New4 bos blue ocean strategy

On Gap Analysis
Class on Blue Ocean Strategy
Ziya G. Boyacigiller
This presentation was created and given by Ziya
Boyacigiller who was leading Angel Investor and a loved
mentor to many young entrepreneurs in Turkey. We have
shared it on the web for everyone’s benefit. It is free to
use but please cite Ziya Boyacigiller as the source when
you use any part of this presentation. For more about
Ziya Boyacigiller’s contributions to the start-up Ecosystem
of Turkey, please go to www.ziyaboyacigiller.com

“GAP ANALYSIS”
Blue Ocean Strategy
How to Create Uncontested Market Space and
Make the Competition Irrelevant
Ziya G. Boyacıgiller
Sabanci Universitesi
Yonetim Bilimleri Fakultesi
By W.Chan Kim & Renee Mauborgne

Ziya G. Boyacigiller (c) 2007 3
Why do some
companies achieve
sustained
high-growth
in revenues and profits?

How Can We
Explain
Sustained
Growth & Profits?

Is it the COMPANY?
Apple Inc. Growth

How Can We Explain
Sustained Growth & Profits?
 Is it the Company?
No, even excellent companies
do not stay that way over time…

Is it the INDUSTRY?
Semiconductor Index Growth

How Can We Explain
Sustained Growth & Profits?
 Is it the Industry?
No, even the most favored
industries don’t stay attractive
over time…

What is Causing Spurts of Growth?
Apple Inc. Growth

It is the
Strategic Moves !

Strategic Moves are the set of
managerial actions and decisions
that have delivered products and
services that
opened and captured
new market space,
with a significant leap in demand.

Line-Extension* vs.
Innovation** Compared
Business Launch 86% 14%
62% 38%
39% 61%
Revenue Impact
Profit Impact
Launches within red oceans Launches within blue oceans
(* Sustaining, ** Disruptive, see Innovation Models)

Challenges of
Innovation
 A new product has to:
1. offer customers exceptional utility
2. at an attractive price, and
3. the company must be able to deliver it at a
tidy profit.
 However, uncertainties surrounding
innovation are so great even seasoned
and insightful managers have a hard time
being accurate.
KEY
SLIDE
KEY
SLIDE

x x
x 
Venture Capitalist’s Matrix
(Benchmark Capital’s Andy Rechliff)ACCURATEBET
CONCENSUS
YES NO
YESNO

How can we reduce the
risk of innovation?

Conventional Competition
 Red Oceans  competitive market space
 Porter’s “Five Forces” says, “don’t get
caught in the middle”, compete on:
 Cost
or
 Differentiation

Blue Ocean Strategy
says “can do both” !
value (=benefits for buyer /price )
Value
Innovation
simultaneous
Value Innovation leads to creating
Blue Oceans  New Markets / No Direct Competition
KEY
SLIDE
KEY
SLIDE
Cost (=total cost for buyer)

Strategy Canvas of the
Short-Haul Airline Industry
Value
Curves
Key Factors of Competition
(KFC)

Key-Factors-of-Competition
KFCs
These are for a given industry, what they compete on
and what they invest in (use RPV model).
Example: The wine industry key-factors KFCs are:
• Price per bottle
• Refined packaging/bottle image
• Above the line-marketing directed to consumers and
distributors/retailers
• Aging quality of wines
• Prestige of the wine’s vineyard and legacy (brand image)
• Taste of wine
• Diverse range of wine selection

In Class Exercise:
You Start Work in a
Design House…
Your 1st
assignment is:
Define KFCs for wallet.

“Blue Ocean” shifts the
Strategy Canvas of an Industry
To fundamentally shift the strategy canvas of an
industry, you must begin by reorienting your
strategic focus from
competitors  alternatives,
and from
customers  noncustomers,
of the industry.
KEY
SLIDE
KEY
SLIDE

Substitutes vs. Alternatives
 Substitutes to “eating at an Italian Restaurant”:
 All Italian restaurants,
 Alternatives* to “eating at an Italian Restaurant”:
 (job: satisfy hunger)
Kebapci, Burger King, balik-ekmek, even “simit”/bagel
and,
 (job: entertainment)
Movies, theater, concert, cruzing along the Bosporus,
watching TV
(* ALTERNATIVES ARE MEANINGFUL WHEN LINKED TO A “JOB”)

Listen to
“noncustomers”?
Look for “common pain”
for “noncustomers” to
identify your Blue Ocean
opportunities (market gaps)
KEY
SLIDE
KEY
SLIDE

Look for
“common pain”…
Potential / Existing customers
are not happy with the existing
alternatives, yet no other choice
exists…
KEY
SLIDE
KEY
SLIDE

Everyone you talk is NOT
equally useful to you!
You need to
identify and
classify the
people you talk to
for getting useful
inputs.Ziya G.
Boyacigiller (c)
2007 26

Who are the
“noncustomers” we want?
KEY
SLIDE
KEY
SLIDE
NOTE: “tier” rhymes
with “beer”
Listen to
these inputs !

Defining Tiers Again…
 Tier 1:
• Their need for the product/service is so
important that they can’t wait, they want it
now. So, they already bought an
alternative and are using.
They will know best, what they like and
don’t like about the alternative they are
using now, and possibly about other
alternatives they have looked at.

 Tier 2:
• Their need for the product/service is NOT
as important, compared to Tier 1
customers, that although they looked for an
alternative to buy, decided to wait, until an
acceptable alternative comes to market.
They will know what they like and don’t like
about the alternatives they looked at.

 Tier 3:
• They have not recognized a need for the
product/service yet. They have not even
looked for alternatives.
They will NOT know what they like and
don’t like about the alternatives on the
market currently – they can only guess…
➜DO NOT WASTE TIME WITH THEM!

Your 2nd
assignment is:
Define a new wallet.
Identify common pains.
In Class Exercise:
You Start Work in a
Design House…

Casella Wines (Australian)
 Looking at alternatives to wine:
 Beer, Spirits, Ready-to-Drink Cocktails (which
capture 3 times sales compared to US wine sales)
 Mass of US adults (non-consumers) saw wine as
a turn-off:
 Intimidating, pretentious, flavor challenging
 These non-consumers are drinking the
alternatives  big potential market!

Four Actions Framework
(how to reconstruct buyer value)
1. Which of the factors that the industry takes for granted
should be eliminated? (have no value for customers, or even
detract from value)
2. Which factors should be reduced well below the
industry’s standard? (overdesigned in race to match or beat
competition, overserving customers and increasing cost for no gain)
3. Which factors should be raised well above the industry’s
standard? (uncover and eliminate the compromises forced on
customers)
4. Which factors should be created that the industry has
never offered? (discover entirely new sources of value for buyers and
create new customers, shifting strategic pricing of the industry)
dropscostsliftvalue&demand
KEY
SLIDE
KEY
SLIDE

Your 3rd
assignment is:
Create Product Strategy using Four
Actions Framework for the wallet.
What is your “tag line”?
What is your mission?
In Class Exercise:
You Start Work in a
Design House…

[yellow tail]
•Fun, social drink accessible to nonwine
drinkers
•Fastest growing brand in the histories of
both Australian and US wine industries
•#1 imported wine into USA, surpassing
wines of France, Italy
•#1 red wine in 750ml bottle in USA,
surpassing California labels
•Sales in about 2 years hit over 4.5million
cases
•While competing with 1,600 wineries in the
USA !

Strategy Canvas of
[yellow tail]

Focus on
alternatives & noncustomers
others [yellow tail]
Easy
drinking
Wine’s complicated taste
is difficult to appreciate
compared to alternatives
[yellow tail] is soft in taste,
with pronounced fruit flavors
(easy drinking wine that
doesn’t need developed
appreciation over time)
Ease of
selection
Isles of wine in markets
overwhelmed and
intimidated customers
Only 2 to choose from (one
white/one red (used same
bottle design for both to
reduce cost)
Fun and
adventure
Elite image did not
resonate with general
public
Australian theme, unusual
label, no mention of vineyard
or other intimidating wine
vocabulary

Eliminate-Reduce-Raise-Create
Grid for [yellow tail]
Eliminate
Enological terminology and
distinctions
Aging qualities
Above-the-line marketing
Raise
Price compared to budget
wines
Retail store support and
involvement
Reduce
Wine complexity
Wine range (variety)
Vineyard prestige
Create
Easy drinking
Ease of selection
Fun and adventure (new
delightful experience)
KEY
SLIDE
KEY
SLIDE

I have to apologize, that I just tried a different boxed
California cabernet, which tasted like a bad children's
fruit drink. I have learned my lesson and will stick to
yellow tail merlot! And I must say that I love yellow
tail, because my wife loves yellow tail.
I was never a wine drinker until I was introduced to
Yellow Tail Chardonnay 3 years ago at a dinner party. I
was immediately hooked! Now, there's nothing I look
forward to more than coming home from work on a
Friday night and pouring myself a glass of Yellow Tail
to unwind. It's a standard at parties that I attend and it's
always a welcome gift. Thanks for a wonderful product
and keep up the good work! Is it Friday yet?
What customers are saying…
[yellow tales] from Casella web site

Three Characteristics of a
Good Strategy
 Focus
Not trying to excel in all factors of competition
 Divergence
Not benchmarking against competitors looking
across alternatives (value curves look different)
 Compelling Tagline
Is the strategy resulting in a unique and strong
tagline (“The essence of a great land…Australia”)
KEY
SLIDE
KEY
SLIDE

Focused & Divergent
FocusedKnowing what-to-do and not-to-do,
DivergentUnlike other value curves

Where to Look to Create Blue Oceans
(You can focus
*
on different areas to identify new opportunities)
1. Looking across Substitute Industries (NetJets)
2. Looking across Strategic Groups within Industries (Curves)
3. Looking across Value Chain of Buyers (Bloomberg)
4. Looking across Complementary Product and Service
Offerings (Borders)
5. Looking across Functional Appeal to Buyers (Starbucks)
6. Looking across Emotional Appeal to Buyers (Body Shop)
7. Looking across Time (Intel)
8. Etc. etc.…
(*)
Using de Bono terminology, this is “focused creativity technique”.
KEY
SLIDE
KEY
SLIDE

Strategy Canvas of NetJets
(looking across substitute industries)

Strategy Canvas of Curves
(looking across strategic groups within industries)

Strategy Canvas of Bloomberg
(looking across chain of buyers)

Strategy Canvas of
Barnes&Noble and Borders
(looking across complementary products & services)

Strategy Canvas of Body Shop
(looking across functional or emotional appeal to buyers)

Four Steps to Visualizing Strategy
(Why “visual”? Means  makes use of “strategy canvas”…)
1-Visual
Awakening
2-Visual
Exploration
3-Visual
Strategy Fair
4-Visual
Communication,
Execution
Compare your
business with your
competitors’ by
drawing your “as is
“ strategy canvas.
See where your
strategy needs to
change.
Go into the field to
explore the six paths to
creating blue oceans.
Talk to:
your customers,
 competitors’ customers,
 noncustomers,
 end users
Observe the
distinctive advantages
of alternative products
and services.
Discover adoptive
hurdles for
noncustomers
Draw your “to be”
strategy canvas
based on insights
from field
observations.
Get feedback on
alternative strategy
canvases from:
 customers,
 competitors’
customers,
 noncustomers,
 end users
Use feedback to
build the best “to be”
future strategy.
Distribute your
before-and-after
strategic profiles on
one page for easy
comparisons.
Support only those
projects, and
operational moves
that allow your
company to close the
gaps to execute the
new strategy.
KEY
SLIDE
KEY
SLIDE

Challenges of Innovation
 A new product has to:
1. offer customers exceptional utility
2. at an attractive price, and
3. the company must be able to deliver it at a
tidy profit.
 However uncertainties surrounding
innovation are so great even seasoned
and insightful managers have a hard time
being accurate.

Innovation = Creativity + Monetization
Doggone… She had an alarm installed…

difference between
Innovation and Invention
“In business, innovation can be easily distinguished from
invention.
Invention is the conversion of cash into ideas.
Innovation is the conversion of ideas into cash.
This is best described by comparing Thomas Edison with
Nikolai Tesla. Thomas Edison was an innovator because he
made money from his ideas. Nikolai Tesla was an
inventor. Tesla spent money to create his inventions
but was unable to monetize them. Innovators produce,
market and profit from their innovations. Inventors may or
may not profit from their work.”
http://en.wikipedia.org/wiki/Innovation#Distinguishing_from_invention

It takes creative focus to “find a
way” to monetize a creative idea.
Entrepreneurs not only need to create a
differentiated product or service, but they
may also need to create a new business
model.
Examples:
Apple iTunes  99 cents songs,
iPhone  Apps

Uncovering the Buyer
Experience Cycle
DisposalMaintenanceSupplementsUseDeliveryPurchase
•How long does
it take to find
the product you
need?
•Is the place of
purchase
attractive &
accessible?
•How secure is
the transaction
environment?
•How rapidly
can you make a
purchase?
•How long
does it
take to get
the product
delivered?
•How
difficult is
it to
unpack and
deliver the
product?
•Does the
product
require
training or
expert
assistance?
•Is the
product
easy to
store when
not in use?
•How
effective
are the
product’s
features
and
functions?
•Do you
need other
products
and/or
services to
make this
product
work?
•If so, how
costly and
difficult to
obtain are
they?
•Does the
product
require
external
maintenan
ce?
•How easy
is it to
maintain
and
upgrade
the
product?
•Does use
of the
product
create
waste
items?
•How easy
is it to
dispose of
the product
and waste
items?

02/06/15
Abraham Maslow’s
Hierarchy of Needs

The Buyer Utility Map
By locating a new product on one or more of the 36 spaces shown here, one can see
how the new idea creates a different utility proposition for existing products.
Six Stages of User Experience Cycle
Purchase Delivery Use Supplements Maintenance Disposal
SixUtilityLevers
Environmental
Friendliness
Fun & image
Risks
Convenience
Simplicity
Customer
Productivity
In which stage are the biggest blocks to customer productivity?
In which stage are the biggest blocks to simplicity?
In which stage are the biggest blocks to convenience?
In which stage are the biggest blocks to reducing risks?
In which stage are the biggest blocks to fun & image?
In which stage are the biggest blocks to environmental friendliness?
KEY
SLIDE
KEY
SLIDE

02/06/15
Thanks to Sahin Tulga / HP Turkiye for sharing this slide... I
h
Examples of Innovation
Business (monetizer) and Utility (invention) created
Norwich Insurance, Pricing depending on usage time of the rental car
– “USE” stage “Tasarruf”
Progressive Insurance, Offering the same prices as competition offers
– “PRE-PURCHASE” stage “Productivity”
Cappy Sun, Triangular pyramidal beverage box
– “DISCARD” stage “Fun”
Starbucks, Coffee in a comfortable & nice environment
– “USE” stage “Fun” and “Image”
DHL, Following up your package through the Internet
– “FOLLOW-UP” stage “Ease” and “Security”
HP, Alert to warn that the ink supply is running low
– “USE” stage “Productivity”
Maxim, Power Supply Design Software
– “PRE-PURCHASE” stage “Productivity”

Sequence of
Blue Ocean Thinking
Buyer Utility
Is there exceptional buyer utility in your idea?
Price
Is your price easily accessible to the masses of
buyers?
Cost
Can you attain your cost target to profit at your strategic price?
Adoption
What are the adoption hurdles? Are you
addressing them up front?
YES
YES
YES
YES
NORETHINK
COMMERCIALLY VIABLE BLUE OCEAN IDEA
NORETHINK
NORETHINK
NORETHINK
KEY
SLIDE
KEY
SLIDE

Your 4th
assignment is:
Improve your utility for the wallet
(create new KFCs) by using Utility Matrix.
In Class Exercise:
You Start Work in a
Design House…

Conventional
Strategic Logic
Value Innovation
Strategic Logic
1. Industry
Assumptions
Industry conditions are
given
Industry conditions can be
shaped. (Don’t accept the
status quo)
2. Strategic Focus A company should build
competitive advantages. The
aim is to beat competition.
Competition is not the
“benchmark”. A company
should pursue a quantum
leap in value to dominate the
market.
3. Customers A company should retain and
expand its customer base
through further
segmentation and
customization, focusing on
what customers value.
A value innovator targets the
mass of buyers and willingly
lets some existing customers go.
It focuses on the key
commonalities in what
customers value.
4. Assets and
Capabilities
A company should leverage
its existing assets and
capabilities.
A company must not be
constrained by what it
already has. It must
ask:”What would we do if we
were starting anew?”
5. Product and
service offerings
An industry’s traditional
boundaries determine the
products and services a
company offers. The goal is
to maximize the value of
those offerings.
A value innovator thinks in
terms of the total solution
customers seek, even if that
takes the company beyond its
industry’s traditional offerings.
Five Dimensions of Strategy KEY
SLIDE
KEY
SLIDE

Ziya G. Boyacigiller © 2005
High Growth in Revenues & Profits
Ref: C. Kim/R. Mauborgne
Five
Dimensions of
Blue-Ocean
Strategy
KEY
SLIDE
KEY
SLIDE
Kinepolis Strategy Map
resulting from its
Value Innovation
Monetization
differentiation

Over time, competition
forces the value curves in
an industry to converge.

Success is a voyage,
not a destination…
Remember:

How Compaq stayed on top
of the server industry?

“We will have to
create faster than
they can copy us!”
Ziya G. Boyacigiller (c)
2007 65
Walt Disney, when his people rush to him in
panic when they find out that others are
copying Disney Studios’ film animation
innovations…

Summarize…
Q&A
Ziya G. Boyacigiller (c)
2007 66

New4 bos blue ocean strategy

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