Blue Ocean Strategy | Gabor George Burt on Creating Blue Ocean Strategy

Blue Ocean Strategy: Sustainability and Renewal 2

Gabor George Burt — 2009-07-20T13:04:14+02:00

In our Blue Ocean Strategy Basics series, we continue our focus on the sustainability and renewal of Blue Ocean Strategy. Once featured, each entry is made accessible through the Blue Ocean Strategy Basics archive of this site. We turn to pages 188 — 189 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne).

When to Value-Innovate Again

Eventually, however, almost every blue ocean strategy will be imitated. As imitators try to grab a share of your blue ocean, you typically launch offenses to defend your hard-earned customer base. But imitators often persist. Obsessed with hanging on to market share, you may fall into the trap of competing, racing to beat the new competition. Over time, the competition, and not the buyer, may come to occupy the center of your strategic thought and actions. If you stay on this course, the basic shape of your value curve will begin to converge with those of the competition.

To avoid the trap of competing, you need to monitor value curves on the strategy canvas. Monitoring value curves signals when to value-innovate and when not to. It alerts you to reach out for another blue ocean when your value curve begins to converge with those of the competition.

It also keeps you from pursuing another blue ocean when there is still a huge profit stream to be collected from your current offering. When the company’s value curve still has focus, divergence, and a compelling tagline, you should resist the temptation to value innovate again and instead should focus on lengthening, widening, and deepening your rent stream through operational improvements and geographical expansion to achieve maximum economies of scale and market coverage. You should swim as far as possible in the blue ocean, making yourself a moving target, distancing yourself from your early imitators, and discouraging them in the process. The aim here is to dominate the blue ocean over your imitators for as long as possible.

As rivalry intensifies and total supply exceeds demand, bloody competition commences and the ocean will turn red. As competitors’ value curves converge toward yours, you should begin reaching out for another value innovation to create a new blue ocean. Hence, by charting your value curve on the strategy canvas and intermittently replotting your competitors’ value curves versus your own, you will be able to visually see the degree of imitation, and hence of value curve convergence and the extent to which your blue ocean is turning red.

Who Do You Call Your Target Customer?

Gabor George Burt — 2009-07-16T14:47:26+02:00

In most industries, all the fundamental strategic differences among customers are captured by a small number of clusters called “strategic groups.” Most companies focus on improving their competitive position within an existing strategic group. But why not create your own strategic group which can draw customers away from several of the traditional groups simultaneously?

Consider the International Date Line, and its possible application in establishing a new strategic group within the office rental market. Essentially by crossing this imaginary line you can gain or lose an entire day. By building an office complex right on it, a real estate developer could cater to a new strategic group: Business tenants looking for an exotic, off-shore presence, and at the same time seeking a solution for effective time management.

Being in the middle of the Pacific Ocean would certainly be exotic. And here, whenever overwhelmed with work or hopelessly behind schedule, occupants could simply walk over to the part of their office that was a day behind, and immediately have an extra 24-hours to catch up. Conversely when having little going on, they would just step across the line in the other direction, and it would instantly be one day later.

[Image via SodaHead.]

A razor sharp Blue Ocean Strategy

Gabor George Burt — 2009-07-15T11:46:12+02:00

One of the core tenets of Blue Ocean Strategy is simplicity. By providing a framework that simplifies the complex process of strategic planning, Blue Ocean Strategy allows companies to see the big picture and focus on the most important questions. Furthermore, simplifying a company's offering allows it to create exceptional value for customers while trimming costs at the same time.

Take for example Razwar’s razor blade subscription service. Their simple, Blue Ocean-like approach has the potential to turn the razor-blade industry on its head by offering a service model to customers, instead of the conventional industry product. From the Board of Innovation:

The new business Razwar of the company Growth Bridge fights directly against the big boys in the razor blade market. Instead of using the traditional bait-and hook principle as it’s being used by Gillette or Wilkinson Sword, this e-shop brings the subscription service concept to the razor blade business. After buying a start kit of € 7.50, users subscribe in order to receive razor blades on a regular basis. For the fixed annual fee of € 27.50 Razwar will deliver 30 razor blades 3 times a year. Straight-forward but innovative in its sector.

This is a good example of a so called blue ocean strategy. Instead of focusing on the traditional value parameters in this market (more blades, less irritation,…), razwar tries to change the rules of the game by focusing on convenience and price transparency. In this case, they offer a service to the client instead of regular product sales. Nowadays many commodities are being sold in a similar way. Monthly socks, monthly boxers, or subscription condoms are good examples. What other concepts do you know?

[Image via M.Sheldrake.]

Your New Business Mantra: Buy High, Sell Low

Gabor George Burt — 2009-07-14T12:14:40+02:00

One of the key attributes of Blue Ocean Strategy is its universal applicability. Companies of all sizes from start-ups to multinationals, operating in any market or industry can benefit from the alluring logic and simplicity of Blue Ocean Strategy.

In contrast, consider a business philosophy with far less applicability. There was a well-known shepherd who would go to the top of high mountains to buy sheep from the mountain dwellers, then bring his collected flock down to the valley and sell them for a healthy profit at the village market. He would always pontificate that the secret of his success was to “buy high, sell low.”

[Image via Te Ara.]

The sustainability and renewal of Blue Ocean Strategy

Gabor George Burt — 2009-07-13T11:19:36+02:00

Shifting to the next segment in our Blue Ocean Strategy Basics series, we focus on the sustainability and renewal of Blue Ocean Strategy. Once featured, each entry in this series is made accessible through the Blue Ocean Strategy Basics archive of this site. For this week’s topic, we turn to pages 185 — 186 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne).

A blue ocean strategy brings with it considerable barriers to imitation. Some of these are operational, and others are cognitive. More often than not, a blue ocean strategy will go without credible challenges for ten to fifteen years, as was the case with Cirque du Soleil, Southwest Airlines, Federal Express, The Home Depot, Bloomberg, and CNN, for starters. This sustainability can be traced to the following imitation barriers rooted in blue ocean strategy:

Value innovation does not make sense to a company’s conventional logic.

Blue ocean strategy may conflict with other companies’ brand image.

Natural monopoly: The market often cannot support a second player.

Patents or legal permits block imitation.

High volume leads to rapid cost advantage for the value innovator, discouraging followers from entering the market.

Network externalities discourage imitation.

Imitation often requires significant political, operational, and cultural changes.

Companies that value-innovate earn brand buzz and a loyal customer following that tends to shun imitators.

Sharks in a Blue Ocean Don’t Bite

Gabor George Burt — 2009-07-09T14:40:00+02:00

Attention advertising and media professionals.... How can Blue Ocean Strategy apply to your job as a Marketing Manager or Media Planner? A recent article in MediaPost asserts that advertising and marketing executives should focus on creating new marketspaces for clients by incorporating Blue Ocean Strategy in “brand visions, strategies and discreet tactical elements.” After all, as the author writes, “Sharks in a Blue Ocean Don’t Bite.”

From MediaPost:

In a crowded market, where hundreds of companies are fighting over a shrinking profit pool, we have to develop entirely new approaches to marketing. No longer can we be content with developing plans that seek to dominate existing markets. After all, making inroads at the expense of established competitors is an expensive proposition requiring a flood of marketing dollars - always a luxury in a tough economy.

Keeping this in mind, it is imperative that our marketing strategies capitalize on new and hitherto unidentified windows of opportunity. If we are to accomplish this effectively, we cannot continue to function solely as marketers. We have to think like entrepreneurs.

And one approach that has always served me well during my career, both in marketing and as an entrepreneur has been the Blue Ocean Strategy.

[Image via Sydney Morning Herald.]

Can your business communicate underwater?

Gabor George Burt — 2009-07-08T13:51:56+02:00

A key utensil in the Blue Ocean Strategy toolset is the Six Path Framework, which allows for the exploration of business strategy from six distinct perspectives, leading to the discovery of blue ocean market space. One of the perspectives, ‘Strategic Groups’ tells us that in most industries, all the fundamental strategic differences among customers are captured by a small number of clusters called “strategic groups.” Blue Oceans can be created by challenging these delineations or by establishing new strategic groups.

Consider the example of scuba diving. Scuba divers make use of hand signals to communicate basic information under water, such as “I am low on air,” “Stay together,” or “Look over there.” But the extent of underwater communication is greatly limited, which may deter more social, talkative adventure seekers from taking the plunge.

Suppose a dive shop wanted to reach out to the previously overlooked strategic group of customers: Chatty divers. They could attempt to accomplish this by significantly expanding the underwater hand signal repertoire with an array of new expressions such as “You look great in those flippers,” or “That grouper reminds me of my mother-in-law,” etc. In the process, this pioneering dive shop would overstep traditional industry definitions of target customers and establish a new strategic group — well on its way towards a Blue Ocean market space.

[Image via - drsteve -]

Blue Ocean Strategy: The 3rd ‘E’ of fair process

Gabor George Burt — 2009-07-06T14:36:49+02:00

In our Blue Ocean Strategy Basics series, we continue to highlight building execution into strategy and the three ‘E’ Principles of Fair Process. Once featured, each principle is made accessible through the Blue Ocean Strategy Basics archive of this site. For an introduction to the third E Principle of Fair Process, we turn to page 175 — 176 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne).

Expectation clarity requires that after a strategy is set, managers state clearly the new rules of the game. Although the expectations may be demanding, employees should know up front what standards they will be judged by and the penalties for failure. What are the goals of the new strategy? What are the new targets and milestones? Who is responsible for what? To achieve fair process, it matters less what the new goals, expectations, and responsibilities are and more that they are clearly understood. When people clearly understand what is expected of them, political jockeying and favoritism are minimized, and people can focus on executing the strategy rapidly.

Defying Conventional Wisdom: Windmills in the sky

Gabor George Burt — 2009-07-02T13:08:55+02:00

Companies today, facing an environment of great uncertainty, can no longer cling to traditional industry assumptions. Instead, the perspective of defying conventional wisdom goes hand-in-hand with the process of Blue Ocean Strategy, which is a systematic approach to turning unconventional ideas into winning strategies. This week, to provide some inspiration, we feature an example of Defying Conventional Wisdom from the energy sector.

Why build ground-based windmills when enegery-producing winds are more abundant higher up in the atmosphere? Contrary to the conventional wisdom that windmills must be near-to-earth, new wind machines placed thousands of feet above large cities have the potential to meet global electricity demand a hundred times over.

More on this uplifting thinking from Wired:

The wind blowing through the streets of Manhattan couldn’t power the city, but wind machines placed thousands of feet above the city theoretically could.

The first rigorous, worldwide study of high-altitude wind power estimates that there is enough wind energy at altitudes of about 1,600 to 40,000 feet to meet global electricity demand a hundred times over.

The very best ground-based wind sites have a wind-power density of less than 1 kilowatt per square meter of area swept. Up near the jet stream above New York, the wind power density can reach 16 kilowatts per square meter. The air up there is a vast potential reservoir of energy, if its intermittency can be overcome.

Even better, the best high-altitude wind-power resources match up with highly populated areas including North America’s Eastern Seaboard and China’s coastline.

[Image via Future Energy.]

Global Crisis – The Comic Angle: Amusement parks and bailouts

Gabor George Burt — 2009-07-01T17:50:04+02:00

No matter where one turns these days, it seems nearly impossible to escape the news of the latest company or industry to unravel. So to challenge the status quo of doom and gloom, and to inject a layer of much needed levity, our series presents satirical articles of different industries in crisis. This week, we turn to two short, humorous bulletins.

From Daily Comedy:

Six Flags Bankruptcy
Due to the slumping economy, Six Flags is filing for Chapter 11 bankruptcy protection. Ironically, when they get to bankruptcy court, they'll have to wait in a line a mile long for two hours only to realize later that this ride really sucks.

Banks Want to Return $68 Billion in Bailout Money
Banks want to return $68 billion in bailout money to the government. They were upset at all the hidden fees.

[Image via Six Flags.]