The Global Downturn and the Imperative for Blue Ocean Strategy

Despite the pain, recessions are historically times of enormous creativity and breakthrough business launches. Microsoft, General Electric, FedEx, CNN, and Apple are among the hundreds of companies that created blue oceans during an economic downturn.

Counterintuitively, innovation goes up when the economy goes down. Yet most companies choose to cut spending on innovation during a recession and shift their focus from growth to reservation, waiting out the storm until the economy picks up again. All companies have to cut costs, and invariably one of the early victims is often spending on innovation activities such as R&D, training, or education budgets. Long-term projects are shelved, hiring is frozen, and workers are made redundant. Worse, risk capital evaporates. This is akin to medical patients deciding to reduce their expenditures by not spending money on medication. Innovative thinking is stifled when it is most needed.

Yet, good ideas are not expensive. As buyers are forced to make better choices within limited means, businesses also must make better strategic choices within their limited means. When times are lean both consumers and companies must make smarter decisions. Real customers continue to face real problems. For companies this means they must find ways to create new value, while reducing costs. This is also called Value Innovation: the cornerstone of Blue Ocean Strategy. To achieve value innovation, it is the ideas that matter, not your resources. It's about taking existing market elements and systematically reconstructing them to create significant new value for your customers and your company. As a result, lean times create innovation that is smarter than the innovation that springs from fatter times. They are "smarter" because they are based on ideas - not big budgets, R&D, or technological breakthroughs.

As Stanford economist Paul Roemer has been telling us for years, great advances come from great ideas. Yet ideas do not fall from the sky; they come from people. Every new thing that gives pleasure or productivity or convenience, be it an iPod or tweaks in a manufacturing plant, is the result of human ingenuity. To reiterate, it is during difficult economic times when we are forced to think more creatively how we create growth. Fortunately, Blue Ocean Strategy provides a proven and practical approach to create the ideas that will lead to breakthrough growth through value innovation: dramatically higher value and lower costs.

Professors Kim & Mauborgne have spent the past decade developing a set of analytical tools and frameworks to make the pursuit of blue oceans as methodical, codified, and executable as competing in the traditional competitive landscape. They studied companies around the world and developed practical methodologies in the quest of blue oceans. The ideas, tools, and frameworks used have been further tested and refined over the years in corporate and public sectors practices in Asia, North America, and Europe.

Blue Ocean Strategy, with its actionable frameworks and tools for both strategy formulation and execution, provides companies with a risk minimizing and profit maximizing approach for companies to grow their way out of the this economic downturn. Blue Ocean Strategy applies across all types of industries from the typical suspects of consumer product goods to b2b, industrial, pharmaceutical, financial services, entertainment, IT, and even defense.

(CNWG)

How to create uncontested market space - the blue ocean way

Renée Mauborgne may not BE as well known as Bill Gates or Jack Welch, or even Michael Porter, but there is one area where she leaves all three far behind. Consider this: her book, Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant, co-authored with W. Chan Kim, has been translated into 41 languages globally. Compare this with 25 languages for books by Gates, 27 and 29 for Welch and Porter respectively , and you realise just how popular the book has grown to be in the last few years.

It may seem like stating the obvious, but as supply outstrips demand in various markets and product categories, it has become essential for companies to find newer ways to compete and create strategies for new markets. “Blue Ocean Strategy is not only about how to tap new markets or uncontested spaces but about how to compete and create strategies in existing markets which offer a leap in value to the consumer,” says Mauborgne.

She uses Nintendo’s now revolutionary video game, Wii, as an example of how a company can use the blue ocean strategy to succeed in a crowded marketplace .

Till the Wii was launched in November 2006, video games were aimed at what she calls — for lack of a more succinct description — ‘anti-social young boys and girls’ . Most were violent games which had the gamer spending hours plonked in front of a screen (ideally, a high definition one so that the graphics were optimised), with minimal interaction with other people.

“The Blue Ocean Strategy comes through when you turn long held ideas and beliefs on their head, and that’s what Nintendo did,” she says. The new game requires people to be on their feet as they play games like tennis or golf on their Wii’s , and it’s marketed as a game that brings families together.

The best part — Nintendo makes a profit of $40 on every console sold, compared to Sony which actually loses $240 on each Playstation 3 (PS3) it sells. Sony makes the money on the software, but the PS3 console is basically is a loss making product.

This example, says Mauborgne, adheres to all the essential principles of a Blue Ocean Strategy. “It grew the demand for the product from the existing set of gamers to tap into a second tier of people who would perhaps be more inclined to playing a sport over a video game, and even a third tier like parents or grandparents,” she says. A product or service has to compete, not only for existing consumers, but also new ones.

The Wii has moved the competition to a new level, no longer fighting for the same lot of gamers as a Sony Playstation or Microsoft Xbox. In the process, it reduced cost through ‘value innovation’ which is the cornerstone of Blue Ocean Strategy — doing something which makes competition irrelevant.

Wii has also managed to differentiate itself by eliminating the need for a high definition TV and reducing the processing power and thereby the cost. This has further widened its potential user base. “What’s important,” says Mauborgne, “is to find a way of achieving differentiation along with low cost simultaneously to grow profitably, and that is what Nintendo has done with the Wii.”

At times, you don’t even need to create a new product to follow the Blue Ocean Strategy — simply re-look at how you are selling it. Cemex, the world’s third largest cement maker, is a case in point. About 85% of the cement sold in Mexico is to the do-it-yourself (DIY) home-builders , most of who take about seven years to add an extra room to their house.

This is because most of their money is spent on milestone events like village festivals, quinceañeras (girls’ 15th birthday parties) and anniversary celebrations, which everyone contributes to. So while having a cement house is top priority for everyone in Mexico , very few people can actually afford it.

“Cemex realised that the market had to potential to grow substantially and in 1998, it started positioning cement not as a functional product, but as a dream gift, romanticising ‘rooms of love’ that allow people to share their joys and bring them closer together,” says Mauborgne.

Now Mexicans gift each other bags of cement and Cemex helps teach people how to construct their extra rooms better. Not only has Cemex tripled the volume of cement consumption by the DIY homeowners, but it also sells at a higher price and has better control over inventory and production — just by repositioning cement from a functional to an emotional product.

A word of caution however. Just because a company is innovative today is no guarantee that it will continue to innovate in the future. An example being Sony. “It revolutionised the way people listened to music when it launched the Walkman, but since then, Sony hasn’t managed to do anything as path-breaking . But its earlier breakthroughs created tremendous brand equity for the company, so even today, a consumer is far more likely to buy a Sony music system over others,” says Mauborgne.

Another trap companies often fall into is classifying all innovation as Blue Ocean. “Often, when companies claim that they have come up with a new innovation , it is an improvement on an existing product or service,” says Mauborgne. The reason for this is simple — most CEOs are more comfortable signing cheques for these seemingly Blue, but actually Red Ocean Strategies, as it is something they can see and relate to.

Of course, Mauborgne isn’t recommending that companies blindly invest in vague and seemingly esoteric businesses only. “A company needs a strong balance between its red and blue ocean businesses, as it is the profits from the red that will fund the blue,” she says.

Also, as Nintendo did with the Wii, its often possible for an incumbent to create a blue ocean within the area of its core competency. An additional benefit, she mentions, tongue firmly in cheek, is that if the product is differentiated from others in the market, it means far lower advertising and marketing spends otherwise needed to make your brand stand out in the clutter.

(The Economic Times)

towards excellence>>www.globalpro.com.my

Is There a Blue Ocean Strategy for the Health-care Industry?

Dr Sarah layton

23 March 08

It is the object of calls for reform on the presidential campaign trail. Its medical errors come under scrutiny on CBS News's “60 Minutes.” It undergoes the Michael Moore treatment in such biased films as “Sicko.” Yes, health care in America looks like it needs a fresh prescription. “Like it or not, our health-care system has become a price-driven commodity business,” says Florida-based corporate strategist Dr. Sarah Layton.

“Blue Ocean Strategy - an approach which creates brand-new market space where no competition yet exists based on creating value -- is not prevalent in this industry. Nevertheless, it is possible in any industry -- even in health care with its regulations and constraints.” So, how can Blue Ocean Strategy come to health care? “It just takes thinking along the right pathways to determine how to break out of the old competitive Red Ocean and into a new Blue Ocean with no competition,” Layton contends. “I believe that the health-care sector can be ripe for those organizations that have the creativity and wherewithal to leave their competitors behind and launch in a new direction.” The Blue Ocean Strategy concept originated from the research documented in the book, “Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant.”

The cornerstone of Blue Ocean Strategy is value innovation, according to Layton, which creates unprecedented value for the customer while simultaneously creating high profits for the company. The business strategist finds that there is hope for the health-care business. Here are examples of organizations which Layton sees as demonstrating a Blue Ocean Strategy: “NovoNordisk, the diabetics care company that reconstructed the traditional market boundary which had a focus on the physician (the influencer) and started focusing on the diabetic (the user). The result is that NovoNordisk has become a diabetic care company rather than just a provider of blood-sugar testing equipment and supplies. When someone is diagnosed with diabetes, that patient will go to the resource that can provide the best information and care, NovoNordisk.” “One trend on the horizon is the prevalence of women as chief health officers,” Layton says. “Women are making the majority of health-care decisions today. So, having a CHO who can speak effectively with women can potentially reach many more of them.” “There is this particular mental health-care company worth noting,” she says.

“Life Spring: after going through the Blue Ocean Strategy process, it realized that out-of-pocket cost, community reputation for quality and expertise, appointment availability, good locations and facilities and friendly and caring staff became the short list of values they most wanted in a mental health facility.” “A fresh prescription requires new thinking,” Layton says. “Blue Ocean can give health care the fresh water it needs today.”

Microsoft Needs a Blue Ocean Strategy

by Dr Sarah Layton,

“What is Microsoft thinking?” asks Florida-based corporate strategist Dr. Sarah Layton of the software titan's hostile bid for Yahoo. Layton advocates the cutting-edge business approach known as Blue Ocean Strategy, which creates brand-new market space where no competition yet exists based on creating value innovation for customers.Some think Microsoft's acquisition of aQuantive might be Phase 1 of a Blue Ocean Strategy and its hostile bid for Yahoo the Phase 2 of a Blue Ocean Strategy, but Layton disagrees. “While these acquisitions may increase share of the on-line advertising market and make Microsoft more competitive, competitors already exist and will be hot on their heels,” she says. “They are simply buying more space in the already bloody red ocean of competition.” The acquisition of aQuantive appears a perfect fit for Microsoft if they want to be more competitive in their current market. Layton explains, “aQuantive's technology targets ads based on Web surfers' habits. That opens large swaths of new customers to Microsoft, but the markets will soon be flooded with competitors after the same business.” So, what is the benefit of getting Yahoo? “The basic job of any Web site is finding things online,” Layton continues. “Both Microsoft's Windows LiveSearch and Yahoo handle many searches as well as Google or Ask. But once people are used to one search engine, it's very hard to get them to change.” Both companies have important sites. Microsoft has a portfolio of sites, but none of them has attracted the consistent use of Yahoo's Flickr. “Yahoo's acquired sites - specifically, Del.icio.us and Flickr -- have had only minor upgrades over the years,” Layton adds. “In the blog arena, Yahoo cancelled its 360 site last year. Both companies have managed to have their instant messaging networks work seamlessly for the past 18 months. If that model has worked, why buy Yahoo?” So, the question remains for Layton: “Where are the new Blue Ocean customers that the combined Microsoft-Yahoo will bring to the table? My answer to that question is there aren't any -- and the lead which the new companies might enjoy will be hard fought and short lived.” “The Red Ocean just got more bloody,” she concludes.

Listen to Your Customers to Find the Blue Oceans

By Louis Columbus

CRM Buyer 01/18/08

As W. Chan Kim and Renee Mauborgne, the authors of the book Blue Ocean Strategy: How to Create Uncontested Market Space and make Competition Irrelevant, show in their research, the ability of manufacturers to reassess the unmet needs of their customers and create entirely new products and solutions that match customers' changing preferences is critical.

Competing for customers has never been more challenging, intensely focused, or costly for manufacturers globally. Instead of relying on plunging prices or continually adding in product line extensions to marginally increase a given product's market size and potential sales, manufacturers must get back to what made many of them successful to begin with, and that is concentrating on knowing the unmet needs of customers and responding to them with innovative products and solutions better than any competitor globally.
Aggressively getting Voice of the Customer (VoC) initiatives and programs off the ground quickly to drive both ongoing quality programs and getting their product development cycles fine-tuned to customers' unmet needs delivers long term competitive advantages. Any lasting competitive strength needs to be built on processes that deliver exceptional value to customers with products that meet their unmet needs and exceed their expectations.

Searching for Blue Oceans and Global Customers: Let the Race Begin
While the catalysts that launched many manufacturers were innovative products and services that in many cases created entire markets, the predominant mindset today seems to be following cost reduction as a strategy to the exclusion of creating new markets. As W. Chan Kim and Renee Mauborgne, the authors of the book Blue Ocean Strategy: How to Create Uncontested Market Space and make Competition Irrelevant, show in their research, the ability of manufacturers to reassess the unmet needs of their customers and create entirely new products and solutions that match customers' changing preferences is critical.
When companies follow this approach to redefining markets for their products and services, they create entirely new market segments, which the authors have called "blue oceans." A market that is considered a blue ocean is one where demand is created, not fought over, and illustrates opportunity for growth and profitability versus margin- and price-cutting to gain market share. Conversely, red oceans are those markets marked by high levels of price-cutting and margin-taking in the hopes of driving demand up quickly to compensate for declining sales. Price isn't the problem in red oceans; relevance is. Finding blue oceans starts, however, with an aggressive VoC plan and continues with a shift in the culture of manufacturers to act on the customer intelligence gained.
There are excellent lessons learned from Blue Ocean Strategy that apply to manufacturers. Here are several of them:
Incumbent manufacturers most often create blue oceans from their core businesses. Chrysler's redefining the family vehicle market with the development of the minivan, IBM's (NYSE: IBM) humble beginnings as the company CTR for tabulation machines, IBM's creation of the server market with the launch of the System/360, Compaq's defining the blue ocean of low-end, fully configured servers with the launch of its ProSignia line, Proctor & Gamble's redefining of floor cleaning products with the Swiffer are all examples of how blue oceans have been defined by incumbent manufacturers.
In entertainment, AMC's definition of the blue ocean strategies of first the cinema multiplex and later, the megaplex, in addition to the redefining of circus entertainment by Cirque du Soleil, which is thoroughly discussed in the book and article by Kim and Mauborgne, also illustrate how manufacturers can create blue oceans for themselves based on their core strengths.
Blue oceans can't be bought purely through technology innovation. Consider the fact that the majority of blue oceans that manufacturers are benefiting from today are based on existing technology, and it's clear that just spending heavily on R&D to create entirely new markets doesn't work. Instead, there needs to be deliberate customer listening strategies including aggressive VoC programs to fully understand the needs of customers and re-align existing product and process strengths to meet them.
The technology behind the Apple (Nasdaq: AAPL) iPod series of personal MP3 players was well known; it was the development of the iTunes store as well as strong demand for personal music that could be quickly saved to a personal MP3 player and used anytime, anywhere that revolutionized this specific market. For manufacturers the message is clear; the blue oceans are out there and it takes a concentrated effort to find them through VoC programs and staying close to how customers want to solve their unmet needs.
Defining blue oceans as traditional industries and markets don't work; yet capturing and acting strategically on customers' changing unmet needs do. Kim and Mauborgne contend that blue oceans defy existing approaches to defining them and as a result require entirely new product strategies, marketing messages, and approaches to meeting unmet customers' needs. Manufacturers who strip away the traditional approaches to business development and new venture creation have a better chance of uncovering the higher growth and uncontested blue oceans that may exist in their customer bases. Customers' approaches to buying, using, and recommending your products change dramatically over time; finding out about how these changes occur is critical to finding blue ocean markets.
Blue ocean strategies transform value/cost trade-offs and force manufacturers to align activities in the pursuit of differentiation and low cost at the same time. For incumbent manufacturers, this is the aspect of cost reduction that makes the greatest potential impact on competing in new markets. The ability to trim cost isn't then used, turning a red ocean even more red with losses. It's about creating such a high level of differentiation in products and delivering such high value that low cost becomes one more competitive differentiator. It isn't the single greatest differentiator, yet a contributing factor in underscoring exceptional value to customers in the fulfillment of their unmet needs.
For manufacturers, the implications of pursuing blue oceans are clear. First, the world is now the playing field -- not any state, province or region they are located in. Globalization has leveled the playing field and is bringing competitors to manufacturers' doorsteps, yet also providing opportunities to capture customers globally with greater efficiency than ever before as well.
Fuel for Global Growth: Capturing Voice of Customer Insights
Manufacturers must find the intersection of their core strengths through the use of aggressive VoC programs find the blue oceans their organizations can compete strongly in. There are a series of qualitative approaches manufacturers rely on to gain insights from their customers, and while these are all valuable as part of a broader VoC program, the culture of any manufacturer must also change to capitalize on the lessons learned.
No one can afford the luxury of being arrogant and ethnocentric in such a rapidly and highly competitive, changing world; if anything, VoC programs must force manufacturers out of their comfort zones before market forces do and force change that is planned versus by accident. Here are the key approaches manufacturers are taking to gain qualitative feedback in their VoC programs:
Advisory councils: One of the most effective approaches to gaining insights from customers, there has been wide variation in results achieved using councils to gain insights into new markets and unmet needs of customers. The cardinal sin so many manufacturers commit here, however, is either thinking they already know what their customers' future plans are, or worse, viewing this as a negative experience just because customers will complain about problems they may have had for years. There is no room for such arrogance in such a rapidly changing global economy. Fail to listen to your customers' complaints and someone else will; and will gain their business in the process.
If there was ever a time to throw off the "we know already" mentality that tends to pervade old-school manufacturers, this is the time because it is time to fight for your customers like never before. Besides that, they have insights into where entirely new blue ocean markets are.
The best-run advisory councils first recruit from the standpoint of exclusivity and the need to gain insights into the direction customers are going. They are hardly sales events; they are more often events where C-level executives gather to share peer-level insights into what is working and what isn't when it comes to solving major strategic challenges. Symantec's (Nasdaq: SYMC) use of advisory councils at the CEO level with its customers has netted remarkably strong results as its customers have shared their long-term security strategies and plans, challenges, and sought advice from the senior security experts at the software company. The result: over two years, the platform product strategy direction of Symantec was perfectly aligned with their customers' needs.
Blogs: If there is one lesson taken away from this article, get out to Google (Nasdaq: GOOG) , get an RSS reader set up and start tracking bloggers who are in your industry. There is an exponential growth of content being generated by bloggers and many of them are hinting at the next blue oceans in key markets. In addition many manufacturers have set up blogs and even defined blogging policies for their employees. Using blogs as a means of connecting with customers needs to be down with transparency, honesty and directness. No sugar-coating problems, not dodging customer complaints, but ownership and sincerity are critical in the blogosphere. Start tracking what bloggers are saying about your company, the industry, and what is going on in related areas as well, as this is a great way to stay on the pulse of what one form of exponentially growing voices of customers is saying.
Focus groups: This is a commonly used qualitative strategy for completing research, yet it can also be used as a VoC program as well; and needs to be considered as part of any new product development effort. The use of focus groups has been criticized, yet it is one more avenue by which manufacturers are attempting to find the blue oceans accessible to them.
Mining unstructured content from sales and post-sales feedback including customer complaints: Well-intentioned at the time they are nearly always ignored when the results come back from customers, sales feedback forms and post-sale customer satisfaction bounce-back cards often up in stack after stack of moving boxes in the marketing director's closet. Because the data is unstructured and difficult to interpret, it gets ignored for years. There is good news for manufacturing company's marketing directors feeling too guilty to throw these boxes out yet seeing a Herculean task of coding them. Companies including Attensity, Cymfony, Island Data and others have software that can interpret unstructured data and create linguistic models based on the results. This is incredibly powerful for finding blue oceans. Consider getting to know how these tools work to gain greater insight into how to find blue oceans globally.
Win/loss analysis needs to grow up: The days of simply relying on sound bites of why business was won or lost have got to end for any manufacturer who wants to compete more effectively on a global basis. If you're a manufacturer and you're not doing a thorough analysis of why you didn't win the major deals, then it's time now to start paying more attention to this area of a VoC program. Kill sound bites and don't allow them to be part of how sales efforts get evaluated; finding out the specific reasons why a given deal was lost is critical if a manufacturer is going to compete globally with greater strength.
Too many companies get lulled to sleep with sound bites while their competitors have found entirely new markets -- their blue oceans have arrived -- and sound bites hide that from a competing manufacturer. Don't be asleep on this area of where weaknesses are slowly eroding competitive strength. Likewise, finding out why a customer chose your products and solutions nearly always points to greater clarification of the unique value proposition manufacturers rely on for positioning and identity.
Listen to Your Customers
Finding blue oceans is the path to profitability and growth for manufacturers, regardless where they are located. For American manufacturers, their core strengths began by uniquely attacking customers' unmet needs and aligning their product strategies accordingly. It's time for this nation's manufacturer to wake up and realize that it doesn't need to just be about cost reductions and product line extensions -- in the vernacular of Kim and Mauborgne -- red ocean strategies.
Instead, embracing the challenge of finding blue oceans through concerted VoC programs needs to be a strategic priority -- and further than that -- a passion to change and become a stronger global competitor in the process.

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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)

Based on the book: The INSEAD Blue Ocean Strategy Institute

Executive summary: INSEAD is currently setting up the INSEAD Blue Ocean Strategy Institute based on the findings from INSEAD professors W. Chan Kim and Renée Mauborgne in the interrnational bestselller "Blue Ocean Strategy" - sold in a million copies in its first year and now published in 39 languages. In the new institute "classrooms should be moving from paper cases to more visual movie-oriented ones,” says Renée Mauborgne.

Edited by Peter Horn

INSEAD is currently setting up the INSEAD Blue Ocean Strategy Institute: The institute in the making will be based on the findings of the international bestseller, "Blue Ocean Strategy" written by INSEAD professors Renée Mauborgne and W. Chan Kim. The book sold more than a million copies in its first year of publication and has being published in 39 languages. There are no plans for a follow-up book at this stage. In an interview the authors strategy professors Kim and Mauborgne tells INSEAD Knowledge that they knew there would be an audience for their research as their articles in the Harvard Business Review sold half a million reprints. “Looking back (...) what we are satisfied with is (...) if we were to write it again, could we have done anything differently, we would say not really,” says Renée Mauborgne. The Blue Ocean authors say they would still have undertaken the same research journey, starting with inductive study based on cases and deductive research based on data. However, Kim says they felt this inductive/deductive approach “wasn’t good enough”, so they began to apply the theory to “actual companies, to write some of the case stories” which appear in the book, albeit with the names of the companies disguised. The research focuses on around 150 cases and highlights “Blue Ocean strategic moves” such as Cirque du Soleil and [yellow tail] wines. In short, Blue Ocean Strategy is concerned with products, processes and people, says Kim. It “looks at the entire value chain, a system-wide approach and the way of thinking, rather than talking about entrepreneurship or some sub-system of the entire organization. “(...) Unless there’s some new enlightenment, we will repeat the same process of a research journey. (...) Its commercial success is a secondary interest, even though it’s exciting to see what happened,” says Kim. Business schools are not pure science: “Business school is not going to be pure science - it never can be. By definition, business is applied science. You cannot have pure science in businesses, because business theory goes with the phenomenon … In pure science like physics, you can find theory with truth that endures 100 years, 200 years. You can have different arguments, but quantum physics is lasting,” says Renée Mauborgne. “Applied science, like business science is about management. It needs to change according to how an organization evolves. (...) You cannot use management theory from 1920 and apply it to 2020. Most of the time business is evolving. Look at the recent internet and bioscience revolutions,” Kim says. Blue Ocean Strategy InstituteINSEAD is currently setting up a Blue Ocean Strategy Institute at its Europe Campus in Fontainebleau. Researchers at the Institute will be on hand to answer questions about blue ocean thinking, Kim says, adding that it will also help to raise INSEAD’s profile. “The main purpose of the Institute is mainly an academic one as it will dedicate itself to the academic development of Blue Ocean Strategy theory.” It will also have a pedagogical ambition as it will be looking to develop short Blue Ocean Strategy “theory movies” in contrast to the current paper-based case studies produced by Harvard and others. “Multimedia can be introduced in a very constructive way in terms of creative content,” says Mauborgne. “If you want to teach industrial history from 1900 to 2000, this is certainly good way to learn by watching how industry has been evolving. In middle of it, the class can discuss the implications using analytics and have a rich conversation. Classrooms should be moving from paper cases to more visual movie-oriented ones.” As for other future Blue Ocean developments, Kim says that for the time being, he and Mauborgne are “very occupied with deepening and broadening Blue Ocean Strategy … because we’ve just started to explore the topic and there are so many things to do.” The authorsRenée Mauborgne is a INSEAD Distinguished Fellow and Affiliate Professor of Strategy and Management at INSEAD, France, the world's second largest business school. She was born in the United States. Mauborgne is a fellow of the World Economic Forum. Her Harvard Business Review articles, co-authored with W. Chan Kim, are worldwide bestsellers and have sold over a half a million reprints. Their Value Innovation and Fair Process articles were selected as among the best classic articles ever published in Harvard Business Review. In 2005 she was selected as the highest placed woman on Thinkers 50, the global ranking of business gurus, and was named along with her colleague W. Chan Kim, as "the number one gurus of the future" by L'Expansion, one of France's leading business magazines. The Sunday Times (London) called them “two of Europe's brightest business thinkers. Kim and Mauborgne provide a sizeable challenge to the way managers think about and practice strategy.” The Observer called Kim and Mauborgne, "the next big gurus to hit the business world." Kim and Mauborgne co-founded the Blue Ocean Strategy Network (BOSN), a global community of practice on the Blue Ocean Strategy family of concepts that they created. BOSN embraces academics, consultants, executives, and government officers. Blue Ocean Strategy has become an “International Bestseller”, after reaching the “Wall Street Journal Bestseller”, “BusinessWeek Bestseller”, and “National (American) Bestseller” status. It has been published in 39 languages, covering over 180 countries, breaking HBSP's historical record of most foreign language translations ever achieved. Blue Ocean Strategy won the Best Business Book of 2005 Prize at the Frankfurt Book Fair. - (EM, 2 Oct 07)

Blue Ocean Strategy: Not your father's strategic planning process

Blue Ocean Strategy is changing the way that forward looking companies are formulating strategy and doing strategic planning. And it is not strategic planning as usual. Traditional strategic planning typically marches out the organization’s financial data and then an effort is made to look at the strengths, weaknesses, opportunities and threats, based on historical and current information. Some of these efforts may bring incremental improvements in a company’s competitiveness or bottom line, they do not ensure long term growth or reveal new opportunities. Many organizations will go so far as to survey customers to see what they want. These companies brag that “We give our customers what they want and more”. The problem is that customers don’t know what they want or don’t want, until it is presented to them. How many customers asked for a desk top computer before it became available? Or a mobile phone? or a larger golf club head? Or even a car, or airplane? or an upscale circus? Yet, when presented with these new products, customers clamber to take advantage of them, leaving the company giving the customer only what they think they want, in the dust. Customers will tell you they want more of what you have, at a lower price. There goes your profit.What is the best way to plan? Focus on the big picture, not the numbers, and reconstruct market boundaries to include customers not being served by your competitors. Dr. Sarah Layton, CEO of Corporate Strategy Institute, is one of a few people world wide qualified in Blue Ocean Strategy tools, concepts and processes by the Blue Ocean Strategy Initiative Centre, London. Blue Ocean Strategy: How to create uncontested market space and make the competition irrelevant, based on the best selling book of the same name by Chan Kim and Renee Mauborgne, shows you how. - (CSI, 6 Sep 07)

Thai talk: Political reform via the 'blue-ocean strategy'

That's probably a very polite way of saying those corrupt, vote-buying manipulators passing themselves off as professional politicians should try to reinvent themselves with some new platform instead of just relying on their old networks of vote-canvassers to put them back in their old parliament seats. Cholvit Chearachit of Srinakharinwirot University wrote in Matichon recently that Thai politicians should dump their good old textbooks that favour a red-ocean strategy and adopt the title strategy in W Chan Kim's and Renee Mauborgne's famous book "Blue Ocean Strategy". The authors suggest that rather than competing within the confines of the existing industry or trying to steal customers from rivals (the bloody or red-ocean strategy), they should develop uncontested market space that makes the competition irrelevant. According to Kim and Mauborgne, competing in overcrowded industries is no way to sustain high performance. The real opportunity, they say, is to create blue oceans of uncontested market space. They propose two very important aspects of the strategy: one is to find and develop blue oceans, and the other is to exploit and protect blue oceans. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid. There are two ways to create blue oceans: one is to launch completely new industries and the other is to create a blue ocean from within a red ocean. The idea, of course, is to do something different from everybody else, producing something that no one has yet seen, thereby creating a blue ocean. The authors don't agree with marketing guru Michael Porter's theory that successful businesses are either low-cost providers or niche-players. Instead, the blue-ocean concept is to find value that crosses conventional market segmentation and offering value at a lower cost. What, then, would a blue-ocean political strategy entail? For a start, politicians would have to stop fighting for votes in the same old market - in other words, paying the same village headmen to canvass for votes in the same old constituencies. Politicians would have to look for an untapped voting base. What about starting with the 30-40 per cent of eligible voters who did not exercise their electoral rights last time? That, clearly, is the real blue ocean, because other candidates have ignored these non-voters whose decision to vote next time could turn the picture upside down. If the politicians continue to fight it out over in the red ocean, they will be shedding blood over the same old market. Thai politics will be forever stuck in the mud. The blue-ocean concept calls for the raising and creating of value for the market, while simultaneously reducing or eliminating features or services that are less valued by the current market or future markets. An innovative politician would try to raise his political party's standards through his own personal integrity, thus creating a market value for himself. In other words, he should try to enhance his value not by making wild, impossible promises in exchange for votes. What should these new blue-ocean politicians reduce and eliminate? Of course, if they really want to reach out to new horizons, this new breed of politicians would have to reduce their reliance on the old patronage system to win elections and build a permanent support base with public-centred policy platforms. And, this perhaps the most innovative step of all, they should eliminate all connections with money politics. A genuine blue-ocean strategy for a promising politician would, in short, entail eliminating corruption, reducing red tape, creating respectability and increasing public trust. This is admittedly easier said than done. But then, even if they constitute a drop in the ocean, we still hope the few good men in politics who go into the blue ocean can make enough waves to chase the old guard out of the red ocean.

By Suthichai Yoon

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 (www.eperolehan.gov.my). 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)