Most organisations are looking for growth, innovation, a way to reduce their costs or expand their markets. Many are trapped by their history in relation to the markets and products/services they offer and need a process to think beyond their current approach.
The strategic schools that have developed over the years provide differing approaches to the consideration of strategy – strategy as position in the market, strategy as competencies to be leveraged, strategy as assets to be exploited – and each have something to offer. The strategy work produced by W. Chan Kim and Renée Mauborgne – Blue Ocean Strategy – provides a number of useful tools by which we can examine potential for new strategies.
The summary (from the HBR article October 2004) is that the “business universe consists of two distinct kinds of space, which we think of as red and blue oceans. Red oceans represent all the industries in existence today—the known market space. In red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are well understood. Here, companies try to outperform their rivals in order to grab a greater share of existing demand. As the space gets more and more crowded, prospects for profits and growth are reduced. Products turn into commodities, and increasing competition turns the water bloody.
Blue oceans denote all the industries not in existence today—the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid. There are two ways to create blue oceans. In a few cases, companies can give rise to completely new industries, as eBay did with the online auction industry. But in most cases, a blue ocean is created from within a red ocean when a company alters the boundaries of an existing industry.
The example they use is Cirque du Soleil who were able to change elements from circus and theatre to create a new uncontested market space and away from a declining circus industry.
So how would we start to look at our organisation and what blue ocean opportunities may be available?
1. Strategy Maps – are a useful tool to understand the elements that clients consider when buying your product/service and where you sit in relation to these items versus your competitors. The elements may include price, service, access, online capability, integration, ease of doing business, post sales support, speed of delivery and many more. You need to consider and understand the utility (usefulness) and importance of these to your target market and to map your performance versus key competitors. This will now give you a visual map of where you are positioned and how you are presenting your value proposition and whether it is superior versus your competitors.
When we look at these elements we need to consider them in four ways;
- Which elements should we reduce what we do versus competitors
- Which elements should we add as new
- Which elements should we eliminate
- Which elements should we increase versus competitors
2. Blue Ocean Strategy (BOS) is focussed in creating uncontested market space, making the competition irrelevant, creating and capturing new demand, breaking the value-cost trade-off and aligning the whole system of a firm’s activities in pursuit of differentiation and low-cost. If it sounds daunting then this discomfort provides the stimulus to think differently.
3. BOS challenges us to look across industries, and strategic groups and re-define the buyer.
4. The Six Stages of Buyer Experience Cycle
To find your blue ocean you need to look at the buyer experience and consider the utility or value of your product or service from their perspective and across the six stages of buyer experience. How is this occurring at the moment and how would it look differently under the new blue ocean strategy?
The six utility levers – the ways in which companies unlock the usefulness of their product or service for their customers – many of which are are obvious. The simplicity of use, the level of fun and the image associated and the environmental friendliness need little explanation. A product or service offers convenience simply by being easy to obtain and or use. The most commonly used lever is that of customer productivity.
An innovation can increase productivity by helping customers do things faster, better, or in different ways. e.g. by offering on-line analytics, comparisons that analyse and compare the raw information it delivers.
By locating a new product on one of the 36 spaces of the buyer utility map, managers can clearly see how the new idea creates a different utility proposition from existing products. In our experience, managers all too often focus on delivering more of the same stage of the buyer’s experience. That approach may be reasonable in emerging industries, where there’s plenty of room for improving a company’s utility proposition. But in many existing industries, this approach is unlikely to produce a market-shaping blue ocean strategy.
A range of other tools are offered to assist in doing your own blue ocean strategy and there is useful information on the http://www.blueoceanstrategy.com/ website.