Двойная ирландская с голландским сэндвичем

Двойная ирландская с голландским сэндвичем (англ. Double Irish Dutch Sandwich, иногда Двойной ирландский виски с голландским сэндвичем) — популярная вСША схема оптимизации налоговых обязательств посредством использования двух ирландских и одной голландской компаний. Ирландские компании выступают в роли «хлеба», а между ними находится голландская компания, как «сыр» или «колбаса».

Такая структура оптимизации используется преимущественно крупными корпорациями США в отношении оптимизации доходов от объектов интеллектуальной собственности.

Схема позволяет значительным образом уменьшать налоги, как на территории США, так и на территории государств возникновения доходов.

Структура схемы

Для схемы «Двойная ирландская с голландским сэндвичем» создается три компании. Компания, использующая схему, передает свою интеллектуальную собственность аффилированной компании (№ 1), зарегистрированной в Ирландии, но являющейся налоговым резидентом какой-либо офшорной зоны. Вторая компания создается в Голландии и сублицензирует права на интеллектуальную собственность у первой компании. Затем третья компания, являющаяся налоговым резидентом Ирландии, сублицензирует права у голландской фирмы.^[1]

Из-за особенностей голландского налогового законодательства и международных соглашений подобное сублицензирование и платежи по нему не облагаются налогами.

Компания № 3 часто является 100 % дочкой компании № 1. Эта же компания и ведет реальную деятельность в различных странах, пересылая практически всю прибыль через голландскую компанию (№ 2) в виде роялти.

Сходные схемы

Double Irish

В схеме Double Irish используется две ирландских компании. Первая из них является офшорной, которая владеет правами на интеллектуальную собственность. Данная компания регистрируется как налоговый резидент в офшорной зоне, например на Каймановых островах или на Бермудах. По налоговым законам Ирландии, компания является налоговым резидентом той страны, из которой она управляется, поэтому ирландская компания может не являться налоговым резидентом Ирландии. Первая компания лицензирует за большую сумму права второй компании, которая является налоговым резидентом Ирландии. Вторая компания получает доходы от использования прав в различных странах (кроме США), однако налогом облагается только разница между лицензионными платежами и доходами. На эту разницу распространяется налог в 12,5 %.

14 октября 2014 года газета The Independent сообщила, что министр финансов Ирландии Майкл Нунан отменил спорную «двойную ирландскую» налоговую систему. Компании, использующие Double Irish, должны перейти на другие схемы налогообложения до 2020 года, новые компании — до 1 января 2015 года.^[2]

Кипр

Что касается российской действительности, то основным инструментом оптимизации доходов от интеллектуальной собственности является использование компаний Республики Кипр. С 1 января 2012 года в отношении доходов от интеллектуальной собственности на Кипре предоставляется восьмидесятипроцентое освобождение от подоходного налога (Income Tax). Таким образом, эффективная ставка налога составляет от 2 % и ниже (так как из налоговой базы допускается вычет расходов на создание и приобретение объектов интеллектуальной собственности).

Применение

Некоторые крупные компании применяли схемы «double irish» или «Двойная ирландская с голландским сэндвичем»:

1. Adobe Systems^[3]
2. Apple^[4][5]
3. Eli Lilly and Company^[3]
4. Facebook^[6]
5. Forest Laboratories^[3]
6. General Electric^[6]
7. Google^[3][6][7]
8. Johnson & Johnson^[6]
9. Microsoft^[3]
10. Nederlandse Spoorwegen^[8]
11. Oracle^[3]
12. Pfizer^[3]
13. Starbucks^[6]

КАК ЭТО РАБОТАЕТ?

Представленная схема позволяет значительно сокращать расходы на налоги благодаря экспорту IP и наличию выгодных соглашений об избежании двойного налогообложения. Применение данной схемы распространено у американских IT-компаний, и используется такими лидерами рынка, как Google Inc., Apple Inc., Microsoft Corp., IBM Corp. и Facebook Inc.

Одним из главным корпоативных неплательщиков в 2012 году оказалась компания Apple. Сумма неуплаченых налогов - $713 млн., в то время как доходы компании составили $41,7. Apple удалось снизить налоговое бремя почти на 25%.

Структура

• Компания в США передает IP Компании в Ирландии, являющейся налоговым резидентом на Бермудах. Для целей корпоративного налогообложения важно место фактического управления компанией, поэтому обязанность по уплате налога возникнет не в Ирландии, а на Бермудах. На практике для уменьшения налога, уплачиваемого в США, Компании в США лучше перевести IP Компании в Ирландии на ранних стадиях, когда оценочная стоимость IP еще минимальна.

• На основании лицензионного договора Компания в Ирландии (налоговых резидент Бермуд) передает права на использование IP Компании в Нидерландах, являющейся налоговым резидентом Нидерландов.

• Компания в Нидерландах заключает сублицензионный договор с Компанией в Ирландии, являющейся налоговым резидентом в Ирландии. Данная ирландская компания – 100%  “дочка” Компании на Бермудах.

• Фактически Компания в Ирландии осуществляет основную деятельность по работе с реальными покупателями за пределами США.

Роялти

• Компания в Ирландии, осуществляющая основную деятельность, получает роялти от всех пользователей за пределами США. Компания оставляет себе маржу 5-10% и перечисляет  оставшуюся часть от общих поступлений Компании в Нидерландах в соответствии с заключенным сублицензионным договором.

• Компания в Голландии также оставляет себе небольшую маржу 5-10% и перечисляет полученные денежные средства Компании на Бермудах в качестве платежа по лицензионному договору.

• Маржа, оставленная Компанией в Ирландии и в Нидерландах, должна соответствовать правилам трансферного ценообразования, требующих передачи активов по “справедливой рыночной стоимости”.

Налогообложение

• Компания в Ирландии, осуществляющая основную деятельность и получающая роялти от все пользователей за пределами США, платит налоги в Ирландии только на оставленную маржу (5-10% от поступивших платежей). В соответствии с Ирландским законодательством роялти уплаченные ирландской компанией по сублицензионному договору с Компанией в Нидерландах уменьшают налогооблагаемую базу в отношении полученных роялти.

• В Ирландии не взимается налог у источника при выплате роялти Компании в Нидерландах. По сути бюджет страны, где фактически осуществляются все продажи, остается без дохода.

• В Нидерландах также не взимается налог у источника при выплате роялти Компании на Бермудах.

• Компания на Бермудах не уплачивает ни налог на прибыль, ни налог у источника при выплате пассивных доходов, а именно: роялти, дивидендов, процентов.

По данным Bloomberg Businessweek, американское правительство ежегодно теряет $60 млрд при том, что компании мнимизируют налоги на законных основаниях.

Схема “двойной ирландско-голландский сэндвич” была разработана ведущими юристами и финансистами и до недавнего времени считалась лучшим легальным способом снижения налогового бремени американских компаний, владеющих IP. Представленная структура полностью соответствовала действующему законодательству США, включая требования правил о контролируемых иностранных компаниях (US CFC Rules).

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НАЛОГОВЫЕ СКАНДАЛЫ

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Недавно череда крупных налоговых скандалов разразилась с участием таких известных игроков рынка, как Google, Apple, Microsoft которые, умело обращаясь с “двойным ирландско-голландским сэндвичем”, достигали существенной экономии на налогах в странах, где фактически оказывались услуги.

Высокотехнологичным компаниям из индекса S&P удается платить втрое меньше налогов, чем представителям из других отраслей.

Примеры недовольства на государственном уровне компаниями, успешно применяющими схему “перебрасывания роялти”, 2012 год:

• Правительство Великобритании предъявило ряд претензий к Google и Amazon, обвинив их в уклонении от уплаты налогов. Так доход Google в Англии составил порядка 4,1 млрд, а бюджет страны пополнился всего на 6 млн фунтов стерлингов.
• Налоговые органы Франции предъявили Google аналогичные претензии, обосновывая свою позицию тем, что бюджет страны недополучил 1,7 млрд евро потому, что американская компания выставляла счета французским рекламодателям от имени ирландского офиса. Сейчас Франция прорабатывает варианты обложения дополнительными налогами такие компании, как Facebook, Google, Amazon и Apple. Уже озвучено предложение сделать персональные данные объектом налогообложения (чем шире пользовательская база данных у компании, тем больший налог он должна заплатить). Ранее Франция предъявляла требования Microsoft Corporation, заявляя о неуплате компанией 52,5 миллионов евро.
• Коммерческая деятельность Google проверялась Италией, чьи фискальные органы выдвигали компании обвинение в занижении доходов, в связи с чем государственная казна недополучила 96 млн евро.
• В Австрии с осуждением отнеслись к использованию Google “низконалоговых” юрисдикций в целях экономии на корпоративном налоге и уже ведут обсуждения поправок в законы, основная цель которых – исключить “лазейки”. 
• На днях Парламент Германии принял закон заставляющий сайты, перепечатывающие и собирающие новостные заметки, платить отчисления авторам используемых новостей. Данный закон уже получил название “Налог на Google”. Ранее Франция выступала с намерением принять аналогичный закон на поисковики.

Недовольство стран Еврозоны подобной налоговой оптимизацией корпораций вполне обосновано: фактически именно в этих странах происходит реальное оказание услуг и извлечение прибыли, но в тоже время их бюджет от этого не выигрывает.

Учитывая тот факт, что применяемая схема является абсолютно законной и разрабатывалась исходя из “лазеек в действующих законах”, то можно сделать вывод, что она работала с “молчаливого согласия” многих стран. В разгар мирового экономического кризиса государства борются за поступления в казну и уже сейчас многие страны начали вносить изменения в налоговое законодательство, запрещая компаниям “прятать прибыль” в офшорах.  

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ТАК ЗАКОННО ИЛИ НЕТ?

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Желание снизить налоговую нагрузку присуще, как начинающему бизнесу, так и большим международным корпорациям. Использование преимуществ международных соглашений и “низконалоговых” юрисдикций считается распространенной практикой во всем мире и является законным до тех пор, пока осуществляется в соответствии с действующим законодательством.

Однако законы могут изменяться в зависимости от политической и экономической ситуации в стране. Соответственно компаниям придется проводить реструктуризацию так, чтобы проводимые операции оставались в рамках закона, в противном случае возрастает риск получить статус налогового уклониста со всеми вытекающими последствиями.

В связи с мировым экономическим кризисом политика многих стран (включая США и Евросоюз) направлена на борьбу с минимизацией налогов международными холдингами. Власти возмущены тем, что крупные корпорации ведут бизнес в одних странах, а налоги платят в других, “низконалоговых”. Наш прогноз на ближайшее время – ужесточение антиофшорных мер.

https://cutt.ly/o2i6Jdy

2015 Healthcare Trends

Riding a wave of policy turmoil, consumer empowerment, and tightening margins, payors and providers have no choice but to go bold.

It can be hard to distinguish the signal from the noise surrounding the healthcare industry these days. And the decibels will only rise in 2015, especially as the U.S. Supreme Court is set to weigh in on a critical facet of the Affordable Care Act and 2016 presidential contenders are beginning to offer their healthcare prescriptions.

Among the din and uncertainty, however, some clarity can be found. Indeed, the immediate future for the healthcare sector can be summed up by these trends, which Strategy& and PwC have dubbed the New Health Economy:

• Consumers will increasingly play a decision-making role in their healthcare coverage and treatments.
• The federal government will further solidify its position as healthcare market maker.
• Insurance reimbursements will become stingier.
• Employers will look for ways to remain paternalistic by exploring new care and funding models such as bundles.

More than five years ago, Strategy& postulated that the creation of state healthcare exchanges would lead to competition for consumers among insurance companies offering a range of affordable insurance plans. Yet we cautioned against the notion that these exchanges would make employer-driven insurance obsolete. So far, these predictions appear to be on track. Despite a shaky start, the new insurance marketplace is having an impact; a total of 6.7 million people had enrolled through the federal and state exchanges as of November 2014, and insurers are planning to offer more products in more states. Of course, if the U.S. Supreme Court rules in favor of the plaintiffs in King v. Burwell and outlaws federal subsidies for people living in states without their own insurance exchanges, the ACA’s insurance market will have been dealt a heavy blow. But it would not be fatal — many states are already developing workarounds to continue subsidizing coverage.

In 2011, Strategy& also forecast that hospital margins would come under tremendous pressure for the rest of the decade, taking a hit of 20 percent. Since then, a Modern Healthcare study has shown hospital margins have lost about 14 percent, going from 3.6 percent in 2012 to 3.1 percent in 2013. Moody’s has similarly reported a decline in hospital margins over the past two years, nonprofit institutions feeling it the most.

Going forward, we anticipate that as reimbursement pressure grows and underlying costs continue to rise, margin pressure will persist, despite economic expansion and increases in overall healthcare spending. Elimination of the subsidies by the U.S. Supreme Court would exacerbate the situation, particularly in the states opposed to the ACA. Hospitals must respond by significantly lowering costs, surgically removing waste, and reinjecting savings into areas of growth. Many health systems, including some of the most advanced systems in the country, are preparing for this through comprehensive transformation efforts, targeting double-digit improvement in financial performance. We believe that every health system still has room to improve on this front by standardizing, innovating, automating, and driving toward greater system cohesion.

Strategy& strongly believes that there is a need for stronger-form healthcare products — procedural, acute, chronic, or long-term care offerings that change the way healthcare is delivered, financed, and consumed. The accountable care organization (ACO) construct, which reimburses participating providers for achieving quality and cost objectives for a defined Medicare population, has not generated sufficient improvements in care transformation or patient engagement. Indeed, the Pioneer ACO program has lost 40 percent of participating hospitals. Health systems that are continuing with the ACO construct are realizing that changes have to be more than skin-deep. Meanwhile, productized or bundled healthcare — in which a patient pays a single fee for all tests and treatments related to a condition or procedure — is gaining in popularity. A recent Strategy& survey found that about 30 percent of the large health systems and innovative employers are pursuing bundled care and another 50 percent are interested in the concept.

We are witnessing the evolution of a new healthcare marketplace, offering a range of solutions that combine care and financing. It will be more competitive and more transparent, and ultimately shaped by the shifting of risk to providers and consumers, and the addition of retail channels for care and financing. This marketplace will deal in population health solutions combined with a range of acute, chronic, and long-term products. Below are three recommendations for how to lead, manage, and differentiate your organization in this new environment.

Ladies and gentlemen, place your bets

In the past, many of Strategy&’s recommendations for healthcare payors and providers took the form of no-regret moves — foundational management actions sure to pay off under any industry scenario. However, no-regret moves are insufficient for competitive differentiation, and this year we urge payors to place big bets.

Huge decisions loom about the role payors will play, particularly in care delivery transformation. As risk shifts to providers, rewards will follow, and payors will have to decide whether to defend against this transition or accelerate and enable it. For example, payors might seek gains by investing in care delivery assets, renting analytical capabilities to ACOs, or helping balance demand and risk for bundled services offered by a provider. Deciding on the right course will require payors to pick winners — a role they have been uncomfortable with up to this point. And becoming more involved in care delivery means going outside the traditional payor core, a move that could make sense for a subset of payors in 2015 as a way of transforming their business while leveraging their capabilities.

Moreover, capturing the new healthcare consumer will require all health plans to develop a clear retail strategy relying on solid customer analytics. To attract a broad swath of consumers, health plans should develop a winning product mix, pricing structure, and customer experience in 2015, with pilots and experimental programs focused on developing new distribution and digital channels by 2016. And just as payors face fresh competition from providers going directly to employers, private exchanges bring the risk that benefits consultants will play a larger role in influencing an employer’s choice of healthcare plans.

Hospitals and health systems are similarly standing at a crossroads. The decision of how much risk to assume is a major one, driven by a range of factors including market dynamics, mission, network adequacy, and technological strengths. We anticipate that several hundred health networks will become payors. Even more fundamentally, many health systems have yet to decide how they will stand out to consumers and employers: Will it be on the basis of convenience, cutting-edge innovation, value, or experience? Downstream from this fundamental choice is a set of decisions about how health systems will use the new retail channels in the financing and delivery of care.

Having decided on how they will differentiate themselves, health systems can and should double down on growth. The nuance this year is to find opportunities that are less capital intensive by crafting affiliations with like-minded organizations, forging more effective physician partnerships, leveraging advances in virtual health, and freeing up internal funds and bandwidth to redeploy in areas where strategic gains are possible.

Don't take no for an answer

As a health plan or hospital executive, you may have had a conversation with your team recently in which you were told that they have nothing left to cut. Respectfully disagree. In our experience, aligning resources with strategic priorities and applying modern industrial engineering techniques, such as standardizing processes as well as the flow of patients through the facility, can reduce health plan administrative costs by as much as 25 percent.

The “find savings” conversation is most contentious in hospitals, where quality and safety are often given as the reasons to just leave things alone. Another frequently heard excuse is, “We don’t want to stop doing x while the payors are still reimbursing it.” In our experience, it is possible to improve quality, safety, access, patient experience, and engagement of physicians and staff while cutting costs. Most of the leading health systems in the country are setting ambitious targets and rightfully embarking on a ruthless search for unnecessary complexity, fragmentation, and waste. By closely matching supply to demand and getting faculty, doctors, staff, and facilities to perform at the top of their potential, these systems are realizing benefits no matter what payment model they choose. In short, a campaign for operational effectiveness and efficiency is no longer optional — it is table stakes.

Don't believe the hype

In 2014, hospitals, payors, and companies from other industries invested record amounts in healthcare technologies through venture funds, incubators, accelerators, and a variety of other vehicles. Chances are, many of your team members are talking about disruptive innovation, and bankers, vendors, and potential partners are lined up outside your door.

But not everyone will be equally successful in these diversification and innovation efforts. Some will play to their strengths and gain capabilities required to succeed in their specific markets. They will use innovation and diversification as an engine to transform their fundamental core and create advantages in the face of multiple possible industry scenarios. Many others will overpay and take their eyes off the ball. Be guided by your particular business strategy.

Conclusion

The coming year will serve as another waypoint in the evolution of the healthcare industry toward a more competitive and efficient marketplace. We’re optimistic about cost-saving innovations, the entry of new consumer-savvy competitors to the marketplace, and the flourishing of genuinely new models like productized and virtual health. The process will remain evolutionary and thus slow, nonlinear, and massively parallel, with an occasional dead end. Those hoping for a great leap forward will likely be disappointed. Those prepared to compete over the long term will succeed.

Part 3: Transform your company and your industry

Cesare Mainardi and Paul Leinwand

Supercompetitors have a special recipe for success. It’s fueled by capabilities and it makes these iconic companies so powerful that they’re actually influencing and reshaping entire industries. Find out how you can use smart strategy to transform your future.

Watch this video to find out how you can join the ranks of the supercompetitors and use smart strategy to transform your future.

Part 2: Take your strategy from paper to pavement

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Far too many strategies fail when it comes time to bring them to life. In fact, more than two-thirds of executives say they don’t have what they need to execute their strategy. Find out how your company can avoid falling into the strategy-through-execution gap by asking 3 questions.

Watch this video to find out how you can build a practical strategy that works.

Part 1: Why strategy matters

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In turbulent times, your strategy matters more than ever. The world's greatest companies weather adversity and uncertainty much more adeptly by operating from their core strengths. A strategy built on these differentiating capabilities helps you outpace the competition, achieve faster growth, and earn the right to win.

Watch this video to find out how you can build the right strategy and turn turmoil into transformation.

What are the ground rules for data-driven marketing?

IAN MICHIELS 

The quickest way to make a CMO roll their eyes is to tell them they should be making more data-driven decisions. Of course we should, everyone knows that. Unfortunately there are a lot of 'buts' attached to making this a reality.

“But the data I need is fragmented throughout the organisation.”

“But I have no way of linking customer data across channels.”

“But we don’t have the analytical skills internally to analyse the data.”

“But I can’t trust available data.”

The list goes on. There are, however, marketing leaders among us who actually do a very good job at leveraging data to inform marketing decisions. The problem is, when we talk about Big Data and data-driven decisions for marketers, it tends to veer toward boil-the-ocean concepts that are too big and audacious for even the largest marketing teams and budgets to take on. So what’s the practical reality from CMOs who are successful at making consistent data-driven decisions? What does 'data-driven' mean in 2015?

Last year, Gleanster Research surveyed over 9,700 senior marketing professionals in companies of all sizes in Europe and the US. And while there are lots of things your organisation should be doing with customer data, not all of them are realistic. You need to devote limited resources, finite time, and tight budgets to leverage data-driven marketing decisions.

There are a handful of somewhat obvious rules and guidelines that successful data-driven marketers consistently follow. The one caveat here is that these things are somewhat difficult to quantify from a research perspective. They are derived from conversations, analysis, and hands-on experience. Consider these the soft skills you’ll need to stay out of the rat holes and maintain credibly as a marketing leader who values the numbers.

Data is everybody’s friend.

Every organisation is applying analytics to marketing decisions – meaning your colleagues and peers also want to be data-driven marketers. At times even the same data produces different perspectives from internal stakeholders. Everyone’s got data to support their decisions. It’s important to realise that there are no one-size-fits-all answers in analysing marketing data – but there are directional and discernible trends. Always test assumptions. There are no magic insights you can derive from any form of analysis, even if you pay statisticians boatloads of money. Test, validate, and test again. You don’t have all the answers, but rather a process for uncovering the most informed decision. What you bring to the equation that is unique is your interpretation of the data and the actions you recommend for marketing optimisation.

Everyone is risk averse.

Risk comes from not knowing what we are doing. For marketers there’s a risk in sticking your neck out there and analysing customer data. What if the data is inaccurate? What if you don’t have the full picture? Tenacity and perseverance in using data to inform marketing decisions pays off. You may not garner the credibility you want initially, but if you always return to the data, risk-averse leaders will gravitate toward your insights rather than to a peer who relies on anecdotal assumptions. When you analyse data, always try to remove the risk from the findings, dig a little deeper, test alternatives.

It’s not a 'Big Data' challenge.

Sure, there’s a ton of data on customers at every organisation. Your job in marketing is not to analyse all of it. It’s to prioritise decisions and figure out where the path of least resistance lies to improve conversion, save costs, save time, and increase revenue. Pick one or two duties in your job and fix something. Anything, big or little. The practical reality is that you don’t have to analyse big data in marketing. You have to pick small samples and populations of data that can inform one or more decisions. World hunger is solved one slice of bread at a time – and every slice makes a difference in the aggregate. Someday machine learning will help us uncover the gems in big data, but today you have to start somewhere, with currently available data, in areas where you can effect change.

Simplicity is the ultimate sophistication.

That’s actually a quote from Leonardo Da Vinci. Marketers are overworked and underpaid. You have regular duties and responsibilities in your job, and normally they don’t account for committing time to analysing data. So you need to look for leverage in how you commit time and resources. If you’re a senior leader, don’t waste your team’s time chasing questions that can’t be answered. Prioritise a few decisions that will make a difference for the organisation and consider that a huge win when they prove valuable.

Context begets analytics.

The challenge with data is analysis paralysis. You have to know when to stop digging and take action. Marketers’ unique skillset for the organization is their creativity and emotionally charged perspective on how to drive a visceral reaction from a target audience. Those skills come from having context about what drives your buyer – what makes them purchase, engage, share, and react. For marketers the insights in customer data usually aren’t black and white. It’s the interpretation of the data as much as the analytical process. Sometimes marketers sell themselves short because they aren’t statisticians or metric oriented. The truth is, the most skilled statistician probably can’t provide the context you can when looking at the same data. They can isolate correlations, but those just tell you where to dig further. Marketers are incredibly valuable because they can layer context over analysis, so be confident in the value you offer.

Frame the opportunity, not the problem.

Every organisation has challenges – especially with respect to analysis. According to Gleanster Research, 8 out of 10 CMOs at large enterprise organizations believe they could be doing a better job leveraging available data to inform marketing decisions. But your job when analysing data is ALWAYS to uncover the opportunity to make a better decision, improve process, or boost key performance indicators. Don’t waste time identifying the problems with the availably of data or the internal use of data. Stay focused on effecting changes with insights informed by data, and eventually you start to stand out as someone who knows how to dig into the data and act accordingly.

Act like a two-year-old from time to time.

No, don’t throw a tantrum. Ask why. Ask why a lot. Why helps delve into the heart of your analysis even after you think you have come to a conclusion. “Why don’t we look at…x?” “Why is this the ideal conclusion?” Why also gives marketers credibility because it’s an analytical question. All too often senior leaders default to “well I think...” and they may or may not have the right answer. But why is going to drive the entire organisation down a discovery path. “I think” closes it out and dictates a decision.

8 Core Principles of Blue Ocean Strategy

The fundamentals that will jump start your strategy development process

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W. Chan Kim and Renée Mauborgne

What is distinctive about blue ocean strategy as a theory? How is blue ocean strategy different from a classic differentiation strategy? Is it another form of low cost strategy? What’s the research process behind it? In the decade since Blue Ocean Strategy was first published, we’ve fielded thousands of such questions. Some executives want to understand how it addresses the issue of execution. Some ask what the strategy is based on. Others question whether the strategy will be effective in their industry. We heard certain questions again and again and, in response, have identified eight core principles. Here we outline the essence of blue ocean strategy.

It’s grounded in data

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Blue ocean strategy is based on a decade long study of more than 150 strategic moves spanning more than 30 industries over 100 years. Industries ranged from hotels, cinema, retail, airlines, energy, computers, broadcasting, and construction to automobiles and steel. We analyzed not only winning business players who created blue oceans but also their less successful competitors. We searched for convergence among the group that created blue oceans and within less successful players caught in the red ocean. We also searched for divergence across these two groups. In so doing, we tried to discover the common factors leading to the creation of blue oceans and the key differences separating those winners from the mere survivors and the losers adrift in the red ocean. As our database and research have continued to expand and grow over the last ten years since the first edition of our book was published, we have continued to observe similar patterns whether blue oceans were created in for-profit industries, non-profit organizations, or the public sector.

It pursues differentiation and low cost

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Blue ocean strategy is based on the simultaneous pursuit of differentiation and low cost. It is an “and-and,” not an “either-or” strategy. Conventional wisdom holds that companies can either create greater value for customers at a higher cost or create reasonable value at a lower cost. Here strategy is seen as making a choice between differentiation and low cost. In contrast, blue ocean strategy seeks to break the value-cost tradeoff by eliminating and reducing factors an industry competes on and raising and creating factors the industry has never offered. This is what we call value innovation.

Value innovation is distinctively different from the competitive strategic approach that takes an industry structure as given and seeks to build a defensible position within the existing industry order. The strategic logic of value innovation guides companies to identify what buyers commonly value across the conventional boundaries of competition and reconstruct key factors across market boundaries, thereby achieving both differentiation and low cost and creating a leap in value for both buyers and the company.

It creates uncontested market space

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Blue ocean strategy doesn’t aim to out-perform the competition. It aims to make the competition irrelevant by reconstructing industry boundaries. Whereas conventional strategic approaches drive companies to define their industry similarly and focus on being the best within it, blue ocean strategy prompts them to break out of the accepted boundaries that define how they compete. Instead of looking within these boundaries, managers need to look systematically across them to create blue oceans – new and uncontested market space of new demand and high profitable growth.

It empowers you through tools and frameworks

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Blue ocean strategy offers systematic tools and frameworks to break away from the competition and create a blue ocean of uncontested market space. The field of strategy, by contrast, has predominantly focused on how to compete in established markets, creating an arsenal of analytic tools and frameworks to skillfully achieve this. Blue ocean strategy is built on the common strategic patterns behind the successful creation of blue oceans. These patterns have allowed us to develop underlying analytic frameworks, tools and methodologies to systematically link innovation to value and reconstruct industry boundaries. The visual and actionable frameworks and tools like the strategy canvas, four actions framework and six paths form the analytic foundations of the blue ocean creation process, bringing structure to what has historically been an unstructured problem in strategy. They provide a roadmap and critical visual guidance for systematically pursuing value innovation and creating uncontested market space. Companies can make proactive changes in industry or market fundamentals through the purposeful application of these blue ocean tools and frameworks.

It provides a step-by-step process

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From assessing the current state of play in an industry, to exploring the six paths to new market space, to understanding how to convert noncustomers into customers, blue ocean strategy provides a clear four-step process to break away from the competition and create a blue ocean of strong profitable growth. The four-step process is designed around the concepts and analytic tools of blue ocean strategy and fair process. It is built based on our strategy practices in the field with many companies over the last two decades. It allows managers and their teams to develop rigorous and concrete strategies while capturing the big picture. In this way, it presents an alternative to the existing strategic planning process, which is often criticized as a number-crunching exercise that keeps companies locked into making incremental improvements.

It maximizes opportunity while minimizing risk

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Blue ocean strategy is an opportunity-maximizing risk-minimizing strategy. Of course any strategy will always involve risks – be it red or blue. However, blue ocean strategy provides a robust mechanism to mitigate risks and increase the odds of success. A key framework here is the Blue Ocean Idea Index. The Blue Ocean Idea Index lets you test the commercial viability of your blue ocean ideas and shows you how to refine your ideas to maximize your upside while minimizing downside risks. It allows you to answer four key questions: First, is there a compelling reason for people to buy your offering? Second, is your offering priced to attract the mass of target buyers so they have a compelling ability to pay for it? Third, can you produce your offering at the strategic price and still earn a healthy profit from it? And finally what are the adoption hurdles in rolling out your idea and have you addressed these upfront? The first two questions address the revenue side of your business model. They ensure that you create a leap in net buyer value. The third question ensures the profit side of your business model. And the last question ensures that you have given good thought and addressed externalities that could trip up even the best new idea.

It builds execution into strategy

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The process and tools of blue ocean strategy are inclusive, easy to understand and communicate, and visual – all of which makes the process non-intimidating and an effective path to building execution into strategy and the collective wisdom of a company.
Equally as important, blue ocean strategy is a strategy that expressly joins analytics with the human dimension of organizations. It recognizes and pays respect to the importance of aligning people’s minds and hearts with a new strategy so that at the level of the individual, people embrace it of their own accord and willingly go beyond compulsory execution to voluntary cooperation in carrying it out. To achieve this, blue ocean strategy does not separate strategy formulation from execution. Although this disconnect may be a hallmark of most companies’ practices, our research shows it is also a hallmark of slow and questionable implementation and mechanical follow-through at best. Instead, blue ocean strategy builds execution into strategy from the start through the practice of fair process in the making and rolling out of strategy.

Fair Process, namely, engagement, explanation and expectation clarity, prepares the ground for implementation by invoking the most fundamental basis of action: trust, commitment, and the voluntary cooperation of people deep in an organization. Commitment, trust, and voluntary cooperation are not merely attitudes or behaviors. They are intangible capital. They allow companies to stand apart in the speed, quality, and consistency of their execution and to implement strategic shifts fast at low cost.

It shows you how to create a win-win outcome

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With its integrated approach, blue ocean strategy shows how to align the three strategy propositions – value, profit, and people – to ensure your organization is aligned around your new strategy and that it creates a win for buyers, the company, and for employees and stakeholders. For any strategy to be successful and sustainable an organization must develop an offering that attracts buyers; it must create a business model that enables the company to make a tidy profit; and it must motivate the people working for or with the company to execute the strategy. While good strategy content hinges upon a compelling value proposition for buyers and a robust profit proposition for the organization, sustainable strategy execution is based largely on a motivating people proposition. The alignment of the three propositions proposed by blue ocean strategy ensures that an organization is taking a holistic approach to the formulation and execution of strategy. Together the three propositions provide an organizing framework for creating a winning strategy that will benefit buyers, the company, as well as internal and external stakeholders.

http://www.blueoceanstrategy.com/