Ch. 9 Conclusion: The Sustainability and Renewal of Blue Ocean Strategy

1. Ch. 9 Conclusion: The Sustainability and Renewal of Blue Ocean Strategy Group 1 John Menth Brent Gafford Tim Loveland Zachary Mayor

2. Barriers to Imitation • Creating blue oceans is not a static achievement but a dynamic process • Sooner or later imitators appear • How soon or late will they come? • How easy or difficult is blue ocean strategy to imitate • When should a company create another blue ocean?

3. Barriers to Imitation • Blue ocean strategy brings with it barriers to imitation • Some are operational and some are cognitive • A blue ocean strategy can go without a challenge for 10-15 years • Cirque du Soleil • Southwest Airlines • The Home Depot • CNN

4. Barriers to Imitation • A value innovation move does not make sense based on conventional strategic logic • CNN was ridiculed • Other networks thought 24/7 news was not feasible • Brand image conflict prevents companies from imitating a blue ocean strategy • Ex. The Body Shop vs. major cosmetic houses • Natural monopoly blocks imitation • Ex. Kinepolis, • first megaplex in Europe • located in Brussels • 15 years success with no imitation • Brussels could not support another megaplex

5. Barriers to Imitation • Patents or legal permits block imitation • High volume generated by a value innovation leads to rapid costs advantages • Places imitators at a cost disadvantage • Ex. Wal-Mart • Huge economies of scale

6. Sustaining and Renewal of BOS • Network externalities also block companies from easily and credibly imitating a blue ocean strategy. • Ebay • The more customers they get, the more attractive the auction site becomes for both sellers and buyers.

7. Sustaining and Renewal of BOS • Because imitation often requires companies to make substantial changes, politics kick in, delaying for years a company’s commitment • Ex. Southwest Airlines

8. Sustaining and Renewal of BOS • When a company offers a leap in value, it rapidly earns brand buzz and a loyal following in the marketplace. • Microsoft • Despite all its efforts and investment, it has not been able to dislodge Quicken. • They have been trying for more than 10 yrs.

9. Review of Imitation Barriers to BOS • Blue Ocean Strategy may conflict with other companies’ brand image. • Patents or legal permits • High volume leads to rapid cost advantage for the value innovator, discouraging followers from entering the market. • Companies that value-innovate earn brand buzz and loyal customer following that tends to shun imitators.

10. When to Value-Innovate Again • Eventually your blue ocean will be imitated… • Don’t become obsessed with hanging on to market share • Because over time, the competition, and not the buyer will become the center of your strategic thought • If you stay do this, your value curve will begin to converge with the competition’s

11. Avoid the Trap • Monitor your value curve on the strategy canvas. • Doing this will signal you when to value-innovate and when not to. • It also keeps you from pursuing another blue ocean when huge profits are still left in your current offering

12. Your Blue Ocean • Swim as far as possible your blue ocean • Be a moving target and dominate the blue ocean over your imitators for as long as possible. • As value curves converge, eventually, the blue ocean will start to turn red. • By plotting yours and your competition’s value curve you will know exactly when this starts to happen • Ex: The Body Shop & Yellow Tail

13. Takeaways • When you have created a unique and successful business model, others will try and imitate • Keeping with your original blue ocean strategy will most likely only last 10-15 years • Example Pitney Bowes from GTG • Expand on your blue ocean concept within your Hedgehog Concept

14. Takeaways • Watch the Value Curve • Avoid Competition • Exploit the Economies of Scale that your blue ocean has established • The most important thing you can take away from this book, MAKE THE COMPETITION IRRELEVANT.