Blue Ocean Strategy: Analytical Tools & Frameworks
September 16, 2010Presented by: Lana Grimes,
Andrei Gololobov, & Laura McMannis
Analytical Tools & FrameworksEssential for development of blue ocean
strategySystematic & actionable as competing in red
watersEnsure risk minimization
How do you break out of red ocean to make competition irrelevant?
How do you open up and capture a blue ocean of uncontested market space?
The Strategy CanvasCentral to value innovation & creation of blue
oceansDiagnostic & action framework
Purpose of Strategy CanvasCaptures the current state of play in the
known market spaceCompetition investingCompetition factorsReceived by customers
Reorients strategic focusCompetitors AlternativesCustomers Noncustomers
THE FOUR ACTIONS FRAMEWORK“QUESTION BY QUESTION”Which factors that the industry takes for
granted should be eliminated?Factors which your industry has long competed
onFactors of competition intended for a Red
Ocean Strategy.Factors which we take for granted but no
longer have any value
Which factors should be reduced well below the industry standard?Factors which are pushing to hard to stay
competitive but yield little or no gain over the competition
High development costs but little or no profit
• Which factors should be raised well above the industry standard?– Eliminate compromises your industry forces
consumers to make
Which factors should be created that the industry has never offeredFind a new source of value for the customerShift demand and/or create new demandShift strategic pricing in the industry
APPLICATION TO A REAL-WORLD EXAMPLE: CASELLA WINESWine market stagnant in the USFew people knew how to understand and
appreciate the complexity of winesCompeting wine yards all marketed on
fineness, quality, and prestigeNarrow target market: difficult to understand
for the average consumer
Expansive range of wines made it difficult for consumers to choose
Stereotyped by the general public as a formal upper-class drink
The average consumer was used to something more “drinkable” like beer or cocktails
THE FOUR ACTIONS FRAMEWORKAPPLIED TO CASELLA WINES
Which factors that the industry takes for granted should be eliminated?Promotional campaignAging qualitiesEcological terminology and distinctions (What
does tannins, oak, and complexity mean to the average consumer?)
Which factors should be reduced well below the industry standard?Wine complexityWine range (no complicated array of choices)Vineyard prestige (Red Ocean marketing)
o Which factors should be raised well above the industry standard?o Price kept above the price of budget wineso Budget wine drinkers moved up
Which factors should be created that the industry has never offered?
Create a wine that is fun and easy to drinkOnly two variants create make selection easyLabeling sets wine as a fun and informal drink,
appealing to more potential consumers
ELIMINATE-REDUCE-RAISE-CREATE GRIDPushes companies to differentiate and reduce
costs, breaking the value-cost trade off.Checks companies which decide to focus on
only creating new products without reducing costs
Easy to understandEvery factor is scrutinized leading the
company to discover implied assumptions made unconsciously in competition
Why are these characteristics important?What will the companies achieve by adhering
to these principles?
Southwest:Focus on friendly service, speed, and
frequent point-to-point flightsDivergence: Uniqueness of the value curveCompelling tagline: “The speed of a plane at
the price of a car – whenever you need it.”
Johnson & JohnsonCompetes in various categories of healthcare
industryTries to achieve divergence through constant
pursuit of innovation and the leading edge medical knowledge
Compelling tagline: “The Family Company”
Innovation Staying ahead of the game: Inimitability and
sustainable advantageTechnology S-CurveEthics codes
Takeaways Strategy Canvas has two purposes:
Captures the current state of play in the known market space: where competition is currently investing and the factors that the industry competes on.
Calls for action by reorienting your focus from competitors to alternatives and from customers to noncustomers of the industry.
Marketing: By reinventing wine, Casella Wines created a whole new target market
in addition to widening the existing market for wines. The Four Actions Framework and the Eliminate-Reduce-Raise-Create
Grid are almost a straight-forward step-by-step strategy which offers an answer to all four parts of the Marketing Mix.
Importance of staying focused: Remember what the product that company delivers is all about. What is
the utility to the customer? Do not lose sight of self by trying to differentiate from competitors. Strive to achieve uniqueness.