A business trip to the ocean
Blue Ocean Strategy is not for everyone; it requires a special set of skills and abilities. But identifying the Blue Ocean and swimming towards it could be great news for your business, says JIM COWAN.
uch of business strategy hinges on either the develop- ment of or the protection
of competitive advantage. You have a strategy, and the strategy seeks to exploit ways in which you have an advantage over those with whom you compete. In some sectors this is becoming harder
and harder. It is becoming difficult to differ- entiate in over-crowded market places, and bland conformity appears to be winning out (or at least that is the impression given). In 2004, W. Chan Kim and Renee Mauborgne defined this crowded market place as the ‘Red Ocean’ – the known market place, limited and bitterly fought over. Kim and Mauborgne proposed that there is another place in which to do business, the ‘Blue Ocean’ – the unknown and uncontested market space. Blue Ocean Strategy was born. But the Blue Ocean isn’t for everyone.
First and foremost it requires you to be innovative; without innovation you are not going to be able to swim away from the Red Ocean to the clear waters where competition does not lurk.
How it works
What does a successful Blue Ocean Strat- egy look like? Think of Cirque du Soleil. Cirque du Soleil was created in 1984,
before anyone had even coined the term Blue Ocean Strategy. The circus trade was dying. It couldn’t compete with the growing number of alternative leisure activities available to children, and animal rights protesters were beginning to win the battle to ban performing animals.
Competitive advantage was sought
by having bigger big tops, more famous clowns, and more grandiose shows, but the public wasn’t being fooled; it was still the same show in (slightly) different clothes. It would appear to be an act of lunacy,
of corporate suicide, to decide to enter this marketplace, but that is what Cirque du Soleil did. However, instead of compet- ing in the overcrowded Red Ocean, they innovated; they created a whole new market for circus performers. Instead of children they targeted adults,
instead of big tops they used theatres and vast indoor venues, instead of being the same as everyone else they found ways not only to differentiate but to operate in new markets. Suddenly adults were queuing up to go to the circus and were happy to pay a lot more money for the privilege!
Blue Ocean principles
The key is to mix innovation with the identification of ignored or unchartered waters in the way Cirque du Soleil did. When identifying the Blue Ocean so clearly twenty years after the advent of Cirque du Soleil, Kim and Mauborgne were also kind enough to provide a handbook with four guiding principles:
Look for where the competition isn’t operating
1 Reconstruct market boundaries. It sounds obvious, but instead of continuing to hunt in the same crowded waters, look for where the competition isn’t operating. This might be among users in place of purchasers, it might be an ignored demographic, it could even be in service as oppose to product sales. Try anticipating rather than following trends, identifying the emotional appeal over the practicality.
2 Think ‘big picture’. Yes, (good) strategy should always do this anyway, but in reality many business strategies become bogged down in budgets and spreadsheets. They over- rely on historical data and give too little consideration to common sense and intuition. When looking to the future think blank canvas; think ‘what could we do?’
3 Look beyond existing demand. Don’t only look at existing customers, look at non-customers. How can they become new and repeat customers? Cirque du Soleil did it by taking the circus to adults in adult venues. Calloway Golf found out that many of their ‘non- customers’ didn’t like playing golf because hitting the ball was too difficult, so they designed a club with a bigger head.
4 Get the strategic sequence right.
If the answer to any of the following questions is ‘no’, you need to rethink your strategy:
● Buyer utility – does your idea offer exceptional buyer utility (not the same as exceptional technology)?
● Price – does your pricing make you accessible to the mass of buyers?
● Cost – can you hit your cost target and make a profit at your strategic price?
● Adoption – have you identified, and are you addressing, the hurdles to adoption up-front?
The Blue Ocean is not for everyone, but for those who are innovative and who can see a big picture it does offer opportunity. A word of warning though, just because your new ocean was blue does not mean it will always stay blue. When Karl Benz invented a replacement for the horse- drawn carriage he was swimming from the red ocean to the blue. When Henry Ford saw the opportunity to mass produce and popularise the automobile he was doing the same. But no-one today would suggest that either Mercedes-Benz or Ford operate in Blue Oceans!❖
Better Business No 189
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