Creating Blue Oceans

Blue Ocean Strategy: Reach beyond existing demand

Continuing with our well-received series on Blue Ocean Strategy Basics, over the course of the next four weeks we will highlight how to reach beyond existing demand and target three tiers of noncustomers.  We will highlight one tier per week, and as each new overview is published it will become accessible in the Blue Ocean Strategy Basics archives.  Today we turn to pages 101 – 102 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne) for our introduction:

No company wants to venture beyond red oceans only to find itself in a puddle. The question is, How do you maximize the size of the blue ocean you are creating?

To achieve this, companies should challenge two conventional strategy practices. One is the focus on existing customers. The other is the drive for finer segmentation to accommodate buyer differences. Typically, to grow their share of a market, companies strive to retain and expand existing customers. This often leads to finer segmentation and greater tailoring of offerings to better meet customer preferences. The more intense the competition is, the greater, on average, is the resulting customization of offerings. As companies compete to embrace customer preferences through finer segmentation, they often risk creating too-small target markets.

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.

Related links:

Buy the Blue Ocean Strategy book.

[Image via Falling Sky.]

Defying Conventional Wisdom: Meat with exercise?

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 by having a discerning view of the world around you. Consider the following bit of comic insight as example of challenging conventional wisdom.

The increasing demand for free-range animal meat is admirable. It shows that people are concerned and compassionate about the amount of exercise animals get prior to being eaten. But is it enough to simply know that a cow or chicken is free-range or not? This label only indicates whether an animal had access to exercise, but doesn’t show to what extent it took advantage of it. So shouldn’t the general temperament of the animal (i.e. lazy, lackluster, frisky or hyper) also be indicated on each package of free-range meat, so as to allow consumers to get the full picture?

[Image via Cobham Farmers Market.]

The Four Steps of Visualizing Strategy: Step Four — Visual Communication

Continuing in our series which takes a closer look at each step in creating a Blue Ocean Strategy Canvas, our focus advances to the fourth and final step — Visual Communication. Once featured, each step is made accessible through the Blue Ocean Strategy Basics archive of our site.  For the fourth step, we turn to pages 93 - 94 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne):


After the future strategy is set, the last step is to communicate it in a way that can be easily understood by any employee. EFS [European Financial Services Co.] distributed the one-page picture showing its new and old strategic profiles so that every employee could see where the company stood and where it had to focus its efforts to create a compelling future. The senior managers who participated in developing the strategy held meetings with their direct reports to walk them through the picture, explaining what needed to be eliminated, reduced, raised, and created to pursue a blue ocean. Those people passed the message on to their direct reports. Employees were so motivated by the clear game plan that many pinned up a version of the picture in their cubicles as a reminder of EFS’s new priorities and the gaps that needed to be closed.

The new picture became a reference point for all investment decisions. Only those ideas that would help EFS move from the old to the new value curve were given the go ahead. When, for example, regional offices requested that the IT department add links on the Web site — something that in the past would have been agreed to without debate — IT asked them to explain how the new links helped move EFS toward its new profile. If the regional offices couldn’t provide an explanation, the request was denied, thereby promoting clarity and not confusion on the Web site. Similarly, when the IT department pitched a multimillion-dollar back-office system to top management, the system’s ability to meet the new value curve’s strategic needs was the chief metric by which it was judged.

Related links:

Buy the Blue Ocean Strategy book.

[Image via Man of War II.]

All revved-up, Blue Ocean style

We’ve covered previously Blue Ocean Strategy-like models of inspiration from the auto industry, such as Koenigsegg and Tesla.  And it seems that the latest entrant, Local Motors, is also set to defy the conventional wisdom of the auto industry. Enter John B. Rogers, the CEO of Local Motors, who is “trying to rethink, rather than overtake, the traditional auto industry.”  His vision: To challenge the paradigm of highly centralized manufacturing, embattled dealerships, and dispersed service locations in order to produce newer, safer, more exciting, more efficient cars bought and serviced in a more pleasurable local experience. 

From BusinessWeek:

I realized it was possible to run an environmentally focused car company in different ways," he says. Most of today's auto entrepreneurs, such as Tesla Motors and A Better Place, focus on alternative fuel sources. But Rogers looked at another way of building a sustainable car business. He imagined he could produce vehicles locally and on demand at "micro-factories," where buyers could watch and even participate in making the car. This would eliminate wasting resources on mass-producing and shipping cars that might sit unbought on a car dealer's lot. More than that, he wanted to source "dream car" concepts direct from potential buyers, rather than to dictate designs, as the major automakers do.

[Image via Boston.com .]

The courage to lead

If you haven’t already stopped by Beyond Business, the companion blog to the newly published book Radical Action for Radical Times, you should definitely click on over to read Jonathan Hornby’s latest entry entitled “The courage to lead.”  In his article, Jonathan questions why we continue to do things just because they have always been done a certain way — for example they’ve been handed down from generation to generation — yet few stop to question if the process is still the most efficient, or if it adds value.  And, echoing what Gabor has said previously, Jonathan points out that recessions or negative events are the best time to innovate and to radically rethink how business is done.

From Jonathan Hornby’s Beyond Business:

During the good times, following may be a wise move — you can learn from others mistakes. But as Carl Schramm noted in my book, recessions are where we make economies stronger coming out of the cycle. And when that uptick happens — it happens fast.

If you haven’t made the investments, if you aren’t “leading,” you may never catch up. Gabor George Burt would say this is a perfect “Blue Ocean Strategy” — these companies are pursuing a differentiated strategy (pursuing environmental issues) while reducing their cost to operate.

[Image via bratan.]

The Four Steps of Visualizing Strategy: Step Three — Visual Strategy Fair

Continuing in our series which takes a closer look at the application steps for visualizing strategy, our focus advances to the third step — Visual Strategy Fair. Once featured, each step is made accessible through the Blue Ocean Strategy Basics archive.  For the third step, we turn to page 90 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne), illustrating the experience of EFS (a European Financial Services Co.):

After two weeks of drawing and redrawing [possible new strategies], the [internal] teams presented their strategy canvases at what we call a visual strategy fair. Attendees included senior corporate executives but consisted mainly of representatives of EFS’s external constituencies — the kinds of people the managers had met with during their field trips, including noncustomers, customers of competitors, and some of the most demanding EFS customers. In two hours, the teams presented all twelve [value] curves — six by the online group, and six by the offline group. They were given no more than ten minutes to present each curve, on the theory that any idea that takes more than ten minutes to communicate is probably too complicated to be any good. The pictures were hung on the walls so that the audience could easily see them.

For more on this example, turn to page 90 of the book Blue Ocean Strategy.

Related links:

Buy the Blue Ocean Strategy book.

[Image via Cup-Sellithaine.]

Let’s get academic — Reader Responses

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.  Gabor’s proposed solution — printed in the November issue of Fast Company — would see universities using a portion of their endownment income to do away with tuition all together, and offer free attendance.  His idea generated a flurry of supportive responses, the most dynamic of which we will share with our readers. 

From Brian Lynch of Lynchpyns:

Just read your letter in the Nov 9 Fast Co issue - very salient points! I think your idea is one with a future - it's something we're discussing with post secondary schools now. We're a start-up web service for students, taking everything they need for learning content and putting it on-line - no more textbooks. It's about making the students (the customer) the priority. Education, economics and the environment - all done better. One of the initiatives we're pressing for is a freshman on-line lottery where the schools that use our service select one freshman in the first semester to receive a four-year scholarship.

Great letter!

Best regards,
Brian

Do you have a Blue Ocean Strategy-like solution for higher education — or perhaps one which Defies Conventional Wisdom?  If so, you can share it with us via the ‘email me’ link above.

[Image via Signal Rock Communications.]

Defying Conventional Wisdom: Sniff this Camembert!

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 by having a discerning view of the world around you. Consider the following bit of comic insight as example of challenging conventional wisdom.

Fashion magazines ought to feature peel-off sniff ads not only for perfumes, but for cheeses as well. In fact the two should be indistinguishable from the outside, so that adventurous readers would discover the nature of the advertisement only during each sniff. This would make for a much more suspenseful olfactory experience, not knowing in advance whether you are about to succumb to the magical scent of an exotic perfume or a small chunk of well-ripened Camembert.

[Image via Indigo Guide.]

The Four Steps of Visualizing Strategy: Step Two — Visual Exploration

Continuing in our series which takes a closer look at each step in creating a Blue Ocean Strategy Canvas, our focus advances to the second step — Visual Exploration. Once featured, each step is made accessible through the Blue Ocean Strategy Basics archive .  For the second step, we turn to pages 88 — 89 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne):



The next step is to send a team into the field, putting managers face-to-face with what they must make sense of: how people use or don’t use their products or services. This step may seem obvious, but we have found that managers often outsource this part of the strategy-making process.  They rely on reports that other people (often at one or two removes from the world they report on) have put together.

A company should never outsource its eyes. There is simply no substitute for seeing for yourself. Great artists don’t paint from other people’s descriptions or even from photographs; they like to see the subject for themselves. The same is true for great strategists. Michael Bloomberg, before becoming mayor of New York City, was hailed as a business visionary for his realization that the providers of financial information also needed to provide online analytics to help users make sense of the data. But he would be the first to tell you that the idea should have been obvious to anyone who had ever watched traders using Reuters or Dow Jones Telerate. Before Bloomberg, traders used paper, pencil, and handheld calculators to write down price quotes and figure fair market values before making buy and sell decisions, a practice that cost them time and money as well as built-in errors.

Related links:

Buy the Blue Ocean Strategy book.

[Image via GO Smell the Coffee.]

Is the fashion industry going out of style?

“There’s no such thing as a permanently great company or a permanently great industry. All industries rise and fall as do companies.  However, there are permanently smart strategic moves” — W. Chan Kim & Renée Mauborgne, from Chief Executive magazine article “Flouting Conventional Wisdom” (May 2003).

A key quality industries and companies should strive for is adaptability, always scanning and acting upon broad market opportunities. All industries and companies face difficult or life-threatening challenges at one point or another, and it is their adaptability and ability to make smart strategic moves which allow them to prosper even in the face of adversity.

It seems that one of the latest industries which may be going out of style is fashion and retail.  From the LA Times:

"Between new technology and the economy, the fashion industry will never be the same," New York designer Norma Kamali said. "It makes you stand back and say, 'If I continue doing what I'm doing, I may not stay in business.' It's time to rethink and look at what's working and what's not."

....The global strategy of branding and merchandising that has dominated the luxury sector for the last decade is falling away in favor of more authentic, localized experiences. Luxury brands are borrowing ideas from the fast-fashion world -- opening pop-up shops, launching limited-edition collections, even mixing it up with the mass market.

Shoppers are "accustomed to having new styles in the stores all the time, and this is forcing luxury brands to be more similar to Zara and H&M in the way they emphasize newness, entertainment and the in-store experience," said Claudia D'Arpizio, a business consultant for market research firm Bain & Co.

"The retail industry has gotten lackadaisical," said Marshal Cohen, chief industry analyst for Port Washington, N.Y.-based market research firm NPD Group. "It went through eight years of uninterrupted growth, where you could just stick it on the floor and it would sell because the customer wasn't thinking about what they were spending money on. But the rules have changed, and you have to earn your stripes again. And price isn't the only answer.

[Image via maaja03.]