Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne
The book "Blue Ocean Strategy" is a unique work devoted to the strategy of business. It graphically describes the high profitability and rapid development of companies that can generate effective business ideas by creating a nonexistent demand for a new market (it is called the "blue ocean"), on which there is virtually no competition. This strategy avoids competition in marginal markets (they are called the "red ocean").
The book is based on fifteen years of research, and as examples, the authors give 150 productive strategies that have been used for 120 years in 30 industries. These strategies made the overall strategy of the "blue ocean" real.
About the authors
Renée Mauborgne is a respected research fellow and professor of strategy and management of the above-mentioned INSEAD, a member of the World Economic Forum and the author of a number of works on the topic of management in international companies.
The book consists of a foreword, a section of authors' gratitude, three large parts, comprising nine chapters in total, a section of applications and notes, a bibliographic list and a block dedicated to the authors. Below I will give some interesting ideas from the book of W. Chan Kim and Renée Mauborgne.
Creation of "blue oceans"
The creation of "blue oceans" can be illustrated by the example of the famous circus show "Cirque du Soleil". Initially, the company decided not to compete with the usual circus show, and began to create an unoccupied market segment, where there was no competition. The market was aimed at a new target audience. The success of the circus is due to the fact that its organizers realized: for victories in the long term, it is necessary to get rid of competition.
From the company and the industry to the strategic step
The strategic step is a set of decisions and actions of the management body aimed at developing a large business proposal that can form a new market.
There are no companies that would be successful all the time. But the strategic steps, which resulted in the creation of "blue oceans" and the emergence of new trajectories of a rapid increase in profits, are surprisingly similar to each other.
Winners and losers in the creation of "blue oceans" differ in that each of them has a different approach to strategy. Those who are stuck in the "red ocean" used the traditional approach in the hope of overtaking competitors and taking a comfortable defensive position in the conditions that prevailed in the market. Those who created the "blue oceans" did not focus on other players in the industry - they acted on a different strategy, called the innovation of value, according to which both innovation and value are equal.
Reconstruction of market boundaries
The first principle of the strategy of the "blue ocean" is the reconstruction of market boundaries aimed at getting out of the world of competition and creating a new industry. And, conducting their studies, the authors were able to identify specific patterns of the process of creating the "blue oceans", namely: six ways of reconstructing markets.
The first way is to study alternative industries. The second way is to study the industry's strategic groups. The third way is to consider the purchase chain. According to the fourth way, it is necessary to study additional services and products. The fifth way indicates an analysis of the functional and emotional attractiveness of the goods for consumers. And the sixth way calls for a closer look at tomorrow.
Focusing on the overall picture, not on numbers
This principle can be called the main when it comes to reducing the risk associated with planning. It is distinguished by the development of an alternative approach to the existing strategic planning, according to which, first of all, a strategic canvas is created. This approach leads to the emergence of strategies that reveal the creative potential of workers and help the organization to consider the "blue oceans".
Creating a strategic canvas includes four steps:
- Visual awakening
- Visual research
- Visual strategies fair
- Visual communication
Going beyond the existing demand
This principle allows us to maximize the size of the created "blue ocean", which is the key point in achieving innovation value. In order to obtain a successful result, two traditional strategic practices need to be overcome - focusing on the already existing customer base and striving for maximum segmentation, allowing to adapt to differences among customers.
Maintaining the right strategic sequence
After the ways of creating the "blue oceans" have been studied, the strategic outline that shapes the future strategy has been developed, and the ways of attracting the maximum number of consumers have been determined, it is possible to start creating an effective business model. Its basis is the correct strategic sequence, expressed in the utility of the product for the buyer, price, cost and implementation.
Overcoming the main organizational obstacles
Companies must overcome four major obstacles.
The first is internal dissonance of employees. Workers should be convinced that a strategic change is correct and necessary.
The second obstacle is the limited resources. The more serious the changes in the company, the more resources are needed to implement them.
The third obstacle is motivation. It is required to understand how key actors can be quickly and clearly motivated to change the current situation.
And the fourth obstacle is political intrigue. Here it is necessary to take into account the attitude of officials and dignitaries to innovations in business.
Each specific case may differ in its degree of complexity, but many companies face in practice only with some of the obstacles. Nevertheless, it is simply necessary to be able to cope with all these difficulties in order to ensure a reduction in organizational risk.
Building the implementation process into a strategy
The organization is not only top management and middle management. Only when the entire staff is united around the strategy and divides it in all situations, the company can stand out from the competition.
The implementation process must be built into the strategy from the very beginning - this ensures the faith and dedication of the employees, and also motivates them to volunteer cooperation. Only a fair process can be the main variable that indicates the difference between successful strategic steps in moving to the "blue ocean" from unsuccessful ones. Depending on whether there is a fair process, the actions of the organization lead to success or failure.
Conclusion
The creation of the "blue oceans" is not a one-time achievement, but a dynamic process. If the company creates a "blue ocean", at some point in time its path will necessarily appear imitators. And the question is, when exactly will they appear? In other words, how complex is the strategy of the "blue ocean" to follow? With the success of the organization and its first imitators in the "blue ocean" new players are pouring in.
And here the following question arises: when should an organization create a new "blue ocean"? In order to avoid competition, you must monitor the curves of value on a strategic basis. The moment when the curve of value of your company merges with the curve of the value of competitors, is an indicator that you should create a new "blue ocean".