Reach Beyond Existing Demand

1. Reach Beyond Existing Demand Chapter 5 – Blue Ocean Strategy Dylan Taylor, Jenny Broussard, Scott Bednorz, Grant Moffett

2. Conventional Strategy Practices to Challenge • Focus mainly on existing customers • Drive for finer segmentation to accommodate buyer differences

3. Maximize the Size of the Blue Ocean • Look to noncustomers instead of focusing on current customers • Focus on the commonalities that buyers value

4. Callaway Golf • Analyzed noncustomer commonalities • Hitting the golf ball was too difficult • Small club heads took time to master • Big Bertha • Larger club head • Bestseller

5. To Reach Beyond Existing Demand… • Think Noncustomers Before Customers • Think Commonalities Before Differences • Think De-segmentation Before Pursuing Finer Segmentation

6. Three Tiers of Noncustomers

7. First-Tier Noncustomers • “Soon-to-be noncustomers” • Pret A Manager • From: queue-order-pay-wait-receive-sitto: browse-pick up-pay-leave • 90 second average store time

8. ExxonMobil • RaceTrac and QuickTrip Customers • On-the-Run car washes (more red ocean) • Online quizzes, commercials and information (more blue ocean)

9. Second-Tier Noncustomers • Refusing noncustomers” • JCDecaux • Most outdoor ads and billboards not effective • Street Furniture

10. Second-Tier Noncustomers • Increased time ads were seen • Signed contracts with municipalities for several years • Business plan: base cost of capital and upkeep + lots of revenue from advertisement = lost of profit

11. ExxonMobil • Customers have issues with ExxonMobil business practices • Exxon’s website how the industry has bettered the US, not how Exxon has

12. Third-Tier Noncustomers • Farthest away from an industry’s existing customers • Unexplored non customers • Their needs are assumed to belong to another market • Tooth Whitening Example • Usually done by dentists • Oral companies entered market

13. U.S. Defense aerospace industry • Inability to control aircraft costs was a vulnerability to US military • Soaring costs, shrinking budgets, and an aging fleet • Navy, Marines, and Air Force all had different views of the perfect fighter plane • The Joint Strike Fighter (JSF) looked at all three of these branches as unexplored noncustomers for a market of high performing, low cost planes

14. U.S. Defense aerospace industry • Two high cost components: avionics and engines • Looked at which features influenced the buying decision for each branch of the military • The Navy • Easy to maintain • Durability • The Marines • Short takeoff vertical landing (STOVL) • Robust countermeasures • The Air Force • Fastest aircraft • Superior tactical agility

15. U.S. Defense aerospace industry

16. U.S. Defense aerospace industry

17. Go For The Biggest Catchment • There is no hard-and-fast rule to suggest which tier of noncustomers you should focus on and when. • Focus on the tier that represents the biggest catchment. • You should also explore whether there are overlapping commonalities across all three tiers of noncustomers.

18. Strategic Orientation • The natural strategic orientation of many companies is toward retaining existing customers and seeking further segmentation opportunities. • Businesses need to challenge these existing, taken-for-granted strategic orientations. • To maximize the scale of their blue ocean they should first reach beyond existing demand as they formulate future strategies.

19. Fallback Strategies • If no such opportunities can be found, businesses can then move on to further exploit differences among existing customers. • They should be aware that they might end up landing in a smaller space. • When competitors succeed in attracting the mass of noncustomers with a value innovation move, many of your customers may be attracted away from your business.

20. Outcome • It is not enough to maximize the size of the blue ocean you are creating. • You must profit from it to create a sustainable win-win outcome.