Blue Ocean: One of 15 Business Strategy Pillars

Blue Ocean, Red Ocean. Why all the fuss? And how do we look at strategy development from a Blue Ocean perspective? And why do we even want to?

This may be old news for some, but I was recently asked about Blue Ocean Strategy, hence this post.

There’s nothing new to report here – just as the concept wasn’t new when it made the news when Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant was published in 2005.

W. Chan Kim and Renée Mauborgn, authors of the book, articulated something that good marketers have always known.

Specifically, that an excellent way for companies to realize strong growth and achieve above average profits is by carving out a new niche for themselves and creating demand in what may, for a while, be uncontested market space.

Kim and Mauborgn dubbed this Blue Ocean Strategy. Red Ocean is the term they associated, somewhat disparagingly, with the more traditional approach of competing head-to-head with direct and indirect competitors for a larger share of a fixed size pie, (i.e. known customers in an existing industry). This traditional approach should not be dismissed out of hand, however, because many organizations achieve excellent results the Red Ocean way by offering a product or service that has a higher perceived value than other market options, and marketing it creatively.

Red Ocean Strategy is viewed as a zero-sum game where one company’s gain reflects another company’s loss. “Stealing market share” is a key element of this approach – and in some cases is the right way to approach the problem at hand.

There are times, however, when it’s tough to steal share and to realize sufficient gains to achieve double digit increases. This is especially tough when…
• the market is saturated,
• consumers are bombarded with too many choices,
• supply exceeds demand and prices plummet, etc.

In these circumstances, the only way to leap ahead of the pack is to challenge the underlying assumptions in the industry – and for senior executives to question the way their company competes in their vertical and how it conducts business in general. Unfortunately, this happens all too infrequently.

In this kind of tough market situation I advise clients to….

• Look beyond their current market boundaries – to see if there are complementary industries that could use their products or services (perhaps with a little tweaking.

• To focus on ways their products can solve myriad consumer problems (retail or corporate) – not just the ones of the current target audience.

• Determine if there are easily-incorporated changes to the product that could stimulate demand in the existing market segments.

• Pursue a reasonable cost strategy (it’s necessary to offer the perceived value – it is not necessary to be the lowest cost provider.

For many companies this will highlight ways of doing business, and identify previously ignored markets. Creating strategies to successfully sell to these segments will usually represent a paradigm shift... and this is really what the Blue Ocean approach is all about.

Over the past 100 years or so (as I said, the concept is not new), it was this kind of thinking that led to...

• Ford introducing the Model T in 1908
• Sunflight Holidays giving Canadians cheap Caribbean holidays with charted flights in the 1970s
• Fred Smith founding FedEx in 1971 and brining the world overnight delivery 2 years later
• CNN bringing us in 1980 with 24/7 news in 1980
• Starbucks giving us coffee bars and the +$5 cup of joe to go
• Cirque de Soleil with its sold out yet lion-less circus acts

Not to mention mutual funds, cell phones, discount retail, minivans, snow boards, home “video” and more.

There are multiple benefits to having this “new mover advantage” (a.k.a. "first to market" advantage). Among them:

• Higher margins in the early days;
• An opportunity to become the dominant player; and
• The opportunity to set the standard (think iPod, iPhones, etc.).

The principle of looking for the sweet spot where your company’s products and/ or services are truly differentiated from those of anyone else doing business in the sector, is simply one of the key pillars for developing good business strategy.

What are the other ones? From my perspective, there are 15 business strategy pillars:

1. Being consistent in what the brand represents – or making one major change to the brand’s positioning, and being prepared to stick with the new image (i.e. don’t destroy your brand by repeatedly changing what it represents.

2. Acting with integrity and in keeping with a set of established core values.

3. Developing a long range vision based on customer input, internal and macro-environment assessment and trend analysis.

4. Being brutally honest about your company’s strengths and weaknesses.

5. Actively formulating and exploring options that break with industry tradition. (The Blue Ocean part)

6. Finding the sweet spot where your company’s products and/ or services are truly differentiated from those of anyone else doing business in the sector. (More Blue Ocean)

7. Being willing to take calculated risks and go out on a limb. (Even more Blue Ocean)

8. Being open to the tried and true (sound like a contradiction, but both approaches are needed to develop sound strategy.

9. Getting input from experts outside your company and industry who have faced similar challenges (different industries tend to solve problems in different ways, and can provide valuable insight.

10. Getting input (and buy-in) from all key functional areas of the company as the strategy is developed.

11. Ensuring that the methods/ path chosen to achieve the vision are sustainable over the long term.

12. Modelling the ‘best’, ‘worst’ and ‘most likely’ scenarios – and making sure that each assumption in the model is based on research, not pure gut.

13. Testing the bold idea before bringing it to market.

14. Making sure all company personnel are brought up to speed on what is happening (good internal communications and training are essential here.

15. Promoting the change(s) creatively in ways that have impact (impact and marketing vehicle choices.

Going back to the original question, I would have to say that Blue Ocean strategy is not a new concept, but the authors of the book labelled what has always been a sound business practice, making it easier to a) explain the concept and b) get corporate buy-in.

How you go about finding your Blue Ocean/ Sweet Spot will be the subject of another post.

In the meantime, if you would like clarification on anything, please feel free to contact me: jmc@theQgroup.com

Until then, remember to have fun and be prepared to "go out on a limb because that is where the fruit is." Jane-Michele Clark

Steps for Creating Corporate Strategy

I'm often asked how we go about helping clients determine their best point five years out on the horizon.

Here are the steps we follow... and the ones I teach my MBA students, too.

1. Conduct a preliminary assessment of your company's internal strengths (look at everything from supply chain to operations to distribution channels, to the product or service itself, to its market position and positioning, to the marketing of it to consumers and through the distribution chain, to customer service... and everything in between).

2. Assess the strengths of your competitors.

3. Determine what your customers want now and are likely to want in the future.

4. Find out why your competitors' customers buy from them and not from you... and find out what it would take for them to start doing business with you (i.e. to buy their products and/or services from you).

5. Examine the trends unfolding in your industry... and in complementary industries.

6. Assess the macro environment, paying close attention to the economic climate, locally, regionally and globally.

7. Take time to really think hard about the direction in which your industry is heading and what it will take to succeed down the road.

8. Start to consider where the industry growth will be occurring... and where declines are expected. Really understand the "why" behind this.

9. Determine where a company such as your should position itself for success down the road based on what you are seeing.

10. Then - and only then - go back and re-evaluate your company in the context of what you have learnt.

Ask yourself the questions below as a starting point.

• Is this a market position that our company can occupy?

• Do we have the right core competencies? If not, can we acquire them through acquisitions, alliances, outsourcing or any other kind of partnership?

• Do we want to?

• How big a change will it mean for our organization?

• Will it be worth it, not simply from an ROI perspective, but in terms of what it means for our future growth?

• What obstacles will we need to overcome to get there?

• What will we need as an organization to leap these hurdles?

• What are the right milestones to achieve on this new path?

There are many more questions to be asked... and these will be part of the next post.

In the meantime, if you would like clarification on anything, please feel free to contact me: jmc@theQgroup.com

Until then, remember to have fun and be prepared to "go out on a limb because that is where the fruit is." Jane-Michele Clark