If you did not you should read Blue Ocean Strategy, from Renée Mauborgne & W Chan Kim. An excellent book not only for reading but also for implementation. A Blue Ocean is a market where a corporate have an ideal value/innovation couple, a red ocean is a competitive dead-end where you try to offer more for less.
My main take-away are.
- not to compete with competitors in red oceans but to open blue oceans, i.e. new value innovation proposition built on innovation and cost monitoring re-founding old sectors in new client offer : render competition irrelevant. E.g. Cirque du Soleil : an uncontested market place.
- Strategy canvas
- Diagnostic on current state of play in the known market space (identification & rating of the principal factors (price, …))
- To build a blue ocean is not to look for offering more for less
- Best way is to focus on alternatives to attract non clients: allows to better redefine the problem the industry focuses
- The four actions framework
- Which of the factors that the industry takes for granted should be eliminated?
- Which factors should be reduced well below the industry standard?
- Which factors should be raised well above the industry standard?
- Which factors should be created & that the industry never offered?
Then a new value curve
| eliminate | Raise |
| reduce | create |
- the characteristics of a good strategy
- focus
- diverged from competitors
- clear tagline – compelling tagline – concise summary of the value proposition in one sentence
- 1st principle : to reconstruct market boundaries
- identify commercially compelling blue opportunities
- break out of red oceans, out of the accepted boundaries that define how they compete
- path 1: look across alternative industries
- why would client choose one alternative industry over another one? (+ / – of alternatives, then try to combine + and avoid –
- path 2: look across strategic groups within the industry
- which factors determine customer decisions to trade up or down from one group to another? Take & combine the best of all
- path 3: look across the chain of buyers
- purchasers /users / influencers
- what are their different definition of value?
- Challenge the conventional wisdom to focus on a specific group of buyers
- Path 4: look across complementary products & service offerings (e.g. babysitting + parking for cinema)
- What is the context in which your product is used? What happened before, during, after? What are the pain points? How eliminate them through a complementary product/service offering?
- Path 5: look across functional or emotional appeal to buyers
- Industries have trained customers on what to expect: more for less. Sell emotion for more. Or from emotion to function.
- Path 6: look across time
- Analyze trend, anticipate the change
- path 1: look across alternative industries
- 2nd principle: focus on the big picture, not on the numbers
- would allow to avoid investing lots of efforts but delivering only tactical red ocean moves
- draw a strategic canva
- show the strategic profile of an industry
- strategic profile of current & potential competitors
- company’s strategic profile or value curve
- then: focus / divergence / compelling tagline
- How?
- Visual awaking: draw the value curve of your corporate / and of its more advanced team / and of the competition (90 min workshop)
- Visual exploration: send a team in the field to see how people (customers & non-customers) use the products & services of the companies. Not only speak to them, but look at them in action. How they use your product, other products, alternative providers (4 weeks) – draw a new strategy drawing 6 new value curves using the six path framework explained previously. Each team has to produce 6 curves.
- Visual strategy fair : presentation by each team (10 min per curve, 2*6 curves) to senior executive, non customers, customers, competitors, … Vote on the rating of the curves. Notes + feedback from the judge. Fig 4.4 Ch4 (curve high/low on low price/relationship management/account execution/corporate dealer/ ease of use / security / accuracy / speed / market commentary given to the client / confirmation /
- Visual communication – communicate the strategy in a way that can be easily understood using the pioneer-migrator-settler (PMS) map
- Pioneer: units of the company who are on blue ocean
- Settlers units of the corp whose value curves conform to the basic shape of industry
- Migrators: give more for less but do alter trade shape
Assessment not on revenue/profitability/ market share / customer satisfaction but on value + innovation
- Reach beyond existing demand
- Do not focus on existing customers but on non-customers
- Drive for finer segmentation to accommodate buyer differences (soon to be – refusing – unexplored)
- Get the strategic sequence right
- – buyer utility: is there exceptional buyer utility in your business idea? (no, then rethink)
- the buyer utility map:
- – buyer utility: is there exceptional buyer utility in your business idea? (no, then rethink)
| purchase | delivery | use | supplements | maintenance | Disposal | |
| Customer productivity | ||||||
| Simplicity | ||||||
| Convenience | ||||||
| Risk | ||||||
| Fun & image | ||||||
| Environmental friendliness | ||||||
- price: is your price easily accessible to the target mass of buyers? (no, then rethink)
- cost: can you attain your cost target to profit at your strategic price?
- Adoption: what are the adoption hurdles in actualizing your business ideas? Are you addressing them up front?
Then you have a commercially viable blue ocean strategy.
- Overcome organizational hurdles
- ‘’in our organization you are shut down before you stand up’’ – avoid…
- tipping point leadership in action
- break through the cognitive hurdle (organization wedded to status quo)
- not by presenting figures but by making people see & experience harsh realities first hand ‘’seeing in believing’’
- employees must come with the worst operational problem, break the denial, show the truth out of the office. On field.
- Meet with the disgruntled customers. Use the dissatisfied clients, learn from them
- Jump the resources hurdle
- No need to cry or fight for more resource, start by multiplying the value of the resource you have
- Hot spots: activities that have low resource input but high potential performance gains
- Cold spots : activities that have high resource input but low potential performance gains
- Horse trading: allocate resource to hot spots in priority, redirect resource from your cold spots
- Jump the motivation hurdle
- Zoom in Kingpins: focus on opinion leaders within the staff
- Place kingpins in a fishbowl: under spotlight (transparency, inclusive, fair)
- Atomization, makes the challenges attainable
- Know over the political hurdle
- Leverage angels (people who will benefit from the changes)
- Silence devils (people who the less benefit from the changes)
- Get a consigliore (political expert who is respected inside) on top management team
- In order to transform the mass, it is more efficient to transform the extremes
- Build execution into strategy
- Develop a cult of trust & commitment
- Fair process
- Engagement (involving people in the strategic decision & not only consultants)
- Explanation
- Expectation, clarity
- Align value, profit & people propositions
- Are your 3 strategic propositions aligned in pursuit of differentiation & costs?
- Have you identified all the stakeholders, inclusive external ones on which the effective execution of your blue ocean strategy will depend? Have you developed compelling people proposition for each of these in order to ensure they are motivated?
- No need to cry or fight for more resource, start by multiplying the value of the resource you have
- Renew Blue Oceans
- The Red Oceans Traps
- The belief that blue ocean strategy is a customer oriented strategy that is about customer led. No, it is non-customer focus. Focusing on existing customers trends to drive organization to do more of the same for less: then red Ocean anker.
- The belief that to create blue oceans you must venture beyond your core business. Not necessary.
- Misconception that blue ocean strategy is about new technology. Not necessary. Need soft friendly environment but not necessary high tech.
- Belief that to create a blue ocean, you must be first to market. Not necessary, but the first to link innovation to value.
- Misconception that blue ocean strategy and differentiation strategies are synonymous.
- Misconception that blue ocean strategy is a low-cost strategy that focuses on low pricing. Target is more strategic pricing, pursue pricing against substitutes and alternatives that are currently capturing the non customers of your industry.
- The belief that blue ocean strategy is the same as innovation. Not innovation, but value innovation.
- Belief that blue ocean is a theory of marketing & niche strategy.
- Belief that blue ocean strategy sees competition as bad when in fact it can be good for companies.
- Belief that blue ocean strategy is synonymous with creative destruction & disruption.
- break through the cognitive hurdle (organization wedded to status quo)
Which Commercial & Investment Bank will dare to apply this approach to its own industry?…
disruptive fun 