Crystal Hill Stephen Lechtenberg Anand McGee Allison Purtell Jason Torres.
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Transcript of Crystal Hill Stephen Lechtenberg Anand McGee Allison Purtell Jason Torres.
Reconstruct Market Boundaries
Challenge: Successfully identify, out of the possibilities that exist, commercially compelling blue ocean opportunities
Six Paths Framework:
Clear patters for creating blue oceansThey have general applicability across
industry sectors, and they lead companies into the corridor of commercially viable blue ocean ideas
These paths challenge the fundamental assumptions underlying many companies strategies
Six Fundamental Assumptions: Keep companies trapped in Red Oceans Define their industry similarly and focus on being
the best within itLook at their industries through the lens of
generally accepted strategic groups, and strive to stand out in the strategic group they are in
Focus on the same buyer group, whether it’s the purchaser, user, or influencer
Define the scope of the products and services offered by their industry similarly
Accept their industry’s functional and emotional orientation
Focus on the same point in time-and often on current competitive threats-in formulating strategy
Path 1:Look Across Alternative Industries
Companies compete not only with the other companies in its own industry but also with companies in those other industries that produce alternative products or services.
Alternatives are broader than substitutes -Example: StarbucksSubstitutes: House Blend, French Blend, Latin
American Blends, Asian Pacific Blends, etc. Alternatives: Tazo Teas for Coffee
Path 1: Look Across Alternative Industries, cont.
In making every purchase decision, buyers implicitly weigh alternatives, often unconsciously
Sellers rarely think consciously about how their customers make trade-offs across alternative industries
Space between alternative industries provides opportunities for value innovation
By focusing on the key factors that lead buyers to trade across alternative industries and eliminating or reducing everything else, you can create a blue ocean of new market space
Examples: Companies Looking Across Alternative IndustriesHome Depot:
Offer the expertise of professional home contractors at markedly lower prices than hardware stores
By delivering the decisive advantages of both alternative industries, and eliminating or reducing everything else, they have transformed the ordinary homeowners into do-it-yourselfers
Southwest Airlines:Concentrated on driving as the alternative to flying,
provided the speed of air travel at the price of car travel
Examples cont: StarbucksStarbucks looked across alternative
industries and entered the markets of:Ice-CreamCD’s, booksDrinkware-cups, mugs, tumblersInstant Coffee Brewing Equipment
Path 2: Look Across Strategic Groups Within Industries
Figure out which factors determine customers to trade up or down from one group to anotherExamples:
Ralph Lauren Lexus
Curves For WomenWomen trade up or down between:
At home exercise programs More convenient, but easy to get distracted
High end health clubs Lots of men, expensive, inconvenient
Developed new concept Women only, more locations, smaller
buildings, cheap to join and manage.
Path 3: Look Across the Chain of Buyers
Purchasers, users, and influencers Companies usually focus on a single buyer
groupCreate blue ocean by shifting buyer group
Novo NordiskFrom insulin producers to diabetic care
companyStarbucks
Selling coffee beans to grocery stores
PATH 4: Look Across Complementary Product & Service OfferingsMost products and services are affected by
other products or servicesMany companies fail to notice thisThe key is to define a solution buyers seek
when they choose a product or serviceA simple way to do this is to think about what
happens BeforeDuringAfter
NABIHungarian bus company that applied Path 4
to U.S. transit bus industryCompetition competed on offering the lowest
purchase price for busesBut,
Designs outdatedDelivery times were lateQuality was low
NABIDiscovered it was costs that came after initial
bus was purchasedMaintenance over it’s 12 year cycleRepairs after accidentsFuel usageWear and tearRustingRising demand for cleaner air
NABI Finds Total SolutionNormally made of steel
HeavyCorrosive Hard to replace parts after accidents
NABI adopted fiberglass when making it’s buses
Solution that killed 5 birds with one stone
Fiberglass BusesCut costs by being corrosion freeLight weight cut fuel consumption and
emissionsAfter accidents they didn’t have to replace a
whole panel rather they could cut the damaged area and replace it
Lighter weight also meant lower powered engines and fewer axles which cut costs
And gave more space inside the bus
Now we must ask ourselvesContext of how our product or service is usedWhat happens before, during and after the
product or service is usedHow to eliminate problem areas through a
complementary product or service offering
Path 5: Look Across Functional or Emotional Appeal to BuyersEmotionally Oriented
Add price without enhancing functionality .Functionally Oriented
Blend commodity products with life by adding emotion.
Examples:Swatch, The Body Shop, Quick Beauty House
Quick Beauty HouseCreated a Blue Ocean in the Japanese
barbershop industry.Shift from emotional to highly functional
Eliminated the time and cost of getting a haircut
Re-defined the Japanese barbershop industry.
CemexThe world’s third largest cement producer.Created a blue ocean by shifting from
functional to emotional.Mexico’s poor didn’t have enough money to
purchase building materials.
Patrimonio HoyCreated around the traditional Mexican
system of tandas. Example:
Ten individuals contribute 100 pesos per week for 10 weeks. Lots are drawn to see who wins the 1,000 pesos. Each individual wins one time only.
Patrimonio Hoy works in the same way.
Functional OrientationService IndustriesDirect Line Group has done away with
traditional brokers. Eliminating emotional orientation
Vanguard Group, Charles Schwab
Path 6: Look Across TimeWhat companies tend to do:
Focus on same point in timePassive actionsProjecting trend itself
External Threats
What companies need to do:Look into timeDon’t predict futureHow the trend will bring Value
Assessing Trends Three principles:
1) The trends must be decisive to your business2) They must be irreversible3) They must have a clear trajectory
-Impact on your business-Work back from conclusion-Ex: EU, iTunes, Cisco, CNN, Sex and the City