You need ablue ocean

strategy

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How do you compete in overcrowded markets?

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Blue Ocean Strategies

- creating your own market space

A’Ohlin Commercial Insightswww.aohlininsights.com

authors: Rebecca Chong & Anna Searle

February 2013

A business in the midst of an increasingly competitive industry will find itself sinking to the bottom:• Profits shrink • Growth shrinks

This makes it all the more important to know what is happening in the market and to have the tools to know what will be there in the next five years.

Stuck in an overcrowded industry?

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A business stuck in an increasingly competitive industry is fighting in bloodied waters• also known as RED OCEANS

Red Ocean characteristics include:• existing industries• defined boundaries• highly competitive• driving competition out of the market• trying to gain greater market share• overcrowded market• products turn into commodities• shrinking profits

Overcrowded industries are RED OCEANS

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Blue oceans are:

Industries not yet in existence

Untainted by competition

Unknown market spaces

Where demand is created

Completely new industries OR altering existing boundaries

Opportunities for growth

The key to pushing out of the red oceans is to adopt a blue ocean strategy

A’Ohlin Commercial Insights © 2013

A’Ohlin Commercial Insights © 2013

Blue ocean strategies make the competition irrelevant and create new demand

Red Ocean Strategy Blue Ocean Strategy

Compete in an existing market space

Beat the competition

Exploit existing demand

Make the value-cost trade off

Align the whole system of the company’s activities strategically choosing

differentiation OR low cost

Create uncontested market spaces

Make the competition irrelevant

Create and capture new demand

No need for the value-cost trade off

Align the whole system of the company’s activities in pursuit of differentiation AND

low costs

source: Kim W and Mauborgne, ‘Blue Ocean Strategy’, Harvard Business Review, October 2004, p. 5

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Unheard of, or just emerging,100 years ago

• Automobiles• Music recording• Aviation• Petrochemicals• Health care• Management consulting

Look back 100 years and ask, how many of today's industries were then unknown? And 30 years ago? Even 10 years ago?

Unheard of, or just emerging,30 years ago

• Mutual funds• Mobile phones• Gas fired electricity plants• Biotechnology• Discount retail• Express package delivery• Snowboards• Coffee bars• Home videos

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What can be expected over the next decade?

Circus OR Theatre Circus + Theatre = Cirque

How many industries that are unknown today

will exist in 2023? ... Many

Companies have a huge capacity to create new industries and re-

create existing ones

Gaming: hand held consoles

Consumers: regular

gamers

Gaming: motion sensing controls, more user-orientedConsumers: regular gamers +

non-regular gamers

Mobile OR mp3 player OR PDA Smartphones

Shops Local shops, online shops, online auctions

Airlines: standard airlines Airlines: standard, budget, long-distance, short-distance

THE PAST THE PRESENT WHAT LIES AHEAD?

What’s it all about?

• Looking at the existing boundaries of competition and then ‘reordering and recombining’ to reconstruct the market boundaries

• Not necessarily technological increases – It’s about reordering and reconstructing

market realities and capturing new demand rather than pre-empting technological trends

• Looking at your current business model from a different perspective and remodelling how it operates

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By breaking the traditional boundaries between circus and theatre, Cirque du Soleil reinvented the circus and increased revenues by a factor of 22 over the last 10 years

A’Ohlin Commercial Insights © 2013

A’Ohlin Commercial Insights © 2013

Apple – iPod+ iTunes, iPhone, iPad what next?

late 2001

2010

Mid 2007

Confirmed by HTC’s latest profits• HTC reported an 80% drop in profits for the September quarter 2012

compared to the year ago quarter (Forbes, 2012)

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The smartphone market is now becoming a bloodbath ...

source: http://www.forbes.com/sites/greatspeculations/2012/10/08/htc-is-the-latest-smartphone-bloodbath-casualty

Weekly cost of the additional 4c a litre reduction

By January 2013, both retailers were offering discounts of at least 8c per litre

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Petrol discounting is another example of red ocean markets

…petrol discounts were a sign that the grocery market was becoming increasingly irrational as Coles and Woolworths vied for market share…

if the 8¢ a litre discounts are maintained all year they will cost each retailer an estimated $200 million

$1.8 million $2.3 million

Cost per WEEK

source: Citigroup analyst Craig Woolford , AFR 2 Feb 2013

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The 14% of businesses that invested in creating new markets and industries delivered 38% of total revenues and 61% of total profits

source: Kim W and Mauborgne R, ‘Blue Ocean Strategy’, Harvard Business Review, October 2004, p. 3

14%

86%

New Ventures

New markets or industries

Line extensions

38%

62%

Revenues

61%

39%

Profits

86% of (the) new ventures were line extensions, (and) while (they) did account for 62% of the total revenues, they delivered only 39% of total profits

Which phase of the business life cycle is your business in?

‘80% of new businesses fail in

the first five years; 52% fail due to management-

related problems’. Don’t fight it out in bloody waters and become another

casualty.

Don’trest on

yourlaurels – If

your offeringis nothing more than

an imitation or incremental improvement

over your competition, you’ll only be treading

water in a red ocean’

The clear blue ocean waters are becoming bloodied. ‘Sadly, most

firms lack a clearly defined, robust and well-communicated innovation strategy.

There is either no focus or they focus on the wrong arenas – on

mature markets, old technologies or tired

product categories that do not represent the

growth engines of tomorrow’.8 Wake up to the strategy – you

don’t want to drown in bloodied waters.

You’re on a downhill slide

but it’s not too late –

‘Every organization

can break free of the head-

to-head zero-sum

competition and open up blue oceans’.

A’Ohlin Commercial Insights © 2013

A’Ohlin Commercial Insights © 2013

A’Ohlin Commercial Insights can help you design your Blue Ocean Strategy

If you are competing in red oceans.If your business needs an adrenalin injection to get going.If you need to redefine your business focus and priorities.If you need to re-engage your Board, executives, senior management, staff or clients.

You need to engage a professional strategy consulting firm such asA’Ohlin Commercial Insights

The clock is ticking

Take action now

Call A’Ohlin Commercial Insights on 0414 453 913

Key sources:

• Kim W and Mauborgne, ‘Blue Ocean Strategy’, Harvard Business Review, October 2004

• Kim W and Mauborgne R, ‘Value innovation: a leap into the blue ocean’, Journal of Business

Strategy

• Misconceptions of blue ocean strategy

• Study by Inc. Magazine and the National Business University of Buffalo Office of Science,

Technology Transfer and Economic Outreach http://

www.professionalpractice.asme.org/Entrepreneurial/Incubators/Join_Incubator.cfm

• Burt G, ‘Swim Blue Ocean’, Leadership Excellence Volume 24 Issue 5 (May 2007)

• Cooper, R ‘Creating Bold Innovation in Mature Markets’, IESE Insight, Third Quarter 2012

Issue 14, p 31

• http://

www.forbes.com/sites/greatspeculations/2012/10/08/htc-is-the-latest-smartphone-bloodba

th-casualty

A’Ohlin Commercial Insights © 2013

Blue Ocean Strategies

- creating your own market space

A’Ohlin Commercial Insightswww.aohlininsights.com

authors: Rebecca Chong & Anna Searle

February 2013