Saturday, September 22, 2007

Blue Ocean vs Black Ocean

WHAT is blue ocean strategy? It is a corporate strategy to develop uncontested market space and make competition irrelevant. According to Prof. W. Chan Kim and Renee Mauborgne, “competing in an overcrowded industry is no way to sustain high performance. The real opportunity is to create a blue ocean of uncontested market space.” (Havard Business Review, October 2004.) How did Cirque profits increase revenue by a factor of 22 over the last ten years in such an unattractive environment? What is the difference between blue ocean and red ocean? Basically, the term “ocean” refers to the market or industry. “Blue ocean” refers to untapped and uncontested markets which provide little or no competition for anyone diving in, as the markets are not crowded. The phrase “red ocean,” on the other hand, refers to a saturated market where fierce competition exists and is already crowded with people (companies) providing the same types of services or who produce the same kind of goods. The idea, then, is to do something different from everyone else; to produce something that no one has yet seen, thereby creating a “blue ocean.” An essential concept is that the innovation (in products, services, or delivery) must raise and create value for the market, while simultaneously reducing or eliminating features or services that are less valued by the current or future markets. Several elements are emphasised in blue ocean strategy, such as the creation of new markets, thinking beyond existing boundaries to identify non-customers and challenging the industry costs. The Malaysian Electronic Government, one of the MSC Flagship Applications, is one example of blue ocean strategy. Towards future realisations, the Government will appoint a company or companies with multimedia technology to develop, operate and execute projects based on the Build-Operate-Transfer (BOT) system. This will inevitably create a blue ocean of uncontested market space. For example, the e-Procurement system ( This is currently being developed by a company which has been given concessions for Build-Operate-Transfer (BOT) projects by the Government for a period of 12 years, or until the year 2012. The implementation of the eProcurement system does not necessary enable government agencies to procure things electronically, but can directly assist them in upgrading the efficiency of procurement transaction processes between the suppliers and federal government agencies. The system also ensures that the best value for government and suppliers becomes much more ingenious and competitive. In addition, this portal will act as a bridge to those websites that are connected to the Electronic Government. All the charges for the use of this portal will be borne by the suppliers themselves. For every transaction, a supplier is required to pay 0.8% (commission) to that company up to a maximum of RM9,600. As mentioned by that company, the suppliers can present their products on the World Wide Web, receive, manage and process purchase orders and receive payment from government agencies via the Internet. Before suppliers can use this system, they are required to pay RM450 in registration fees, RM50 annually for a smart card, and RM185 for a card reader (USB type). For items uploaded onto the website, a fee of RM15 per item will be charged, not inclusive of images. Training will be provided by the company to suppliers who are not familiar with the system. The training courses are as follows: ePerolehan Supplier Registration, Internet and Computer Literacy Course, ePerolehan Central Contract (RM250/day), ePerolehan Direct Purchase & Catalogue Creation (RM550/day), ePerolehan Quotation and Tender (RM650/day). For electronic catalogues, an annual cataloguing fee ranging between RM300 and RM6,000 will be charged to the suppliers. The question is: how much does a supplier need to “invest” in order to gain “returns” from government projects? How soon will the supplier be “awarded” with government projects?’ Apart from that, how safe are the suppliers’ confidential information/ data? How is the information/ data stored? Who are the people responsible for the information/ data? Who can access the confidential information/data? The operational concept for this approach reminds us of the recent CTOS debacle. What is the difference between Internet banking (website access) and eProcurement (also website access)? In our march forward, we should always place emphasis on the need to adopt noble values in our system, management chain and work ethics. It is sometimes much easier to appreciate the significance of noble values, rather than put them into practice. This may be due to our individual shortcomings. These shortcomings could be due to the lack of spiritual emphasis in our lives. Therefore, the blue ocean strategy could become a “black ocean” strategy. Correct strategies are like compasses; they always point the way. And if we know how to interpret them correctly, we will not be distracted by conflicting voices and values. - (IKIM View-The Star, 4 Sep 07)

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