Creating Blue Oceans

Military justice or innovation-busting?

We’ve previously shared articles from Bruce Nussbaum, former assistant managing editor for Business Week and current professor of innovation and design at Parsons School of Design.  In a recent blog post, Nussbaum draws an interesting comparison between military and business spheres, and explains how in his view President Obama may have single-handedly quashed innovation with the firing of  his man in Afghanistan known for defying conventional wisdom — General McChrystal.   Is it a case of military justice, or innovation-busting?  You be the judge.

From the Harvard Business Review:

President Obama may well have made a major management mistake in dismissing General Stanley McChrystal, the senior commander of US and NATO troops in Afghanistan. Counterinsurgency is a creative act and McChrystal is the Frank Gehry of modern warfare. In removing him, Obama is undermining both the strategy and execution of his own policy for defeating the Taliban and building a stable, democratic Afghanistan.

McChrystal's defiance of authority, exemplified by his intemperate remarks about White House policy-makers in Rolling Stone and willingness to buck the collective behavior of his own peers, highlighted by his vote for Obama over military hero Senator McCain, reflect the values of an innovative personality and style of leadership that is exactly what is needed in unconventional warfare.

McChrystal spent his entire career in the most creative sphere of the military, its Special Operations. First as a Ranger, then as head of the Joint Special Operations Command in Iraq, McChrystal moved in the edges of military circles where an approach and package of methods and tools was developed that corporations and consultants recognize as Design Thinking.

[Image via Google Images.]

Blue Ocean Strategy Action #2: Reduce

As part of our ongoing Blue Ocean Strategy Wisdom series, we advance to the next ‘action' in the Four Actions Framework.  Once featured, each entry in this series is made accessible through the Blue Ocean Strategy Basics archive of this site.  For the second action 'Reduce,' we return to the example of Cirque du Soleil, as depicted on pages 36 - 37 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne).

Cirque du Soleil, while not eliminating altogether, greatly reduced slapstick humor in its shows. Cirque kept the clowns, but shifted their humor away from traditional slapstick to a more enchanting, sophisticated style of comedy, thus creating appeal for adults of all ages as well as children.

Related links:

Buy the Blue Ocean Strategy book.

[Image via Jose I.N. ]

Blue Ocean Strategy critical (not just) in India

There are several driving forces behind a rising imperative to create blue oceans, including increasing price wars and shrinking profit margins.  For major product and service categories, the accelerated pace of commoditization means that differentiating brands becomes harder in both economic upturns and downturns.  And as brands become more similar, customers increasingly make their purchasing decision based on price — propagating a vicious, bloody tide of red oceans.

Citing the critical need to create blue oceans, an excerpt from the India Business Standard: 

Blue Ocean Strategy is critical in today’s business climate because prospects in most established market spaces — red oceans — are shrinking steadily. Technological advances have substantially improved industrial productivity, permitting suppliers to produce a plethora of products and services. And as trade barriers between nations fall and information on products and prices becomes instantly and globally available, niche or monopoly markets are beginning to disappear.

The result is that in more and more industries, supply is overtaking demand. This situation has inevitably hastened the commoditisation of products and services, stoked price wars, and shrunk profit margins. If we look at some of the major brands in India, a variety of product and service categories have become more and more alike. And as brands become similar, people increasingly base purchase choices on price. In overcrowded industries, differentiating brands becomes harder both in economic upturns and in downturns.

[Image via Che Esko.]

Getting up from the things you believe

A principal credo of Blue Ocean Strategy is to challenge taken-for-granted industry assumptions. While most businesses are stuck competing within boundaries and rules set by others, questioning such assumptions can lead to unprecedented value propositions for customers, and hence blue oceans.

Meanwhile, on a deeper level, the limiting assumptions and beliefs we hold in our personal lives can have similarly insulating effects.  Here’s one set of creative suggestions to “burn the empty chair and get up from the things you believe,” via Planet Shifter: 

Freedom From Limiting Beliefs

Here is a creative exercise to achieve freedom from limiting or highly-charged beliefs:

1. Isolate your negative belief.
2. Express your negative reality in art: write a poem, paint a painting, compose a musical piece, write a play or short story.  Allow it full expression, paint the darkest picture you can.
3. Write the essence of the belief (and history) you want to dump on small pieces of paper.

[Image via the Swindle Corporation nwr.]

Blue Ocean Strategy Action #1: Eliminate

As part of our ongoing Blue Ocean Strategy Wisdom series, we begin taking a  closer look at the critical Four Actions of Blue Ocean Strategy via the eye-opening example of Cirque du Soleil. Combining these actions allows one to break out of competitive, shark-infested, Red Ocean market spaces, and sail towards vast Blue Oceans — just as Cirque du Soleil did.   Once featured, each installment in this series is made accessible through the Blue Ocean Strategy Basics archive of this site.  For the first action, Eliminate, we turn to pages 36 - 37 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne).

Cirque du Soleil eliminated star performers, animal shows, aisle concession sales and multiple show arenas. Star performers, while demanding premium compensation, were not really seen by circus-goers as true, Hollywood-like stars. Animals, while a key attraction, were the most costly element of a circus as well as increasingly controversial (animal rights). So even though eliminating stars and animals seems blasphemous to circus purists, in hindsight it made good business sense to a band of former street performers from Quebec, Canada, who had the audacity to challenge traditional wisdom.

Other typical circus offerings such as aisle concession sales and multiple show arenas, had been accepted as an industry standard as well, but while costly to the circus owners, added very little additional perceived value to the circus-goer. So what did Cirque do? It eliminated them as well.

Related links:

Buy the Blue Ocean Strategy book.

[Image via Animal Planet.]

Paddling out of the Industrial Revolution and towards Blue Oceans

We’ve regularly written about academia and its ripeness for Blue Ocean Strategy-based thinking and solutions.  In fact, one such solution for academia presented by Gabor was even featured in Fast Company, and our two recent videos with Sir Ken Robinson were also on this very topic.  As a follow-on, we share with you another poignant article which discusses the need for blue oceans to reconstruct the ailing educational institution which has seen very little change since its creation before the Industrial Revolution.

From the American Association of School Administrators:

It’s evident that sitting in rows and listening to lectures — didactic teaching dating back two centuries — does little to prepare students to collaborate on problems, let alone think critically and entrepreneurially or communicate clearly. If we are to reinvent and reform our schools, fostering a world-class team learning and teaching culture — at all levels — is a vital first step of any blue ocean strategy, and done right it will self-perpetuate as more see its value.

IBM says, in its corporate philosophy: “Teams are one of the most productive resources that companies have, provided that they operate with clear goals, effective process and shared accountability.” Why shouldn’t that also be the case in elementary and secondary schools?

[Image via Todd Klassy.]

Defying Conventional Wisdom and the path to profitability

 

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 winning strategies.

Echoing this sentiment, Md Arif Mahmood, corporate strategic planning vice-president at Petronas — which also happens to be one of the most profitable companies in the world.  From Malaysia’s Star Online:

Coming up with robust strategies that stay ahead of the curve and sometimes defy conventional wisdom, can better adapt to changing industry dynamics, and agile enough to fully leverage on emerging mega trends...

Arif said more strategic shift by international oil companies (IOCs), [National Oil Companies] NOCs, independents, and Asian Sovereign wealth funds to pursue partnerships and acquisitions in unconventional oil and gas assets were expected to happen as access to conventional oil and gas resources became more difficult and limited.

For Petronas, he said the company had been pursuing growth beyond just the comfort zones of traditional focus areas, as well as into non-conventional play, adding that this had allowed the company to pursue expansion in countries like Venezuela and Iraq.

[Image via Wikipedia and reused with permission from someformofhuman under Creative Commons license.]

Three characteristics of Blue Ocean Strategy

Blue Ocean Strategy presents a systematic approach to making the competition irrelevant and outlines a framework which can be used to create uncontested market space.  Given this premise, what then are the three characteristics necessary for an effective Blue Ocean Strategy?  Continuing with our Blue Ocean Basics series, we turn to page 37 of the book Blue Ocean Strategy, co-authored by Professor W. Chan Kim and Professor Renée Mauborgne, for the answer to this question.

Yellow Tail, like Cirque du Soleil, created a unique and exceptional value curve to unlock a blue ocean. As shown in the strategy canvas, Yellow Tail’s value curve has focus; the company does not diffuse its efforts across all key factors of competition. The shape of its value curve diverges from the other players’, a result of not benchmarking competitors but instead looking across alternatives. The tagline of [yellow tail]’s strategic profile is clear: a fun and simple wine to be enjoyed every day.

When expressed through a value curve, then, an effective blue ocean strategy like Yellow Tail’s has three complementary qualities: focus, divergence, and a compelling tagline. Without these qualities, a company’s strategy will likely be muddled, undifferentiated, and hard to communicate with a high cost structure. The four actions of creating a new value curve should be well guided toward building a company’s strategic profile with these characteristics. These three characteristics serve as an initial litmus test of the commercial viability of blue ocean ideas.

Related links:

Buy the Blue Ocean Strategy book.

[Image via three flavours.]

iPad’s profitable blue ocean

A few months ago we wrote about the launch of Steve Jobs’ latest technical wonder, the iPad.  The device itself is “yet another example of his willingness to defy conventional wisdom and bend the ethos of Silicon Valley to his own will.”  Now, with a whopping 2 million units sold in a mere two months, we thought to check in on the forecast for this blue ocean marketspace.
 
From  PC World:

The Morgan Stanley analysts state that iPad build plans are more optimistic than expected, and that iPad suppliers are forecasting 8 million to 10 million iPad shipments in calendar year 2010, double the previous estimate of 5 million.

"Suppliers expect to ship 2.5 million iPads in the first three months (Mar-May), which compares favorably to our 750K estimate for the June quarter," Huberty and Schneider write in their report. The analysts predict that Apple will ship more than 6 million iPads this year, higher than consensus estimates of 3 million to 4 million.

[Image via Google Images.]

Blue Ocean Strategy vs. Five Forces

Here’s one for die-hard business strategy enthusiasts:  What happens when Blue Ocean Strategy is compared to Five Forces?  Professors Andrew Burk, Andre van Stel and Roy Thurk from Cranfield, EIM and Erasmus University respectively, discuss their recent empirical study, in which they found evidence to support that blue ocean strategy is both sustainable and has a positive impact on profitability. 

From the Harvard Business Review:

We looked at profits and numbers of vendors for 41 shop types over a 19-year period (1982–2000). In 2000 these shop types accounted for some 83% of all Dutch retail stores and about 90% of the industry’s revenue and employment. We were surprised to find evidence that blue ocean strategy is sustainable. In more than half the shop types, average firm profits and the number of firms were positively related. And more important, after controlling for extraneous factors such as business-cycle effects, we discovered across all types that average firm profitability and the number of vendors rose and fell together over the period.

[Image via Foto_Annye.]