The international bestseller Blue Ocean Strategy by Professors W. Chan Kim and Renée Mauborgne was published 10 years ago. Based on a study of 150 strategies of businesses in 30 industries up to 2000, it was a “how to” business book like no other before it. The framework, tools and examples it provided to businesses seeking strategic paths out of head-to-head rivalry in bloody “red oceans” of crowded competition in order to create “blue oceans” of uncontested market space were practical and communicable across organisational functions – the engines of change. Such was the success of this business education phenomenon that a Blue Ocean Strategy Institute now exists in the prestigious INSEAD business school and libraries of business publications and support materials help spread the message.
From a practitioner’s viewpoint, the strength of Blue Ocean strategy is its’ recognition that a business’ resources are finite and, whilst customers are always very happy to receive more and above-industry-average service levels, customers know what they value i.e. what they are willing to pay for.
Value Innovation – the cornerstone of Blue Ocean strategy – provided a strategic framework for reducing or eliminating factors (e.g. specific services) within a business’ offer that a particular market is reluctant or unwilling to pay for, so that resultant cost savings can be re-invested in raising customer valued-factors and in creating new offers to help capture attractive and uncontested
market space. Whilst it might be argued that the development of new markets or the creation of enhanced offers is merely a different explanation of the Ansoff’s matrix, the strength of Blue Ocean strategy is that it provides practical steps to value innovation and the six pathways approach to creating new business opportunities.
Whilst the relevance of strategic methods described in the book are indisputable, unfortunately with some studies now being over 20 years old, some of the exemplar strategic innovations are in organisations that have since met difficult times. This undermines the message to today’s reader. Even though at the root of these companies’ downfall is an adoption of “me-too” or “corner-cutting” strategies that ignore Blue Ocean thinking, when competitors begin to invade the profitable blue ocean market space that they have created. Burke et al., (2010) makes the point that where invasion of a blue ocean is damaging, either the scope of new opportunities is limited or the barriers to entry are very low. Either way, in such circumstances a company focussed on competitive advantage would outperform an innovator – who is less equipped to compete and who faces the innovator’s dilemma of either remaining the incumbent, held captive by serving existing customer needs, or of destroying their business model to once again become the provider of disruptive innovation to the market. For this reason it is certainly easier for new market entrants to create blue oceans.
The good news from the Burke et al., survey is that pursuing a Blue Ocean strategy can be sustainable, certainly over 15 years. Which is a significant timescale in business today. If you would like to learn how the practical application of Blue Ocean Strategy can help your business create and implement new, attractive opportunities contact Pennog by calling +44 1484 443001 or by selecting “Finding New Business Opportunities” in the easy contacts form and providing some details of your interest.