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

The Four Steps of Visualizing Strategy: Step Two — Visual Exploration

Gabor George Burt — 2009-11-10T09:53:36+01:00

Continuing in our series which takes a closer look at each step in creating a Blue Ocean Strategy Canvas, our focus advances to the second step — Visual Exploration. Once featured, each step is made accessible through the Blue Ocean Strategy Basics archive . For the second step, we turn to pages 88 — 89 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne):  

The next step is to send a team into the field, putting managers face-to-face with what they must make sense of: how people use or don’t use their products or services. This step may seem obvious, but we have found that managers often outsource this part of the strategy-making process. They rely on reports that other people (often at one or two removes from the world they report on) have put together.

A company should never outsource its eyes. There is simply no substitute for seeing for yourself. Great artists don’t paint from other people’s descriptions or even from photographs; they like to see the subject for themselves. The same is true for great strategists. Michael Bloomberg, before becoming mayor of New York City, was hailed as a business visionary for his realization that the providers of financial information also needed to provide online analytics to help users make sense of the data. But he would be the first to tell you that the idea should have been obvious to anyone who had ever watched traders using Reuters or Dow Jones Telerate. Before Bloomberg, traders used paper, pencil, and handheld calculators to write down price quotes and figure fair market values before making buy and sell decisions, a practice that cost them time and money as well as built-in errors.

Related links:

Buy the Blue Ocean Strategy book.

[Image via GO Smell the Coffee.]

Is the fashion industry going out of style?

Gabor George Burt — 2009-11-05T11:10:57+01:00

“There’s no such thing as a permanently great company or a permanently great industry. All industries rise and fall as do companies. However, there are permanently smart strategic moves” — W. Chan Kim & Renée Mauborgne, from Chief Executive magazine article “Flouting Conventional Wisdom” (May 2003).

A key quality industries and companies should strive for is adaptability, always scanning and acting upon broad market opportunities. All industries and companies face difficult or life-threatening challenges at one point or another, and it is their adaptability and ability to make smart strategic moves which allow them to prosper even in the face of adversity.

It seems that one of the latest industries which may be going out of style is fashion and retail. From the LA Times:

"Between new technology and the economy, the fashion industry will never be the same," New York designer Norma Kamali said. "It makes you stand back and say, 'If I continue doing what I'm doing, I may not stay in business.' It's time to rethink and look at what's working and what's not."

....The global strategy of branding and merchandising that has dominated the luxury sector for the last decade is falling away in favor of more authentic, localized experiences. Luxury brands are borrowing ideas from the fast-fashion world -- opening pop-up shops, launching limited-edition collections, even mixing it up with the mass market.

Shoppers are "accustomed to having new styles in the stores all the time, and this is forcing luxury brands to be more similar to Zara and H&M in the way they emphasize newness, entertainment and the in-store experience," said Claudia D'Arpizio, a business consultant for market research firm Bain & Co.
"The retail industry has gotten lackadaisical," said Marshal Cohen, chief industry analyst for Port Washington, N.Y.-based market research firm NPD Group. "It went through eight years of uninterrupted growth, where you could just stick it on the floor and it would sell because the customer wasn't thinking about what they were spending money on. But the rules have changed, and you have to earn your stripes again. And price isn't the only answer.

[Image via maaja03.]

Red Ocean turbulence ahead

Gabor George Burt — 2009-11-04T08:34:17+01:00

Despite the potential upswing of the global economy – there is still great uncertainty and tension in the air. So to inject a much needed layer of levity, our “Global Recovery Comic Angle” series presents satirical articles of different industries during this period. Today we showcase ‘Awful Airlines,’ an editorial cartoon roundup by Daryl Cagle depicting the trials and tribulations of air travel.

View the entire slideshow here.

[Image via MSNBC.]

The Four Steps of Visualizing Strategy: Step One — Visual Awakening

Gabor George Burt — 2009-11-02T14:26:40+01:00

Continuing with weekly insights on Blue Ocean Strategy fundamentals, we advance to the Strategy Canvas. This visual process has four steps. Today we focus on the first step — Visual Awakening, which, along with each step to follow, will be made accessible through the Blue Ocean Strategy Basics archive. For the first step in visualizing strategy, we turn to pages 84 - 85 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne):

A common mistake is to discuss changes in strategy before resolving differences of opinion about the current state of play. Another problem is that executives are often reluctant to accept the need for change; they may have a vested interest in the status quo, or they may feel that time will eventually vindicate their previous choices. Indeed, when we ask executives what prompts them to seek out blue oceans and introduce change, they usually say that it takes a highly determined leader or a serious crisis.

Fortunately, we’ve found that asking executives to draw the value curve of their company’s strategy brings home the need for change. It serves as a forceful wake-up call for companies to challenge their existing strategies. That was the experience at EFS (a European Financial Services Co.). A detailed illustration of EFS’ visual awakening is provided on pages 85-87 of Blue Ocean Strategy.

Let’s Get Academic – Part 2

Gabor George Burt — 2009-10-29T13:58:09+01:00

In the September issue of Fast Company, Editor Robert Safian posed challenging questions about the state of higher education, and the best model for the future. With the average annual cost of attending a private four-year college rising nearly 4% to US$ 32,307 this school year — the biggest increase since 2001 — academia is ripe for Blue Ocean Strategy-based thinking and solutions.

Yesterday we promised our readers the eagerly-awaited solution proposed by Gabor to the challenge raised by Robert Safian in Fast Company’s “Letter from the Editor: Lessons of the Edupunks.” Below is an excerpt from the full version of Gabor’s solution, which appears in the November issue of Fast Company.

Given the astounding tuition cost of leading universities, education has to be regarded as a business proposition by both students and the schools themselves. Students make an investment to attend in the hope of qualifying for well-paying jobs after graduation, while universities count on continuous donations by alumni to keep themselves going. Embracing this simple equation is the first step in universities shedding the false sanctity of outdated traditions in favor of asking such timely questions as: How can we create a model that minimizes the costs and maximizes the return for both students and our university simultaneously? How can we best enrich the lifestyle of our students so they are not saddled with debt from the moment they graduate? And how can we become ‘market driving’ rather than simply ‘market driven’ to attract the greatest pool of talented students? Bold questions, indeed.    
So here is a possible solution: Leading universities have amassed billions of dollars in endowment. Rather than trying to out-compete each other in endowment ratios and levels, let’s tap these funds as the source for the new model. Let’s use a portion of the endowment’s yearly investment income to do away with tuition fees all together, and offer free attendance. In return, once students graduate they would contribute a certain percentage of their annual earnings to the school for x number of years, or until a specified threshold is reached.
For universities with suitable resources, the cost of this program could be relatively low – just 5% of total endowment could more than cover the full tuition of all students – meaning that they would only have to invest a portion of their yearly investment income, and not principal. To illustrate, here is the rough calculation for Amherst College, with rounded figures: 5% of its $1.7 Billion endowment would yield $50,000 for each of its 1,700 students per year, more than sufficient to cover tuition). And the returns would be tantalizing: They could select students purely on future potential from a vastly expanded talent pool, and see much greater levels of alumni contributions than currently (they could even account for a portion of students not pursuing commercial careers with their degree). For students this model would eliminate the biggest burden of higher education altogether, better prepare them for the post-graduation marketplace, and allow them to take charge of their future with much greater flexibility. In short, there would be a close alignment of interests between students and universities.

[Image via Brands of the World.]

Let’s Get Academic: Blue Ocean Strategy for higher education

Gabor George Burt — 2009-10-28T10:30:56+01:00

In the September issue of Fast Company, Editor Robert Safian posed challenging questions about the state of higher education, and the best model for the future. With the average annual cost of attending a private four-year college rising nearly 4% to US$ 32,307 this school year — the biggest increase since 2001 — academia could definitely benefit from Blue Ocean Strategy-based thinking and solutions.

In “Letter from the Editor: Lessons of the Edupunks” Mr. Safian poses the following questions:

If you were starting a system of higher education from scratch today, would you still choose a campus-based model that charges hundreds of thousands of dollars for a degree? Or might the efficiency of the Web inspire a model in which classes would be remotely delivered via Web streaming, discussion groups conducted over Facebook, and testing handled electronically?....

One possible remedy? Tune in tomorrow when we present Gabor’s response to Mr. Safian.

[Image via ANVRecife.]

Creative Blue Ocean Strategy vs. Management Efficiency

Gabor George Burt — 2009-10-27T11:21:47+01:00

Back at the beginning of the economic downturn, we wrote about Blue Ocean Strategy being an important tool for leaders as it looks for cost reduction AND new sources of value for buyers. The assertion was echoed by Bruce Nussbaum, Innovation Editor at BusinessWeek, and Sami Mahroum, a Research Director of Britain's National Endowment for Science, Technology & the Arts, among others. Continuing on this theme, a recent article from Psychology Today discusses the necessity for Blue Ocean Strategy-like thinking — in contrast to simple cost slashing — as a solution to the economic downturn.

From Psychology Today:

The mantra for business for much of the last century has been operational efficiency. So leaders look for ways to cut costs and make the operations lean and mean. Yet much of the rationale for and evidence supporting efficiency as a key management strategy is questionable.

In a great article by Adam Hartung in Forbes, titled “The Myth of Efficiency,” he outlines how leaders have mistakenly used efficiency to drive business results, often with disastrous results. Hartung cites W. Chan Kim and Renee Mauborgne, of INSEAD International Business School, and the authors of Blue Ocean Strategy, who advanced the argument that businesses should create new market space or "Blue Ocean" rather than competing in an existing industry. Kim and Mauborgne say that only 14% of innovations are radical, and that those few radical innovations produce 61% of company profits....

3M's CEO, George Buckley in BusinessWeek, argues that creative blue ocean strategy produces better business results than the traditional focus on operational efficiency, and he argues further, that excessive focus on efficiency stifles innovation.

[Image via elrani.]

Blue Ocean Strategy Path 6: Look across time

Gabor George Burt — 2009-10-26T09:44:06+01:00

Continuing in our series which takes a closer look at each of the paths in Blue Ocean Strategy’s Six Paths Framework, our focus advances to the sixth and final path — looking across time. This path, along with each previously highlighted path, is made accessible through the Blue Ocean Strategy Basics archive. For our highlight of the sixth path, we turn to pages 75 - 78 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne):

All industries are subject to external trends that affect their businesses over time. Think of the rapid rise of the Internet or the global movement toward protecting the environment. Looking at these trends with the right perspective can show you how to create blue ocean opportunities.

Most companies adapt incrementally and somewhat passively as events unfold. Whether it’s the emergence of new technologies or major regulatory changes, managers tend to focus on projecting the trend itself. That is, they ask in which direction a technology will evolve, how it will be adopted, whether it will become scalable. They pace their own actions to keep up with the development of the trends they’re tracking.

But key insights into blue ocean strategy rarely come from projecting the trend itself. Instead they arise from business insights into how the trend will change value to customers and impact the company’s business model. By looking across time — from the value a market delivers today to the value it might deliver tomorrow — managers can actively shape their future and lay claim to a new blue ocean. Looking across time is perhaps more difficult than the previous approaches we’ve discussed, but it can be made subject to the same disciplined approach. We’re not talking about predicting the future, something that is inherently impossible. Rather, we’re talking about finding insight in trends that are observable today.

Related links:

Buy the Blue Ocean Strategy book.

[Image via Sofia Katariina.]

The Perfect Calm Series: Dean Kamen Reinvents Coke’s Soda Fountain

Gabor George Burt — 2009-10-23T10:20:38+02:00

One of the most exciting spheres of application for Blue Ocean Strategy is the realm of Social Capitalism. This explosive market space is at the intersection of successful business and lasting social impact. Traditionally these two spheres were considered separate, but the two can be pursued simultaneously via Blue Ocean Strategy. Periodically, we feature stories which illustrate stimulating ventures, ideas and concepts targeting this very market space.  

This week, we select the story: Dean Kamen Reinvents Coke’s Soda Fountain .

Do you know of other companies, organizations or business visionaries sailing along the intersection of good business and social good? Share your ideas with the Creating Blue Oceans Community.

[Image via BusinessWeek.]

Blue Ocean Strategy co-authors rank among ‘World’s Top 50 Thinkers’

Gabor George Burt — 2009-10-21T10:56:04+02:00

In conjunction with McGraw Hill, the Crainer-Dearlove annual list of the World’s Top 50 Thinkers has been published. As a testament to the power and relevance of Blue Ocean Strategy, Professor Renée Mauborgne and Professor W. Chan Kim again appear in the Top 10, this time being awarded fifth place.

From TheThinkers50, here are the Top 10:

CK Prahalad
Malcolm Gladwell
Paul Krugman
Steve Jobs
W. Chan Kim & Renée Mauborgne
Muhammad Yunus
Bill Gates
Richard Branson
Philip Kotler
Gary Hamel

Blue Ocean Strategy became an International Bestseller, after claiming the Wall Street Journal Bestseller, BusinessWeek Bestseller, and National (American) Bestseller status. It has been published in 41 languages, covering over 180 countries, breaking HBSP's historical record of most foreign language translations ever achieved.

More about the TheThinkers50, including the complete 2009 list and how it is assembled, as well as a video gallery and ‘guru radar’ is available via their website.

[Image via richardsmith155.]