Creative Blue Ocean Strategy vs. Management Efficiency

Back at the beginning of the economic downturn, we wrote about Blue Ocean Strategy being an important tool for leaders as it looks for cost reduction AND new sources of value for buyers.  The assertion was echoed by Bruce Nussbaum, Innovation Editor at BusinessWeek, and Sami Mahroum, a Research Director of Britain's National Endowment for Science, Technology & the Arts, among others.  Continuing on this theme, a recent article from Psychology Today discusses the necessity for Blue Ocean Strategy-like thinking — in contrast to simple cost slashing — as a solution to the economic downturn.

From Psychology Today:

The mantra for business for much of the last century has been operational efficiency. So leaders look for ways to cut costs and make the operations lean and mean. Yet much of the rationale for and evidence supporting efficiency as a key management strategy is questionable.

In a great article by Adam Hartung in Forbes, titled “The Myth of Efficiency,” he outlines how leaders have mistakenly used efficiency to drive business results, often with disastrous results. Hartung cites W. Chan Kim and Renee Mauborgne, of INSEAD International Business School, and the authors of Blue Ocean Strategy, who advanced the argument that businesses should create new market space or "Blue Ocean" rather than competing in an existing industry. Kim and Mauborgne say that only 14% of innovations are radical, and that those few radical innovations produce 61% of company profits....

3M's CEO, George Buckley in BusinessWeek, argues that creative blue ocean strategy produces better business results than the traditional focus on operational efficiency, and he argues further, that excessive focus on efficiency stifles innovation.

[Image via elrani.]