Blue Ocean examples of companies. In dreams of “blue oceans.” Principles for implementing a blue ocean strategy
Blue Ocean Strategy is one of the most valuable business development books ever written. This practical guide for those who strive to build a powerful uncompetitive market.
In this article you will learn 4 stories of companies that, thanks to strategy, emerged from the battle of competitors and achieved incredible success.
The usual way to achieve success is. Or you can go the other way: create a market in which there are no competitors, and there cannot be. This way you kill two birds with one stone: you increase the value of the company for customers and its employees and create such demand that competition makes no sense.
Sounds good, but not entirely clear? A little more detail from this point.
The market is two oceans. Red - everything that exists at the moment, all sectors of business. The boundaries here have long been defined, as well as the rules of the game. In the red ocean, each player tries to defeat his competitor. The more people there are in the market, the fewer opportunities for growth and success.
In a blue ocean, demand appears on its own; there is no need to fight for it. Growth here is vigorous, profitable, generous.
There are two ways to create a blue ocean. First, come up with a new business area, as eBay did, for example, in its time. Secondly, break out of established limits, following the example of Cirque du Soleil.
Cirque du Soleil is the one who managed to create their own blue ocean. In 1984, the circus almost closed: business was in decline as TV shows appeared. The target audience - children - preferred to play video games rather than watch clowns and acrobats.
However, du Soleil managed to regain popularity and increase profits. How? They relied on an adult audience: theatergoers and fans of ballet art and completely changed the program. The company managed to destroy the boundary between circus and theater and create its own blue ocean.
How to go beyond the red ocean?
You need to stop looking back at your competitors. Look for alternatives and don't try to fool old clients. This is how Cirque du Soleil did it: they combined theater and circus to cater to an adult audience.
Another example is the American budget airline SouthWest. The company decided to stop chasing air passengers and relied on car enthusiasts. Flying our planes is as easy as driving a car! - that's what they told clients. SouthWest offered customers the speed of an airplane combined with the low cost and comfort of a car.
It's actually not hard to get off the beaten path.
If you don't sell a tangible product, think about whether you help your clients achieve success, are you ready to take their business to the next level? Or are you just selling a product without thinking about where it will lead consumers? In other words, are you preparing a clearing for? Think about it.
More examples.
Casella Wines, an Australian wine producer. They managed to go beyond the boundaries by offering party wine to consumers.
For many years, the wine industry has positioned itself as a market for elite drinks that only a true gourmet can understand and love. At the same time, many ordinary people preferred simpler drinks that did not require serving or any special serving of food.
Wine from Casella Wines has become accessible - you can bring it to a regular party and drink it easily, without ceremony. This is how the company gained a market where other winemakers have almost no presence.
Curves. An international network of fitness clubs for women was born in Texas, USA. The company moved away from traditional concept fitness clubs with many visitors and a wide variety of exercise equipment. Often women simply give up the race, unable to compete with pumped-up regulars or constantly stand in line at the gym.
Curves proposed a revolutionary approach: there are no mirrors or few of them, all exercise machines are as simple as possible, and training involves circular movement on a certain type of exercise equipment. They are based on the principle of hydraulic resistance, shock loads can be avoided and the load range can be changed smoothly.
Just two full circles on six machines - it's easier than ever. Curves spread all over the planet and reached, including Russia.
This is absolutely a classic. During the years when Nokia waged brutal wars with Samsung, the market mobile phones Apple appeared. The company released only one smartphone model, different versions of which remain popular to this day. It was only later that competitors and similar products appeared, but in 2007 Apple, without any doubt, found its blue ocean.
Have fun and high sales!
Blue Ocean Strategy aims to encourage companies to break out of the red ocean of competition by creating a market niche, where you don’t have to be afraid of competitors. Blue Ocean strategy suggests refusing to share existing - and often diminishing - demand with others, while constantly looking over your competitors, and instead dedicating yourself to creating new, growing demand and avoiding competition. The book not only encourages companies to take this step, but also explains what needs to be done to achieve this. Our goal is to make blue ocean strategy as effective as competition in the red waters of the market we already know.”
"Blue Ocean Strategy" W. Chuck Kim, Rene Mauborgne
Regardless of my personal attitude towards the idea of “blue oceans”, I would like to first impartially talk about the idea presented by the authors of this strategy, so that those who are not familiar with this theory or are only vaguely familiar with it can formulate some kind of their own opinion about this approach to strategy. And after consideration this work, in response to the reader’s already formed opinion, I will express my own opinion about this strategy.
The essence of the blue ocean strategy proposed by Chen Kim and Mauborgne is that at the current pace of development and copying of technologies, head-to-head competition is irrelevant and, in the long term, destructive for the company. Allegorically speaking, the authors call competitive markets“scarlet oceans” full of blood of competitors “grabbing” each other. In the “red ocean”, the boundaries of the market and the operating principles of the industry are clearly defined and uniform for all participants. Products from competing companies have similar characteristics, and the differences between them, over time and benchmarking efforts, are erased.
“Blue Ocean” is an unoccupied niche in the market that the company creates based on:
- unmet need different groups consumers united by it;
- concentration on key criteria for consumer selection and evaluation of a product;
- orientation towards attracting “non-customers” of the company to consume the product.
In a blue ocean, a company does not have to choose between a low-cost or high-value strategy; it can offer both.
Blue Ocean Strategy is the result of fifteen years of research and data examining the market strategies of 108 companies in 30 industries over the past 100 years. As a result, the authors found that 86% of business ventures during this period were linear expansions, that is, improving work in “red oceans.” At the same time, such undertakings accounted for 62% of total income and only 39% of profit. In other words, it is in the “blue oceans” that the company’s prospect of obtaining highest profit. And there are no competitors there at all - since the company that created the “blue ocean” is the first and, for a long time, the only one in it. It is important to note that Blue Ocean is not measured by industry or specific company- This is rather a strategic step, a winning solution for the company for its market situation.
The main tool of the blue ocean strategy is the “strategy canvas” - it serves to diagnose and build such a strategy. To build a “strategic canvas,” a company needs to identify the key characteristics of products—its own and those of its competitors—that are subject to competition within a given industry. The company also analyzes the level of supply received by the consumer for each factor. A high score means large investments into the development of a specific factor area.
The authors provide a way to visually depict the “strategic canvas” to facilitate its analysis and presentation. Analysis of the "strategy canvas" allows a company to determine how similar its market strategy is to the strategies of competitors. Using the example of a strategic canvas, such similarities are easy to determine - the graphical forms of the “strategic canvas” of companies with similar approaches to competition have a similar shape.
After analyzing the “strategic canvas” and the importance of different competitive factors for different companies and for the customers themselves, Chen Kim and Mauborgne suggest that company management ask themselves four questions:
1. What competitive factors, identified and accepted in the industry, can be eliminated? For example, McDonald’s positions itself as a restaurant, but such an integral “feature” of a restaurant as waiters was initially deliberately abolished - costs are lower, service is faster.
2. What competitive factors should be significantly reduced from industry standards? For example, after analyzing the “strategic canvas” of the US wine market, Cassela Wines concluded that factors such as the richness and complexity of the wine, the prestige of the winery and the choice of wine names, so cherished by winemakers, are not particularly important for American consumers. All three factors were reduced by limiting the product range, shifting the emphasis of communications from the history and prestige of the winery to other factors, and producing wines with a more pronounced and simple taste.
3. What factors should be significantly improved above industry standards? Thus, Apple’s creation of the iTunes online music store is based on increasing the number of key factors music file sharing industries: high quality sound; a wide range of melodies, including works from previous years; possibility of purchasing thematic selections of songs.
4. What factors should the industry create that have never been proposed before? Virgin, for example, has left even major competitors behind by offering an unconventional but sought-after range of services to passengers, including in-flight massages. Another airline, NetJets, offers corporate clients the service of using a private jet for a fixed annual fee, significantly different from the costs of actually maintaining such an aircraft at the expense of the company.
The book outlines approaches and tools for developing and implementing a blue ocean strategy, including six ways to create one and approaches to interpreting the resulting strategic canvas. Despite the popularity of the described idea of \u200b\u200bthe perception of competition, it was Chen Kim and Mauborgne who were the first to offer a clear and practical toolkit for applying the blue ocean strategy in practice. The language of presentation is simple, the examples are modern and understandable. The book contains applications with background information on industry and conceptual features of the blue ocean strategy.
It is worth noting that the methodology for creating blue oceans has been reduced to a simple graphical representation and several easy-to-remember rules. For example, it is proposed to pave the way to the blue ocean using a matrix called “abolish-lower-increase-create.” To work with a team, it is proposed to use the rule of three E: Engagement (involvement), Explanation (explanation), Expectation (clarity of expectations). This presentation of the theory is convenient for businessmen who are hungry for new knowledge but do not have free time.
The first way is to consider as competitors not only representatives of your industry, but also companies operating in alternative industries. For example, cinema and restaurants are completely different types business. However, on a Saturday evening they are equally valuable alternatives for a pleasant pastime. And most often it is in the space of such alternatives that value innovation can be created.
The second way is to examine the underlying strategies of companies within an industry. Usually the differences in strategies come down to what one chooses this company: low prices or high quality. In fact, we need to abandon this alternative and understand what other factors, in addition to price and quality, influence customer choice.
The third way is to look at the customer chain. The person who makes the purchasing decision is not always the end user of the product.
The fourth way is to consider additional products and services that provide value to the customer.
The fifth way is to analyze the functional and emotional appeal of the product for buyers
The sixth way is to look to tomorrow and see the possibilities for creating a blue ocean.
I would also like to cite one of the wonderful methodological tables given in the book.
The chapter “Focus on the Big Picture, Not the Numbers” in Creating a Blue Ocean Strategy outlines four steps to visualizing your strategy.
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1.Visual awakening |
2. Visual examination |
3. Visual Strategy Fair |
4. Visual communication |
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Now we can say that we have achieved a brief introduction to the content and principles of creating a blue ocean strategy. I gave a review of the text that was as objective as possible, or rather positive, but now I would like to add a couple of fly in the ointment to this huge barrel of honey.
Let's try to understand what the popularity and all the hype is about this theory about "blue oceans" - the basic concept of a "blue ocean" is that a company that, guided by the methods given in the book, can create its own "blue ocean" which, in fact, is the “Grail of immortality” in the business world, because the creation of a “blue ocean”, according to the authors, leads to the fact that the company leaves the “red ocean” forever competitive environment and ensures eternal prosperity due to a huge army of clients, super profits and the absence of competitors.
This idea about " eternal life”, flavored with the author’s terminology “blue and scarlet oceans”, “visualization”, etc., looks less like a business work, and more like a book by modern esotericists, promising “enlightenment” and “eternal life”. Again, in this terminology lies a deep impact on the reader’s subconscious - every top manager or business owner has a dream of a “blue ocean”, workaholics who dream of a vacation on the shores of a “blue ocean”, and “red oceans” of competition, “ full of blood,” on the contrary, influence typical human fears and cause disgust. Here are the words of one Russian entrepreneur about the reasons for his acquisition of this publication: “Blue Ocean is an excellent term for a new market, where your company is the first, where there are no competitors, where you can get high profits. Escaping competition is the dream of entrepreneurs. This is probably why the title of the book, Blue Ocean Strategy, immediately intrigued me.” Again, the authors of this book also play the Messiah, who has come to save this world from the blood of competition and lead it to the blue oceans of happiness, as illustrated by a quote from Chen Kim’s speech during his visit to Ukraine: “Ukrainians, wake up. I came to you with hope. Like a farmer who sows grain in the spring and hopes for a big harvest, I came to Kyiv to sow grain (to give new knowledge). I hope it will grow here, and I will water it. And I will be proud of what Ukraine has become!”
But it’s good, it’s clear that, first of all, the popularity of a book is caused by a beautiful “wrapper”, PR and so on, but this is not bad, the main significance in any scientific or business work is assessed by its usefulness, but this is a different question... But I would prefer to divide the work into 2 parts (idea and methodology) and accordingly evaluate the usefulness based on this division.
The usefulness of the blue ocean idea is most likely close to “0”, why? Because the initially utopian idea of a “blue ocean” cannot be used and therefore be useful in a pragmatic business world. Its utopianism lies in the fact that the declared withdrawal from the competitive field with the help of the “blue ocean”, like anything else, is impossible! And the examples of “blue oceans” given by the authors are, to put it mildly, far-fetched. After all, the creation of the “blue ocean” McDonalds, cited as an example of a successful “blue ocean”, did not take this network of “restaurants” out of the competitive field of catering, fast food, etc. The “blue oceans” of American auto giants, given as examples, have not taken them out of the competitive field; moreover, they do not help them get ahead of competitors, for example, Japanese automakers. On the contrary, while they are actively losing to them... Here is a quote: “Blue oceans are not technological innovations. Advanced technologies are sometimes involved in creating blue oceans, but are not distinctive feature. This also applies to technology industries. Blue oceans are often created by older players within the confines of their core business. For example, Crysler and GM were established companies when they created blue oceans. Research has shown that most blue oceans are created within, rather than outside, the red oceans of existing industries. Blue oceans are near you in every industry.
A blue oceans strategy is so powerful that it can create a brand that will last for decades. Think Ford (Model T), Crysler (minivan), IBM (electronic computer). The leaders of these companies can attest that the key to creating new market space is small budgets for scientific developments, but the right strategic actions. That is, the creation of a blue ocean is a product of strategy and, in many respects, a product of management actions.”
Let’s say that the companies cited by the authors created “blue oceans,” but we can easily recall the recent problems of each of these companies - Ford, Chrysler, and IBM. Accordingly, it can be understood that the “blue ocean” theory does not exist.
The methodology is definitely useful, but, unfortunately, it is secondary... Michael Porter wrote about the possibilities of protection from market competition in his work of the same name. He proposed two strategies for such protection:
a) create a “reliable defense against the power of competition”;
b) take a position where the company will be least vulnerable to competitive forces.
Of these strategies, it is the second that is increasingly resonant with modern management thinkers and practitioners.
And most of all, the methods of the authors of “Creating a Blue Ocean Strategy” are similar to the classic works of D. Trout - “Differentiate or Die!” and his other works. By the way, despite the fact that W. Chuck Kim and Rene Mauborgne constantly repeat that benchmarking and focus on competitors are the exclusive prerogative of the “red ocean” of competition, and are fundamentally not applicable in creating a “blue ocean”, nevertheless, in their own methods actively use these approaches, which we can see in the table above in the text “Four stages of strategy visualization” (places where competitive benchmarking is used are underlined).
To make the secondary nature of the “blue ocean” methods more convincing, I would like to cite brief analysis works of D. Trout.
As competition intensifies, it becomes more and more difficult for companies to find points of difference (in Chuck Kim’s words, this would sound like “finding blue oceans is increasingly difficult”). But there is no other way.
“Differentiate or die!” This slogan, proclaimed by Jack Trout in 2000 in his book of the same name, opened a new page in the development of modern marketing. According to some experts, the word “differentiation” is actually just a new version of the term “positioning”, to which Trout personally and co-authored (with Al Ries and others) devoted many books. Which again shows the love of the “classics” of the business genre to use new terminology to describe old concepts.
The essence of the theory of differentiation is extremely simple and boils down to the following: in order to survive in conditions of fierce competition and commodity saturation in the markets, you need to loudly declare your difference, or, in other words, about the blue ocean. At the same time, the main sign of both product and market differentiation is the image that consumers have of the company and its products. Another sign is the methods by which the company provides itself with advantages over its competitors.
In Differentiate or Die, Jack Trout and Steve Rivkin outline the basic steps to achieving differentiation. First, you need to know the situation in your market and be aware of the positions of your competitors. Secondly, find an idea that would qualitatively distinguish the company or its product from similar ones. Then this idea must be effectively implemented and introduced into consciousness target audience. Those. the company must understand its position, the positions of direct and indirect competitors and non-competitors close to it, on the basis of this, develop its qualitative difference from them (“blue ocean”), which subsequently loudly declare on the market (brand itself and its own difference (blue ocean) ocean), inform about it, explain the value of this difference to the target audience).
“It’s better to be first than to prove that you are better,” says the first principle of J. Trout’s bestseller “The 22 Immutable Laws of Marketing.” However, experts question this postulate, just as they now question even more the postulates of the authors of “Creating a Blue Ocean Strategy.” In most cases, this approach works when products from brands in the same segment have tangible differences between them. Over the past two years, we have observed a trend toward gradual equalization of product quality in all markets. Without a strong brand and equally well-established distribution, most consumers are unlikely to choose a brand with the same quality as others but at a higher price.
In an increasingly competitive environment, it is becoming increasingly difficult for companies to find a point of differentiation when building marketing strategies. The successful implementation of this task largely depends on whether the company can place an image or quality characteristic of the product in the buyer’s mind. Today, leaders have simply dismantled the values generally accepted by the target audience: quality, reliability, simplicity, sophistication. In this context, it is worth citing the example of the Finnish company Raisio Group and its trademark cough instant cooking. Among all positive characteristics of this product (healthiness, affordability, ease of preparation, high taste) when building marketing strategy The “speed of cooking” category was selected. The slogan “More time to communicate” perfectly expresses the main idea of positioning this brand. If this case had been discussed in “Creating a Blue Ocean Strategy,” it would have been included as one of the the most successful examples creating a “blue ocean”, because Before that, none of their direct or indirect competitors identified “communication” as their competitive advantage, i.e. From the highly competitive field of food products, these instant porridges have moved to the sphere of communications and leisure, where they are also outside the competitive field, because in this market segment there was no porridge yet.
A classic example of the Rolls-Royce strategy demonstrates how to segment a market and achieve a dominant position in its segment. The consumer was offered additional car trim, after sales service in order to ensure machine reliability. Thus, a stable idea of the product was created as an item of luxury, comfort, designed for the snobbery of buyers. It is worth noting that Rolls-Royce does not often offer innovative technical developments, remaining in the shadow of the auto giants. Again, here we can talk about a “blue ocean,” right? But once upon a time it was called positioning, or differentiation...
Well, I think that I have examined the concept of blue oceans strategy quite clearly and objectively.
From all this, I concluded for myself that the book is good, but as an exciting business fiction about a business utopia with more than vague and not clear recommendations for using the hackneyed, but always burning topic of competition in the key of “wishful thinking.”
But again, even though this is a “fairy tale”, and the given methods of avoiding competition or competitive struggle are “secondary” and are based on the earlier works of such classics as M. Porter, D. Trout and others, but this is not the main thing...
The main thing is that the beautiful “wrapper” and the ease of presentation of the material in the form of a “serious fairy tale for adults” attracted the attention of a very wide audience of readers who, perhaps, had not read either D. Trout or M. Porter, respectively, the authors of the book found their “ blue ocean", selling his work not only to potential clients, but also to lovers of light reading, esotericism, etc., introducing a very large readership to the basics strategic marketing, differentiation and positioning, creative marketing in the form of “for dummies”, without letting readers feel like they are.
Moreover, “advanced” readers were able to enjoy easy reading and repetition of what they had learned in classical works in a new form. Whatever you say, “repetition is the mother of learning”!
Despite all the fly in the ointment, this book can be considered a barrel of honey, because it quite well presents previously known methods and ideas, but in a beautiful and intelligible form. The authors cannot be called “creators,” but their “tuning” of ideas and the creation of a beautiful myth “about milk rivers and jelly banks” deserves all praise.
29.08.2018
The book was published more than 10 years ago, but in my opinion, on the topic innovation strategy nothing better has yet been written. Of course, critics may say that the authors’ ideas are not new, and the popularity of the book was ensured by beautiful name. But what is definitely for sure is that the book helps to clearly put everything in order and provides tools for finding an innovative strategy.
“The only way to beat the competition is to stop trying to win.”
Without going into deep ocean details: the authors of the book propose to imagine all existing markets in the form of two large oceans in which entrepreneurs swim and make money.
Schematically:
It is obvious that the vast majority of entrepreneurs flounder in the first pond - ruthless competition, the constant pursuit of profit sometimes really takes on a scarlet hue.
The second ocean is much calmer - there is peace, grace and, in principle, the same money... but how to get there?
To answer this question, the strategy canvas method was proposed, which can be clearly described by the following example.
Imagine - 1940s, a small Scandinavian country. On existing market furniture has developed a typical example of a scarlet ocean - healthy competition, but in general the entire assortment is quite monotonous. Expensive furniture made from precious wood, beautifully presented assembled in central city stores. The furniture is almost eternal, so it will serve even your grandchildren - choose, buy, everything will be packed and delivered.
If we break everything down into several parameters, then in disassembled form we can present the activity with the following graph:
Since there was a lot of competition in this situation, it apparently suited the needs of local buyers. You could, of course, try your hand at eating a shared cake, but there are other options. If you place the “dots” in the opposite direction, you will get a separate market segment.
That's right - inexpensive and not very durable furniture, made from dubious materials, sold in stores on the outskirts of the city in disassembled form and not delivered to the buyer (at least not delivered free of charge).
It would seem, who needs all this?
However, the fortune of the man who once had a bright thought is currently about 23 billion dollars - this is Ingvar Kamprad and he is rightfully considered one of the richest people in the world. You probably already guessed the name of his company. This is IKEA.
How to create a blue ocean
Creating a blue ocean doesn't require starting a new industry, as most companies create blue oceans within red oceans by pushing existing industry boundaries the way Cirque du Soleil or The Body Shop did.
At the heart of the blue ocean strategy is value innovation. Value innovation is not competitive advantage, but what makes competition simply unnecessary due to the company reaching a fundamentally new level.
In contrast to the classical competitive approach, using a value innovation strategy does not require a trade-off between low cost and high value. This strategy allows you to simultaneously create high value at low cost.
Principles for creating blue oceans
Creating blue oceans requires six principles.
Principle 1: Redefining Existing Market Boundaries
It can be implemented in several ways:
1. Pay attention to alternative industries.
Examples of alternative industries are restaurants and movie theaters. These are different industries, but from the point of view of a pleasant pastime for the client, they are alternatives.
The key to finding a suitable alternative is to see and understand the factors that cause buyers to choose between alternative industries.
2. The second way is to consider the so-called strategic groups - companies and industries that have similar strategies.
For example, in the automobile industry there is a strategic group for luxury cars and a strategic group for low-cost cars. Competition takes place within these groups: luxury and cheap cars compete only between companies in their categories.
The key to creating a blue ocean in such an environment is to find out what motivates customers when choosing between one group or another.
3. The third way is to pay attention to the customer chain. In certain industries, companies target specific customer segments—some focusing on large sales, others on individual sales. Often the buyer and the user are different individuals, which makes it possible to target a group of buyers that competitors do not work with. Thus, the Danish insulin manufacturer Novo Nordisk, thanks to its product NovoPen (insulin pen), was able to work directly with diabetics, bypassing the usual scheme of selling products through doctors.
4. The fourth way is to consider opportunities to introduce additional products or services. For example, large bookstores Borders and Barnes & Noble have made visiting their stores more enjoyable by equipping their rooms with sofas and armchairs and opening coffee bars.
5. The fifth way is to analyze the functional and emotional appeal of the product for buyers. The opportunity to create a blue ocean here comes from disrupting traditional competitive paths that appeal either to price and features (functional appeal) or to the buyer's feelings and emotions (emotional appeal).
It is possible to create a blue ocean by adding an emotional component to a functionality-oriented model or vice versa, thereby pushing the boundaries of the market and stimulating new demand.
6. The sixth and most difficult way is to try to look into the future. The point is not to simply predict and adapt to future changes, but to analyze how an existing new trend will change the market in the future and how it might affect the company's business model and the value of its offering to customers.
Principle 2: Focus on the big picture, not the numbers
This is not easy to do, since the strategy of most companies is firmly tied to the red oceans of existing markets.
For a chosen strategy to have growth potential, it must meet three parameters:
1) The strategy should be focused on a specific factor in the industry, and not be scattered across everything;
2) The strategy must be different from the strategies of competitors and, accordingly, the company’s value curve should not overlap with the value curves of competitors;
3) The strategy can be expressed in the form of a clear and attractive slogan.
Principle 3: Going Beyond Existing Demand
Most companies focus on meeting the needs of traditional types of customers. However, as the authors emphasize, such a strategy ultimately leads to deeper segmentation of the market, which naturally slows down business growth.
Therefore, for a company aiming to create a blue ocean, it would be wise to look at the industry's non-customers. And instead of trying to satisfy all possible needs of existing customers, we need to find something in common that could be appreciated by those who are not currently among the industry's customers. Thus, Cirque du Soleil switched from children, the usual clients of circuses, to solvent adults, and Cassella Wines began selling wine to those who had not drunk it before.
Principle 4: correct strategic consistency
The essence of this principle is to test the commercial viability of a blue ocean idea and determine whether your proposal is not just an innovation, but an innovation of value to the customer.
To structure this process, the authors suggest asking yourself four questions in order:
1. Does your offer provide exceptional value to the buyer?
2. Is the price you set suitable for the majority of buyers?
3. Do costs allow you to make a profit?
4. What barriers prevent the implementation of your proposal? Is it possible to think them through in advance?
A successful blue ocean strategy requires positive answers to all four questions.
Principle 5: Overcoming organizational contradictions
The implementation of any strategy is accompanied by significant difficulties, and the implementation of a blue ocean strategy is associated with even greater difficulties, since it involves changing the usual approach to transformation. Naturally, in such cases, companies, among other things, have to deal with internal resistance to innovation.
1. Internal resistance of employees who need to be convinced of the correctness of the change in strategy.
To overcome this contradiction, the authors recommend the use of “intentional leadership,” which makes it possible to achieve fundamental change in a faster and less expensive way. The essence of purposeful leadership is the ability to move other people to accept new strategy not through graphs, plans, numbers and abstract categories and appeals, but through the acquisition of their own experience.
2. Limited resources. This refers to the common belief that major changes require major expenditures.
In order to change the company's strategy, having only limited resources, you need to concentrate on existing resources and direct them to the so-called hot spots - those areas of activity that bring the greatest return at the lowest cost (the opposite phenomenon is “cold spots”).
3. Motivation - it is necessary to motivate key employees to take actions that contribute to the implementation of the strategy.
To overcome the problem of motivation, the authors recommend focusing on three tasks:
First, find natural leaders among company employees who enjoy respect and authority.
Third, to make tasks seem more manageable, complex tasks need to be broken down into smaller ones.
4. Political intrigue - opposition arises from those whose interests are affected by the transformations. “The main principle in the fight against intrigue is not to fight it alone.”
In order to overcome this serious obstacle, you need in advance:
Enlist the help of those who benefit from a change in strategy;
Neutralize and isolate those who have the most to lose from this;
Enlist the support of experienced employees experienced in political intrigue.
Principle 6: Build Execution into Strategy
Without the support of a company's employees, any strategy, no matter how good, is doomed to fail. Therefore, it is necessary to overcome possible mistrust of company employees. Standard methods of positive and negative motivation will not work in this case. The alternative proposed by the authors is a “fair process”.
Its essence is to attract employees to your side at the stage of creating a new strategy through the principle of the three “Es”:
Engagement means that employees participate in strategic decision making;
Explanation - means that all interested employees of the company must understand the reasons for introducing the new strategy;
Clarity of expectations (Expectation) means that employees must clearly understand their goals, responsibilities and responsibility for their implementation arising in connection with the implementation of the new strategy.
Life cycle of a blue ocean
Of course, competitors and imitators are not asleep, and you need to be prepared for their appearance, and for the fact that the blue ocean will sooner or later turn scarlet.
To avoid losing sight of this process, the authors recommend regularly monitoring value curves. If your curve starts to merge with your competitors' curves, it's a sign that your performance is declining and it's time to look for ways to create new market spaces.
It should always be remembered that the search for a blue ocean is not a one-time process, but a dynamic one.
Simulation on MBA program IBDA RANEPA
The first and only MBA program in Russia that includes a simulation computer game“Blue Ocean Strategy”, created by INSEAD specialists to develop and practice skills in accepting non-trivial management decisions V non-standard situations and used at Harvard Business School.
Here we have people with approximately the same type of needs.
And here are companies that satisfy this need in approximately the same way.
Commercial relationships are established between people and companies: people pay,
companies provide a service or sell a product.
It turns out to be a market.
There is a market for Internet providers and a market for mobile communications. There is a food market. There is a market
pizzerias and a separate market of Japanese restaurants with delivery. AND Common Market"Where should I eat to
shouldn't cook? Oil market. Market educational services. There are an incredible number of markets.
If you are the only company in the market and you have many clients, you are good. You dictate prices and determine
rules of the game. Clients come only to you because only you solve their need. It's blue
ocean: a market without competition.
Soon other companies see how good you are and come to your market. They start providing the same services
to the same people, but cheaper, faster or better quality. Competition begins and blood is shed. Now
This is the red ocean: a competitive market.
The essence of the blue ocean strategy is to come up with a product or service that will create a blue ocean for you.
ocean.
Don't compete
The essence of the “Strategy...” is to stop competing with other companies, that is, to play by their rules. Stop
try to do the same thing as them, but cheaper, faster or better. Just don't do that.
Instead of fierce competition, Wichan and Mauborgne propose changing the rules of the game and creating new markets - blue
oceans in which there is no one yet. And be there first.
The computer was considered a tool for the office. Apple came up with the idea that the computer
should be homey and personal.
A small family bakery made bread for the entire area. But here in the area
They opened a chain supermarket, which began to bring bread from the plant. The bakery started baking fresh
buns for restaurants.
The company helped with moving between apartments, but saw that there was too much
other companies do the same. We started helping with moving between offices and became successful.
Blue oceans are being created all the time, although no one thinks about them in that way. But every time
A revolutionary product appears on the market - welcome to the blue ocean.
January 28, 2010: Steve Jobs presents the first iPad, which was sold under the slogan
"Revolutionary device." Despite the fact that tablet computers existed before the iPad, it was
Apple turned the idea of a tablet computer into a commercially successful product. Source - LA Times.
How to create a blue ocean
In the book “Blue Ocean Strategy” there are no perky slogans from the series “Do it once, do it twice!” Book
thorough, detailed and with reservations. I will try to summarize the main approaches to the discovery of blue
oceans. The list is incomplete and not precise enough, but gives a general idea.
To create a blue ocean, new demand is needed. Where to get it from:
1. REVIEW THE PORTRAIT OF THE BUYER
Focus not on those who are already in your market, but on those you don’t. Think who
more doesn't buy your product and why.
Before Bloomberg financial news, stock data and analytics
supplied different companies. And they focused not on the stockbrokers themselves, but on their CIOs,
who made decisions on the purchase of computers and programs. Therefore, systems for stockbrokers are actually
in fact, they were made for IT specialists and took into account their interests: so that they could be easily deployed and configured
and were supported.
Bloomberg said "Enough!" and made a system for stockbrokers. This is the one
the most legendary computer with two screens and special programs. Flocked to these computers
all analytics, stock data and news, and it was primarily aimed at traders,
and not on their directors.
Bloomberg terminal for stock traders. Source - New York Times
Australian winemakers Casella Wines looked at who doesn't drink in America
wine. It turned out that almost the entire middle and working class does not drink it - and this is a huge market. Why
don't drink? Because they can’t choose, don’t understand the taste of wine and don’t distinguish between all these geographical
designations. The wine market is too complex for the average American. Winemakers compete with each other
The other thing is that for 90% of people it doesn't matter.
Australians have made a simple, democratic wine: with fresh fruit
taste, without geographical problems, with a small choice. This wine is easy to choose and
easy to drink. You don't have to be a sommelier to enjoy it. New within a year
The Australian brand has become the fastest growing wine brand in the US. With incredible
overcrowding of the wine market.
The secret of Casella Wines is to fight not for those who already drink wine, but for those who do not drink it yet.
2. REVIEW MARKET STEREOTYPES
The Blue Ocean is easy to identify if you catch yourself blinkered at the market.
We produce expensive, high-quality luxury cars. Class
“Lux” - that is, with all the little things: leather interior, heated steering wheel, charger for
telephone and panoramic sunroof. Why not break the rules of the game and make an inexpensive car
with all this stuff?
Flying by plane is a long journey. It is important that
passengers felt comfortable everywhere: both at the airport and on the plane. Fine. But why not
Why not make the flight a simple journey, like a bus? You don't need comfort, you need it quickly
and simply, without transfers and waiting. American airline Southwest made flights
simple, quick registration, removed all luxury elements and lowered prices. And they did a lot
direct flights to small airports in America, so that there is no need to transfer to large ones
terminals.
The sports company Curves looked at the situation in the fitness market:
expensive fitness centers, spas, showers with saunas, expensive exercise equipment, classes at a minimum
by the hour. Going to such a fitness center is a big deal. “We’re breaking everything,” Curves said. Done
small inexpensive halls, simple showers, the easiest to use exercise equipment
and came up with a system of circuit training so that everyone had enough space and time. Half an hour
you've done your work and you go on about your business.
Competition intensifies where people think in the same terms. Fitness club opened
spa and juice bar. The neighbor looked at him and opened two spas and a restaurant
healthy food. The third opened all this plus a nutritional supplement store. Everyone is looking at each other
and no one is looking at the consumer. This is the path to the red ocean.
3. LOOK AT RELATED PRODUCTS
Trace the entire chain of use of your product and service. With what products are they often used?
are they buying? What problems arise? How to solve them? Look beyond what
traditionally considered your product. Look at it from the buyer's point of view.
Kettles did not always have a scale filter. They were invented when
They saw that scale was getting into the cup. It's impossible to see if you only think
about what shape and size your teapot should be.
Ikea is essentially a furniture showroom. But it sells everything for
at home: knives, cups, light bulbs, soft toys, slippers, flowers, and stems
bamboo How interesting would it be at Ikea if there were only rows of
sofas?
American departments of transport are purchasing regular buses. Competition,
It’s clear that the market is huge: everyone wants to serve municipal contracts
and supply buses for budget money. There is fierce price competition.
Manufacturers are trying to reduce the price of one bus in order to win tenders.
But in addition to the bus itself, departments are spending
for anti-corrosion body treatment, maintenance and fuel for powerful engines.
Expensive maintenance is a problem in the bus market.
Here comes a Scandinavian company that offers
buses with fiberglass bodies. It is durable, easy to repair, and not subject to
corrosion resistant and lighter than metal. Lighter body - less powerful engines. Less
fuel. As a result, the bus itself is more expensive, but its maintenance is much cheaper.
Fiberglass buses are taking over America.
Another example with a problem that lay a little outside the product boundary:
American moms and dads want to go to the movies, but children
Many films are not interesting to watch. There is no one to leave the child with, so families go
only for children's films. If there was someone to leave the child with, the parents would go
at the movies more often. The solution is to open a children's playground at the cinema, where animators
look after children during sessions.
When a manufacturer consciously goes beyond the scope of his product, he falls into
into the blue ocean.
4. CHANGE THE EMOTIONAL COMPONENT OF THE PRODUCT
Some products are sold due to emotions and rituals - beauty salons, tea shops
ceremonies expensive restaurants, expensive watches and exclusive clothes. One way
create a blue ocean: dramatically change, add or subtract emotional
component of the product.
There was a beauty salon - it became a fast eatery where
Precisely and accurately cuts hair in 15 minutes. These are “Quickbeauty” and “Chop-Chop”
There was a coffee shop - it became a local club
according to interests with board games. This is Starbucks.
There were expensive elite watches - now they are simple youth watches.
This is Swatch.
Blue Ocean Discovery Technology
In a criminally abbreviated form, the technology looks like this:
Understand the market: what rules does it play by?
and why, where is our place in it.
Conduct field research. Understand how people
use the product in life, not in our dreams.
Focus not on the “how”, but on the “how”
“how not.” Why not use it? Who doesn't use it? Why don't they use it? Which
Are there any problems with this?
Set a big goal: to do it in a new way. Convey
this goal is shared with everyone who will participate in the project.
Realize the goal.
In one of the next issues we will focus on this fifth point. The book is worthy
second approach.
- What is the essence of the blue ocean strategy?
- What are the basic principles of the strategy.
- How to implement it correctly.
- What does implementing a blue ocean strategy give to a business?
- Which companies have already created blue oceans.
« General manager» tells what advice to entrepreneurs and company managers give by the authors of one of the most popular business books of the 21st century about blue ocean strategy.
What is the essence of the blue ocean strategy?
The book “Blue Ocean Strategy” by Kim Chan and Rene Mauborgne is one of the main business bestsellers in recent years. The publication of the text was preceded by fifteen years of study 150 company strategies over the past 120 years in 30 sectors of the economy.
Studies have shown that every year competition in various markets and in various industries becomes more intense and tough. As a result, low-profit markets began to be called “red oceans.”
The authors of “Blue Ocean Strategy” are confident that high profitability and rapid growth are demonstrated by companies that are able to come up with something new, creating demand in a new market, that is, in the “blue ocean”. Blue oceans include all industries that do not yet exist today. There's no need to fight hard here competition. At the same time, the pioneers of blue oceans do not face competition, and they can continue to develop through their own creative ideas.
At the heart of the blue ocean strategy is the concept of “value innovation.” According to this approach, blind infatuation innovation in itself will not make the company’s development effective. Innovation must be inseparable from the value it creates for consumers new product. At the same time, values without innovation close down opportunities for brand differentiation.
Basic principles of blue ocean strategy
The authors argue that there are no companies that will remain successful forever. However, strategies that different times led to the creation of "blue oceans" and increased profitability companies are surprisingly similar to each other. Only those organizations that adhered to a value innovation strategy in their work, placing equal emphasis on both innovation and values, were able to achieve real success.
What are the basic principles of a blue ocean strategy? Let's look further in the text.
Reconstruction of market boundaries
The first principle on which the blue ocean strategy is based is the reconstruction of market boundaries. The company must find the strength to break out of the “red ocean” and create a new industry. At the same time, the authors of the book identify 6 ways to reconstruct markets:
- Exploring alternative industries.
- Studying strategic groups industry.
- Analysis of the purchasing chain.
- Studying additional services and goods.
- Analysis of the functional and emotional attractiveness of the product for the consumer.
- Studying current trends and market development forecasts.
How to find new promising market niches
To apply a blue ocean strategy to your business, you must first find free niche market. This process is quite complex, so the editors of the General Director magazine have prepared for you a detailed algorithm for finding promising areas.
Focusing on the big picture, not the numbers
Compliance with this principle allows companies to significantly reduce the risks associated with planning. This approach is an alternative to existing methods strategic planning. In accordance with it, the company must first develop a strategic outline that will help to more clearly understand the goals of the organization and establish communications with employees. At the same time, the creation of a strategic outline, according to the book, should consist of 4 stages:
- Visual awakening.
- Visual research.
- Visual strategy fair.
Going beyond existing demand
This principle will allow companies to expand the size of the blue ocean they create. It is necessary to abandon two traditional strategic practices that significantly reduce the effectiveness of the strategy - focusing on what is already available client base and the desire for market segmentation.
Maintaining the correct strategic sequence
This principle summarizes the study of ways to reconstruct market boundaries, develop a strategic framework and select methods attracting clients. Once these stages have been completed, you should begin to create an effective business model.
The basis for a blue ocean business model must be the correct strategic sequence, which is expressed in terms such as “product utility”, “price”, “cost” and “implementation”.
How to implement a blue ocean strategy correctly
Written by Kim Chan and Rene Mauborgne, Blue Ocean Strategy sets out its own principles for implementing strategy. In order for the implementation of the strategy to be as effective as possible, you should adhere to 2 principles, which we will consider below.
Overcoming organizational obstacles
There are 3 obstacles that can hinder the implementation of a blue ocean strategy:
- Most employees are against change.
- The company has limited resources.
- Employees do not want to change their usual ways of working.
To overcome these obstacles, the “spot activation” method should be used. Supervisor should focus on key employees and activities on which the development of the entire company depends. One way to solve this problem could be to contact “opinion leaders.”
The authors advise company managers to make sure that employees themselves understand the need to change the strategy, to force them to communicate with dissatisfied clients. Avoid issuing binding orders. Make strategy discussions transparent and open to all parties. Try to split the overall goal into smaller tasks, then it will be easier for employees to cope with them.
Building Commitment to Strategy
The implementation of a blue ocean strategy must be developed through open discussion. This way, employees can ensure that its implementation is carried out fairly and transparently.
What does implementing a blue ocean strategy mean for a business?
Research conducted by the authors of the blue ocean strategy showed that new product occurs only in 14% of cases, which provide 61% of the total company profits. This means that organizations that adhere to the principles of a blue ocean strategy have a significantly greater chance of success.
Companies that create new demand must pursue differentiation and lower costs. Then the price of the new product will become affordable for buyers. Over time, economies of scale will kick in and costs will fall even further.
Companies that have chosen a blue ocean strategy for their development can cover all available demand in the industry. As a result, imitation of a strong brand becomes disadvantageous for competitors.
When competition As the new market begins to strengthen, find new ways to innovate. Go beyond the original strategy canvas and create new blue oceans.
Examples of large companies with a blue ocean strategy
The most popular example of creating a blue ocean, which the authors of the book “Blue Ocean Strategy” refer to, is Cirque du Soleil. The management of the circus, founded in 1984 in Canada, chose a fundamentally new business model, which differs from the approaches of traditional circus shows. The creators of the circus became convinced that the popularity of this type of entertainment in Canada began to decline rapidly. The children were interested in television shows and video games.
Cirque du Soleil was able to return the popularity of circus shows by focusing on adult audiences. The circus management shifted its focus to fans of theater and ballet art. As a result, the boundary between circus and theater became blurred, and adults began to make decisions about visiting the circus. At the same time, the cost of a ticket to Cirque du Soleil did not exceed the price of a theater ticket, and the circus itself was able to reduce costs by abandoning traditional circus elements. Cirque du Soleil's annual revenue now exceeds $600 million, and the Canadian show's performances have been watched by more than 150 million viewers in more than 300 cities around the world.
Another well-known example of the implementation of a blue ocean strategy is the history of the iTunes music service from Apple. In the early 2000s American company was able to create a new market space in music industry, where it retains leadership today.
In the late 1990s, the music market began to actively combat illegal downloads of music content. Apple managed to take advantage of this trend and offered users a legal, but at the same time simple and convenient way to download tracks. The iTunes music library has a convenient and understandable structure, and online users have the opportunity to download individual songs instead of purchasing the entire CD.
As a result of such an unprecedented strategic decision, as well as through collaboration with the world's largest musical Apple companies was able to ensure copyright protection in the industry and meet the needs of users.
About the book “Blue Ocean Strategy” by Kim Chan and Rene Mauborgne
Blue Ocean Strategy is a business strategy book published in 2005. Since its first publication, the book has been translated into 43 languages and has sold more than 3.5 million copies. Blue Ocean Strategy has been named a Wall Street Journal, BusinessWeek, and Amazon.com bestseller. At the same time, the 00-CEO-READ resource named it the best-selling book of the decade 2000-2010.
Professor Chan Kim has been an advisor to many international corporations, as well as an author for leading business publications and the recipient of numerous major awards. Now Professor Kim is a member of the European Union with advisory functions.
Rene Mauborgne is one of the presenters researchers French school INSEAD, member of the World Economic Forum and author of a large number of journalistic and scientific works.
A comparison of the capabilities of the blue and red oceans is given in the table:
|
Red Ocean Strategy |
Blue Ocean Strategy |
|
Fighting in the existing market space. |
Creation of a new market space. |
|
Victory over competitors. |
The opportunity not to be afraid of competition. |
|
Exploiting existing demand. |
Formation and receipt of new demand. |
|
Trade-off between value and costs. |
Breaking down the value-cost trade-off. |
|
Building the entire system of the company’s activities depending on the strategic choice focused on differentiation or low costs. |
Building the entire system of the company’s activities in accordance with the task of simultaneously achieving differentiation and reducing costs |
Conclusion
Described in a book by European professors Chan Kim and Rene Mauborgne, the blue ocean strategy was first presented more than 10 years ago. However, this approach to the development of business strategy remains relevant today, when world markets remain oversaturated with similar offers, and consumers are paying more and more attention to the unique characteristics and values of the product.
