Blue ocean strategies are a unique strategy that has a great deal to do with finding a new innovation. And so, we're going to take a look at how innovations are revealed in a blue ocean strategy. First of all, the concept is really formed out of a book by Kim and Mauborgne, who wrote this book on blue ocean strategy a number of years ago. And it's concept is really hard to find uncontested market space by making the competition irrelevant and that idea is really the notion that you're finding a blue ocean, you're finding an open opportunity. And so, we're going to look at how that happens. First of all, let's distinguish between what we called a red ocean and a blue ocean. A Red Ocean is where it's a typical competitive environment. It's where you're competing in the same market space with your competitor. You're trying to beat the competition, you're trying to exploit the existing, maybe even limited amount of demand. And you're making value and cost trade offs trying to really beat out the other competitor. And in a Blue Ocean, what you're trying to do is to create uncontested market space. Your not competing in the same market space with your competitor, but you're trying to find new market space and what you're trying to do is make, not beat the competition, but make the competition irrelevant. And you're trying to capture new demand that maybe doesn't exist. You're creating it, and capturing it. And what you're trying to do is to break out of the value-cost trade off. Offer something totally new that doesn't have a value proposition that Is in the competitive environment. And so, you align your firm activity in the pursuit of differentiation and low cost. So you're moving into a totally different area with blue ocean strategies. So that's the fundamental concept of blue ocean strategy. In blue ocean strategy, what you're trying to do is to find the value of innovation. And you do that by a number different ways you reduce some factors to well below the industry standard and so that's you cost value innovation. And you create new factors that the industry has never offered. That's creating a new value curve, and you're raising some of the factors above the industry standards. So what you're trying to do is reducing cost factors and raising quality factors. And on the left, you'll see if you can eliminate those factors that the industries takes for granted. Basically, you're not trying to do everything that your competitors are doing. You're trying to do different things. And so, you're reconstructing market foundations. There are six paths to doing this. And so, the first path is where you move away from, what we call substitutes within the industry to alternatives. Things that are different. And that maybe cross industries that are different parts of different industries. And another path is to move away from competing within those strategic group to competing across a strategic group. So you're cutting across different industries and you're trying to offer a product that straddles and cuts across different industries. A third path is where you move away from existing consumers and look for new participants. New participants in the supply chain or new participants in the value chain. Or new participants in different markets. A fourth path is where you move away from narrow products. To complimentary systems of products, where you create a collection of products that might be appealing to a new and different market segment. A fifth path is where you transform the functional and emotional meanings of your products. How are they perceive by a customer base? Are they perceive the same way as your competitors? Are they perceived in a totally different way? And the six path is you move away from a market of today to a transformed market of tomorrow. Look ahead to something that hasn't been offered. That you think the market might be interested in responding to in the future. And so, here again we just say we're moving from red to blue oceans. And so, each of these paths, offer a way to move from a red ocean to a blue ocean. And so, this is just a layout of how each of these paths. The industry path, the strategic group path, the buyer group path, the nature, the product path, the functional target and the timing. All help you move from red ocean to blue ocean. And so, here we have a sequence of how you move from identifying by your utility to having a price the successible buyers, and can you actually meet that cause of target in this price and can you address the adoption hurdles and if you can address all those things, then you have a commercially viable blue ocean strategy. A Blue Ocean innovation. You have things that will respond to the market need. You innovations that will be price accessible then you have innovations that if you've constructed them in a way and in compose them in a way can actually be produced in a way to meet those targets. And then, if you can actually carry it out, and get in to the market place then you have a commercially viable Blue Ocean Strategy and a Blue Ocean innovation. So the way to do this in terms of analyzing that opportunity is to use what we call Strategy Canvas. And human be born did a very interesting way of putting this all together. Strategy canvas actually provides a format for comparing and identifying differences between the innovative initiative that you have and those of existing competitors. And so, that you can lay those out and compare them, and so you can put down specific offerings that you can compare and scale along some kind of metric of customer appeal that will help you understand how competitive and different and unique your innovative idea is. So we'll start with a fairly common example, a unique example actually. Cirque du Soleil. And it's compared with other forms of circuses. Barnum and Bailey, a very traditional circus. And other smaller regional circuses. And you can see down at the bottom are a whole range of comparative elements that you can compare these three offerings. And what you can find is that Cirque du Soleil didn't do well. And some of them didn't necessarily, it was fairly competitive around price, but then it didn't do well in some. But then it did extremely well on appearance, on appeal, and uniqueness. And it offered a totally difference experience. And what it did, it was captured a market. That was very different than typical circuses. And so, it was a hybrid of the theater market and the circus market. And what it did was appeal to some entirely new market segment that didn't exist before they created this idea. Another example here a more traditional example is a strategy canvas for smartphones as opposed to regular phones. And you can see again you have course you have convenience you have other things, and what you can see is that a smartphone different types of smartphones, end up competing on a customer basis much better than others. And so, by comparing each of these by customer scoring and customer interest you can analyze and look at what your best solution might be. Another example, a very common example, familiar one that most of you I'm sure, is where Southwest Airlines was able to compete on service, on speed, and on frequency of reaching very accessible airports. And so, there were short hop airlines, but what they did was they were able to meet the need that wasn't really being met before they got into it, and to the airline business. Another example here is the telecommunications industry, and where you see a comparison between Skype and Swisscom and Orange Mobile, and what you see is Skype turns out to be a very competitive on a couple of aspects that these other two can't be competitive on and so they moved into a blue ocean market. One other example here is Yellowtail Wines and you can see the difference between the top line is what the thoughts about premium wines wear by customers and then the other red line is budget wines and sometimes what happen is people won't satisfy the price of premium wines. And they won't satisfy with the quality and the flavor and the taste of the budget lines and so there was a new market space that wasn't being met and the only tail did that by packaging. And having very affordable and very easy to drink wines and what they did was a move in to a market space that didn't exist before. And so, that was another example of read in this case to a wine company moving in to a blue ocean market. And so, the takeaways here are you want to moved red oceans to blue oceans. But is a matter of visualizing what the opportunity really is. And what's missing? What’s missing in the marketplace? And what can you do, what can your innovation do to move into that space? And by using value of innovation as a tool you can help identify specific Innovation opportunity. What is it that the market is evaluing? And finally, using a strategic canvas, a strategy canvas, actually helped reveal those innovation opportunities by comparing what that blue ocean opportunity can do along various criteria customers care about.
