Excellent tools for generating creative strategies
In the decade since the first edition of their book was released, the ferocity of competition in existing industries and the pressures on costs and profits have only intensified, according to authors W Chan Kim and Renee Mauborgne in the latest incarnation of their best-selling book, “Blue Ocean Strategy Expanded Edition”. That is why there is a rising call for creative new solutions and such an allure in the idea of escaping from cut-throat “red ocean” markets into competition-free “blue ocean” market space.
While most businesses and organizations are trapped in very difficult competitive environments, there are plenty of examples around of organizations which have carved out their highly profitable blue-ocean niche. Is their success attributable solely to rare strategic brilliance or luck, or is there a systematic way of coming up with winning strategies? According to the authors, there are systematic ways of finding blue oceans, and the book provides a number of tools designed to help the reader do just that.
Blue ocean strategy is fundamentally based on value innovation; that is, finding a new way of providing compelling value to clients or customers by pursuing both differentiation and low cost at the same time. To do this, you identify the different strategic factors applicable to a particular industry, and then select some factors to be reduced well below the industry’s standard, some to be raised, some to be eliminated and some new ones to be created. The result of the process needs to be a focused strategy which diverges significantly from the industry’s average profile, and which comes with a compelling tagline.
However, a truly sustainable blue ocean strategy also needs barriers to imitation. These can include:
- Alignment barriers, making it difficult for competitors to align their value proposition, profit and people in the same way
- Cognitive and organizational barriers, whereby the particular form of value innovation conflicts with competitors’ conventional logic
- Brand barriers, whereby the value innovation conflicts with competitors’ brand image
- Economic and legal barriers, such as patents, a natural monopoly or a cost advantage driven by high volume
While not every reader of the book will discover a perfectly formed blue ocean strategy, almost every reader who spends time and effort working through the tools provided by the authors will come up with some creative strategic ideas which might not otherwise have arisen. This is one of my favourite books on strategy and, although the changes between the first edition and the expanded edition are not substantial, they are still enough to justify the price of buying the new edition.