Outperform 99% of your competition - BLUE OCEAN STRATEGY

LITTLE BIT BETTER
18 Aug 202319:56

Summary

TLDRThe Blue Ocean strategy proposes creating new uncontested market spaces with no competition, as opposed to struggling in competitive 'red oceans' where companies fight over limited customers. It utilizes innovative 'value innovation' to provide higher value at lower cost. Analysis tools like the strategy canvas and four actions framework (eliminate, reduce, raise, create) are used to develop new offerings. Six practical tips called the six path framework also help uncover blue ocean opportunities, including looking across substitute industries, complementary offerings, buyer groups, trends, etc. Overall, the Blue Ocean strategy aims to make the competition irrelevant by creating new demand and market growth.

Takeaways

  • 😀 The market is divided into two oceans: blue ocean (uncontested market space) and red ocean (crowded with competition). Blue oceans offer more opportunities for growth.
  • 👍 Value innovation means providing higher value to customers while reducing costs. This is key to blue ocean strategy.
  • 📈 A study found that blue ocean launches brought 61% of profits while red ocean launches brought only 39% despite being more numerous.
  • 📊 The strategy canvas captures what the competition offers and the value customers receive on horizontal and vertical axes respectively.
  • ✂️ The four actions framework poses key questions to develop a blue ocean strategy: Eliminate, Reduce, Raise, Create.
  • 🔍 Six practical tips called the six path framework help identify blue ocean opportunities.
  • 🎯 The main idea is to create new market space and make the competition irrelevant.
  • 📉 Reduce costs through eliminating and reducing factors the industry takes for granted.
  • 📈 Raise value by improving factors valued by customers above the industry standard.
  • ✨ Create new value factors the industry has never offered before.

Q & A

  • What are the two oceans that the market is divided into according to the Blue Ocean Strategy?

    -The two oceans are the blue ocean, which represents untapped market space with no competition, and the red ocean, which refers to existing competitive market space.

  • What is value innovation?

    -Value innovation refers to providing higher value to customers at a lower cost. It is a new way of thinking that increases value while reducing costs.

  • How did Casella Wines use the four actions framework to create a blue ocean?

    -Casella Wines eliminated non-essential factors like complexity and aging, reduced the wine selections to just two varieties, raised prices but kept them below premium wines, and created an easy-drinking wine called Yellowtail aimed at non-wine drinkers.

  • What were the results of Casella Wines' blue ocean strategy with Yellowtail?

    -In just two years, Yellowtail became the fastest growing wine brand in Australian and US history. It brought non-wine drinkers into the market while also attracting drinkers from budget wines and more expensive wines.

  • What is the six path framework?

    -The six path framework provides six practical tips to identify blue ocean opportunities: 1) Look across functional/emotional appeal 2) Look across alternate industries 3) Look across complementary products/services 4) Look across strategy groups 5) Look across the chain of buyers 6) Look across time.

  • How did Toyota create a blue ocean with its Lexus brand?

    -Toyota offered the quality and luxury of high-end German cars like Mercedes and BMW but at much lower, economy car prices. This attracted buyers from both the luxury and economy car markets.

  • How did Novo Nordisk shift the insulin industry focus from doctors to patients?

    -They developed an easy to use insulin pen so patients no longer had to struggle with complex insulin injections. This provided higher convenience and value to users.

  • What trends can provide blue ocean opportunities when looked across time?

    -External trends like rapid growth of the internet and increased environmental awareness are examples. Using insights into how these trends will impact your industry can uncover new value for customers.

  • What is the key message or thesis of the Blue Ocean Strategy?

    -The main idea is to create new market space and break away from competition by making the competition irrelevant. Instead of fighting over existing demand in a crowded market, you can tap into hidden demand.

  • How can identifying substitutes help uncover blue oceans?

    -Looking at substitute products from other industries that satisfy the same customer needs can spark innovative new offerings. You can combine the best elements of substitutes to provide greater value.

Outlines

00:00

😊 What is the Blue Ocean Strategy and how companies can create it

The Blue Ocean strategy involves creating uncontested market space and making the competition irrelevant. It is based on the concepts of value innovation - providing higher value to customers at lower cost. The strategy canvas and four actions framework are key tools used to develop a Blue Ocean strategy. Companies like Casella Wines used these tools to create the wildly popular Yellowtail wine brand which brought new non-wine drinkers into the wine market.

05:01

😀 Four action framework - Eliminate, Reduce, Raise and Create

The four actions framework provides a systematic way to develop a Blue Ocean strategy. It poses four key questions to challenge an industry's factors that are taken for granted. Eliminate - Which factors should be eliminated, Reduce - Which ones should be reduced well below industry standard, Raise - Which factors should be raised well above industry standard, and Create - What new factors should be introduced that the industry has never offered before.

10:01

🧐 Six practical tips to identify Blue Ocean opportunities

The six path framework provides practical tips to uncover Blue Ocean opportunities - 1) Shift appeal from functional to emotional or vice versa 2) Look across alternate industries 3) Consider complementary offerings in the full customer experience 4) Combine most attractive factors across strategic groups within an industry 5) Look across the chain of buyers 6) Identify trends over time that can inspire new value.

15:03

😊 Summary of key ideas from Blue Ocean Strategy book

The main idea of the Blue Ocean Strategy is to create new uncontested market space and make competition irrelevant. This can lead to highly profitable growth and value innovation. The book provides frameworks and tips on how to systematically analyze the market to uncover these new opportunities.

Mindmap

Keywords

💡Blue Ocean Strategy

The key concept and theme of the video. It refers to creating new uncontested market space instead of competing in crowded existing markets (red oceans). This is done through value innovation - providing higher value at lower cost.

💡value innovation

A cornerstone of blue ocean strategy. It means giving buyers more value while reducing costs through eliminating and reducing factors the industry competes on.

💡four actions framework

A blue ocean tool with 4 key questions to develop a blue ocean strategy: Eliminate, Reduce, Raise, Create. It guides you to cut costs while also creating new value.

💡strategy canvas

A diagnostic tool to understand what value the industry offers to buyers and on what factors they compete. It captures competitor offerings and value delivered to buyers.

💡non-customers

People who consciously reject or are uninterested in your industry's offerings. Creating products for them can result in new demand and market growth.

💡functional appeal

Appealing to customers based on product usefulness and price. Coffee is functionally positioned but Starbucks made it emotional.

💡emotional appeal

Appealing to customers based on feelings and experiences. Most industries compete on functional or emotional appeal.

💡six paths framework

6 practical tips to identify blue ocean opportunities: look across appeal, industries, complements, strategy groups, buyers, and trends.

💡red ocean

Crowded, bloody waters with intense competition. Firms try to outperform rivals for a greater share of limited demand.

💡trade-off

What customers consciously or unconsciously give up or compromise between to make a purchasing decision.

Highlights

The market is divided into two oceans - a blue ocean and a red ocean

Creating a blue ocean can lead to better profits and growth

Value innovation means providing higher value to customers at a lower cost

The four actions framework poses four key questions to develop a blue ocean strategy

The purpose of eliminating and reducing is to reduce costs

Raising and creating are focused on generating new value

Yellowtail created a new market by appealing to non-wine drinkers

The main idea is to create a new market by breaking from the competition

The six paths framework helps identify blue ocean opportunities

Look across emotional versus functional appeals

Consider substitute industries that serve the same need

Analyze complementary products that affect perceived value

Combine factors attractive to different strategic groups

Understand all groups involved in the buying decision process

Identify industry trends and how they may shift value

Transcripts

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regardless of what business you're in or

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what job you are doing you're always

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competing with others if you want to

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dominate the market and outperform 99 of

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your competitors then the book called

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The Blue Ocean strategy is exactly what

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you need I have personally read this

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book two times and will definitely read

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it a few more times in the future if you

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are an entrepreneur then this is the

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type of book you need to study like a

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school textbook not just read and forget

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about it

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in this video I'm going to share the key

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ideas from the book with you so let's

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get started

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imagine you're about to dive your diving

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instructor meets you and gives you two

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options you can either dive into a vast

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and pristine ocean where the water is

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Crystal Blue and there is an abundance

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of marine life and there are not many

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other divers around which means you can

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move around easily

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or you can dive into an ocean where the

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water isn't clear and the surrounding is

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crowded with many other divers who are

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trying to experience the same things as

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you are

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you can still experience a few nice

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things but you have to be quicker than

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the other divers which would you choose

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obviously the first option right

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starting a business is like diving and

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most entrepreneurs unfortunately choose

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the second option

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according to this book The Market is

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divided into two oceans a blue ocean and

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a red ocean the blue ocean is exactly

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like the first option there is no

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competition the rules of the game

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haven't been set yet and there's a lot

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of opportunity for profitable growth on

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the other hand the red ocean is crowded

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with many businesses all competing for

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the same customers and resources in the

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red ocean the rules of the game are

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known and companies try to outperform

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each other to grab as much of the

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existing demand as possible but as the

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market becomes more crowded profits and

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growth get smaller and smaller products

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become generic and the competition is so

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intense that water turns red with the

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blood of competitors and creates the red

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ocean

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today it's becoming harder and harder

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for companies to be profitable they are

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fighting over the same limited customers

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and resources if you've noticed products

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are becoming more and more similar to

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each other for example people used to be

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very loyal to Brands like tide for

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laundry detergent or Colgate for

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toothpaste but now if some other brand

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is on sale they might switch to that

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instead it's getting harder and harder

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to stand out from the crowd a study was

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conducted to see the impact of creating

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blue oceans versus competing in red ones

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the study analyzed 108 companies and

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their new business launches out of the

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108 companies studied in the research 86

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of them were simply improving their

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existing product within the existing

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Market space these launches brought 39

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percent of total profits the remaining

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14 of the companies focused on creating

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a blue ocean they came up with new and

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Innovative products the market had never

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seen before these companies generated an

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impressive 61 percent of total profits

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this data clearly shows that creating a

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blue ocean can lead to better profits

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and growth now let's see what the Blue

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Ocean strategy is exactly and how you

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can apply it the Cornerstone of the Blue

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Ocean strategy is something called value

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innovation which basically means

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providing higher value to your customers

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at a lower cost

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I can almost hear you saying how can a

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company provide higher value to the

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customer while reducing its cost doesn't

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higher value mean higher costs

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the answer is no value innovation is a

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new way of thinking which provides

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higher value at a lower cost let me

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explain it with an example

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the wine market is one of the most

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competitive markets in the USA But

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despite that the Australian wine company

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called Casella wines became the number

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one wine thanks to value innovation

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Casella Wine's first analyzed the market

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by using a blue ocean tool called

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strategy canvas the strategy canvas is a

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simple framework that helps you to

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understand two important things about

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the market what your competition is

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offering to the customers and what value

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customers are getting for their money

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the strategy canvas is like the

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screenshot of the market you are

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freezing everybody and taking a picture

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the information about the competition

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and their offerings is captured in the

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horizontal axis and the information

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about the value the customers receive is

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captured on the vertical axis for

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example in the case of price a higher

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score indicates a higher value to the

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customer premium wines all have the same

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conventional strategy which is to offer

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a high price and high quality across all

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factors budget wines on the other hand

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have a low price and low quality across

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all factors

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after analyzing the market costella

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wines used the second and most important

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blue ocean tool called four actions the

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four actions framework poses four key

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questions to develop a Blue Ocean

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strategy eliminate reduce raise create

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number one eliminate which factors that

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the industry takes for granted should be

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eliminated number two reduce which

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factors should be reduced well below the

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industry's standard three raise which

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factors should be raised well above the

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industry's standard

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four create which factors that the

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industry has never offered should be

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created

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the purpose of the first two questions

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is to reduce costs if you remember a few

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minutes ago we were discussing how is it

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possible to increase the value while

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reducing the costs well this is where

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the cost savings comes from

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reducing the cost is half of the job you

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still need to create new value and that

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is where questions number three and

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number four come in raise and create

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now back to our example here is how

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Casella wines applied the four actions

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framework to create a blue ocean

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eliminate

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they eliminated all the factors the wine

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industry had long competed on such as

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complexity and aging with the need for

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aging eliminated they also eliminated

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costs on Oak barrels and Storage

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reduce they dramatically reduced the

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range of wines offered creating only two

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white chardonnay and a red Shiraz the

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Simplicity of offering only two wines

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reduced the costs further plus it made

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the wine selection process easier for

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non-wine drinkers raise they removed all

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technical jargon from the bottles and

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created a simple and non-traditional

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label they also raised their prices

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above the budget wines but below the

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premium wines

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create they mainly focused on

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non-customers of wine such as beer and

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cocktail Drinkers and found out that

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many of them rejected one because of its

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complicated taste and difficulty to

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select using this information they

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created a wine called yellowtail that is

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easy to drink easy to select and fun the

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wine promised to jump from the glass

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like a kangaroo the result is that

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yellowtail appeared to a broad group of

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alcoholic beverage consumers

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in just two years yellowtail emerged as

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the fastest growing brand in history of

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both the Australian and the U.S wine

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Industries it became the number one

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imported wine into the United States

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surpassing the wines of France and Italy

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what's more yellowtail didn't just steal

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sails from competitors it grew the

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market the wine brought non-wine

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drinkers into the wine market novice

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wine drinkers started to drink wine more

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frequently budget wine drinkers moved up

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and drinkers of more expensive wines

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moved down to become consumers of

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Yellowtail the main idea of the Blue

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Ocean strategy is to create a new market

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by breaking away from the competition in

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other words making the competition

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irrelevant

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but where do you actually look to find

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ideas for creating a blue ocean

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here are six practical tips that can

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help you to identify blue ocean

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opportunities the authors call this six

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path framework

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path number one look across functional

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or emotional appeal to buyers

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every industry companies compete based

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on two bases of appeal functional or

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emotional functional appeal means

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offering a product or service based on

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its usefulness and price while emotional

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appeal means offering a product or

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service based on feelings for example

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coffee is a functional product but

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Starbucks turned it into an emotional

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product by creating a unique experience

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around it Starbucks isn't just a place

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where you get coffee it's also a place

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where you can relax and forget about

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your problems get some work done or meet

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your friends

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quite opposite to Starbucks a Japanese

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barber shop called Quick Beauty created

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a blue ocean by Shifting the industry

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from an emotional one to a highly

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functional one in Japan the time it

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takes to get a man's haircut hovers

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around one hour why a long process of

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activities is undertaken to make the

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hair cutting experience a ritual

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numerous hot towels are applied

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shoulders are rubbed and massaged

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customers are served tea and coffee and

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the barber follows a ritual in cutting

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hair including special hair and skin

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treatments such as blow drying and

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shaving the result is that the actual

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time spent cutting hair is a fraction of

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the total time moreover these actions

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create a long cue for other potential

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customers QB house changed all that it

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recognized that many people especially

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working professionals don't wish to

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waste an hour on a haircut

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QB house Stripped Away the emotional

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service elements of hot towels shoulder

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rubs and teen coffee and reduced special

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hair treatments to focus mainly on basic

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Cuts QB house also eliminated the

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traditional time-consuming wash and dry

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practice by creating the air wash system

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so to summarize tip number one if your

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industry competes on functionality and

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see how you can make it emotional if the

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opposite is true and everybody competes

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On Emotion then see how you can make

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your product functional path number two

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look across alternate Industries

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a company doesn't just compete with

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other companies in their own industry

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but also with companies in other

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industries that offer similar products

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or Services different products or

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Services can be substitutes for each

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other because they provide the same

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function or utility but come in various

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forms there are opportunities for

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companies to innovate and offer

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Something New by looking beyond their

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own industry and considering

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alternatives

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for example to sort out your personal

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finances you can use Financial software

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hire an accountant download an app or

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use pen and paper the software the

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accountant the pen and paper and the

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financial app are largely substitutes

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for each other they have different forms

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but serve the same function helping

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people manage their financial affairs

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another interesting example you probably

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know that Ford Model T was the first

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mass-produced affordable car that

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revolutionized the car industry this was

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all possible because Henry Ford used an

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assembly line production system where

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one worker did only one single task

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Henry Ford got the idea of the assembly

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line production from visiting a

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slaughterhouse and grain factories in

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other words he looked at alternative

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Industries to create a blue ocean

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opportunity when people make purchasing

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decisions they often think about their

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options unconsciously they consider what

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they want and how they can achieve it

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however when companies sell products or

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Services they don't always think about

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how their customers are making

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trade-offs across different Industries a

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company called netjets observed that

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business Travelers in the airline

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industry had two choices they could fly

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on a commercial airline or the company

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could purchase its own aircraft

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companies choose commercial airlines

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because it's cheaper buying your own

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aircraft and maintaining it is quite

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expensive on the other hand buying your

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private aircraft provides benefits such

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as cutting total travel time avoiding

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busy airports and allowing Executives to

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arrive more energized and productive

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netjets created a new way of air

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traveling called fractional jet

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ownership this means customers don't buy

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a whole private jet but only a small

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part of it this makes it a lot cheaper

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than buying a whole jet plus you don't

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have to change planes or wait in line at

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the airport it only takes a few minutes

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to go from your car to take off you can

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complete trips much faster and arrive at

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your destination energized and fresh

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the final result is that buyers get the

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convenience of a private jet at the

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price of commercial airline travel

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netjets created a new market by

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combining the best parts of private jets

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and commercial airlines and eliminating

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everything else

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this made them a multi-billion dollar

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company and they are still the biggest

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in the business so tip number two is to

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look at industries that are alternative

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to yours especially focus on the key

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factors that cause customers to switch

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from your industry to another industry

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path number three look across

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complementary product and service

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offerings

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for example in the movie theater

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industry the ease and cost of getting a

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babysitter and parking the car affects

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the perceived value of going to the

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movies by offering a babysitting service

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a movie theater could tap into this

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hidden value and create a blue ocean

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by considering the entire customer

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experience including what happens before

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during and after the use of a product

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you can uncover New Opportunities

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despite its importance to British

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culture the British tea kettle industry

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had been struggling to make a profit

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until Philips Electronics came along and

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turned the red ocean blue Phillips

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realized that the problem people had

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with brewing tea wasn't with the tea

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kettle itself but with the water used to

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make the tea the tap water had a mineral

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called lime scale that built up in the

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kettle as it boiled and then ended up in

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the tea people had to use a spoon to

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scoop out the lime scale before drinking

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their tea the tea kettle industry didn't

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think this was their problem but

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Phillips saw an opportunity to create a

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new product that solved this issue and

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made the tea kettle more valuable to

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buyers this helped Philips create a new

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market space in the tea kettle industry

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so tip number three to discover a blue

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ocean opportunity is to look at the

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entire customer experience and analyze

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what happens before during and after

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they use your product

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path number four look across strategy

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groups within the same industry

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a strategy group is a group of companies

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within an industry that pursue a similar

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strategy for example online shoe stores

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versus physical shoe stores they both

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serve the same need choose another

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example the luxury car market versus the

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economy car market both fall within the

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same overall industry automobiles but

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they pursue very different strategies

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for serving the same need and because of

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that they don't see each other as

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competition thinking that luxury car

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buyers wouldn't be interested in

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economic cars and vice versa but the

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truth is that customers can trade up and

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buy more expensive options or trade down

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and buy cheaper options you only need to

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understand the factors that determine

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customers decisions to trade up or down

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for example people who buy expensive

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cars are interested in luxury on the

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other hand people who buy economic cars

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are concerned about the price

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the Blue Ocean strategy would be to

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produce a car that is a luxury but the

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price is not so much higher than the

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economic car price this way the economic

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car buyers can trade up and luxury car

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buyers can trade down this is exactly

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what Toyota did with its Lexus offering

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the quality of high-end cars such as

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Mercedes and BMW at economy car prices

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by doing that Lexus captured customers

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from both segments not just that it also

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Drew many new customers to the market so

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tip number four for creating a blue

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ocean is to combine the most attractive

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factors of different groups within your

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industry

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path number five look across the chain

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of buyers

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creating a blue ocean can also be

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achieved by looking across the chain of

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buyers in the industry there are often

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multiple groups involved in the buying

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decision including purchasers users and

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influencers for example the

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pharmaceutical industry primarily

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targets influencers such as doctors

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while the clothing industry targets

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users by gaining new insights into how

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to redesign the product to appeal to

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different buyers companies can create a

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blue ocean Market Novo Nordisk a Danish

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insulin producer wanted to create a blue

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ocean in the insulin industry the

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industry had always focused on doctors

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as the key influencers in insulin

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purchasing decisions however Novo

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Nordisk saw an opportunity to create a

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blue ocean by Shifting the industry's

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focus from doctors to patients

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themselves they found that insulin

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supplied to diabetes patients presented

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significant challenges in administering

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patients had to handle syringes needles

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and insulin and administer doses

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according to their needs which was

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complex and unpleasant this led Novo

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Nordisk to develop the novopen the first

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user-friendly insulin delivery solution

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that looked like a pen the pen contained

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an insulin cartridge that allowed the

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patient to easily carry roughly a week's

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worth of insulin the pen had an

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integrated click mechanism making it

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possible for even blind patients to

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control the dosing and administer

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insulin patients could take the pen with

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them and inject insulin with ease and

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convenience without the embarrassing

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complexity of syringes and needles this

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Innovative insulin delivery system

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shifted the industry landscape and

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transformed Novo Nordisk from an insulin

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producer to a Diabetes Care company

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today almost 30 years after its initial

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blue ocean strategic move Novo Nordisk

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Remains the global leader in Diabetes

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Care and around 70 percent of its total

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turnover comes from this offering

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path number six look across time

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all Industries are subject to external

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trends that affect their business over

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time for example think of the rapid rays

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of the internet or the global movement

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toward protecting the environment by

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looking at these Trends in your industry

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you can find Blue Ocean opportunities

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for example as Netflix saw internet

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Broadband explode it realized that fast

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and real-time streaming of movies would

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soon be able to take off this Insight

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inspired Netflix to create a blue ocean

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for itself so can you identify the

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trends that have a high probability of

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impacting the industry you are in how

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will they change your industry using

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this information can provide higher

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value to your customers and create a

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blue ocean for yourself

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this is it for this video hope it was

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useful if you are an entrepreneur who is

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always busy feels burnt out and doesn't

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see results despite the hard work then

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check out the video you see on your

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screen it's the summary of a book called

play19:47

who not how this book will save you so

play19:51

much time and increase your income

play19:53

thanks for watching