Strategy crash course making the competition irrelevant.pps

Blue Ocean Strategy + Lean Startup = Blue Ocean Startup

STRATEGY FAST TRACK:MAKING THE COMPETITION IRRELEVANT

Blue Ocean Strategy + Lean Startup = Blue Ocean Startup

Gil Rachlinwww.linkedin.com/in/[email protected]

• Introductions• Basic Definitions• Blue Ocean Strategy Basics – Value Innovation• Finding Blue Ocean Strategy• Strategic Pricing• Execution• When to Innovate Again

Table of Contents

• Introductions• Basic Definitions• Blue Ocean Strategy Basics – Value Innovation• Finding Blue Ocean Strategy• Strategic Pricing• Execution• When to Innovate Again

2- Blue Ocean Startup-

Innovation + Execution = Success

Introductions: Name What you do? What would you like to achieve from the class?

Who am I?

3

www.linkedin.com/in/gilrachlin@gilrachlin

Basics Definitions:INNOVATION and STRATEGY

4

Some Definitions: INNOVATION

Innovation is the creation of better ormore effective Products, Processes,Services, Technologies, or Ideas that areaccepted by Markets, Government, andSociety. Innovation

From Wikipedia, the free encyclopedia

5

Innovation is the creation of better ormore effective Products, Processes,Services, Technologies, or Ideas that areaccepted by Markets, Government, andSociety. Innovation

From Wikipedia, the free encyclopedia

- Blue Ocean Startup-

Innovation used in Product, Business Model,Disruptive Innovation, Sustaining Innovation, Open Innovation,Innovation Management

How Do Most Companies Promote Innovation

Vertical Innovation Approach• Random connections• Different skill sets• Provide best chance for new andinnovative advancements (pixar)

Common Innovation Approach• Use separate and divided internal / Externalgroups• Skills hand offs towards innovation development.• Typically:

- Lengthy timelines- Diluted ideas and- Responsibility drops.


Common Innovation Approach• Use separate and divided internal / Externalgroups• Skills hand offs towards innovation development.• Typically:

- Lengthy timelines- Diluted ideas and- Responsibility drops.

Open Innovation Approach• External / Internal ideas• External / Internal paths to market

Some Definitions: STRATEGY

STRATEGY is a plan of action designedto achieve a vision…gaining (or beingprepared to gain) a position ofadvantage over adversaries or bestexploiting emerging possibilities.

7

STRATEGY is a plan of action designedto achieve a vision…gaining (or beingprepared to gain) a position ofadvantage over adversaries or bestexploiting emerging possibilities.

StrategyFrom Wikipedia, the free encyclopedia

Generally, strategic planning deals with at least one of three key questions:"What do we do?""For whom do we do it?""How do we excel?"

Strategic PlanningFrom Wikipedia, the free encyclopedia


Examples of InnovativeCompanies with GoodStrategy?

8

Innovative and strategic Companies

Entertainment

Publishing


What made them Different from other players?

Transportation

Information

Publishing

Government

Evaluating a GoodCompany Strategy

10

• friendly service, Speed and frequency• “Speed of a plane at the price of a car anytime

you need it”

• The digital entertainment center of your world• "Welcome to the digital music revolution." (2004)

• Monthly subscription, No late fee, no due dates• “Save gas and time. Let Netflix deliver your movies

again”

Three Characteristics of a good strategy

Focus SplitClear differentiation

from existing trend

CatchySlogan

• friendly service, Speed and frequency• “Speed of a plane at the price of a car anytime

you need it”

• The digital entertainment center of your world• "Welcome to the digital music revolution." (2004)

• Monthly subscription, No late fee, no due dates• “Save gas and time. Let Netflix deliver your movies

again”


How to create innovation?

Blue Ocean Startup?

12

Blue Ocean Startup

Lean Startup•RiesEric

Blue Ocean Strategy•MauborgneRenée/W. Chan Kim

Blue Ocean Startup?

Innovate ExecuteLean Startup

•RiesEric

Blue Ocean Strategy•MauborgneRenée/W. Chan Kim


Allocate resources asefficiently as possible:

• Develop MVP• Validated Learning• Build Measure Learn

Make the competition irrelevantDIFFERENTIATION and LOW COST =Value innovation

Red Ocean vs. Blue Ocean

14

Focusing on Blue Ocean Strategy…..

Red Ocean vs Blue Ocean Strategy

BLUE OCEAN STRATEGYRED OCEAN STRATEGY

Create uncontested market spaceCompete in existing market space

Make the competition irrelevantBeat the competition

Create and capture new demandExploit existing demand

15

Break the value-cost trade-offMake the value-cost trade-off

Align the whole system of a firm’sactivities in pursuit of differentiationand low cost

Align the whole system of a firm’sactivities with its strategic choice ofdifferentiation or low cost


Blue Ocean Strategy BasicsValue Innovation

16

Value Innovation

17

Overall strategy of all company activities to bring valueto themselves and to customers


Customers1) Who are our clients?2) Main usage of offering?

Industry1) What is our industry? Players?2) Industry elements? Characteristics?

NewValueCurve

Reduce

CreateEliminate

Creating Value Innovation (ERRC)

4) Create –factors that industry

never offered

2) Reduce –below industry

standardsDrop Cost

NewValueCurve

Create

Raise

Eliminate

18

4) Create –factors that industry

never offered

1) Eliminate –elements takenfor granted bythe industry 3) Raise –

above industrystandards


AddCustomerValue

Visualizing Value Innovation:Value Curve

19

• Visual Representation of thedifferentiation and added value

Value Curve – The Core of BOS

20

WHY VISUAL:•Effective Wisdom Collection Strategy Formulation•Effective execution through communication Strategy Execution


Value Curve EvaluationExample: SouthWest Airlines

21

Eliminate: Raise:

Southwest Airlines – 4 Elements Table (ERRC)

NewValueCurve

List possible competitive elements !!!

22

Reduce: Create:

NewValueCurve


Eliminate:• Class Choice• Central Airport

Raise:• Friendly Service• Speed

Southwest Airlines – 4 Elements Table (ERRC)

NewValueCurve

List and place the competitive elements !!!

23

Reduce:• Price• Lounges• Meals

Create:• Frequency

NewValueCurve


Value Curve – Southwest Airlines

24

Eliminate Reduce Raise Create


• Focus Clear and focused strategic profile– Southwest: friendly service, Speed and

frequency• Split Clear differentiation from existing

trend– Value curve always stands on its own

• Catchy Slogan Clear and convincingSouthwest: “Speed of a plane at the price of a

car anytime you need it”

Back to Curve Evaluation –Three Characteristics of a good strategy

• Focus Clear and focused strategic profile– Southwest: friendly service, Speed and

frequency• Split Clear differentiation from existing

trend– Value curve always stands on its own

• Catchy Slogan Clear and convincingSouthwest: “Speed of a plane at the price of a

car anytime you need it”


26

Frameworks and Tools ToFinding Blue Ocean Strategy

• Six Paths from Red to Blue• Buyer Experience Cycle• Barriers to copying BOS

Frameworks and Tools Include

• Six Paths from Red to Blue• Buyer Experience Cycle• Barriers to copying BOS


Finding a way across oceans


Best in SameIndustry

Sector Definition Alternative

Same competinggroup

(e.g. luxury cars, economiccars, and family cars)

Strategic GroupsDifferentiation Different

Improve service toSame customer

(buyer, user or influencer)Buyer groups Redefine customers

Redefining Market Borders :The six conventional boundaries of competition

Improve service toSame customer

(buyer, user or influencer)Buyer groups Redefine customers

Maximize Existing valueIn range similar to their

sector.

Scope of product orservice offering

Complementingproducts and

services

Accept ExistingImprove pricing inside

industry

Functional-emotionalorientation of industry Redefine

Present Time line Define trends overtime


Eliminate:• Buy Whole CD for one song

Raise:• Best Sound Quality• Control on Usage and

Usage learning• Availability for users (one

place to find all)• UI, Browse, Search

Apple iTunes (ERRC) Path from Red to Blue

NewValueCurve

30

Raise:• Best Sound Quality• Control on Usage and

Usage learning• Availability for users (one

place to find all)• UI, Browse, Search

Reduce:• Price per song (+Try Before

you buy)

Create:• Complement with iPod/

Mac• Liberal Licensing to

download digital content

NewValueCurve


What did Apple iTunes Realize?

31



32

Beyond Existing Demand

Going beyond existing demand – Non Customers

Third Layer(NeverUsed)

SecondLayer

(Refuse toUse)Why refuse?

Static ads on busstops of benches

Find user resemblance(teeth whitening)

33

Your Market

First Layer(minimal use

ready tojump ship)

Go for the largest potential market- Blue Ocean Startup-

Give value on usage(Prêt a Manger)

Why refuse?Static ads on bus

stops of benches

Eliminate:• Fees (Late, Shipping,

Handling)• Due Dates

Raise:• Search Capability• Partnerships, Affiliates

Netflix (ERRC) goes beyond existing demand

NewValueCurve

34

Reduce:• Num office/store Locations

Create:• flat-fee unlimited rentals.• Mail Service• Online Streaming

NewValueCurve


Value curve of the Netflix

35



Competitive Barriers

36

• Non conventional Logic• Clash with Other Companies’ Brand• Natural Monopoly• Legal Barriers (e.g. Patents)• Sales Volume• External Factors not supporting

competition• Extraordinary changes requirements• Consumer loyalty to Innovative

companies.

Barriers to Copying BOS

• Non conventional Logic• Clash with Other Companies’ Brand• Natural Monopoly• Legal Barriers (e.g. Patents)• Sales Volume• External Factors not supporting

competition• Extraordinary changes requirements• Consumer loyalty to Innovative

companies.


Strategic Pricing

38

Strategic Pricing Flow

Strategic Pricing

Target Profit

Define PricingCorridor

ExtraordinaryBenefit

From Benefit,Price, and Costto Adaptation

39

Target Cost

Efficient andInnovative PricingPartnerships

Pricing Innovation


From Benefit,Price, and Costto Adaptation

Pricing Corridor of the Masses

Large Barrier of EntryHard to Copy

SameShape

Diff ShapeSame function

Diff shapeand functionSamepurpose

40

Pricing Corridorof the masses

Some Barrier of Entry

Low Barrier of EntryEasy to mimic

Med Price

(*) Shape size is proportionate to number of buyers that product attracts


BOS Validation Cycle

41

Consumer BenefitIs there an extraordinary value to the consumer

(Purchase, Delivery, Usage, Add-ons, Maintenance, Removal)

PriceIs your price accessible to mass consumers

yesNo – rethink

yesNo – rethink

Validate the Buyer Experience Cycle

42

CostCan you reach target cost for revenue at strategic price

AdaptationWhat are the barriers in implementing your strategy? Are you

dealing with them?

BOS is Valid

yes

yes

No – rethink

No – rethink


Executing Innovation

43

Solving Organizational Barriers

44

CognitiveChallenging

Existing StatusQuo

FinancialLimited

Resources

PoliticalResistance frompowerful parties

Solve the 4 Barriers to Strategy Implementation

•Seeing means believing•Meet unsatisfied customers

•Maximize budget value•Focus on clear, mainchannels(most influentialpeople in org).

•Enlist Angels, Silence Devilsand….•Use Secret Advisor to seniormanagement. Financial

LimitedResources

MotivationalLack of withemployees

PoliticalResistance frompowerful parties


•Aquarium Effect (viewed by all)•Achievable fractions (start with MVP)

Fair Process:Engagement!Explanation!!Expectation (Clarify)!!!

Value curve of the NYPD with Bill Burton (1994)

46



Implementing InnovationLean Startup Style

47

Innovate - Build – Measure – Learn

Ideas/BOS

Innovation

Build /Resources

Learn /Insights

Two Hypothesis:• Value Creation

Hypothesis - BOS• Growth Engine

Hypothesis / Drivers(Growth Engine: Viral,Sticky, Paid)


Product /MVP

Base Line

Measure /Metrics

Data /Reports

From Lean Startup Loop

Two Hypothesis:• Value Creation

Hypothesis - BOS• Growth Engine

Hypothesis / Drivers(Growth Engine: Viral,Sticky, Paid)

• Product Analytics:• Customer Analytics• Marketing Analytics

What is Measured?

• Product Analytics:– Insights to usage patterns, bug paths etc.– Improve product roadmap, customer service

etc.• Customer Analytics

– Customer behavior to optimize services forcustomers and dealers.

• Marketing Analytics– Keyword bidding to improve performance and

reduce costs– Weblog data to offer additional services etc.

KPI – Key Performance Indicators


• Product Analytics:– Insights to usage patterns, bug paths etc.– Improve product roadmap, customer service

etc.• Customer Analytics

– Customer behavior to optimize services forcustomers and dealers.

• Marketing Analytics– Keyword bidding to improve performance and

reduce costs– Weblog data to offer additional services etc.

Measurement Types / Innovation Accounting:

• Vanity Metrics– e.g. PageViews, Unique Visitors,1 Million Messages per day,

funding– Interesting blog entry: http://blog.kissmetrics.com/throw-

away-vanity-metrics/• Actionable Metrics - Cause and Effect (vs. Vanity)

– Help make decisions: a/b testing, pricing, cost per acquisition.– E.g. when we shipped feature X, did it affect customer

behavior?• Cohort Analysis

– Go to the lowest level of analysis on groups of users withsomething in common.


• Vanity Metrics– e.g. PageViews, Unique Visitors,1 Million Messages per day,

funding– Interesting blog entry: http://blog.kissmetrics.com/throw-

away-vanity-metrics/• Actionable Metrics - Cause and Effect (vs. Vanity)

– Help make decisions: a/b testing, pricing, cost per acquisition.– E.g. when we shipped feature X, did it affect customer

behavior?• Cohort Analysis

– Go to the lowest level of analysis on groups of users withsomething in common.

Cohort Analysis:

Core engagement metric:Time on SiteCohort retention


Courtesy of: http://jonathonbalogh.com/2012/03/24/introduction-to-cohort-analysis-for-startups/

• Did you make product alteration that only Week 3 cohort is exposed to?• Did you change your advertising that week?• Does Week 3 correspond with any major holidays or events?

Engine of Growth Funnel Metrics: AARRR

AfterOptimization

Initial MVP

PaidViralEngine of Growth

1 7%5%Acquisition: Visit Site /Registration Rate

90%17%Activation: Sign Up 90%17%Activation: Sign Up

5%Too LowRetention: Come Back

4%Too LowReferral: Invite Friends

11%1%Revenue: Buys Product

$1 per backupMinimalLifetime Value

Sample Success Metrics 1• Growth Driver: Recurring subscribers.

Product Usage after releasing a new recurring revenue feature

Important tips:

• Marketing Goal- Not reduced cost acquire customers and maximize your

profits

• Metrics depend on Industry / business type- Focus on Customer Value- Focus on Conversions, sales and profits- Set your Base Line and Time Frame

• Examples:- Profitability of Each Customer (Life Time Customer Value)- Cost of Acquiring New Customers- Repeat Purchase Rate of Existing Customers- At least 1000 orders/impressions/clicks for 3% margin of error


• Marketing Goal- Not reduced cost acquire customers and maximize your

profits

• Metrics depend on Industry / business type- Focus on Customer Value- Focus on Conversions, sales and profits- Set your Base Line and Time Frame

• Examples:- Profitability of Each Customer (Life Time Customer Value)- Cost of Acquiring New Customers- Repeat Purchase Rate of Existing Customers- At least 1000 orders/impressions/clicks for 3% margin of error

Some Known Tools to use:

• www.Google.com/Analytics (goal seeking)• www.KissMetrics.com (customer focus)• www.Mixpanel.com (events based)• www.Appfigures.com (mobile apps)• www.Piwik.org (open source web analytics)• www.birst.com (BI focus for sales)


• www.Google.com/Analytics (goal seeking)• www.KissMetrics.com (customer focus)• www.Mixpanel.com (events based)• www.Appfigures.com (mobile apps)• www.Piwik.org (open source web analytics)• www.birst.com (BI focus for sales)

When to Innovate Again

56

Ongoing Process to develop Blue Ocean next to Red Oceans.

Innovate when the barriers go down!

When to Innovate again?

Or else….?!Borders and Barnes &Nobles:Blue Ocean – In Store ServiceNook – Too late?

Amazon –Repeated Blue Ocean:- Online book store to- Online market place to- Mobile book to- Online cloud

57

Borders and Barnes &Nobles:Blue Ocean – In Store ServiceNook – Too late?

Amazon –Repeated Blue Ocean:- Online book store to- Online market place to- Mobile book to- Online cloud

Blockbuster:Blue Ocean – Rental of movies forfew dollars Instead of high cost ofmovies.Subscription / Streaming – Too late?

Netflix–Repeated Blue Ocean:- Subscription (no late fees)- Online Streaming


Highlights• Value Innovation

• ERRC (Eliminate, Reduce, Raise, Create)• Value Curve• Evaluate (Focus, Split, Catchy Slogan)• 6 Paths (Industry, Strategic Group, Buyer Group, Scope of

product/service offering, Functional-Emotional orientation,Time)

• Beyond Existing Demand• Competitive Barriers of Entry• Strategic Pricing

• Execute• Tipping Point Leadership and Fair Process• MVP• Validated Learning (Build Measure Learn)

• Repeat

• Value Innovation• ERRC (Eliminate, Reduce, Raise, Create)• Value Curve• Evaluate (Focus, Split, Catchy Slogan)• 6 Paths (Industry, Strategic Group, Buyer Group, Scope of

product/service offering, Functional-Emotional orientation,Time)

• Beyond Existing Demand• Competitive Barriers of Entry• Strategic Pricing

• Execute• Tipping Point Leadership and Fair Process• MVP• Validated Learning (Build Measure Learn)

• Repeat58- Blue Ocean Startup-

Question????

Remember:If you get over the hill, you’ll begin to pick up speed!!!


Remember:If you get over the hill, you’ll begin to pick up speed!!!

Stay Hungry, Stay Foolish!Steve Jobs.

Thank you!!!!Gil Rachlin.

Slides: slidesha.re/STQzMg

Class Feedback:http://generalassemb.ly/education/class-feedback/

Contact Info: [email protected]/in/gilrachlin@gilrachlin

Site: www.blueoceanstartup.com

Free Gift: www.scanbizcards.com/promo/gil

October 31st: Hands on Workshops (15% off – 15OFF):http://www.skillshare.com/profile/Gil-Rachlin/5240900


Thank you!!!!Gil Rachlin.

Slides: slidesha.re/STQzMg

Class Feedback:http://generalassemb.ly/education/class-feedback/

Contact Info: [email protected]/in/gilrachlin@gilrachlin

Site: www.blueoceanstartup.com

Free Gift: www.scanbizcards.com/promo/gil

October 31st: Hands on Workshops (15% off – 15OFF):http://www.skillshare.com/profile/Gil-Rachlin/5240900

Additional Info:

61

– New-business strategy which directs startup companies to:Allocate resources as efficiently as possible.

– Origins from the Lean Manufacturing theories.

• Develop an MVP (Minimum Viable Product)• Validated Learning• Build Measure Learn

Lean Startup

– New-business strategy which directs startup companies to:Allocate resources as efficiently as possible.

– Origins from the Lean Manufacturing theories.

• Develop an MVP (Minimum Viable Product)• Validated Learning• Build Measure Learn

62

Developed by:Eric Ries-Silicon Valley entrepreneur and author.- Recognized for pioneering the Lean Startup movement


• Simultaneous pursuit of

• Methodically innovate without competition(make the competition irrelevant)

Blue Ocean Strategy

DIFFERENTIATION and LOW COST = Value innovation

63

Based on150 strategic moves over a 100 years (1880-2000)Developed by:

W. Chan Kim- Co-Director of the INSEAD Blue Ocean Strategy Institute.-The Boston Consulting Group Bruce D. Henderson Chair.- Professor of Strategy and International Management at INSEAD, France.Renée Mauborgne-The INSEAD Distinguished Fellow and a professor of strategy at INSEAD.-Co-Director of the INSEAD Blue Ocean Strategy Institute.


Cirque Du Soleil Case Study

64

Eliminate:• Stars Shows• Animal Shows• Seat based pricing• Parallel stage shows

Raise:• Uniqueness

Cirque Du Soleil – 4 Elements Table (ERRC)

NewValueCurve

65

Reduce:• Humor Entertainment• Thrill and Danger

Create:• Subject Theme• Comfortable Viewing

environment• Different Shows• Music and Dance

Choreographies

NewValueCurve


Value curve Sample - Cirque du Soleil


ERRC in Value curve - Cirque du Soleil

67



Value Curve Evaluation

68

• Focus Clear and focused strategic profile– Cirque Du Soleil: Themed entertaining shows with acrobatics mixed

with music, dance and, of course, the effects of light andscenery.

– The acts of Nouvelle Expérience blend theatre, music, circusarts and dance

• Split Clear differentiation from existing trend– Value curve always stands on its own

• Catchy Slogan Clear and convincing– Cirque Du Soleil: “dramatic mix of circus arts and street

entertainment….. “– Cirque Du Soleil: “A world of fantasy… find a story of fantasy and

dream, where all your wishes come true– Cirque Du Soleil: “…thousands of artists gather with a single purpose:

to prove that magic exists.”

Curve Evaluation –Three Characteristics of a good strategy

• Focus Clear and focused strategic profile– Cirque Du Soleil: Themed entertaining shows with acrobatics mixed

with music, dance and, of course, the effects of light andscenery.

– The acts of Nouvelle Expérience blend theatre, music, circusarts and dance

• Split Clear differentiation from existing trend– Value curve always stands on its own

• Catchy Slogan Clear and convincing– Cirque Du Soleil: “dramatic mix of circus arts and street

entertainment….. “– Cirque Du Soleil: “A world of fantasy… find a story of fantasy and

dream, where all your wishes come true– Cirque Du Soleil: “…thousands of artists gather with a single purpose:

to prove that magic exists.”
