INTRODUCTION

TO ROUND BLUE-1
 Dear Instructor

The introductory slides to Round Blue-1 have been designed

to be delivered after the introductory slides to Round Red.
This is the « standard » BOSS schedule, as shown page 4.

If you have decided to skip Round Red and start BOSS with
Round Blue-1, you may need to include in this presentation a
Dr. Rémi Triolet few slides from the Round Red intro:
Simulation Expert
- Introduction to the BOSS world;
- Introduction to BOSS application

Make sure to delete this slide before running the intro!

YOUR ROLE OVER THE NEXT YEAR
 ROUND BLUE-1 IS ONE YEAR LONG

n Round Blue-1 starts in Year 44 and is one-year long

n Your role is to assist the new Executive Team in creating a Blue Ocean

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 MIKE D’OLPHIN IS NOMINATED CEO OF BLUE BUDDIES

n Mike is very interested in the Blue Ocean Strategy theory and convinces the
Executive Team to try to create a Blue Ocean
n Mike and the Executive Team discuss what they should do and make two vital
decisions
n To focus just on the Product (rather than Service and Delivery) for the moment
n To begin by conducting their own Visual Exploration of the market, focusing more
on noncustomers of the industry than on existing customers.

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 YOU WILL HAVE TO ACCOMPLISH SIX MAIN TASKS

1. To draw the current competitor ‘As Is’ Value Curves,

2. To read and debate the outcome of the Visual Exploration
conducted by the Executive Team
2
3. To develop several To-Be ERRC grids and their associated
Strategy Canvases (one per Path in the Visual Exploration)
4. To develop a final To-Be ERRC grid and its Strategy Canvas
that will be used to create a Blue Ocean offering 1
3&4
5. To decide on how to allocate your budget across Red Box, 6
your newly created Blue Box and Corporate Projects 5

6. To make the necessary decisions to launch your Blue

Ocean product in the market.

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AS-IS STRATEGY CANVAS WIZARD
 THE WIZARD HELPS YOU DRAW THE CURRENT
VALUE CURVES FOR THE COMPETITORS

Step 1 – Set Levels for each Value Curve Step 2 – View Value Curves

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 THE WIZARD PROVIDES YOU WITH THE INDUSTRY
AVERAGE AND A GRADING OF YOUR AS-IS CURVES

Step 3 – View Industry Average Value Curve Step 4 – View Automated Grading

Your Raise and Reduce actions in the To-Be

Strategic Canvas will be based on average
levels for Red Ocean factors
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 AS-IS STRATEGY CANVAS – FINAL STEP

n Discuss the shape of the Curves obtained in step 2 and draw a conclusion
about the industry
n This step is called Visual Awakening

These curves are sample

ones for demonstration
purpose only.

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VISUAL EXPLORATION AND SIX PATHS
MORE ON THE THEORY
 SIX PATHS TO BLUE OCEAN STRATEGY

THE SIX WAYS TO RECONSTRUCT INDUSTRY

Alternative Industries

Strategic groups
From To
Competing Creating
Within Buyer/user groups Across
Scope of product or
service offering
Functional-emotional
orientation of an industry

Time

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 PATH ONE – INDUSTRY

n Ask:

n What are the alternative industries to your industry?

n Why do buyers trade across to these?

n Example

n Netjets
n Cirque du Soleil
n André Rieu

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 PATH TWO – STRATEGIC GROUP

n Ask:

n What are the strategic groups in your industry?

n Why do buyers trade up to the higher cost/quality groups, and why do they trade
down for the lower ones?

n Example

n Curves

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 PATH THREE – CHAIN OF BUYERS

n Ask:

n What is the chain of buyers/users/decision influencers in your industry?

n Which buyer group does your industry typically focus on?

n If you shifted the buyer group of your industry, could you create new value and
unlock new demand?

n Example

n Novo Nordisk

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 PATH FOUR – COMPLEMENTARY PRODUCTS &
SERVICES
n Ask:

n What is the context in which your product or service is used? What happens
before, during, and after use?

n Can you identify the pain points?

n How can you eliminate these pain points through a complementary product or
service offering?

n Example

n Barnes & Noble

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 PATH FIVE – FUNCTIONAL-EMOTIONAL ORIENTATION

n Ask:

n Does your industry focus mostly on functionality or emotional appeal?

n If the industry competes more on emotional appeal, what elements can you strip
out to make it more functional?

n If the industry competes on functionality, what elements can be added to make it

more emotional?

n Example
n Starbucks

n Viagra

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 PATH SIX – TIME

n Ask:

n What trends have a high probability of impacting the valued your industry
provides, are irreversible, and evolving in a clear trajectory?

n How will these trends impact your industry?

n Given this, how can you take account of these trends in reconstructing your
strategic offering to create unprecedented value?

n Example

n IPod + ITune

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VISUAL EXPLORATION IN BOSS
 THE VISUAL EXPLORATION TELLS YOU HOW YOU CAN
RECONSTRUCT MARKET BOUNDARIES
n BOSS provides you with the transcript of the conversation that takes place
when the Executive Team meets after having individually conducted their
Visual Exploration of the market
n Read and debate the Visual Exploration. Understand what it is telling you in
terms of how you can reconstruct industry boundaries and create a Blue Ocean
n Three types of noncustomers are revealed:
n Path 3 represents the biggest volume potential of a 30% growth in the market
n Path 1 represents the second biggest volume potential at 24%
n Path 5 represents a volume potential of 18%.
n In term of the age of these noncustomers, the Executive Team has done the
estimation below:

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 POTENTIAL PRODUCT COMPETING FACTORS

n The next step is to create the Strategy Canvas of the Blue Ocean product that
you would like to create and launch on the market

n A list of potential product competing factors is offered from which you can
choose those you believe will attract noncustomers and unlock new demand
n This list is available at the end of the “Visual Exploration”
n A full description of the potential product competing factors is given including what
is offered to potential buyers/users at each level, from 1 (very low) to 5 (very high)

n What makes one competing factor less attractive than another is a

combination of the cost and complexity of developing it as seen against the
relative desirability of that competing factor in the market

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TO-BE STRATEGY CANVAS WIZARD
 STEP 1 – CREATING AND NAMING STRATEGY CANVASES

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 STEP 2 – PUTTING EXISTING AND POTENTIAL
COMPETING FACTORS INTO THE ERRC GRID

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 STEP 3 – REFINING THE STRATEGY CANVAS WHICH IS
AUTOMATICALLY GENERATED FROM YOUR ERRC GRID

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 STEP 4 – VIEWING THE STRATEGY CANVAS

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 STEP 5 – VIEWING REQUIRED R&D BUDGETS AND
PRODUCTION UNIT COSTS

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LAUNCHING YOUR BLUE OCEAN
OFFERING
 MAKING DECISIONS

n Once you have drawn and debated several To-Be Strategy Canvases, you must
decide on the one that you want to select as your Blue Ocean offering
n You will only be allowed to launch one product

n You will then have several decisions to make, as shown below

n Each of these decisions is explained in detail on the following pages

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 YOUR PRODUCTION PLAN DECISION INFORMS THE
PRODUCTION DEPARTMENT ON FORECASTED SALES

n Your Production Plan decision will depend on the success of your Blue Ocean
offering

n The Production department is highly flexible and will always manufacture the
required quantities in the best possible conditions

n Your forecast should be as accurate as possible as errors in planning have

financial consequences

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 MONITORING THE FINANCIAL CONSEQUENCES OF
YOUR PRODUCTION PLAN DECISIONS
Reminder of the Production Plan decision made at
the beginning of the period

Number of units actually produced. This is equal to

the number of units sold.

= Units produced – Production plan

The higher this number (in absolute value), the
higher your error in sales forecasting

Cost for producing one unit of your brand. This cost

depends on the characteristics of your product

Total reduction negotiated by the Production

department, based on the production plan

Cost charged by the Production department in case

it had to produce more or less units than what was
specified in the production plan. The penalty is
proportional to the production surplus or deficit.

= (Units produced x Unit cost) − Volume based COGS

reduction + Penalty for production adjustment

= Cost of Goods Sold ÷ Units produced

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 YOU MAY ADJUST THE PRICE OF YOUR BLUE OCEAN
OFFERING

n The price of your Blue Ocean offering is initially set according to the level
indicated for price in your Strategy Canvas

n You may then fine-tune the pre-set price in the form

n Key in the price you believe will unlock the most demand and still produce profits

n Dumping is strictly forbidden in the BOSS world: the price of a product must be
equal to or higher than its unit production cost

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 YOU MUST ALLOCATE A BUDGET TO MARKETING
ACTIVITIES

n The marketing budget is used to purchase advertising space: TV, internet,

billboards, press, etc.

n It is aimed at building the awareness of customers for your new offering

n The higher your “share of voice” the higher the awareness level of your
product
n Check the Benchmarking Study to get information on competitive spending

n In the case of a successful Blue Ocean offering, marketing ‘buzz’, free PR and
word-of-mouth should allow you to lower your marketing budget for the
same volume of sales

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 GEOGRAPHICAL EXPANSION : YOU DECIDE WHAT
PORTION OF THE TOTAL TERRITORY TO COVER

n Geographical Expansion is in the form “R%/S%” where R% is the expansion in

Roundland and S% the expansion in Starland.

n Your product will only be distributed in Roundland if you enter a value lower
than or equal to “100%/0%”

n Geographic Expansion in Starland starts with a value of “100%/10% or more

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 YOU MAY INVEST IN UP TO TWO INTERNAL
CORPORATE PROJECTS EACH PERIOD
n Corporate Projects are aimed at increasing your productivity, reducing your
costs and/or improving your organization capabilities
n This will improve the execution of your strategy in case some of your organization
capabilities are weak
n All projects are described in the online documentation
n Corporate projects will benefit all both your Red and Blue Ocean products.

Corporate Projects Cost in K$

A. Relocation Manufacturing to a Low Labor Cost Country 10 000
B. Process Re-engineering (6 Sigma) 5 000
C. Restructuring for Cost Reduction (Making Employees Redundant) 5 000
D. Acquisition to Access R&D Technology 10 000
E. New Appraisal and Reward System for Employees 6 000
F. Comprehensive New IT System 15 000
G. Leadership Development 500
H. Training Selected Employees in Project Management 500
I. Restructuring for effectiveness (No Redundancies, Just Changes in Responsibility) 2 000
J. Campaign for Internal Cost Consciousness 500
K. Time Management Training for all Managers 1 000
L. Recruiting Highly Qualified People to Stimulate Strategic Thinking 2 000
M. Suggestion Scheme for 'Bottom Up' Improvement 2 000
N. Radically upgrading Leadership and Service in the Customer Contact Centre 3 000
O. Culture Change Project 2 000
P. Hiring Expert Trainers to Train Distributors' Salespeople 3 500
Q. Hiring the Top Team from a Regional Specialist Luxury Goods Retailer 2 000
R. Hiring a Team Experienced in Developing and Managing a Fast Food Franchise 2 000
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 YOU ARE ALLOCATED A BUDGET TO COVER YOUR EXPENSES

n A budget is allocated to your team to cover your investments for your Red
Ocean as well as your Blue Ocean offerings.
n The amount depends on your success / failure in the previous period
n Equal to a 30% of revenues, with a maximum ($300m) and a minimum ($70m)
n It must not be exceeded: if total spending exceeds your allocated budget, you will
receive an error message

n Your budget will cover your investments in

n Product Development
n Marketing
n Distribution
n Corporate Projects

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 YOU MAY REALLOCATE PART OF YOUR BUDGET
FROM RED BOX TO BLUE BOX

n Decisions for Red Box are automated during the Blue Ocean rounds
n A share of your total budget is spent by the Red Box manager

n You may reallocate budget from Red Box to Blue Box

n Spend the budget you need on the Blue Ocean decisions
n The Red Box Manager will reduce his expenditures so as to save the budget you
need for Blue Box.

n If you decide to reallocate too much budget from Red Box to Blue Box, you will
get a warning or an error message, explaining you that you are endangering
your Red Ocean sales and taking on too much risk

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 THE BUDGET FORM

This team has not yet transferred the full

authorized amount from Red Box to Blue Box

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 CHECKING YOUR DECISIONS

n Before submitting your decisions, it is highly recommended that you check

whether you have made any mistakes with your decisions
n Look at the “Errors, Warnings & Highlights” chart
n Errors indicate inconsistencies in your decisions → These need to be corrected
n Warnings are shown to draw attention to potential problems
n Highlights remind you of key decisions made

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 GROUP DYNAMICS

n Establish a good working relationship within your team

n Each team member must be involved in all the discussions in order for
everyone to have the same understanding of the business situation and
strategy formulation

n Try to avoid letting each member concentrate solely on his/her area of

professional expertise

n Rotate responsibilities at regular intervals

n Maximize your internal resources and make sure that everyone benefits
equally from the BOSS experience and key learnings

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