Blue Ocean Strategy - Are There Really No Permanently Great Companies?

Blue Ocean Strategy - Are There Really No Permanently Great Companies?

Here at Creating Blue Oceans we continually receive inquiries, from corporate executives to small business owners, asking for advice or confirmation for their pursuit of Blue Oceans Strategy. So today, we thought to open up our heavily guarded vaults and share with you a fundamental nugget of Blue Ocean Strategy Basics.

Are There Really No Permanently Great Companies?

“There’s no such thing as a permanently great company or a permanently great industry. All industries rise and fall as do companies. However, there are permanently smart strategic moves” - W. Chan Kim & Renee Mauborgne, from Chief Executive Magazine article “Flouting Conventional Wisdom” (May 2003).

This claim is a cornerstone of Blue Ocean Strategy. It signals the shift from emphasis on industries or companies to strategic moves as the key unit of measurement and analysis. One of the problems with the quest for permanent greatness is that it draws companies into the trap of wanting to continuously outperform competitors. his creates a myopic view of being too focused on competitors, and hence getting locked into head-to-head competition with accepted industry boundaries.

Instead, a key quality companies should strive for is adaptability, always scanning and acting upon broad market opportunities. All companies face difficult or life-threatening challenges at one point or another, and it is their adaptability and ability to make smart strategic moves which allow them to prosper even in the face of adversity.

Consider the case of Nokia. In 1991 trade with the Soviet Union, Finland’s and Nokia’s largest market, collapsed overnight. At the time the company’s core activities were paper and rubber products. By 1994 Nokia was selling off its industrial divisions and was listed on NYSE as the world’s premier supplier of mobile phones, which was just a small, peripheral division three years earlier.

Or the case of IBM. Between 1991 and 1993 IBM recorded losses of USD 16 Billion and the future was looking grim to say the least. In 1993 Lou Gerstner became CEO, the first company leader who was not from within the company, in fact not even from within the industry. He completely re-oriented the company’s focus from technology driven to customer solution driven, so that by 2001 $35 Billion of $86 Billion total sales were from the newly created Global Services. This radical shift in company culture and orientation is widely accredited with IBM’s exemplary recovery to growth and healthy profitability.