Instead of fighting head-on with your competitors, how do you create uncontested market space and make the competition totally irrelevant? Based on a study of 150 strategic moves spanning more than 100 years and 30 industries, Blue Ocean Strategy addresses this question and provides a systematic approach to drafting and implementing your own Blue Ocean Strategy. In this summary, we’ll give a synopsis of the key concepts, tools and tips from the book.
BLUE OCEAN VS RED OCEAN
Why bother with Blue Oceans to begin with? Essentially, they create new demand, leading to easy uncontested growth in sales and profits, and wider and deeper market opportunities in the unexplored space.
A cornerstone of the BOS is Value Innovation, which is essentially the area where a company’s actions concurrently reduce costs and increases its value offering to buyers. It is about creating a quantum leap in value for your buyers, thereby creating new and uncontested market place. This strategy needs to span across the entire system of a company’s activities.
Formulating your Blue Ocean Strategy
ANALYSING THE MARKET: TOOLS AND FRAMEWORKS
Here’s a brief overview of some of the tools and frameworks used in the formulation and execution of the Blue Ocean Strategy. Do get more details in our full 12-page summary. To apply the strategy, do get more details from the BOS official website, or get a copy of the book for details.
The Strategy Canvas
This is a tool to capture the current state of play in the marketplace, so you can understand: where the competition is currently investing, how the industry currently competes, and what customers receive from existing competitors in the market.
Four Action Framework
This framework is used to break the trade-off between differentiation and low cost to create a new value curve, using 4 key questions to challenge an industry’s logic and business model.
Eliminate-Reduce-Raise-Create (ERRC) Grid
The ERRC pushes companies to specify the actions that they can eliminate and reduce, so they can communicate their strategy internally and take concrete action.
The Pioneer-Migrator-Settler (PMS) Map
Use this map to plot your company’s current and planned portfolios gives you perspective on your potential for growth, grouping your offerings into 3 categories: Settlers (me-too offerings/ businesses), Migrators (offerings/businesses above market average), and Pioneers (offerings/businesses of unprecedented value).
Buyer Utility Map
This map shifts the focus to buyers, helping to identify the utility spaces that a product or service can potentially fill. The Buyer Experience Cycle (BEC) outlines the 6 stages of buyers’ experience, with a range of experiences within each stage. The utility levers cut across stages of the buyers’ experience.
FORMULATING BLUE OCEAN STRATEGY: 4 KEY PRINCIPLES
How do you pull the tools above together to formulate your Blue Ocean Strategy? Here’s a quick overview on what’s involved in formulating and executing your BOS:
1) Reconstruct Market Boundaries
Examine how the market is currently performing and competing, then create a strategy that is drastically different from the rest of the players. The book details 6 paths you can take to identify blue ocean opportunities and reconstruct your market boundaries (read more from the book or our complete summary).
2) Reach Beyond Existing Demand
To maximize the size of the blue ocean, you need to look to 3 tiers of non-consumers: “Soon-to-be” non-consumers, “Refusing” non-consumers and “Unexplored” non-consumers. Focus on the tier that represents the biggest catchment at the time, but also explore and build on overlapping commonalities that applies to different tiers of non-consumers.
3) Getting The Strategic Sequence Right
There are 4 key steps that must be covered, to develop a robust strategy. Each of the criteria below must be addressed in sequence before a commercially-viable blue-ocean strategy can be borne.
Exceptional Buyer Utility => Accessible Price=> Viable Cost => overcome Adoption Hurdles
4) Focus On The Big Picture
Visualize your Strategy to unlock the creativity of people within your organization, help them see the blue oceans, and communicate the strategy for effective execution. This includes 4 components: Visual Awakening, Visual Exploration, Visual Strategy Fair, Visual Communication.
Executing the Blue Ocean Strategy
1) Overcome Key Organizational Hurdles
Because BOS represents a huge shift from status quo, the challenge of execution is amplified. The book recommends using the approach of “tipping point leadership” to overcome the 4 key hurdles to change:
• Cognitive Hurdle (waking up employees to the need for change);
• Resource Hurdle (executing a strategic shift with fewer resources);
• Motivational Hurdle (motivating key players to move fast and tenaciously); and
• Political Hurdle (overcoming age and treachery)
For each of these hurdles, Kim & Mauborgne offer suggested steps that can be taken to overcome them.
2. Build Execution into Strategy
There will always be resistance to change, and much more so with BOS, as it pushes people out of their comfort zones and challenges past practices. To minimize the risk of distrust, non-cooperation and even sabotage, the book recommends a “fair process” in making and executing strategy, which involves Engagement, Explanation and Expectation Clarity. (Get more details on the 3 “E Principles” from the book or our summary bundle).
Other Details in “Blue Ocean Strategy”
The book is packed full of great ideas, tools and frameworks, but the real-life examples and case-studies are what really brings them to life. The book covers examples of [yellow tail], SouthWest Airlines, Cirque du Soleil, NetJets, Curves, NTT DoCoMo, Home Depot, Ralph Lauren, Toyota, Novo Nordisk, Bloomberg, QB House, Apple, European Financial Services , Pret a Manger, IKEA, Swatch, and many more.
The BOS official website also comes with many useful resources including a detailed breakdown of the concepts, tools, frameworks and additional tips.
Start creating your own blue ocean today and win in the marketplace!