. 7. 8. 9.
RAISE
MFG PROCESS & PRODUCT QUALITY EFFECTIVE UTILIZATION OF RESOURCES VENDOR SUPPLY CAPABILITY CONTINUOUS IMPROVEMENT ORGANIZATIONAL RESPONSE 3 INTEGRATED PLANTS 2 AMORTIZED PLANTS PHYSICAL PROTOTYPING FACILITIES PRODUCT & COMPONENTS RELIABILITY
REDUCE
CREATE
1. 2. 3.
MFG COST INVENTORY CYCLE ORDER TO DELIVERY
1. 2. 3.
OUTSOURCING (VENDOR PARTNERSHIPS) STANDARDIZATION LEVELS INTEGRATED LOGISTICS
DKD
Page 54
MANUFACTURING ENGINEERING STRATEGY CANVAS

Providing Manufacturing Engineering Services Satisfying Customers through Providing Manufacturing Engineering Services Satisfying Customers through Effective Integration of Processes and Facilities Effective Integration of Processes and Facilities
HIGH (100)
AVERAGE
TO BE
LOW (0)
CURRENT
EFFECTIVE UTILIZATION OF RESOURCES (INCLDING OUTSOURCING)
PROJECT MANAGEMENT & CONTROL
INVESTMENT LEVEL
ORGANIZATION RESPONSE
PLC APPLICATIONS
ORDER TO DELIVERY TIME
CONTRACTOR/ SUPPLIER PARTNERSHIP
OEM EXPERIENCE
PROCESS TECHNOLOGY INNOVATION
TECHNICAL & ENGINEERING STANDARDS
FLEXIBILITY LEVEL
COST OF OWNERSHIP
1 DKD
10
11
12
13 Page 55
ONE-STOP SOLUTION

ELIMINATE
1. 2. 3. 4. 5. 6. 7. 8.
RAISE
PROCESS TECHNOLOGY INNOVATION EFFECTIVE UTILIZATION OF RESOURCES FLEXIBILITY LEVELS PROJECT MANAGEMENT & CONTROL ORGANIZATIONAL RESPONSE OEM EXPERIENCE PLC APPLICATION ONE-STOP SOLUTION
REDUCE
CREATE
1. 2. 3.
INVESTMENT LEVELS ORDER TO DELIVERY TIME COST OF OWNERSHIP
1. 2.
TECHNICAL & ENGINEERING STANDARDS CONTRACTOOR & SUPPLIER PARTNERSHIPS
DKD
Page 56
LOW
MID
HIGH
DKD
1. 2. 3. Level of Debt (Profit Orientation) Customer Orientation Sense of Urgency Compartmentalization (Lack of Cross Functional Teams) Cost Orientation Clarity of Mission Objectives Clarity of Vision & Strategy 4. 5. 6.
NISSAN - 1997
7. 8.
9. 10. Supplier Keiretsu (Number of Suppliers) 11. Capacity Utilization 12. Number of Platforms
Communication Transparency & Engagement Decision Making & Execution Efficiency
PROTONS 2006 SITUATION VS. NISSANS 1999 SITUATION
5th JANUARY 2007

13. Number of Product LifeCycles 14. Manufacturing System Capability 15. Personnel Motivation 16. R&D and Technology Innovation 17. Sales, Marketing & Distribution Efficiency 18. Reach of Global Markets
PROTON - 2006
SOURCE: SHIFT Inside Nissans Historic Revival Carlos Ghosn Jan 2005
Page 57
19. Strategic Alliance
LOW
MID
HIGH
DKD
1. 2. 3. Level of Debt (Profit Orientation) Customer Orientation Sense of Urgency Compartmentalization (Lack of Cross Functional Teams) Cost Orientation Clarity of Mission Objectives
PROTON - 2006
Clarity of Vision & Strategy
NISSAN - 2004
4. 5. 6.
7. 8.
9. 10. Supplier Keiretsu (Number of Suppliers) 11. Capacity Utilization 12. Number of Platforms
Communication Transparency & Engagement Decision Making & Execution Efficiency
PROTONS FUTURE REVIVAL IF IT WERE TO EMULATE NISSANS HISTORIC REVIVAL
5th JANUARY 2007

13. Number of Product LifeCycles 14. Manufacturing System Capability 15. Personnel Motivation 16. R&D and Technology Innovation 17. Sales, Marketing & Distribution Efficiency 18. Reach of Global Markets
PRIORIY FOCUS AREAS FOR ACTION
Page 58
PROTON REVIVAL STRATEGY CANVAS (VALUE-CURVES)

ELIMINATE
3. 6. Level of Debt (Profit Orientation) Compartmentalization (Lack of Cross Functional Teams) 1. 2. 4. 5. 7. 9. 11. 14.
RAISE
Clarity of Vision & Strategy Clarity of Mission Objectives Customer Orientation Sense of Urgency Cost Orientation Decision Making & Execution Efficiency Capacity Utilization Manufacturing System Capability
15. Personnel Motivation 16. R&D and Technology Innovation 17. Sales, Marketing & Distribution Efficiency
REDUCE
10. Supplier Keiretsu (Number of Suppliers) 12. Number of Platforms 8.
CREATE
Communication Transparency & Engagement
13. Number of Product Life-Cycles 18. Reach of Global Markets 19. Strategic Alliance
DKD
5th JANUARY 2007
Page 59
LOW
MID
HIGH
DKD
1.
RAISE TO-BE CREATE REDUCE ELIMINATE
2.
3.
Level of Debt (Profit Orientation) Compartmentalization (Lack of Cross Functional Teams) Supplier Keiretsu (Number of Suppliers) Number of Platform Clarity of Vision and Strategy Clarity of Mission Objectives Customer Orientation Sense of Urgency Engagement Cost Orientation
4. 5. 6.
7. 8.
9. 10. Decision Making and Execution Efficiency 11. Capacity Utilization
PROTONS FUTURE REVIVAL IF IT WERE TO EMULATE NISSANS HISTORIC REVIVAL
5th JANUARY 2007

12. Manufacturing System Capability 13. Personnel Motivation 14. R&D & Technology Innovation 15. Sales, Marketing & Distribution Efficiency 16. Communication Transparency & Engagement 17. Number of Product Life -Cycles 18. Reach of Global Markets
PRIORIY FOCUS AREAS FOR ACTION
Page 60

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BLUE OCEAN STRATEGY

25 December 2006 3RD JANUARY 2007

BLUE OCEAN STRATEGY THE NEW MARKET SPACE

BLUE OCEANS. BLUE OCEANS.

THE IMPACT OF CREATING BLUE OCEANS

86% 14% 86% 14% 38% 38% 61% 61%

Launches with Red Oceans

THE RISING IMPERATIVE OF CREATING BLUE OCEANS

FROM COMPANY & INDUSTRY TO STRATEGIC MOVE

VALUE INNOVATION THE CORNERSTONE OF BLUE OCEAN STRATEGY

The Simultaneous Pursuit of Differentiation and Low Cost

RED OCEAN VS. BLUE OCEAN STRATEGY

BLUE OCEAN STRATGEY

FORMULATING AND EXECUTING BLUE OCEAN STRATEGY

The Six Principles of Blue of Blue Ocean Strategy

RISK FACTOR FOR EACH PRINCIPLE ATTENUATES

RISK FACTOR EACH PRINCIPLE ATTENUATES

25 December 2006 3RD JANUARY 2007

ANALYTICAL TOOLS AND FRAMEWORKS

1. The Strategy Canvas

An illustration of a Strategy Canvas [yellow tail] Wine

25 December 2006 3RD JANUARY 2007

ANALYTICAL TOOLS AND FRAMEWORKS

2. The Eliminate-Reduce-Raise-Create Grid

Eliminate-Reduce-RaiseCreate Grid [yellow tai]

A New A New Value Value Curve Curve

Wine complexity Wine range Vineyard prestige

25 December 2006 3RD JANUARY 2007

ANALYTICAL TOOLS AND FRAMEWORKS

SEATING HUB CLASS CONNECTIVITY CHOIICES FRIENDLY SERVICE

FREQUENT POINT TO POINT DEPARTURE

25 December 2006 3RD JANUARY 2007

ANALYTICAL TOOLS AND FRAMEWORKS

A Company caught in the Red Ocean

Over-delivery without Payback

An Internally Driven Company

Six Principles 4 Formulation + 2 Execution

25 December 2006 3RD JANUARY 2007

BLUE OCEAN STRATEGY PRINCIPLE 1 RECONSTRUCT MARKET BOUNDARIES

25 December 2006 3RD JANUARY 2007

FORMULATING BLUE OCEAN STRATEGY

FORMULATING BLUE OCEAN STRATEGY

Path 2: Look Across Strategic Groups within Industries

Path 8: Look Across Time

25 December 2006 3RD JANUARY 2007

FORMULATING BLUE OCEAN STRATEGY

Blue Ocean Creation

25 December 2006 3RD JANUARY 2007

25 December 2006 3RD JANUARY 2007

FORMULATING BLUE OCEAN STRATEGY

A TYPICAL STRATEGY PLAN

BLUE OCEAN STRATEGY PLAN

44 STEPS OF VISUALIZING STRATEGY STEPS OF VISUALIZING STRATEGY

25 December 2006 3RD JANUARY 2007

FORMULATING BLUE OCEAN STRATEGY

44STEPS OF VISUALIZING STRATEGY STEPS OF VISUALIZING STRATEGY

VISUAL VISUAL EXPLORATION EXPLORATION

VISUAL VISUAL STRATEGY STRATEGY FAIR FAIR

VISUAL VISUAL COMMUNI-CATION COMMUNI-CATION

25 December 2006 3RD JANUARY 2007

FORMULATING BLUE OCEAN STRATEGY

BLUE OCEAN STRATEGY PRINCIPLE 3 REACH BEYOND EXISTING DEMAND