ERP Industry and Blue Ocean Strategy

Transcription

1 Trend (1) ERP Industry and Blue Ocean Strategy Moon, Tae Soo Professor, Dept. of Information Management Dongguk University at Gyeongju, Korea

2 1. Changing Business Environment 20th 21th Industrial Society Society Knowledge Society Efficiency Mission Customer Cost Reduction Financial Internal Organization Vertical Functional Centralized Strategy Performance Orientation Organization Value Creation Financial + Non-Financial Inter-Organizational Horizontal Process-oriented Decentralized Internal Optimization Sales Prod. Mat. Qual. Pers... ERP Implementation Value to Customer ERP Transaction Sales Prod. Mat. Qual. Pers... Best Practice Supply Chain Optimization 2

3 (1) Size of Market Computer Software Association of Japan 2. Major trends of ERP Market in Korea Market Size of Korea ERP Industry -473 Million USD, Million USD, 2006 Forecasted Market Size of 2007 : 567 Million USD BIG CAGR = 6.5% SMB CAGR = 8.2% BIG Company(over 2billion us$) SMB(under 2Billion us$) (Source) KRG(2007) 3

4 2. Major trends of ERP Market in Korea (2) ERP Market Structure in the Korea Big Company ( 52%), Upper SMB (29%), Lower SMB (19%) Big Company (Big 2), Upper SMB (Big 5), Lower SMB (Deep Competition) 0% Total 20% Big Company 52% 52% 40% 100% 60% Upper SMB 29% 80% SMB 48% 100% Lower SMB 19% 4

5 3. What is the Blue Ocean Strategy? (1) Definition Red Ocean V.S. Blue Ocean Strategy The imperatives for red ocean and blue ocean strategies are starkly different. Red Compete in existing market space. Beat the competition. Exploit existing demand. Make the value/cost trade-off. Align the whole system of a company's activities with its strategic choice of differentiation or low cost. Blue Create uncontested market space. Make the competition irrelevant. Create and capture new demand. Break the value/cost trade-off. Align the whole system of a company's activities in pursuit of differentiation and low cost. 5

6 3. What is the Blue Ocean Strategy? (2) Two Strategic Logics The Five Dimensions of Strategy Industry assumptions Strategic focus Customers Assets and capabilities Product and service offerings Conventional Logic Industry s conditions are given. A company should build competitive advantages. The aim is to beat the competition. A company should retain and expand its customer base through further segmentation and customization. It should focus on the differences in what customers value. A company should leverage its existing assets and capabilities. An industry s traditional boundaries determine the products and services a company offers. The goal is to maximize the value of those offerings. Value Innovation Logic Industry s conditions can be shaped. Competition is not the benchmark. A company should pursue a quantum leap in value to dominate the market. A value innovator targets the mass of buyers and willingly lets some existing customers go. It focuses on the key commonalities in what customers value. A company must not be constrained by what it already has. It must ask, What would we do if we were starting anew? A value innovator thinks in terms of the total solution customers seek, even if that takes the company beyond its industry s traditional offerings. 6

7 3. What is the Blue Ocean Strategy? (3) Four Actions Framework (ERRC) Reduce Which Factors should be reduced well below the industry s standard Eliminate Which of the Factors that The industry takes for granted should be eliminated A New Value Curve Create What Factors should be Created that The industry has never offered? Raise Which Factors should be Raised well above the industry s standard (Weechan Kim & Renee Mauborgne, 1997; 2004) 7

8 4. ERP Industry and the Blue Ocean Strategy (2) Stage 2 : Expansion ( ) (2) Initiation Era ( 95-00) Expansion Era(01-05) High (5.0) Global Vendors Local Vendors Low (1.0) Price Marketing System Consulting Complexity Best Practice Project Input Education & Training Maintenance Industry Solution 8

9 4. ERP Industry and the Blue Ocean Strategy (4) Stage 3 : Mature ( ) High Initiation Era Expansion Era Mature Era Low Price Marketing System Consulting Complexity Best Practice Project Input Education & Training Industry Solution Maintenance Easy To use Easy To Implement Easy To Upgrade 9

10 4. ERP Industry and the Blue Ocean Strategy (7) Suggestions Change Management through Extended Enterprise Application -Inter-Organizational Restructuring by Cross-Functional View -To Define the Process/Data Ownership of Enterprise Application Strategic Partnership with Core competences -To Improve Network Competitive Ability with Outsourcers -Business Integration with Vertical/Horizontal Integration -Global Standard and Core Application Structure Corporate Performance Management -Not only Financial Performance, But Balanced Performance -Balanced Score Cards with 4 Perspectives -Internal Business Process, Growth, and Customer Perspectives IT Governance and Total Cost of Ownership(TCO) -To Link Business Strategy with IT Strategy -Alignment of Enterprise Application into Corporate IT Architecture -Effective Make or Buy Decision Making 10