WHAT IS BOS?

Nine Key Points of Blue Ocean Strategy (BOS)

• BOS is the result of a decade-long study of 150 strategic moves spanning more than 30 industries over 100 years (1880-2000).

• BOS is the simultaneous pursuit of differentiation and low cost.

• The aim of BOS is not to out-perform the competition in the existing industry, but to create new market space or a blue ocean, thereby making the competition irrelevant.

• BOS offers a set of methodologies and tools to create new market space.

• While innovation has been seen as a random/experimental process where entrepreneurs and spin-offs are the primary drivers – as argued by Schumpeter and his followers – BOS offers systematic and reproducible methodologies and processes in pursuit of innovation by both new and existing firms.

• BOS frameworks and tools include: strategy canvas, value curve, four actions framework, six paths, buyer experience cycle, buyer utility map, and blue ocean idea index.

• These frameworks and tools are designed to be visual in order to not only effectively build the collective wisdom of the company but also to effectively execute through easy communication.

• BOS covers both strategy formulation and strategy execution.

• The three key conceptual building blocks of BOS are: value innovation, tipping point leadership, and fair process.

BOS Concepts, Tools & Frameworks

The strategy canvas

The strategy canvas is the central diagnostic and action framework for building a compelling blue ocean strategy. The horizontal axis captures the range of factors that the industry competes on and invests in, and the vertical axis captures the offering level that buyers receive across all these key competing factors.

The strategy canvas serves two purposes.

• Firstly, it captures the current state of play in the known market space. This allows you to understand where the competition is currently investing and the factors that the industry competes on.

• Secondly, it propels you to action by reorienting your focus from competitors to alternatives and from customers to non-customers of the industry.

The value curve is the basic component of the strategy canvas. It is a graphic depiction of a company's relative performance across its industry's factors of competition.

Customers to non-customers

Typically, to grow their share of a market, companies strive to retain and expand existing customers. This often leads to finer segmentation and greater tailoring of offerings to better meet customer preferences. The more intense the competition is, the greater, on average, is the resulting customization of offerings. As companies compete to embrace customer preferences through finer segmentation, they often risk creating too-small target markets.

To maximize the size of their blue oceans, companies need to take a reverse course. Instead of concentrating on customers, they need to look to non-customers. And instead of focusing on customer differences, they need to build on powerful commonalities in what buyers value. That allows companies to reach beyond existing demand to unlock a new mass of customers that did not exist before.

Although the universe of non-customers typically offers big blue ocean opportunities, few companies have keen insight into who non-customers are and how to unlock them. To convert this huge latent demand into real demand in the form of thriving new customers, companies need to deepen their understanding of the universe of non-customers.

There are three tiers of non-customers that can be transformed into customers. They differ in their relative distance from your market. The first tier of non-customers is closest to your market. They sit on the edge of the market. They are buyers who minimally purchase an industry’s offering out of necessity but are mentally non-customers of the industry. They are waiting to jump ship and leave the industry as soon as the opportunity presents itself. However, if offered a leap in value, not only would they stay, but also their frequency of purchases would multiply, unlocking enormous latent demand.

The second tier of non-customers is people who refuse to use your industry’s offerings. These are buyers who have seen your industry’s offerings as an option to fulfill their needs but have voted against them.

The third tier of non-customers is farthest from your market. They are non-customers who have never thought of your market’s offerings as an option. By focusing on key commonalities across these non-customers and existing customers, companies can understand how to pull them into their new market.

Four Actions Framework

To reconstruct buyer value elements in crafting a new value curve, we use the Four Actions Framework. As shown in the diagram above, to break the trade-off between differentiation and low cost and to create a new value curve, there are four key questions to challenge an industry's strategic logic and business model:

• Which of the factors that the industry takes for granted should be eliminated?

• Which factors should be reduced well below the industry's standard?

• Which factors should be raised well above the industry's standard?

• Which factors should be created that the industry has never offered?