Keywords: blue ocean strategy criticism, blue sea strategy summary
Blue Sea Strategy, a publication by W. Chan Kim and Renee Mauborgne, produces and talks about how to overcome the competition by achieving beyond it into new unexplored marketplaces. The authors use the metaphor of the blue sea as a direct comparison to red oceans. Red oceans will be the battling grounds for typical market competition where businesses battle for an already described and stagnate market. Blue oceans, on the other palm, describe a technique that breaks from the bloodstream red ocean into clear, uncharted oceans, or new marketplaces (see Appendix A for the details of the differences). The authors studied the business enterprise launches of 108 companies, more than 150 tactical moves from 1880 to 2000, and even more than 30 market sectors to uncover the main element traits and routines of what they call "Blue Sea Strategy. "
Kicking off the booklet with four analytical tools that assure to help businesses find and exploit untapped market segments, the authors give a step by step approach, made up of six principles, about how to break from your competition of red oceans and perform a blue sea strategy. They show how and just why a blue ocean strategy causes a market where competition is - for a while - outdated. Each concept is described and recognized by real life good examples from such companies as Ford, Cirque du Soleil, Dell Computers, Casella Wines, and even the New York City Police force Department. The graph, physique 1, illustrates both the concept of blue sea strategies, and the business of the reserve, Blue Ocean Strategies.
The first part of the book explains what Kim and Mauborgne call the cornerstone of Blue Ocean Strategies: value invention. Value innovation is basically a jump in value that makes current competition irrelevant. Whereas value by themselves merely extends the worthiness of a preexisting market, and advancement alone could "shoot beyond what buyers are ready to accept and pay for" (p. 13), value creativity anchors invention with utility, price, and cost by breaking the typical value-cost trade-off.
The creators offer several analytical tools to help evaluate a company's location on the ocean - be that red or blue - also to help them move toward the blue ocean. The first of such tools is the strategy canvas, which captures the existing market competition, especially the factors that the industry competes and invests in. Further information on the strategy canvas and how it operates are available in Appendix B. The Four Actions Framework and the Eliminate-Reduce-Raise-Create Grid (appendix C), are being used together to uncover ways to lessen cost while increasing value. As the Four Actions Platform detects and organizes the factors into one of four categories - eliminate, reduce, raise, and create, the Grid itself describes the actions prepared to get rid of, reduce, raise, and create. The fourth tool is only three questions to ensure that the plan is actually a blue sea strategy. These questions are, will the program have a target, does indeed the new value curve (appendix A) from the Strategy canvas diverge from the marketplace competition, and lastly, is there a compelling tagline to spell it out the new plan?
The authors then take the audience by having a six step approach to developing and executing blue sea strategies. The first step is to Reconstruct the Market Boundaries, which involves analyzing the existing market so that the blue oceans become noticeable. Offering six different pathways of approach, this task attempts to cope with the capability to "successfully identify, from the haystack of possibilities which exist, commercially convincing blue sea opportunities" (p. 47). The paths are directly incompatible with traditional business strategies (appendix D). Pursuing at least one of these paths virtually expands the boundaries of the defined market segments and uncovers new solutions for a company to produce.
The second step is to reframe the strategy utilizing the strategy canvas to focus on the picture as a whole. The authors claim that traditionally professionals "spend nearly all tactical thinking time completing boxes and running numbers instead of thinking beyond your box and developing a clear picture of how to break from the competition" (p. 82). The strategy canvas, in line with the book, unlocks ingenuity, discloses blue oceans, and, as a result of visuals, creates a fairly easy to comprehend and converse strategy.
The third concept, or step, is to increase the new market probable by attaining beyond current market demands and concentrating on the potential of the three tiers of non-customers. The first tier non-customers is referred to as those customers who aren't committed to the product or service offered and want for substitutes or alternatives. The second tier customers are tagged, "refusing non-customers" (p. 107), who either find the product/service unacceptable or cannot afford it. Third tier non-customers are "unexplored" (p. 109) because their needs are assumed to belong to other markets. Concentrating on the commonalities of non-customers to customers will supposedly help organizations establish understanding into possible blue oceans.
Step four is to develop the business enterprise model, or Obtain the Strategic Collection Right. Here the writers explore ways to ensure that the blue ocean actually pays off. A couple of four ways to test the new technique to see if it is feasible and each way must be achieved in order, you start with exceptional electricity, price, cost, and closing with adoption. To check the exceptional energy of the product/service, the creators recommend using the Buyer Energy Map (p. 121) which reduces customer experience into six steps from purchase to disposal, and then reduces utility. Setting the price involves studying not only the costs of products/services within the industry, but also the industry alternatives and choosing either low or high depending how easily a competitor can imitate the new product/service. Rather than allowing cost to determine price, the booklet implies using price to dictate a goal cost because it will supposedly prevent competitors from imitating - and defeating the organization in it's new blue coean. This equation also helps organizations assess costly factors and procedures, and could even lead to cost cutting down improvements changing the pricing model from offering to renting as Blockbuster performed with videotapes (p. 135). The fourth step is reducing the fear and amount of resistance change inevitably brings employees, associates and everyone. This step, labeled "adoption" handles educating these teams in order that they are up to speed and supportive.
Overcoming Key Business Hurdles is the fifth theory or step to attaining a blue ocean strategy, but it is the first step to actually executing it. The creators package with common organizational hurdles - level of resistance from employees, having less resources, having less motivation, and the inner and external politics resistance - by exploiting the idea of "tipping point leadership". Tipping point management targets "identifying and then leveraging the factors of disproportionate impact in an group" (151). The creators describe several techniques to accomplish this (see appendix F for more details).
The last step to creating a blue ocean strategy is to perform it within the company using fair processes - or complete transparency - to ensure a world of trust and dedication exists. The booklet claims that only this kind of environment helps the trust, assistance, and motivation for just about any strategy, but especially a blue sea strategy, to succeed. Without it even the best designed strategies purportedly can and can fail.
Critical Analysis
By concentrating on the study of strategic steps rather than specific companies or market sectors, Blue Ocean Strategy claims to acquire unveiled the key to success for companies across establishments. While the publication does accomplish its promise to describe how and why blue ocean strategies work, it fails to produce a complete and viable plan. Where and just why it fails has not been more popular possibly because the concept of the work is so appealing and the truth of its descriptions and instances are so visible. And yet, the strategy skips or oversimplifies many functional steps and makes unsupported assumptions. A deeper looks exposes the way the several steps are really the same step reworded to appear to be a complete tactical plan when it could just be a useful tool toward a strategy and nothing more. When whittled right down to its real necessities, the complete "strategy" depends seriously on innovative minds, strong personalities, extreme market intuition and knowledge, and could even just describe a natural accruing business phenomenon.
First and foremost, the book does indeed provide an excellent research of the patterns and tendencies of successful proper movements. Using highly noticeable instances such Ford's Model T, Blockbuster's choice to hire rather than sell, Apple's creation of the Computer, and more, the authors clearly demonstrate that success originates from the discoveries and exploitation of blue ocean, or untapped, markets. The examination of what made these improvements successful is also intriguing. In this manner, the idea of searching for blue oceans is helpful.
However, following steps and using the various tools will not really open new market segments if a firm lacks the advancement, the funds to aid research and development, the marketing prowess to take it to the general public effectively, and the leader personality necessary for tactical execution. These important and functional steps are practically overlooked in the publication. Although making a compelling tagline is helpful, even necessary, to successful marketing, it's barely the only marketing step necessary to produce results. The booklet, however, does make it seem to be as though this holds true. As you detractor quipped,
. . . when you get started to execute on the blue sea opportunity, there may be one thing you know for certain: Your rivals are arriving. However, an effective marketing strategy can help you increase your market show and defend it from your competition. Without a online marketing strategy, sure, you will create a blue ocean, but as long as you're out there, by yourself in that wide open water, you will not be the market leader; you'll be chum. (Pollard, , 2005).
Of course, the booklet does package with such dangers as competition to blue sea strategies. The authors cover the risk of competitive imitators, who grab ideas, by discussing competitive charges, quick execution to make a excitement and market commitment, and patents. Plus, the very nature of the blue ocean often immobilizes potential competition. The example given in the e book is The Body Shop (Kim & Mauborgne, 2005 p. 186). But Pallard's main complaint is the book's failure to mention the need for real and detailed marketing, a valid and valuable objection. For instance, none of them of the improvements described would have reached the new markets without effective marketing. The mere taglines by themselves for Cirque du Soleil would not have resulted in thousands of parents purchasing tickets. Instead, advertising and marketing campaigns created an awareness and the marketplace to support the blue sea created by Cirque du Soleil.
The other assumption is that each business will have a readily available blue sea to tap into requiring mostly proper thought. However, almost all of the most significant successes are anticipated to innovation. Despite the fact that innovation is not the only path to seek and find blue oceans, it is a solid factor in the success of blue ocean strategies. In the exemplory case of the model T the blue sea could not have been found without the innovative assembly collection. Apple could not have created the PC without the ground breaking technology behind it. The concentrate on strategy by itself without the effectiveness of innovation behind it can be as fruitless as benchmarking prices against the competition, yet this seems to be what the booklet is recommending. Sydney Finkelstein, the Steven Roth teacher of management at Dartmouth College's Tuck Institution of Business, was quoted to state (Mattioli, 2005): "When you can find these new areas the revenue potential is better than contending in a well-developed market. " That is to say, there is a possibility a organization won't find the new areas, especially without unleashing the enhancements and the thoughts behind them.
In their publication, Execution (2002), Bossidy and Charan summarize in detail the sort of personality it requires to put into action change inside a business composition. Using many types of real life CEO's and their first hand experiences, the authors outline the features, the connections, and the techniques of successful leaders. Based on the study, authority success is dependant on the strength of the leader's character, their knack for instruction, and asking the correct questions. Conversely, Blue Sea Strategy oversimplifies the execution steps by concentrating almost completely on process and failing woefully to explain the required communication and instruction styles necessary to make this step meaningful.
Furthermore, although not absolutely all inventions require huge cash to be invested into research & development, many do. One article (Columbus, 2005), handles the theory that companies could buy their way to blue oceans by focusing on R&D. Theoretically, this is possible, but it can ignore some important cautions of the Blue Ocean Strategy. The booklet warns against development for innovation's sake because the new product can skip the market by providing a service or product the public isn't ready to purchase. Also, the writers emphasize the importance of retaining the delicate balance between price and cost. Therefore, dumping money into R&D, though it can eventually find a blue sea, won't ensure success. Actually, it almost ensures failure. Among the key, and most important principles of the strategy is the necessity to identify the viability of an idea before investing money in its development.
And yet, the blue sea strategy places so much emphasis on technology that it is not astonishing that some procedures will lead to an over emphasis on R&D funding. It begs the question about what came first: the innovation or the market need. The publication seems to suppose the ultimate way to handle technology is to discover a market dependence on it first. Although the truth is, innovators don't always focus on a market need basis. But what would the world of creativity appear to be if it were always and constantly motivated by the search for blue oceans? Would creativity and the truly impressive become outdated, swallowed entire by business experts and marketing geniuses?
The main problem with the strategy - as it is identified in the publication - is it is (or was) not necessarily used by the samples illustrated in the publication. The authors expect that because a company have indeed find a blue ocean and resulting success, then using the strategy in the book will lead an organization to similar success. But how can this bottom line be drawn when no where in the booklet did any one company use the detail by detail approach or the various tools? Instead, the creators have simply applied general ideas and common styles of the blue ocean to work backwards into a theoretical, untested strategy.
To make issues worse, the steps themselves are convoluted and overworked, often just repeating the same principles in several words. For instance, the sub-step to process four, building a business design is adoption, which is getting employees, lovers, and the public on board (p. 137-39). Yet, concept five offers exactly with adoption, only it is referred to as overcoming hurdles (147-169) Theory two, using the strategy canvas as a aesthetic awakening, visible exploration, a technique fair, and a communication tool to make an impression on the support of employees (94-96) is essentially the same thing as principle five, awakening the necessity as a way of overcoming the particular creators label cognitive obstructions (151-155). Reconstructing the marketplace boundaries, principle one, is the same as reaching beyond the prevailing demand, rule three. The terms are essentially the ditto. Reconstructing the marketplace is pretty much when firms dwelling address the potential needs of the three tiers of non-customers defined in process three. Likewise, the Four Actions Framework and Eliminate-Reduce-Raise-Create Grid will be the same tool. The Construction, in theory, pushes the company to ask the questions, while the Grid pushes businesses to act on the items. It appears redundant to make a construction that asks the questions and also to develop a grid that answers them. Why isn't it just one tool? These redundancies are only a few examples of many. Furthermore, although these tools are considered "key to masterpieces of blue oceans" (p. 35), it appears unlikely that the successful instances used them. In short, the whole publication could be summed up in the very first chapter where value development is explained because value innovation is not the cornerstone of blue sea strategy - it is blue sea strategy.
Although blue oceans enable a firm to get uncontested market space, it is only for a time that this is so. Sooner or later, competition does meet the market leader. In the majority of the illustrations given in the e book, this does by natural means happen and it leads one to ponder set up Blue Ocean Strategy illustrated in different industries and in several centuries, is indeed a strategy or just a natural trend of market growth. Like progression in nature, a unitary types mutates into a far more effective exemplory case of biology. As one columnist commented "Mauborgne's Blue Sea can quickly turn red. For instance, Barnes & Noble developed superstores in the 1990s that are almost indistinguishable from Borders" (Stewart, 2007). Can it be that the creators of Blue Ocean Strategy required an economic given and transformed it into something controllable when it truly is a question of the right mind being aligned to the right time and the right market?
Appendix A: Red versus Blue Oceans
Blue Sea Strategy
Red Ocean Strategy
Strategies
- Strive to create uncontested market space for untapped consumers
- Continues to battle over an existing market share
- Breaks from competition
- Strives to beat the competition
- Identifies and efficiently targets the necessity for a fresh demand
- Exploits the prevailing demand
- Breaks the value-cost trade-off by increasing value and increasing differentiation and chopping or preserving cost
- Adheres to value-cost trade-off by choosing between cutting down costs, or differentiating products/services
Results
- Innovative new products/services
- Supply surpasses demand
- Difficulty differentiating brands
- Profit and earnings increases
- Decline in prices, income, and profit
Appendix B: Strategy Canvas Basics
The key components a viable strategy canvas include a concentration, a divergence from the common value curve, and a compelling tagline to describe the new strategy. The strategy canvas is a graph that maps out the fighting factors of a business based on a high/low vertical gain access to that coordinates with the factors over the horizontal access. The resulting coordinates produce a curve, labeled the worthiness curve. A viable graph illustrates a strong give attention to a few key factors, rather than most of them. The placement of coordinates should not follow the value curve of the industry in general; instead, it will diverge from that curve, featuring its own unique curve. Finally, it should be easy to describe the graph with a brief and compelling tagline, which shows that the strategy can deliver a clear significant message (Kim & Mauborgne, 2005 p. 37-41).
A New Value CurveAppendix C Four Actions Construction and Eliminate-Reduce-Raise-Create Grid
The Four Activities Construction categorizes the factors into one of four organizations: eliminate, reduce, increase, and create. The first two categories help cut costs. Kim and Mauborgne maintain that industries take the importance of certain factors for granted even though these factors may no more be relevant on the market. If this is the case, the authors suggest reducing these factors from the new strategy. Over-design, over-delivery, and over-serving are similar for the reason that the product or service offers value that is not perceived by the customer. This is a result of benchmark contending - constantly striving to out do the competition. They are the factors the author recommend reducing. The next two teams help create or increase customer value by increasing factors that in their current low point out push customers to compromise their needs, and by creating new sources value altogether. The Grid works with the Framework because it forces firms to have actionable items in each of the four teams ((Kim & Mauborgne, 2005 p. 29-37).
Appendix D: Pathways to Blue Oceans and Examples
Traditional Business Market Analysis
Blue Ocean Market Analysis
Strive to be the best within a precise industry.
Focus on why is customers seek alternate industries to solve the same problem.
Strive to create itself apart in the strategic band of industry.
Focus on what makes customers operate up or down within an organization, such as luxury items to discount items.
Focus on identified buyer group.
Study the string of customers and question who is able to and really should be the mark buyer outside the described buyer group.
Define scope of products and services offered similar to the way competitors identify it.
Aim to resolve the major "pain items" in customers' total solution, before, during, and after purchase.
Accept the industry's practical or emotional orientation of marketing.
Consider divulging from tradition by attractive to the opposite orientation.
Focus on the same point in time in strategy formulation.
Study how developments may change value as time passes, or create new value.
One route is to search across industry alternatives to learn why customers choose to use another solution - thought as "products which may have different functions or forms but provide the same purpose" (p. 49). The creators use Home Depot as an example where in fact the latent market of do-it-yourself do-it-yourself was tapped into by providing the supplies combined with this market's need for expert knowledge (p. 55). Another way, searching across organizations within an industry, was discussed through the exemplory case of Curves, a women's only fitness center that centered on the different reasons women choose to become listed on traditional health clubs as opposed to women who choose home exercise programs. The road uncovered the latent dependence on a quick, private, and simple work out done in a group with only women.
Appendix F: Tipping Point Leadership Techniques
Blue Ocean Strategy reduces the key techniques to successfully performing tipping point management. The first hurdle explained in the fifth basic principle is the cognitive hurdle, or the unwillingness of the folks of a firm to identify the necessity for change. Tipping point leader deals with this obstacle by keeping away from unmeaningful volumes, and instead "making people see and experience harsh reality first side" (p. 152). This creates an internally influenced mindset. To take care of issues of learning resource allocation, the authors identify hot places, cold areas and horse trading. Hot places indicate where resources are lacking, cold spots indicate where they can be abundant, and horse trading reallocates them in a manner that his fair suitable to both functions. The use kingpins, fishbowl management and atomization offer with issues of inspiration. Concentrating on kingpins is simply receiving over the natural market leaders within the infrastructure who are respected and persuasive and who'll in the long run convert others to the new strategy. Fishbowl managing is inserting these key players under a magnifying glass for his or her peers to evaluate, exposing brief comings and creating instant desire for performance. Atomization breaks down goals into simpler to reach steps. The attainability is self rewarding. To get over political hurdles, the writers recommend "leveraging angels, silencing devils and getting a consiglierge at the top management team. Angels, according to the reserve, are those who believe in the need for change or who'll directly reap the benefits of it. Devils are those people who have the most to reduce from the change. A consiglierge can be an insider who understands who the devils and angels are and how to approach them.
