Blue_Ocean_Strategy_Lecture

1/6/2010 Blue Ocean Strategy Blue Ocean Strategy (BOS) “Go where profits and growth are – and where competition isn’t.” Kim & Mauborgne 1 1/6/2010 The Profit and Growth Consequences of Creating Blue Oceans What is Blue Ocean Strategy' • • The simultaneous pursuit of differentiation and low cost The aim of BOS is: § § § Not to out-perform the competition in the existing industry (a red ocean), But to create new market space (a blue ocean), Thereby making the competition irrelevant 2 1/6/2010 Red Versus Blue Red Ocean Strategy Compete in existing market Beat the competition Exploit existing demand Make the value-cost trade-off Blue Ocean Strategy 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 company’s activities with its strategic choice of differentiation or low cost Align the whole system of a company’s activities in pursuit of differentiation and low cost Examples of BOS 3 1/6/2010 Key Concepts of BOS • • The key conceptual building blocks of BOS are: § § Value innovation Fair process BOS requires organizations to develop and align the three strategy propositions: § § § Value proposition Profit proposition People proposition Value Innovation: Four Actions Framework (ERRC) 4 1/6/2010 Criteria for Effective ERRC • • • Cost reduction and elimination efforts should focus on nonstrategic activities. § Manual document processing Important investment affecting organizational performance should not be eliminated. § Investment in human capital development Value creation efforts should focus on core competencies improvement. § § Investment in research support Investment in classroom equipments in order to improve learning experience How Fair Process Affects People’s Attitudes and Behavior Strategy Formulation Process Attitudes Fair Process Engagement Explanation Expectation Clarity Trust and Commitment “I feel my opinion counts.” Behavior Strategy Execution Voluntary Cooperation “I’ll go beyond the call of duty.” Exceeds Expectations Self-initiated 5 1/6/2010 Consequences of the Presence and Absence of Fair Process in Strategy Making Fair Process Intellectual and Emotional Recognition Trust and Commitment Voluntary Cooperation in Strategy Execution Violation of Fair Process Intellectual and Emotional Indignation Distrust and Resentment Refusal to Execute Strategy Example of Peirce College Example of University ERRCERRC Eliminate Unnecessary facilities (dormitories and ancillary buildings) Extracurricular programming (e.g., sports and clubs) Raise Program accreditations Degree conferred from associate to baccalaureate Flexibility of registration time (year-round) and accelerated degrees Recruiting levels to secure employees from outside of higher education with needed professional operational skills Reduce Create Tuition rates Interchangeable learning platforms and delivery systems (on-campus, onsite, online) to bring learning to students instead of having students come to school Burdensome, long-term debt service by State-of-the-art customer relationship reallocating & restructuring existing resources management system tailored for older, working with subsequent fund transfers to better usage students areas Independent technology development Strategic partnership with high-quality, external entities to enhance the academic core, while maintaining academic control and integrity 6 1/6/2010 Example of SIIT ERRC Example of University ERRC Eliminate Poor-quality high-school applicants Raise Resources to support research Human capital development Investment in core assets Stronger alumni network Reduce Paperwork Create High-quality graduates Nonstrategic activities Customer relationship management system tailored for targeted groups of students Strategic partnership with high-quality, external entities to enhance the academic core, while maintaining academic control and integrity High-quality, attractive graduate programs QUESTIONS' 7