Sunday, December 30, 2007

Enterprise 2.0 and Blue Ocean Strategy

In 2004, two professors from INSEAD, W. Chan Kim and Renée Mauborgne published an article in the Harvard Business Review, introducing the concept of “Blue Ocean Strategy”. A number of articles soon followed and a book was published in 2005. This approach has quickly become one of today’s more influential works on business strategy and the book has published over a million copies.
Blue Ocean Strategy is about creating new markets through the introduction of new products. The reference to “Blue Ocean” comes from the authors’ use of a metaphor of markets as oceans. They claim that most organsiations compete in Red Oceans, with essentially the same products against a shared core customer base. In this model, companies focus all their time and energy competing with each another: products become commodities and victories are pyrrhic. With all this fighting, the marketplace is bloody – a Red Ocean.
Blue Oceans are about creating product offerings that are so fundamentally different, they create a new market. The competitor is innovation, not a similar company. As is shown in the book, companies that have created Blue Oceans have been the big winners in the 20th century and the authors believe this trend with continue. Examples include Henry Ford with the automobile and Southwest Airlines with budget travel. Most case studies from the authors are not technology companies or even new companies.
The authors provide plenty of case studies that show that creating a Blue Ocean is not necessarily about technology. That said, I believe it is becoming increasingly difficult for an existing organisation to be innovative without good technology or at least simple technology – especially large companies. This is because their legacy systems are so complex and difficult to manage and their products so tied to this infrastructure that thinking beyond the current-state is extremely difficult.
Implementing systems based on Enterprise 2.0 principles of agility, collaboration and simplicity enables a much better way to innovate. It’s long journey for big company, but worth starting now. And sailing on the Blue Ocean gets a lot easier without a bunch of leaky boats. --(Fastforward)

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