By W. Chan Kim, Renée Mauborgne
Blue Ocean Strategy - How to Create Uncontested Market Space and Make
the Competition Irrelevant, by W. Chan Kim and Renée Mauborgne (Harvard
Business School Press, 2005)
The Facebook Effect
Who would have thought that Facebook would threaten Google’s dominance on
the Web. Facebook is blurring the line between the various modes of social
interaction and communication. It is consolidating email, tweets, sharing of
digital media, and networking There are so many other websites each offering
specific services. But Facebook is attracting traffic from all others. It
has overtaken Google as the most visited website. If each of the other
specialized service providers is strong in its own business, how is Facebook
able to compete against them all at the same time? Or does it? Facebook's
strategy is a good example of what this book is all about.
The Red Ocean – Crowded Marketplace
Every strategist knows that one needs to come up with a novel idea to
compete against companies in its industry and to sustain the dead-heat race
to dominate the marketplace. The author calls this marketplace battle, the
“red ocean”. Companies package in more functions and features and price the
products or services against the competition. Everyone is competing against
offering the commonalities, slashing the profit margins as a consequence.
The best way out is to just not swim in the “red ocean”. Rather take a calm
back-stroke in the “blue ocean”.
The Blue Ocean – The Serene Getaway
“Blue Ocean” is an uncontested marketplace. Companies swimming in the “blue
ocean” offer products and services with features that are divergent from
those offered by the proclaimed competition. The book introduces Cirque du
Soleil as perfect example of such a strategy. Cirque du Soleil offers a
unique form of entertainment that does not necessarily compete against any
particular form of entertainment. It combines circus acts with theater arts
with a hint of Broadway musical. Each venue has its own theme. It does not
directly complete with the name-old circuses, or Broadway shows, or operas.
With this unique offering it is also able to charge a premium price for its
shows. Thus a “blue ocean” is about carving a niche marketplace that does
not exist, which the author quotes as “value innovation”.
The Strategy Canvas and Analytical Framework
This book offers some effective analytical tools and a strategy framework to
help strategists to create uncontested marketplaces. The primary tools
are:
The Strategy Canvas: This is a two-dimensional graphical tool with the
horizontal axis showing a list of factors with which the company is
competing, and the vertical axis representing the level of competence
ranging from low to high
The Four Actions Framework: This involves the actions of Reducing,
Eliminating, Raising, and Creating factors to differentiate from the
competition.
The process involves mapping the existing strategy of a company along with
the competition in the same canvas; then applying the four actions framework
to diverge from the competing industry factors.
How to Differentiate and Identify New Customer Segments
The second part of the book provides a valuable analytical framework that
helps to develop a value curve by providing steps to fine-tune the different
factors identified using the strategy canvas. It not only provides the
visual tools to conceive a new marketplace but also provides the analytical
framework to identify new segments of customers, and to develop a target
cost structure based on the price the customer may be willing to pay.
Steps to Implement, Execute, and Sustain the Lead
Once a new strategy has been developed, then comes the most difficult part,
the implementation and execution. The success of the “blue ocean” not only
lies in the development of new value curve, but also relies on the buy-in of
all the internal and external stakeholders. The book provides clear and
time-tested guidelines of how to overcome the barriers-to-change that the
new strategy will bring about. It doesn’t stop there. This development of
the “blue ocean” strategy does not happen just once. The company should be
on the lookout for changes in all fronts, vis-à-vis macro-economic changes,
political climate, technological evolutions, imitations, and changing
consumer behavior.
This is a great book for all the strategy executives, turn-around
specialists, marketing and consumer research analysts and all those who are
interested in keeping up with the ever changing market dynamics. The book is
studded with plethora of visually illustrated success stories of
organizations that knowingly or unknowingly swam in the “Blue Ocean”.
This article was originally published on
Suite101.com
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