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By Patrick Mayoh
It has been a quite while, I am fully aware of it. I recently went on a shopping spree on my best market place (Amazon) to order books with big hypes in the business community. One of those is “Blue ocean Strategy » of INSEAD BUSINESS SCHOOL’s professors W.Chan Ki and Renee Mauborgne. The book was so applauded that the two authors were duly rewarded with an academic unit within the prestigious business school bearing of course the same name as the title of the book: the Blue Ocean Strategy Institute”.
Well I read the book as well and I tell you what, this is probably the best one I have read on strategic thinking. Mostly because the authors espouse my idea that strategic thinking should adopt a reconstructionist rather than a structuralist approach to markets, industries and the competition, more on that a bit later.
Blue oceans make competitors useless
What is your perspective when it comes to your business environment? Are you and your strategic team always thinking about better ways to beat competitors, slice markets shares, differentiate, and focus? Sounds a bit like the Potter idea of competition doesn’t it?
There is nothing wrong with thinking about the competition and about ways to beat your competitors. But as long as your focus remains on them, you end up losing sight of what really matters to customers and how you could actually reinvent your industry or business sector.
This has been termed a “red ocean” where a “market gets crowded” because “prospects for profits and growth are reduced. Products become commodities, and cutthroat competition turns the red ocean bloody”. The book pontificates that no industry or company is permanent, there is always a way to turn your business environment around and the best way to do that is to make the competition useless or irrelevant by going around it.
The strategy canvas
This is what the book all comes down to. Creating a blue ocean will require you to four activities:
· Identify the key common factors of your industry/sector
· Eliminating those that do not really matter to customers
· Raising those that do matter to customers but are downplayed by your industry
· Create new ones (factors) to enhance your value proposition to an unprecedented level within your industry
1) Identify
Individual organizations might differ from one another but industries are usually associated with key commonalities. It is therefore your responsibility to find out which factors most characterize your industry and its relationship with customers. Such factors obviously will vary from one industry to another. Also most industries are usually very complex in their structures and although you might deliver the same products or services to customer, it is worthwhile to know where you stand in your industry. Take the automobile industry for example, a huge sector; you have those who compete for luxury like BMW, Mercedes and Chrysler to name just those few. And then you have those that compete on affordability like Ford, Honda and to some extent Toyota. So although these organizations belong to the same industry, they still operate in different strata. It is therefore critical to identify first your stratum within your industry and then list the factors that are common in that particular stratum before you embark on your blue ocean creation.
2) Eliminate
Once you know for sure the key factors that characterize your industry or the stratum along which you operate in your business sector it is important to spot the factors that do not matter to customers. Business leaders that are not willing to challenge existing boundaries within their industry are more likely to fail than those who question status quo.
This is how Ford became the leader in the Automobile industry in the early 1900s. While other hundreds automakers thought cars were meant to be luxuries and inaccessible to the common masses, Henry Ford built a car that was easy to drive, reliable and durable. As it indicated in a 1909 brochure “Watch the Ford go by. High priced quality in a Low priced car”. So it is time for you to challenge the existing boundaries within your sector and proceed to eliminate those that do not matter. Henry Ford eliminated the fact that cars were meant to be luxuries for the elite. What do you need to eliminate? What are those things or factors your customers do not really care about?
3) Raise
Once you have eliminated the factors that do not matter at all to your customers it is time find those that really matter. As the authors rightly suggest, innovation is not always linked to technology but to those elements your customers “value”. Once you raise the factors that really matter to them you win! This is what Dell actually did. True customers value impressive features and software applications on newly bought computers. But many even value more computers that are delivered faster to individuals’ specifications and wishes. So the purchasing and delivering experiences although greatly neglected by other manufacturers actually mattered to customers and Dell was quick to spot that, reducing the purchasing and delivery time to 4 days as opposed to 10 weeks for competitors.
4) Create
This is probably the gist of the blue ocean school of thought. Once you have identified, eliminated and raised factors that do not or do matter in your industry stratum, you can think of introducing factors that will make your competitors irrelevant and set you apart from the rest.
A word of caution, innovation is not only or always about technology but about introducing factors that add value to your overall customer satisfaction. Enhancing your value proposition will very much depend on those factors you add to your customers’ experience of your products/services and organisation.
Kinepolis just did that by adding a childcare service to its value proposition. Most people enjoy a good night out to the cinema but many parents find it difficult especially when the last minute baby-sitter is not available. So Kinepolis a chain of movie theaters in Belgium added childcare facilities to its cinemas allowing parents not to worry about children on a good night out, and was able to make competitors irrelevant.
Something of relevance here is also the fact that a blue ocean strategic thinking provides your organization with Focus, Divergence and a powerful Tagline. In a red ocean, companies compete along the same factors making it difficult for your organization to make profit/margins. With the creation of a blue ocean, the company sets itself apart by simultaneously eliminating/reducing, raising and creating new factors.
References
W. Chan Kim and Renee Mauborgne (2005) Blue Ocean Strategy: how to create uncontested market space and make the competition irrelevant Havard Business Review Press Boston Massachussetts
