Creating Blue Oceans

Defying Conventional Wisdom: The common thread of greatness

Companies today, facing an environment of great uncertainty, need to embrace the idea of challenging traditional industry assumptions.  This perspective of defying conventional wisdom goes hand-in-hand with the process of Blue Ocean Strategy, which is a systematic approach to turning unconventional ideas into successful strategies.  

The importance of embracing the perspective of defying conventional wisdom was noted recently in an interview given by Steve Forbes, editor of Forbes magazine, to the Tampa Times.  The inspiration for Forbes’ insight came a few years ago when he was browsing in a Florida bookstore and picked up a copy of Hannibal Crosses the Alps by Eckerd College classics professor John Prevas. From the Times interview:

As he reviewed the book for his magazine, Forbes was struck by two things: that the elements of successful leadership have not changed in 2,000 years and that anyone who accomplishes something great or unique, whether in business or politics, often does so by defying conventional wisdom.

Are you continuously searching for a different angle and fresh perspective?  For inspiration, you can see more of our ideas on Defying Conventional Wisdom.

[Image via Dai Oni.]

South Korean government announces exploration of serious ‘blue ocean’ games

“The overriding focus of strategic thinking has been on competition-based red ocean strategies …. To focus on the red ocean is therefore to accept the key constraining factors … and to deny the distinctive strength of the business world:  the capacity to create new marketspace that is uncontested” (From pages 6 - 7 of Blue Ocean Strategy, co-authored by Professor W. Chan Kim and Professor Renée Mauborgne).

Recently the South Korean Ministry of Culture, Sports and Tourism revealed plans to inject  USD 64 million into the serious games market, which Minister Yu In-Chon refers to as an “emerging blue ocean.”  In fact, the blue ocean is so vast that according to the Korea IT Times the ministry's goal is to grow this marketspace to a value of USD 400 million by 2012.

From gameindustry.biz:

The functional game market is at an early stage, but the market is an emerging blue ocean.  The government is going to give support to prompt private investment in that field,” said minister Yu In-Chon.

As you might have guessed, “serious” games are those which are developed for a primary purpose other than pure entertainment.  While the Korean government has yet to make a specific announcement about gaming applications, they are likely to include medical simulations, educational titles and military simulations.

[Image via getCHU.]

Blue Ocean Strategy: Jump the resource hurdle

Continuing with our Blue Ocean Strategy Basics series, we are highlighting Tipping Point Leadership and the Four Organizational Hurdles to Strategy Execution.  Once an overview of each ‘hurdle’ is published it is made accessible through the Blue Ocean Strategy Basics archive of this site.  For our introduction to the ‘Resource Hurdle’ we turn to pages 156 – 157 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne).

How do you get an organization to execute a strategic shift with fewer resources? Instead of focusing on getting more resources, tipping point leaders concentrate on multiplying the value of the resources they have. When it comes to scarce resources, there are three factors of disproportionate influence that executives can leverage to dramatically free resources, on the one hand, and multiply the value of resources, on the other. These are hot spots, cold spots, and horse trading.

Hot spots are activities that have low resource input but high potential performance gains. In contrast, cold spots are activities that have high resource input but low performance impact. In every organization, hot spots and cold spots typically abound. Horse trading involves trading your unit’s excess resources in one area for another unit’s excess resources to fill remaining resource gaps. By learning to use their current resources right, companies often find they can tip the resource hurdle outright.

What actions consume your greatest resources but have scant performance impact? Conversely, what activities have the greatest performance impact but are resource starved? When the questions are framed in this way, organizations rapidly gain insight into freeing up low-return resources and redirecting them to high-impact areas. In this way, both lower costs and higher value are simultaneously pursued and achieved.

Related links:

Buy the Blue Ocean Strategy book.

[Image via visualpanic.]

A Blue Ocean revolution in finance

Challenging an industry’s conventional wisdom about which buyer group to target can lead to the discovery of new blue oceans. By looking across buyer groups, companies can gain new insights into how to redesign their value curves to focus on a previously overlooked set of buyers (Blue Ocean Strategy, page 61).

We recently received an article contribution entitled "Islamic Finance in the Blue Ocean," which describes the need not only for change and reform in finance, but to address the banking needs of a previously overlooked set of buyers.  That set of buyers is, in fact, a rather large one — potentially consisting of the entire global Islamic population. 

As Ng Boon Ka writes:

Blue Ocean Strategy advocates a better strategy by exploring “blue oceans,” or untapped and untargeted markets that hold tremendous growth potential — rather than going against rivals for a share of existing markets.

The development of BOS revolves around preference for risk minimization by reconstructing market boundaries; focusing on the big picture, not numbers; reaching beyond existing demand; getting the right strategic sequences, overcoming organizational hurdles and embedding execution into strategy.

The present economic crisis sparks “creative destruction” whereby “out of destruction a new spirit of creativity arises” for Islamic finance to be the agent of change.

In fact, the revolution is likely to happen sooner than anticipated, with the recent announcement by Shaikh Saleh Kamel, chairman of Al Baraka Banking Group, of the imminent launch of a new mega Islamic Bank.

Download the entire article Islamic Finance in the Blue Ocean, by Ng Boon Ka, Oxford law graduate and PhD candidate at Centre for Education on Islamic Finance, INCEIF, here.

[Image via Reuters.]

Global Crisis – The Comic Angle: Remain afloat till hard times pass

No matter where one turns these days, it seems nearly impossible to escape the news of the latest company or industry to unravel.  So to challenge the status quo of doom and gloom, and to inject a layer of much needed levity, our 'Global Crisis — The Comic Angle' series presents satirical articles of different industries during the crisis.  Today we showcase an article poking fun at the strategy of demanding bailouts to combat the current crisis, which encapsulates typical Red Ocean thinking in this quote: “Our hope is to remain afloat as an industry until these hard times pass.”

From Recoil Magazine:

Washington, D.C. – Citing the nation’s poor economy and a major downturn in the Grand Openings sector, CEOs of the giant ceremonial scissors industry went before Congress Tuesday, asking the U.S. government for bailout funds to keep their businesses alive during the current slowdown.

CEOs from the four largest giant ceremonial scissors makers laid out a plan that would call for $13 billion to fund job-creating activities like grand re-openings for more than 4,000 grocery stores across the nation, a redeemable voucher program to encourage consumers to buy American-made ceremonial shears, and a government buyback program that would guarantee higher aftermarket values for giant ceremonial scissors purchased within the next year.

“Our hope is to remain afloat as an industry until these hard times pass,” said Frank Melman, CEO of Festive Cuts, a giant ceremonial scissors manufacturer that produced its first pair of massive scissors in 1922. “We’ve tried everything we can to curb the effects of this recession, but in order to keep our employees working and to keep America opening stores and breaking ground in our time-honored grand fashion, we need an investment from our fellow citizens and leaders.”

[Image via The Pitch.]

Blue Ocean Strategy: Break through the cognitive hurdle

Continuing with our Blue Ocean Strategy Basics series, over the course of the next three weeks we will continue to highlight Tipping Point Leadership and the Four Organizational Hurdles to Strategy Execution.  Once an overview of each example, or ‘hurdle,’ is published it is made accessible through the Blue Ocean Strategy Basics archive of this site.  For the next entry in our series on Tipping Point Leadership and the Four Organizational Hurdles to Strategy Execution, we turn to pages 152 – 155 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne).

Tipping point leadership does not rely on numbers to break through the organization’s cognitive hurdle. To tip the cognitive hurdle fast, tipping point leaders such as Bratton zoom in on the act of disproportionate influence: making people see and experience harsh reality firsthand. Research in neuroscience and cognitive science shows that people remember and respond most effectively to what they see and experience: “Seeing is believing.” In the realm of experience, positive stimuli reinforce behavior, whereas negative stimuli change attitudes and behavior. Simply put, if a child puts a finger in icing and tastes it, the better it tastes the more the child will taste it repetitively. No parental advice is needed to encourage that behavior. Conversely, after a child puts a finger on a burning stove, he or she will never do it again. After a negative experience, children will change their behavior of their own accord; again, no parental pestering is required. On the other hand, experiences that don’t involve touching, seeing, or feeling actual results, such as being presented with an abstract sheet of numbers, are shown to be non-impactful and easily forgotten.

Tipping point leadership builds on this insight to inspire a fast change in mindset that is internally driven of people’s own accord. Instead of relying on numbers to tip the cognitive hurdle, they make people experience the need for change in two ways.

To break the status quo, employees must come face-to-face with the worst operational problems. Don’t let top brass, middle brass, or any brass hypothesize about reality. Numbers are disputable and uninspiring, but coming face-to-face with poor performance is shocking and inescapable, but actionable. This direct experience exercises a disproportionate influence on tipping people’s cognitive hurdle fast

To tip the cognitive hurdle, not only must you get your managers out of the office to see operational horror, but also you must get them to listen to their most disgruntled customers firsthand. Don’t rely on market surveys. To what extent does your top team actively observe the market firsthand and meet with your most disgruntled customers to hear their concerns? Do you ever wonder why sales don’t match your confidence in your product? Simply put, there is no substitute for meeting and listening to dissatisfied customers directly.

Related links:

Buy the Blue Ocean Strategy book.

[Image via PsicoCafe.]

The Small College from Kentucky that outshines Harvard

According to a survey by the US Department of Education in 2006, nearly two of every three undergraduate students in the USA are going into debt to go to college, owing an average of more than US$19,000.  And this figure speaks only about the segment of students who qualify for financial aide.  What about those who aren’t quite as lucky, don’t they deserve a chance at higher education as well?

Enter Berea College, which is defying conventional wisdom in the education sector.  The school’s secret?  Free tuition.  The college’s unique approach opens up education to a larger pool of quality students, decreases the overall cost per student (by having them work), and gives them a high quality education — all Blue Ocean Strategy themes.

From Time:

At Berea, which was founded in 1855 as the first integrated college in the South, all 1,530 students work at least 10 hours a week in a campus or service job, earning US$ 3.80 an hour and four years of free tuition. Eighty percent of the school's operating costs are funded by its endowment and the rest comes from donations, a tough combination these days: the school announced on Friday that it would lay off 30 employees, or 5% of the staff. Berea did not, however, back off from its commitment to offering a free education, and this year, not surprisingly, as applications cratered at some expensive schools, Berea notched a 15% increase. And more of the students applying were of a higher academic caliber. The number who received the school's top "four-star" academic rating jumped 10%, raising the average GPA of admitted students to 3.48. All of which might be expected after an October survey from MeritAid.com found that 57% of high school seniors were considering a less prestigious school for financial reasons. Berea is used to getting high-quality students who say affordability is a major factor, says Joe Bagnoli, associate provost for enrollment. "This year, there were just more of them."

What the school didn't expect, however, was to hang on to so many of those top students....

[Image via Rosa Say.]

Blue Ocean Strategy: Go where they’re not

We recently came across a thought-provoking article by business author Scott Eblin, in which he discusses how ‘underdogs’ have been winning at a much higher rate over the past 100 years.  Why?   Because they better understood their weaknesses and adopted strategies against their much larger and better equipped opponents.  Creating a ‘blue ocean’ is a prime example of this approach.  As such, we second Eblin’s suggestion that as we move through the downturn and into recovery, perhaps business and government leaders need to adopt the mindset that we are all ‘underdogs.’ 

From Business Management Daily:

Go Where They’re Not:  In their book, Blue Ocean Strategy, Chan Kim and Renee Mauborgne offer an underdog’s handbook for succeeding by going where the competition isn’t.  Rather than competing in the red ocean (think of sharks fighting for the same food), they talk about creating blue ocean opportunities.  Take online music as an example.  It wasn’t long ago that the Recording Industry Association of America was filing law suits against 15 year olds for downloading music from free file sharing sites.  Enter Steve Jobs and Apple who said, “How about if we create a service where you can download all the songs you want for 99 cents each?”  Five billion downloaded songs later, Apple’s changed an industry and created two “must have” devices (iPod and iPhone) that have fed off the iTunes model.

[Image © CreatingBlueOceans.com ]

Blue Ocean Strategy: Tipping Point Leadership in Action

Continuing with our Blue Ocean Strategy Basics series, over the course of the next four weeks we will continue to highlight examples of Tipping Point Leadership and the Four Organizational Hurdles to Strategy Execution.  Once an overview of each example or ‘hurdle’ is published, it is made accessible through the Blue Ocean Strategy Basics archive of this site.  For the next entry in our series on Tipping Point Leadership and the Four Organizational Hurdles to Strategy Execution, we turn to pages 148 – 149 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne).

Consider the New York City Police Department (NYPD), which executed a blue ocean strategy in the 1990s in the public sector. When Bill Bratton was appointed police commissioner of New York City in February 1994, the odds were stacked against him to an extent few executives ever face. In the early 1990s, New York City was veering toward anarchy. Murders were at an all-time high. Muggings, Mafia hits, vigilantes, and armed robberies filled the daily headlines. New Yorkers were under siege. But Bratton’s budget was frozen….

Yet in less than two years and without an increase in his budget, Bratton turned New York City into the safest large city in the United States. He broke out of the red ocean with a blue ocean policing strategy that revolutionized U.S. policing as it was then known. Between 1994 and 1996, the organization won as “profits” jumped:  Felony crime fell 39 percent, murders 50 percent, and theft 35 percent. “Customers” won: Gallup polls reported that public confidence in the NYPD leaped from 37 percent to 73 percent. And employees won: Internal surveys showed job satisfaction in the NYPD reaching an all-time high. As one patrolman put it, “We would have marched to hell and back for that guy.” Perhaps most impressively, the changes have outlasted its leader, implying a fundamental shift in the organizational culture and strategy of the NYPD. Even after Bratton’s departure in 1996, crime rates have continued to fall.

Few corporate leaders face organizational hurdles as steep as Bratton did in executing a break from the status quo. And still fewer are able to orchestrate the type of performance leap that Bratton achieved under any organizational conditions, let alone those as stringent as he encountered. Even Jack Welch needed some ten years and tens of millions of dollars of restructuring and training to turn GE into a powerhouse.

Moreover, defying conventional wisdom, Bratton achieved these breakthrough results in record time with scarce resources while lifting employee morale, creating a win-win for all involved. Nor was this Bratton’s first strategic reversal. It was his fifth, with each of the others also achieved despite his facing all four hurdles that managers consistently claim limit their ability to execute blue ocean strategy: the cognitive hurdle that blinds employees from seeing that radical change is necessary; the resource hurdle that is endemic in firms; the motivational hurdle that discourages and demoralizes staff; and the political hurdle of internal and external resistance to change.

Related links:

Buy the Blue Ocean Strategy book.

[Image via 1832pro.]

Blue Ocean Strategy: Key to preparing for an abnormal recovery

In light of the lingering global economic downturn, we continue to receive inquiries from around the world asking how Blue Ocean Strategy can help.  While during the short-term the situation may seem gloomy, Blue Ocean Strategy is especially important and relevant during such times — because it looks for sources of innovation and cost savings simultaneously.  In fact, yet another recent article along this same theme discusses “3 Ways To Prepare For An Abnormal Recovery,” and advocates that companies “Use the ‘Blue Ocean Strategy’ to achieve value innovation and more favorable economics in new and existing markets.

From MediaPost:

The value that is vaporizing in one business can be created anew in another. Capitalize on the new paradigms of a digital interactive age by embracing socialization, personalization, monetization and other means to a profitable end. Wean off of traditional, legacy structure and assets and embrace virtual, interactive solutions. Use the "Blue Ocean Strategy" to achieve value innovation and more favorable economics in new and existing markets. It is mandatory to take some measured risk with what you know and can control.

Deep cost cuts that sacrifice talent and intelligence have become a damaging, counterproductive reflex to a situation that is as much about transformation as recession. These times call for shifting -- not eliminating -- spending, and forging new game plans to capitalize on tech advances. Consumers' digital adoption continues full steam ahead, even in economic tough times. Translate everything you can be and do to smaller screens, mobile devices and interactive exchanges with key constituents. Reinvent yourself. It beats sitting on your hands.

[Image © CreatingBlueOceans.com ]