Creating Blue Oceans

Let’s Get Academic – Part 2

In the September issue of Fast Company, Editor Robert Safian posed challenging questions about the state of higher education, and the best model for the future.  With the average annual cost of attending a private four-year college rising nearly 4% to US$ 32,307 this school year — the biggest increase since 2001 — academia is ripe for Blue Ocean Strategy-based thinking and solutions.  

Yesterday we promised our readers the eagerly-awaited solution proposed by Gabor to the challenge raised by Robert Safian in Fast Company’s “Letter from the Editor: Lessons of the Edupunks.”  Below is an excerpt from the full version of Gabor’s solution, which appears in the November issue of Fast Company.

Given the astounding tuition cost of leading universities, education has to be regarded as a business proposition by both students and the schools themselves.  Students make an investment to attend in the hope of qualifying for well-paying jobs after graduation, while universities count on continuous donations by alumni to keep themselves going.  Embracing this simple equation is the first step in universities shedding the false sanctity of outdated traditions in favor of asking such timely questions as: How can we create a model that minimizes the costs and maximizes the return for both students and our university simultaneously?  How can we best enrich the lifestyle of our students so they are not saddled with debt from the moment they graduate?  And how can we become ‘market driving’ rather than simply ‘market driven’ to attract the greatest pool of talented students?  Bold questions, indeed.  
 


So here is a possible solution:  Leading universities have amassed billions of dollars in endowment.  Rather than trying to out-compete each other in endowment ratios and levels, let’s tap these funds as the source for the new model.  Let’s use a portion of the endowment’s yearly investment income to do away with tuition fees all together, and offer free attendance.  In return, once students graduate they would contribute a certain percentage of their annual earnings to the school for x number of years, or until a specified threshold is reached.  

For universities with suitable resources, the cost of this program could be relatively low – just 5% of total endowment could more than cover the full tuition of all students – meaning that they would only have to invest a portion of their yearly investment income, and not principal.  To illustrate, here is the rough calculation for Amherst College, with rounded figures: 5% of its $1.7 Billion endowment would yield $50,000 for each of its 1,700 students per year, more than sufficient to cover tuition).   And the returns would be tantalizing:  They could select students purely on future potential from a vastly expanded talent pool, and see much greater levels of alumni contributions than currently (they could even account for a portion of students not pursuing commercial careers with their degree). For students this model would eliminate the biggest burden of higher education altogether, better prepare them for the post-graduation marketplace, and allow them to take charge of their future with much greater flexibility.  In short, there would be a close alignment of interests between students and universities.

[Image via Brands of the World.]

Let’s Get Academic: Blue Ocean Strategy for higher education

In the September issue of Fast Company, Editor Robert Safian posed challenging questions about the state of higher education, and the best model for the future.  With the average annual cost of attending a private four-year college rising nearly 4% to US$ 32,307 this school year — the biggest increase since 2001 — academia could definitely benefit from Blue Ocean Strategy-based thinking and solutions.  

In “Letter from the Editor: Lessons of the Edupunks” Mr. Safian poses the following questions:

If you were starting a system of higher education from scratch today, would you still choose a campus-based model that charges hundreds of thousands of dollars for a degree? Or might the efficiency of the Web inspire a model in which classes would be remotely delivered via Web streaming, discussion groups conducted over Facebook, and testing handled electronically?....

One possible remedy?  Tune in tomorrow when we present Gabor’s response to Mr. Safian.

[Image via ANVRecife.]

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.]

The Perfect Calm Series: Dean Kamen Reinvents Coke’s Soda Fountain

One of the most exciting spheres of application for Blue Ocean Strategy is the realm of Social Capitalism. This explosive market space is at the intersection of successful business and lasting social impact. Traditionally these two spheres were considered separate, but the two can be pursued simultaneously via Blue Ocean Strategy. Periodically, we feature stories which illustrate stimulating ventures, ideas and concepts targeting this very market space.



This week, we select the story:  Dean Kamen Reinvents Coke’s Soda Fountain .

Do you know of other companies, organizations or business visionaries sailing along the intersection of good business and social good? Share your ideas with the Creating Blue Oceans Community.

[Image via BusinessWeek.]

Blue Ocean Strategy co-authors rank among ‘World’s Top 50 Thinkers’

In conjunction with McGraw Hill, the Crainer-Dearlove annual list of the World’s Top 50 Thinkers has been published.  As a testament to the power and relevance of Blue Ocean Strategy, Professor Renée Mauborgne and Professor W. Chan Kim again appear in the Top 10, this time being awarded fifth place. 

From TheThinkers50, here are the Top 10:

1. CK Prahalad
2. Malcolm Gladwell
3. Paul Krugman
4. Steve Jobs
5. W. Chan Kim & Renée Mauborgne
6. Muhammad Yunus
7. Bill Gates
8. Richard Branson
9. Philip Kotler
10. Gary Hamel

Blue Ocean Strategy became an International Bestseller, after claiming the Wall Street Journal Bestseller, BusinessWeek Bestseller, and National (American) Bestseller status. It has been published in 41 languages, covering over 180 countries, breaking HBSP's historical record of most foreign language translations ever achieved. 

More about the TheThinkers50, including the complete 2009 list and how it is assembled, as well as a video gallery and ‘guru radar’ is available via their website.

[Image via richardsmith155.]

Defying Conventional Wisdom: Enterprising Snail

Blue Ocean Strategy is all about challenging conventional wisdom – questioning taken-for-granted assumptions, and overstepping industry boundaries. It’s a frame of mind of continuously questioning and searching for a different angle and fresh perspective. You can draw inspiration from everyday life, and train your mind to have a discerning view of the world around you. Consider the following bit of comic insight as an example of challenging conventional wisdom.

Snapshot from the animal kingdom:  As snails grow they abandon their shells and seek bigger empty shells to move into. Going through the process repeatedly, could it ever occur to an enterprising snail that there is a real business opportunity in this? It could collect a selection of various size shells and lease them to fellow snails in exchange for food or protection, thereby creating a primitive barter system.

[Image via Sundrop designs.]

The Blue Ocean Tipping Point

Despite news reports that the global enconomic downturn may be coming to an end, there is still admittedly great uncertainty. And while the short-term outlook may seem still a bit gloomy, Blue Ocean Strategy is especially important and relevant during this period — because it looks for sources of differentiation and cost savings simultaneously.  In fact, in a recent interview from Forbes India magazine, Professor Renée Mauborgne (co-author of Blue Ocean Strategy) discusses why Blue Ocean Strategy is now more imperative for companies than ever before.

From Forbes India:

Q. Your Blue Ocean Strategy’ book and concept — which encourage firms to stop fighting their rivals in ‘bloody-red oceans’ for a shrinking pool of profits and instead create ‘blue oceans’ of uncontested market space — has been wildly popular. How does the current finance crisis affect this theory?

A. In the past few months, the impact of the financial crisis has been felt around the globe. The turmoil has been eroding business confidence, contracting both investments and consumer spending, and increasingly trapping the real economy into recession. As we know, a recession or depression is typically marked by a decline in overall demand, which will further exacerbate the situations of companies that are already facing intense competition and shrinking profit margins. Under such conditions, competing within a contracting market and dividing existing-and-shrinking demand will only lead to the path of doom.

It is therefore more imperative than ever for companies to shift their attention and efforts from the competition to buyers, and from dividing existing demand to creating new demand in order to embark upon the path of profitable growth and lead themselves and the world out of the crisis. The effort to create new market space and generate new demand at the micro level, which is at the core of Blue Ocean Strategy (BOS), serves to complement and reinforce government efforts worldwide to stimulate demand at the macro level.

[Image via marci.icram.]

A greener shade of blue

What does it mean to challenge conventional wisdom, and to create a strategy that may appear counter-intuitive and sidesteps the competition?

“To maximize the size of their blue oceans, companies need to take a reverse course. Instead of concentrating on customers, they need to look to noncustomers. And instead of focusing on customer differences, they need to build on powerful commonalities in what buyers value. That allows companies to reach beyond existing demand to unlock a new mass of customers that did not exist before” (from page 61 - 62 of the book Blue Ocean Strategy, co-authored by Professor W. Chan Kim and Professor Renée Mauborgne).

We recently spotted an article about Conway electronics company of Korea, which is looking to establish itself as a major player in the electronics industry.  However, rather than going head-to-head with competition ranging from Samsung and LG to Siemens and Whirlpool, Conway is reaching beyond current demand and create a blue ocean through ‘green goods’ and eco-friendly home appliances. If it is successful, it will afford Conway the immediate and coveted label of being ‘environmentally-friendly’ as well as ‘lifestyle driving’ — as opposed to just being market driven.

From the Korea Times:

In boosting Coway as a globally recognized brand, Lee said the green goods market offers many more opportunities compared to competing already-competitive industries.

``The rivalry in white goods is too fierce, with so many international powerhouses competing head to head. Obviously, we do not want to step in there,'' said Lee who worked for Samsung Electronics 20 years before joining Coway.

``By contrast, few players have waded into the green goods market. Samsung, LG, Siemens and Whirlpool have yet to take the fledgling market seriously. We are looking to make a noise with a `blue ocean' strategy,'' he said, referring to the strategy of creating new market space.

In other words, Lee said Coway strives to stand out by capitalizing on the world electronics market's paradigm shift toward environmental-friendly products.

``When the potential of green goods becomes full-fledged, we will be able to savor a first-mover advantage on the strength of our competitiveness in technologies, designs and global sales networks,'' Lee said.

[Image via Shumate.]

The Perfect Calm Series: Space Adventures sends Cirque du Soleil founder to space

One of the most exciting spheres of application for Blue Ocean Strategy is the realm of Social Capitalism. This explosive market space is at the intersection of successful business and lasting social impact. Traditionally these two spheres were considered separate, but the two can be pursued simultaneously via Blue Ocean Strategy. Periodically, we feature stories which illustrate stimulating ventures, ideas and concepts targeting this very market space.

This week, we select the story:  Space Adventures sends Cirque du Soleil founder to space .

Do you know of other companies, organizations or business visionaries sailing along the intersection of good business and social good? Share your ideas with the Creating Blue Oceans Community.

[Image via CNET News.]

Global Recovery Comic Angle: Bank of America sued for 1,784 billion trillion dollars

Despite the potential upswing of the global economy – there is still great uncertainty and tension in the air.  So to inject a much needed layer of levity, our “Global Recovery Comic Angle” series presents satirical articles of different industries during this period.  Today we showcase a story about a man suing Bank of America for a rather large sum of money — which is reflective of the general frustration with the banking industry — especially given its reliance on government bailouts just to keep afloat.

From gothamist:

A disgruntled New Yorker is suing the Bank of America for "1,784 billion, trillion dollars." It gets weirder: The suit, filed by Dalton Chiscolm last month, is being reviewed by the same federal judge who sentenced Bernard Madoff to a 150-year prison sentence. Judge Denny Chin has called the lawsuit "incomprehensible" and demanded that Chiscolm explain his claims, and elaborate on charges that he received "inconsistent information from a 'Spanish womn" reached by phone at the bank.

When he filed the lawsuit, Chilsom also demanded that the money be deposited into his account the next day, plus an additional $200,164,000....

[Image via The Consumerist.]