Creating Blue Oceans

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.]

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.]

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.]

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.]

Radical Action for Radical Times

The new book featuring Gabor George Burt and nine other thought-leaders, sharing effective and inspirational strategies to help any organization succeed, regardless of the state of the economy.

For more information and to purchase your copy of Radical Action for Radical Times click HERE.

All book royalties are being donated to children’s cancer research.

Busted: Wii’s emotional pull goes too far

Besides providing exceptional functionality or utility, products and services can grab customers emotionally as well. In fact, if you can establish a strong emotional pull to your brand, your customers will become loyal and committed fans. The challenge is to create an intrinsic association between their lifestyle aspirations and what you are offering them.

As a comic example of the excess sensation and irresistability that the Nintendo Wii — a favorite Blue Ocean Strategy offering — has created, we bring you a story out of Tampa, Florida  involving undercover drug investigators, search warrants and ... a Nintendo Wii.

From Tampa Bay Online:

As investigators searched the home for drugs, some drug task force members found other ways to occupy their time. Within 20 minutes of entering Difalco's house, some of the investigators found a Wii video bowling game and began bowling frame after frame.

While some detectives hauled out evidence such as flat screen televisions and shotguns, others threw strikes, gutter balls and worked on picking up spares.

A Polk County sheriff's detective cataloging evidence repeatedly put down her work and picked up a Wii remote to bowl. When she hit two strikes in a row, she raised her arms above her head, jumping and kicking.

While a female detective lifted a nearby couch looking for evidence, another sheriff's detective focused on pin action.

[Image via TBO.]

Coca-Cola: Creating value through design

Companies which understand they are not in the business of selling certain products or services, but rather in the business of delivering lifestyle enrichment to customers, are the ones that prosper.  Blue Ocean Strategy helps to instill this perspective, and once it takes root, a company can continue to stay highly relevant to customers, drive lifestyle changes, and continuously create blue oceans.

But what do you do when you are a company like Coca-Cola — which sells the fizzy beverage at the rate of 18,000 servings per hour — yet your product doesn’t change?  Enter David Butler, Coca-Cola’s VP of Global Design, whose aim is to create value for the business through design.  Following some Blue Ocean Strategy-like insights of his own, Mr. Butler now is helping to show that Coke’s core business is not just as a 123 year old manufacturer and distributor of beverages, rather, it’s core business is actually design.  

From Fast Company:

The idea was to show his colleagues that even though they didn't recognize it as such, Coca-Cola is one of the world's largest design companies. And to point out that a more deliberate focus on design could sell more stuff. "The word 'design' is not so important to the top echelons of the company, but winning at the point of sale is fundamental," Butler says. "I wanted to show how you could create value for the business through design. I had no organization, no influence, nothing to point to, but now we had that statement out there -- a flag in the ground."

[Image via Flickr.]