Teaching Module

The first session, “From a structuralist to a reconstructionist view of strategy,” is designed as a strong and compelling transition from how to compete in existing markets or industries (a dominant focus of most strategy curriculums to date), to how to redefine market boundaries and create new market spaces. This session focuses on how the two different strategic paradigms, structuralism or red ocean strategy versus reconstructionism or blue ocean strategy, unveil different strategic opportunities and lead to different profitable growth trajectories. To achieve this, the case and two-part DVD movie on the US wine industry in the early to mid-2000s is used.

The case and its accompanying Part A of the DVD movie, Creating a Blue Ocean in the US Wine Industry, provides an in-depth overview of the US wine industry. It reviews the history of winemaking, the industry’s competitive forces, key players and potential for future growth. Here, students see the dynamics of the wine industry first-hand. The instructor then leads a discussion to assess, from a competitive strategy viewpoint, the attractiveness of the US wine industry and the strategic recommendations for both an incumbent and an upstart based on competitive strategy logic. Part A of the teaching note is designed to guide the instructor through this assessment. Students find a highly competitive industry with limited opportunities for profitable growth when assessed from a competitive strategy lens.

Part B of the DVD movie then documents how one firm, Casella Wines, created a blue ocean of new market space within this highly competitive US wine industry with its introduction of [yellow tail]. It shows how by applying a reconstructionist view of strategy, the firm gained insight into how market and industry boundaries can be reconstructed by the actions and beliefs of industry players. Part B of the video case illustrates how Casella wines shifted its strategic focus from competitors to alternatives, and from customers to noncustomers. In so doing, it reconstructed the industry boundaries to unlock new demand, not by simply stealing current sales from competitors, but by bringing non-wine drinkers into the wine market. The session shows how a strategic move can reach beyond existing demand in an overcrowded and highly competitive industry to create new market space. Here the analytic tools of the strategy canvas and four actions framework of blue ocean strategy are introduced.

Having appreciated the conceptual distinction between a structuralist and reconstructionist view of strategy, the second session, “Paths to creating new market space,” explores in depth the logic of creating new market spaces. Using the fascinating case and accompanying DVD movie of Cirque du Soleil, the professor/instructor explores the specific paths to the creation of blue oceans of new market spaces, and how the creation of new market spaces allows a company to shift the productivity frontier outwards thereby creating all new demand and breaking the value-cost tradeoff to simultaneously achieve differentiation and low cost. The six paths framework is introduced and explored.

The third session, “Noncustomers: reach beyond existing demand” guides students/executives through the interactive case of Gillette to deepen their understanding of how to reach beyond existing demand that is essential to blue ocean creation. Here instructors introduce the three tiers of noncustomers framework and guide students/executives to challenge two conventional strategy practices. One is the focus on existing customers. The other is the drive for finer segmentation to accommodate customer differences. Here instead of focusing on existing customers and their differences, students/executives are challenged to look to noncustomers and to understand the powerful commonalities in what buyers’ value. The interactive case on Gillette complete with PowerPoint presentation and photographic visuals is used to lead a stimulating class discussion.

The fourth session, “Building profitable business models for value innovation,” shifts the focus from how to create new market spaces to how to build profitable business models whereby companies as well as buyers receive a leap in value. Here professors/instructors explore the important issue of how to create system alignment between the company’s profit proposition and its value proposition including strategic pricing, strategy as sequence, partnering, and overcoming adoption hurdles. Here the case of NTT DoCoMo’s I-mode is used,“NTT DoCoMo i-mode: Value Innovation at DoCoMo,” allowing the professor/instructor to address a technology intensive industry in the early 2000’s. Here the price corridor of the mass and profit model of blue ocean strategy are introduced. Again, a detailed Teaching Note is available.

The last session, “The strategic patterns behind the creation of new market spaces,”looks back at the last 100-plus years of business history. The case and accompanying DVD movie used in this session, “A History of Blue Ocean Strategic Moves: Is There a Pattern?” examines three representative industries that touch peoples’ everyday lives: autos – how people get to work; computers – what people use at work; and movie theaters – where people go after work for entertainment. The aim is limited to identifying the key strategic moves, what we callblue ocean creations, which shaped each of these industries, and to assessing whether consistent strategic patterns can be identified across them.

Students/executives will find that, contrary to conventional strategic thought, patterns do exist across blue ocean strategic moves both within and across industries. Specifically, professors/instructors can draw out the following key learning points:

• Blue oceans are not about technology innovation per se. Leading-edge technology is sometimes involved in the creation of blue oceans, but is not a defining feature of them, even in industries that are technology intensive. Across all three industries represented in the case, blue oceans were seldom the result of technological innovation per se; the underlying technology was often already in existence. Rather, the key defining feature of blue oceans is value innovation – innovation that was linked to what buyers value.
• Blue oceans are created by both industry incumbents and new entrants, contrary to the assumption that start-ups have natural advantages over established companies in creating new market space. Moreover, the blue oceans created by incumbents are usually within their core businesses. Indeed most blue oceans are created from within, not beyond, red oceans of existing boundaries, creating profitable growth for start-ups and incumbents alike.
• Company and industry are the wrong units of analysis. Companies can be brilliant at one time and wrongheaded at another. Companies tend to rise and fall over time. Likewise, an industry’s relative attractiveness is driven largely by the strategic actions companies take, and even unattractive industries can be made attractive by the creation of blue oceans from within.
• The most appropriate unit of analysis for explaining the creation of new market spaces is the strategic move – the set of managerial actions and decisions involved in making a major market-creating business offering. Lasting excellence is scarcely achievable for any company; to date, no company was able to lead journeys into blue oceans continuously over the long run. However, companies with powerful names are often those that have been capable of reinventing themselves by repeatedly creating new market space.
• The creation of blue oceans of new market space is a key catalyst in setting an industry on an upward growth and profit trajectory. It is pivotal in determining not only a company’s rise but its fall, when another company takes the lead by creating a new blue ocean.
• Creating blue oceans builds brands. The creation of blue oceans does more than contribute to profitable growth; it exercises a strong, positive effect on establishing a company’s standing brand name in buyers’ minds. As the case illustrates, many blue ocean strategic moves have created brand equity that lasted for decades. Almost all of the companies in the case are remembered in no small part for the blue oceans they pioneered long ago.

To download PDF Version of the Teaching Module, Click here.