Blue Ocean Strategy Articles : What is Competitive Advantage? by Ben Haring
What is Competitive Advantage?
All of us in business are constantly thinking of ways to stay ahead of our competitors, but what actually is competitive advantage? Many strategy specialists discuss competitive advantage and the need for it in business, yet very few of them actually define the term. The difficulties in finding a suitable definition may simply be the result of competitive advantage meaning what it is; i.e. an advantage in terms of competitiveness, where no exact definition is given because it is company or product specific.
The notion that competitive advantage is company specific is supported by Hay and Williamson (1991, p42), where they define the term as a, "deceptively simple idea of assessing a company's capabilities and market position by how they give it advantage relative to competitors". They bring forward the opinion that competitive advantage can only be found by making a comparison between a company and its competitors. This is further supported by Barney (1991, p99) who also brings in the concept of adding value, where he states, "a firm is said to have a competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by current or potential competitors".
Thus competitive advantage is unique to the company in question, it's compatibilities, how it positions itself in the market and how it adds value to its customers. When identifying your company's competitive advantage try assessing it by these factors above.
Recent Developments in Competitive Advantage
Rayport and Jaworski (2004) suggest as the focus of competition shifts from what companies do to how they do it, the new frontier of competitive advantage lies in the quality of interactions and relationships companies can establish with their customers and markets. In order to gain the most from advances in (Human) thinking as well as in new technology, they believe that a harmony must be found in the intelligent division of labour between man and machine. Thus a company may be able to achieve competitive advantage by differentiating how they interact with their customers. With the advances in modern technology companies can reach more customers in different ways. For example, you can now order a pizza from Domino's via interactive digital television. No other pizza delivery company can offer such a service and so Domino's has developed a differentiated competitive advantage through exploiting new customer interfaces.
Kim and Mauborgne (2004) introduce the concept of 'Blue Ocean Strategy' as a method of doing away with all competition. They split the business world into 'red oceans' and 'blue oceans'. A red ocean is an existing and often over crowed market place, where competition is great. A blue ocean is a newly created uncontested market place, which makes all competition irrelevant. When it comes to creating blue oceans, Kim and Mauborgne (2004) believe that successful companies pursue differentiation and low cost strategies simultaneously. However, it could be argued that use the use of the term 'blue ocean' is just an elaborate explanation of key concept of marketing; finding a need, satisfying it and regenerating it at a profit. Where the 'blue ocean' is the 'need' that has not yet been found.
For help in developing your competitive advantage feel free to contact AC&A (http://www.creativeattitude.org) and discuss it with one of our strategy specialists.
Bibliography
Barney, J., 1991. Firm resources and sustained competitive advantage. Journal of Management. Vol. 17, p99-120
Hay, M. Williamson, P., 1991. The Strategy Handbook. Oxford, Basil Blackwell, p42.
Kim, W. Mauborgne, R., 2004. Blue Ocean Strategy. Harvard Business Review, Oct 2004, p77-84
Rayport, J. Jaworski., 2004. Best Face Forward. Harvard Business Review. Dec 2004, p47-58
About the Author
Ben Haring - BA (HONS) Leisure Marketing
AC&A Senior Account Manager - http://www.creativeattitude.org
A specialist in business and management strategy
Source: http://www.goarticles.com/cgi-bin/showa.cgi?C=284156
29 March 2008
What is Competitive Advantage?
Knowing How to Apply Graphics
Knowing How to Apply Graphics by Brian Lee
In any decent website, the pictures and graphics incorporated into the page aren't simply for show, but can also be a marketing strategy. When graphics are used properly it can get your revenue up tenfold. On the other hand, poorly chosen, made or placed graphics within a webpage can be more devastating then having no graphics at all.
Graphics on any type of website should be a tool used to accent the major points of your page. When pictures are well placed, it will persuade your visitor to become a client. This can be done by simply integrating marketing strategies when designing your graphics.
For instance, when picking out a color for your graphics, don't only choose your favorite colors or colors you find nice, but pick hues that will emphasize your sites product or service. For example, let's say that your website is one that offers summer vacations near the ocean. For this site topic, choosing colors like grey and purple has nothing to do with your product. Instead, choosing colors such as blue, gold and orange are good example because it contrasts's the colors of the ocean, sand and sun.
Another point is to moderate the amount of graphics you apply on each page. Too many pictures will give your page a butchered and messy look, which can be a turnoff for a lot of internet users. Also, a lot of graphics will definitely slow down your site loading speed, which is another thing you probably wouldn't want happening. But putting too few pictures can also be a major turnoff since it gives your page an incomplete and plain look.
The picture you decide to use as your sites background can also be a deciding factor for your web page's success. The graphic and color used as a wallpaper should never, and I repeat, NEVER interfere with the legibility of your content. For example, putting yellow writing on a white background won't help sales. Background graphics should be applied the same way as any other graphics, to accentuate your business.
In the end, keep in mind that people purchase items depending on emotion. So use your graphics to play on those emotions to up profits. For instance, pictures of individuals with a content, satisfactory look on their faces while using your product are good.
About the Author
Brian Lee works for NRJ design, a Montreal Web design company.
Source: http://www.goarticles.com/cgi-bin/showa.cgi?C=256851
22 March 2008
The Four Steps of Visualizing Strategy: Step One - Visual Awakening
Given the positive response to our series highlighting each of the Paths in the Blue Ocean Strategy Six Paths Framework, we will continue each week to highlight helpful Blue Ocean Strategy fundamentals. The next natural topic is the Strategy Canvas and the mechanisms for its creation. The process, which builds on the Six Paths of creating Blue Oceans and involves visual stimulation to unlock new insight, has four major steps. Today we focus on the first step—Visual Awakening. This step, and each step to follow, will be made accessible through the Blue Ocean Strategy Basics archive. For our highlight of the first step, we turn to pages 84 - 85 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne):
Step One - Visual Awakening
A common mistake is to discuss changes in strategy before resolving differences of opinion about the current state of play. Another problem is that executives are often reluctant to accept the need for change; they may have a vested interest in the status quo, or they may feel that time will eventually vindicate their previous choices. Indeed, when we ask executives what prompts them to seek out blue oceans and introduce change, they usually say that it takes a highly determined leader or a serious crisis.
Fortunately, we’ve found that asking executives to draw the value curve of their company’s strategy brings home the need for change. It serves as a forceful wake-up call for companies to challenge their existing strategies. That was the experience at EFS (a European Financial Services Co.), which had been struggling for a long time with an ill-defined and poorly communicated strategy. The company was also deeply divided. The top executives of EFS’s regional subsidiaries bitterly resented what they saw as the arrogance of the corporate executives, whose philosophy, they believed, was essentially “nuts in the field, brains in the center.” That conflict made it all the more difficult for EFS to come to grips with its strategic problems. Yet before the firm could chart a new strategy, it was essential that it reach a common understanding of its current position.
Source: http://blueoceanstrategy.typepad.com/creatingblueoceans/2008/03/the-four-steps.html
The Four Steps of Visualizing Strategy: Step Two—Visual Exploration
Blue Ocean Strategy Articles : The Four Steps of Visualizing Strategy: Step Two—Visual Exploration
Continuing in our series which takes a closer look at each step in creating a Blue Ocean Strategy Canvas, our focus advances to the second step— Visual Exploration. Once featured, each step is made accessible through the Blue Ocean Strategy Basics archive of our site. For the second step, we turn to pages 88 - 89 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne):
Step Two - Visual Exploration
The next step is to send a team into the field, putting managers face-to-face with what they must make sense of: how people use or don’t use their products or services. This step may seem obvious, but we have found that managers often outsource this part of the strategy-making process. They rely on reports that other people (often at one or two removes from the world they report on) have put together.
A company should never outsource its eyes. There is simply no substitute for seeing for yourself. Great artists don’t paint from other people’s descriptions or even from photographs; they like to see the subject for themselves. The same is true for great strategists. Michael Bloomberg, before becoming mayor of New York City, was hailed as a business visionary for his realization that the providers of financial information also needed to provide online analytics to help users make sense of the data. But he would be the first to tell you that the idea should have been obvious to anyone who had ever watched traders using Reuters or Dow Jones Telerate. Before Bloomberg, traders used paper, pencil, and handheld calculators to write down price quotes and figure fair market values before making buy and sell decisions, a practice that cost them time and money as well as built-in errors.
Source: http://blueoceanstrategy.typepad.com/creatingblueoceans/2008/03/the-four-step-1.html
20 March 2008
The Best Kept Secret of Successful Differentiation
"Core Benefits" are the benefits that the consumer already expects to receive from a product like yours. This is the list of "what's important to the consumer" in your product or service category. "Core Benefits" are more than the essential product benefits. The core benefits of today's cellular phones include much more than the possibility of conducting a conversation while you're in motion. Everything that the consumer has already come to expect from the product is included in the core benefits. These are the benefits that all of your competitors offer, because they compose the essence of the product and it is impossible to compete in the market without them.
That is precisely the reason why if you really invest your efforts and are truly brilliant and make a major break-through in improving core benefits - do you know what will happen? They'll imitate you as fast as possible. That's what will happen. You must understand: in that case, your competitors can't allow themselves not to imitate you. You'd do exactly the same thing.
Many companies have learned this the hard way. Volvo, for example, created its brand around a central core benefit: safety. They did everything humanly possible! They invested limitlessly! And they succeeded! They especially succeeded in convincing their competitors that it is very important to invest in safety. Today, no one will tell you (except for a few out-of-date marketers) that safety is Volvo's differentiation.
In order to create a differentiation that won't be imitated, you have to think beyond the core benefits that are (already or even just in potential) considered important in your market. Think about "what's important to the consumer" in other product or service categories that you can be the first (or better yet: the only) one to supply in yours. It works time after time. The companies that have succeeded in maintaining their differentiation over the years and weren't imitated even though they were making tremendous profits are those that innovated in qualities beyond the core benefits of their market. The farther you look, the more successful you can become.
What are they waiting for?
Let's look at some examples of off-core differentiation.
Swatch decided to treat the watch face and band as a design area. What does this have to do with the core benefit of a watch? Exactly! So no one has imitated them. Not really.
Grey Goose vodka is the only vodka produced in France. This differentiation is so way-out of the core benefits of the vodka industry! No vodka connoisseur in his right mind would imitate that.
What about The Body Shop? There's no place for another cosmetics chain that actively fights against animal experiments, for the environment and for the needy wherever they are. No one even thinks about imitating them.
The mob and the mobile
Sometimes an off-core differentiation can become eventually a core benefit. This happened to Nokia. It happens when the differentiation is not really off-core but is actually based on a deep insight into the direction that the market is going and of consumers' future needs. Nokia took the global market with a seemingly off-core strategy. While Motorola was busy developing better and better mobile phones, Nokia predicted that mobile phones were going to be a popular product. When people will start carrying their cellphone around with them as they go about their everyday life, it will become an apparel item, a fashion statement. And thus the idea that helped turn Nokia into the world leader was born - the idea of the exchangeable panels that let you match the phone to your clothes. It didn't seem like a core benefit of the category back then. Totally not connected to what a mobile phone is supposed to do.
But when the technology of most mobile phone manufacturers became similar, they began to compete over design. Samsung, Sony Ericsson and yes, even Motorola, started to beat Nokia, using its own weapon. As I am writing, Nokia's share of the market is still double that of Motorola's (do you realize what a lead Nokia was able to open?). But Nokia has lost its differentiation.
You may say that only a few companies have become leaders by means of an off-core differentiation. Let's not argue what is many and what is a few. By the way, most companies never become leaders, nor need they become. However, if you are in a competitive market and trying to make a living, an off-core strategy is the best chance you have to give a group of consumers a good reason to devotedly prefer you and even create a private monopoly for you.
Open a window
I'm not trying to argue that differentiation within the core benefits is a bad idea, if you can do it. It opens a window of opportunity for you, until they start to imitate you. For a man like Michael Dell, that was enough to become a billionaire. Dell changed the way in which personal computers are sold. Michael Dell understood that from the moment that personal computers became standardized (thanks to the IBM clones on the one hand and to the foresight of Microsoft in the 1980's, on the other hand) - people would buy them over the phone and later, over the internet. Dell also understood that since personal computer components are standardized anyway, you can put them together to suit each user's needs. That wasn't an Off-Core Differentiation. Dell simply saw where the trends are leading to. Today, everyone sells computers this way, but the period of time in which he had this shining differentiation made him one of the richest people on the planet.
18 March 2008
Creating Brand Instrumentality Beyond The Product
Blue Ocean Strategy Articles : Creating Brand Instrumentality Beyond The Product Author: Dan Herman
The main reason for the general fascination with brands is their ability to provide the consumers an extra value in addition to what the product/service company themselves can provide. A value which becomes the major motivation for consumers to desire the product. Everybody agrees about that, but from here on it becomes foggy. First of all, what is this value exactly? Also, how precisely is this value being added and incorporated into the brand? In this short article I attempt to provide a clear answer to both of these key questions and to suggest a workable approach to creating value added brands.
By way of introduction, let me say that strong brands are perceived instruments, means to achieve goals or benefits, in the consumer's mind. They arouse emotions because they are perceived as a source of something beneficial. The positive emotions are direct outcomes of these anticipations. Their various symbolizations (name, logo, font, emblem, etc') have little impact of their own. Their importance is mainly as identifiers of sources of already attributed and anticipated benefits.
The act of branding has ten different meanings which are ten different ways to create instrumentality or usefulness beyond the tangible benefits which the product/ service/ company themselves can provide.
Creating a conceived linkage to a tangible benefit
The most basic level of branding is creating a conceived linkage between the brand name and other identifiers and a tangible benefit. Huge brands like Pantene shampoo which promise to amend the six symptoms of unhealthy hair look, work in this level.
Forming a mental context
A "mental context" is a concept or an organizing principle which allows the consumer to conceive originally unrelated facts (such as: the various marketing activities of a company) as connected by a guiding intent or by some other common factor. For example: should you stumbled into a hotel like the "Hudson" or the "Royalton" in the heart of Manhattan, you are promised pleasure on different levels, but if you know you're in a "Boutique Hotel" your stay becomes a very different experience altogether.
Directing an experience
This is essentially a hypnotic effect, in some cases related to Placebo. The branding here is the creation of an expectation which alters the sensed experience and enables the consumer a richer experience than what the product alone can provide him with. For instance, the expectation that an energy drink like "Red Bull" will energize, makes the consumers feel a wave of energy beyond the physical effect of the drink.
Creating a means of self presentation
Here the branding creates a symbol with a meaning that is well known to everybody in a relevant group, which enables the consumer to characterize himself. The brand "ABSOLUT vodka" became a way for yuppies to signal their yuppieness to other yuppies and so became a huge success.
Creating a means to deliver a message
The branding role in this approach is to create a symbol of another kind, its meaning known for everybody as well. The diamonds giant "De Beers" made the diamond a means of expressing commitment, making the physical fact that a diamond is indestructible a metaphor for the lastingness of a relationship.
Building a social-cultural authority
The next branding approach is the creation of an authority which the consumers can use as a guide, to help them understand what's happening around them and to inform them which behavioral ways are normative, what will make them happier etc'. The brand "Apple" depicted the personal computer, not only as a working tool but also as a device for self expression and creativity.
Creating "a long hand"
In this approach, the branding is creating means for the consumer and empowering her to act for noble objectives and high purposes, which are important to her, but which she can't achieve by herself. The "Body Shop" network made buying a way for contributing to the preservation of the environment and helping people in need all around the globe.
Creating an Alter Ego
Here, the brand is a way for the consumer to behave (at least on a fantasy level) in a manner he would like to but doesn't dare, or isn't willing to pay the price for. The provocation of the fashion brand "Diesel" is made as if "in the name of" the brand customers. They can feel like they are provocative themselves every time the brand advertises one of its outrageous campaigns.
Building an "Emotional Gym"
Opting for our civilized and protected life style, we compromise (not once, happily) a lot of our possibilities as humans. We go to the gym to prevent the degeneration of our body which, in our life style, doesn't get to face the challenges it was designed for. Similarly, we watch movies and TV series' in order to "exercise" emotional skills which aren't legitimate in our life style. Brands like "Sicily" from "Dolce & Gabbana", allows us too to experience such emotional possibilities.
Facilitating fantasies
With only a fine difference from the previous approach, this branding approach helps the consumer to fantasize an alternative reality. The brand "Timberland" was designed as a way for consumers to fantasize about courageous adventures against the forces of nature.
The understanding of the different kinds of added value, the ways by which these values are instrumental to the consumer and the methods by which brands can be destined to be means for the consumer for achieving his goals, makes the difference between masterful creations of brands and amateur imitation which produces mere look-alikes.
Source: http://www.articlesbase.com/branding-articles/creating-brand-instrumentality-beyond-the-product-347306.html
The Limitations Of Blue Oceans Strategies And An Unexpected Alternative
Blue Ocean Strategy Articles : The Limitations Of Blue Oceans Strategies And An Unexpected Alternative Author: Dan Herman
The vast red and blue oceans of the marketing world tsunamied into our awareness and vocabulary a few years ago, when two INSEAD professors, W.Chan Kim and Rene Mauborgne, claimed that competition can be rendered irrelevant.
Their book, Blue Ocean Strategy, heralded the news to marketing managers and CEOs all over the world: after years and years of surviving in red bloody oceans, swarming with murderous competitors, finally there's a better alternative!
In red oceans, executives captivated in a conception-cage of competitive strategy business thinking, have been rivaling head to head with their competition over the same consumer segments doing exactly the same things, only better and cheaper in order to offer customers a better cost/value tradeoff in order to convince them to stick around with their wallets open. In the process, these executives wore out their own companies and their profits were ground to dust. Now, the Blue Ocean enunciation, based on long years of research, claimed that both serenity and profitability can be amply found in Value Innovation, which creates, via a new business model and new products, a "Virgin territory devoid of me-too brand propositions and cutthroat pricing" (BusinessWeek).
Let us consider an example of a company which supposedly followed Kim and Mauborgne's Blue Ocean strategy:
Casella Wines, an Australian winery, decided to "de-complex" wine for the sake of intimidated unpretentious adults. It decided to create new wine drinking rules, and to make a fun wine, sweet and fruity, to suit any taste. The chosen brand name was Yellow Tail; the label was highly recognizable, the selection targeted the mainstream (Chardonnay and Red Shiraz), and the price just above budget: $6.99.
The result? The brand quickly became the number one imported wine into the USA, without a promotional campaign or consumer advertising. In just two years it emerged as the fastest-growing brand in the histories of both the Australian and US wine industries. Casella Wines even grew the overall market. Genuinely Impressive.
The big "Blue Ocean" promise took over the business world, but also aroused a great wave of criticism, partially justified; with the strongest claim being that the text carries no novelty beyond Ted Levitt's old differentiation directive, remolded with the trendy belief in the importance of innovation.
Personally, I think differently. First, Kim and Mauborgne talked about differentiation and innovation on the levels of strategy and business model, while most traditional occupation with differentiation and innovation has been focused on the level of products or brands. But more importantly, the Blue Ocean thinkers honed a major observation regarding the nature of business competition.
In sports competitions, competitors are compelled to completely defined rules while striving to achieve a superior result. In the business world, competitors also strive to achieve a better result of the same type: a larger share of the consumer's wallet. However, the competition does not restrict participants to any specific actions. The contrary is true.
And yet, it is in this aspect exactly that Kim and Mauborgne are wrong and misleading, upon claiming that competition can be rendered irrelevant. Even in the case of Yellow Tail, which obviously turned many non-wine-consumers to active buyers, clearly when consumers are buying Yellow Tail they are buying other types of alcohol that they would have purchased in its absence. The prospect of raising demand infinitely simply does not exist. This is where the Blue Ocean Strategy finds its limitation. Since you always take sales away from someone (whether a direct or an indirect competitor), and being that you will always be surrounded by businesses striving to increase sales, once your Blue Ocean Strategy works, sooner or later someone will copy or even improve your already successful model.
One must credit the writers that they are not blind to this fact. In an interview with W. Chan Kim posted on Business Innovation Insider on October 2005, he said very openly: "After a while the first copycats will arise, competing on the very same value points as you. That's completely normal; however it forces the entrepreneur to find a new strategy every several years."
In other words, the most brilliant BOS will grant you with no more than a limited, relatively peaceful, period of time. Does this mellow promise of the BOS express maximal possible achievement? Naturally, you can guess that my answer is no. Introducing the Unfair Advantage. An UA is a situation in which you become unique and adored by your customers, while competitors do not imitated you.
Beyond the not so simple challenge of creating a differentiated value innovation, the critical question is: what can be done which is immune from imitations? Apparently the principle is simple as it is unexpected: when your innovation and differentiation are improving on benefits considered central to customers in your industry, fully expected from a product or service such as yours (I call it On-Core Differentiation), then sooner or later imitations will mushroom, no matter how big your innovation. Why? Exactly because the benefit is considered relevant by your consumer. On the other hand, when your innovation and differentiation offer further benefits which are not considered relevant in your category (I call it Off-Core Differentiation), there is a good chance of avoiding imitations, even after years of success.
This kind of differentiation, when it manages to excite consumers, is that which creates the Unfair Advantage. Why will you not be imitated? Because what you offer is perceived by your competitors as weird, irrelevant, or overly-unique, such which is pointless to imitate. This is the big secret. This is your competitor's trap.
There are two main types of Off Core Differentiation: Imported Benefits, and Peculiar Particularity. In many cases a combination of the two is being used.
The first type happens when you import a benefit which is important to consumers in other product categories, but are not considered relevant in yours. Umpqua Bank turned its branches into a unique combination of packaged goods stores, and community clubs, in order to provide consumers with benefits of a pleasant buying experience as well as a social neighborhood hangout, to which they go on a regular basis for various activities and social gatherings. Umpqua is today the largest independent bank in the Pacific Northwest, and it grew in 15 years from four to 120 branches, which is an imaginary growth rate in the banking industry. And the best part is that no one even tried to imitate them.
The other type is a unique style which is not typical to the category. Take Toblerone, the Swiss chocolate brand. It has been producing its triangular alp-summit look alike chocolate bars since 1908. No one has imitated them. The Body Shop chain has grown to 2,000 shops in 50 states, to become the second largest cosmetics chain in the world. It is an active crusader fighting for environment protection, underprivileged rights, human rights and animal rights, worldwide. It fine tunes its acquisition policy, employee volunteering requirements, marketing communication budgets etc, for serving these purposes. Again, no one has imitated them.
So now you know and the choice is yours: a Blue Ocean Strategy, or an Unfair Advantage.
Source: http://www.articlesbase.com/management-articles/the-limitations-of-blue-oceans-strategies-and-an-unexpected-alternative-352020.html
14 March 2008
If you can’t beat your rivals, don’t join them!
Blue Ocean Strategy Articles : If you can’t beat your rivals, don’t join them!
You likely recall an entry we posted last week entitled 'LG’s Heart and Seoul: 2 By 10' regarding LG’s Blue Ocean Strategy mantra to rank as one of the Top 3 mobile communications companies in three years, and the Number 2 player by 2010.
Continuing the popular LG dialogue, we share with our Creating Blue Oceans community a copy of a recent interview with Gabor on LG and its implementation of Blue Ocean Strategy, specifically in India.
The interview is featured in the March 2007 edition of The Analyst, the flagship publication of ICFAI University Press, which brings to life the insights and best practices of corporate world in the area of finance.
The interview begins with the question from The Analyst “What is the rationale behind LGEIL adopting the Blue Ocean Strategy in India?” To this, Gabor responds:
LG is adopting the Blue Ocean Strategy (BOS) in India as part of its global strategy. LG has set ambitious growth targets for both revenues and profits for which BOS provides the blueprint for achievement. While other strategic concepts tell companies how to survive or realize incremental growth in well-defined, over-saturated markets (which we call “red ocean” market space), BOS gives a framework for breaking away from the competition to achieve high customer value and profitability simultaneously (which we call “blue ocean” market space).
More specifically, India has market attributes that make the application of BOS especially compelling: It is a vast and rapidly evolving market, so the business potential is ample over here. Indian consumers are very sensible and closely consider product attributes before purchase; so real product distinction is important.
Furthermore, LG has a strong position in almost every one of its product categories in India which would be difficult to maintain and expand, unless a strategy of continuous innovation is adopted. And lastly, LG is looking at India not just as a market destination but also as a production and export base. Therefore, adopting the right strategy and accompanying internal culture will help LG to build a strong international center of operations in India.
Source: http://blueoceanstrategy.typepad.com/creatingblueoceans/2007/03/if_you_cant_bea.html
12 March 2008
Is Your Customer Wearing A Chain?
Blue Ocean Strategy Articles : Is Your Customer Wearing A Chain?
In most industries, competitors converge on the definition of the target customer. However, the customer is usually a chain of “customers”: the purchasers, the users and the influencers who hold different definitions of value. Businesses can identify compelling opportunities by understanding how to best relate to each member of this chain – according to one of the Six Paths of Blue Ocean Strategy.
Consider this anecdote as a humorous illustration of the ‘chain of customers’ perspective. There is a story of a Hungarian man who was once bargain shopping in Vienna and found shoes at extremely favorable prices. He swiftly purchased half a dozen pairs. Unfortunately, all the shoes began to fall apart almost as soon as he put them to use.
When he went back to complain at the shop, he was informed that the shoes were not really designed for much wear. They were in fact made for dressing the dead. And as such, the proprietor was not accustomed to complaints about the shoes’ performance or durability. Clearly, in this case the ‘target customer’ was indeed the purchaser and not the user of the product.
Source: For more Blue Ocean Strategy articles, please visit http://blueoceanstrategy.typepad.com/creatingblueoceans/2008/03/is-your-custome.html
The Four Steps of Visualizing Strategy: Step 1 - Visual Awakening
Blue Ocean Strategy Articles : The Four Steps of Visualizing Strategy: Step 1 - Visual Awakening
Given the positive response to our series highlighting each of the Paths in the Blue Ocean Strategy Six Paths Framework, we will continue each week to highlight helpful Blue Ocean Strategy fundamentals. The next natural topic is the Strategy Canvas and the mechanisms for its creation. The process, which builds on the Six Paths of creating Blue Oceans and involves visual stimulation to unlock new insight, has four major steps. Today we focus on the first step—Visual Awakening. This step, and each step to follow, will be made accessible through the Blue Ocean Strategy Basics archive. For our highlight of the first step, we turn to pages 84 - 85 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne):
Step 1 - Visual Awakening
A common mistake is to discuss changes in strategy before resolving differences of opinion about the current state of play. Another problem is that executives are often reluctant to accept the need for change; they may have a vested interest in the status quo, or they may feel that time will eventually vindicate their previous choices. Indeed, when we ask executives what prompts them to seek out blue oceans and introduce change, they usually say that it takes a highly determined leader or a serious crisis.
Fortunately, we’ve found that asking executives to draw the value curve of their company’s strategy brings home the need for change. It serves as a forceful wake-up call for companies to challenge their existing strategies. That was the experience at EFS (a European Financial Services Co.), which had been struggling for a long time with an ill-defined and poorly communicated strategy. The company was also deeply divided. The top executives of EFS’s regional subsidiaries bitterly resented what they saw as the arrogance of the corporate executives, whose philosophy, they believed, was essentially “nuts in the field, brains in the center.” That conflict made it all the more difficult for EFS to come to grips with its strategic problems. Yet before the firm could chart a new strategy, it was essential that it reach a common understanding of its current position.
Source: For more Blue Ocean Strategy articles, please visit http://blueoceanstrategy.typepad.com/creatingblueoceans/2008/03/the-four-steps.html
10 March 2008
The Perfect Calm Series: Giving the Poor a Means to Work
Blue Ocean Strategy Articles : The Perfect Calm Series: Giving the Poor a Means to Work
One of the most exciting spheres of application for Blue Ocean Strategy is the realm of Social Capitalism. This explosive market space is at the intersection of successful business and lasting social impact. Traditionally these two spheres were considered separate, but the two can be pursued simultaneously via Blue Ocean Strategy. Periodically, we feature stories which illustrate stimulating ventures, ideas and concepts targeting this very market space.
This week, we select the story which embodies many of the key principles of Blue Ocean Strategy: challenging cost assumptions, simplification, going for mass of non-customers and creating new standards of value. See these principles reflected for yourself, as you read the following article from Business Week: Giving the Poor a Means to Work.
Do you know of other companies, organizations or business visionaries sailing along the intersection of good business and social good? Share your ideas with the Creating Blue Oceans Community.
Source: http://blueoceanstrategy.typepad.com/creatingblueoceans/2008/03/the-perfect-cal.html
Defying Conventional Wisdom: Money In The Bucket
Blue Ocean Strategy Articles : Defying Conventional Wisdom: Money In The Bucket
Blue Ocean Strategy is all about challenging conventional wisdom – questioning taken-for-granted assumptions, and overstepping industry boundaries. It's a frame of mind of continuously questioning and searching for a different angle and fresh perspective. You can draw inspiration from everyday life, and train your mind by having a discerning view of the world around you. To help stimulate this sort of thinking, here are examples of comic observations that challenge conventional wisdom.
Defying Conventional Wisdom: Money In The Bucket
Perhaps street performers should be required to ante up some money, say five dollars in coins, before they start a gig. They would have to place this sum in their money collection jars or hats up front. This way, pedestrians could express both their approval and disapproval of the performance. If and when the pot was to become totally depleted, the act would have to stop. This system would quickly weed out those street performers who are clearly out there in public just for the art of irritation.
Source: http://blueoceanstrategy.typepad.com/creatingblueoceans/2008/03/defying-convent.html
06 March 2008
Blue Ocean Strategy Path 6: Look Across Time
Blue Ocean Strategy Path 6: Look Across Time
Continuing in our series which takes a closer look at each of the paths in Blue Ocean Strategy’s Six Paths Framework, our focus advances to the sixth and final path—looking across time. This path, along with each previously highlighted path, will be made accessible through the Blue Ocean Strategy Basics archive. For our highlight of the sixth path, we turn to pages 75 - 78 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne):
Blue Ocean Strategy Path 6: Look Across Time
All industries are subject to external trends that affect their businesses over time. Think of the rapid rise of the Internet or the global movement toward protecting the environment. Looking at these trends with the right perspective can show you how to create blue ocean opportunities.
Most companies adapt incrementally and somewhat passively as events unfold. Whether it’s the emergence of new technologies or major regulatory changes, managers tend to focus on projecting the trend itself. That is, they ask in which direction a technology will evolve, how it will be adopted, whether it will become scalable. They pace their own actions to keep up with the development of the trends they’re tracking.
But key insights into blue ocean strategy rarely come from projecting the trend itself. Instead they arise from business insights into how the trend will change value to customers and impact the company’s business model. By looking across time—from the value a market delivers today to the value it might deliver tomorrow—managers can actively shape their future and lay claim to a new blue ocean. Looking across time is perhaps more difficult than the previous approaches we’ve discussed, but it can be made subject to the same disciplined approach. We’re not talking about predicting the future, something that is inherently impossible. Rather, we’re talking about finding insight in trends that are observable today.
Source: http://blueoceanstrategy.typepad.com/creatingblueoceans/2008/03/blue-ocean-stra.html
HCL’s pursuit of Blue Oceans attracts key partner
Blue Ocean Strategy Articles : HCL’s pursuit of Blue Oceans attracts key partner
We recently reported on HCL, a forerunner in India’s technology sector, and the emergence of its Blue Ocean through the combination of collaborative outsourcing (client companies can pick and chose which part of their IT infrastructure operations to outsource) and remote management.
It seems that the HCL’s pursuit of Blue Oceans has drawn the attention of the world’s largest business software company, SAP, setting the stage for an equitable partnership between the two companies.
From a recent press release issued by SAP:
As part of the agreement, SAP and HCL will now partner to enhance value and accelerate growth for customers in a manner that will reduce implementation costs while providing strong domain-centric solutions to transform their business processes.
“HCL’s global partnership with SAP is a step towards delivering on the promise of a services-based IT approach,” said Vineet Nayar, CEO of HCL Technologies. “By combining SAP’s global market leadership in inter-enterprise solutions with HCL’s domain expertise and focus of creating new markets and solutions through a Blue Ocean strategy, we plan to create and deliver new innovative solutions that deliver unique customer value.”
Source: http://blueoceanstrategy.typepad.com/creatingblueoceans/2008/02/hcls-pursuit-of.html
01 March 2008
Value Innovation and Toyota’s Crown glory
Blue Ocean Strategy Articles : Value Innovation and Toyota’s Crown glory
"What consistently separated winners from losers in creating blue oceans was their approach to strategy. The companies caught in the red ocean followed a conventional approach, racing to beat the competition by building a defensible position within the existing industry order. The creators of blue oceans, surprisingly, didn’t use the competition as their benchmark. Instead, they followed a different strategic logic that we call value innovation. Value innovation is the cornerstone of blue ocean strategy" (from page 12 of the book Blue Ocean Strategy, co-authored by Professor W. Chan Kim and Professor Renée Mauborgne).
Last week Toyota revealed the newest iteration of its Crown sedan, the first car created under its Value Innovation (VI) program. Toyota is focusing its strategy, aimed at saving the car maker over US$ 2.8 billion per year, on Value Innovation—the core ingredient in any Blue Ocean Strategy.
As Yahoo! news reports:
Toyota began work three years ago on the ambitious plan, called "VI" for Value Innovation, which seeks to lump some of the tens of thousands of car components together to form modules and systems. Analysts have been keen to see the fruits of the scheme for hints to its impact on the car's price, features and eventually the competitiveness of parts suppliers.
The 13th incarnation of the high-end Crown series features many examples of cost-cutting measures under the VI plan, enabling Toyota to cap the car's price while packing more safety and other features compared with the previous generation, the company said.
"We were able to enhance the car's cost performance through the VI efforts," President Katsuaki Watanabe told a news conference.
The VI plan will be built into each new model that Toyota rolls out going forward, and Watanabe has said he expects it to help the company achieve annual savings of at least 300 billion yen (US$ 2.8 billion) from the business year starting in April.
Source: http://blueoceanstrategy.typepad.com/creatingblueoceans/2008/02/value-innovatio.html
Blue Ocean Strategy Path 5: Look Across Functional or Emotional Appeal to Buyers
Blue Ocean Strategy Articles : Blue Ocean Strategy Path 5: Look Across Functional or Emotional Appeal to Buyers
Continuing in our series which takes a closer look at each of the paths in Blue Ocean Strategy’s Six Paths Framework, our focus advances to the fifth path— looking across functional or emotional appeal to buyers. Next week we will highlight the sixth and final path and place it alongside previously highlighted paths, all of which are viewable in our Blue Ocean Strategy Basics archive. Today, for the fifth path, we turn to pages 69 - 70 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne):
Blue Ocean Strategy Path 5: Look Across Functional or Emotional Appeal to Buyers
When companies are willing to challenge the functional-emotional orientation of their industry, they often find new market space. We have observed two common patterns. Emotionally oriented industries offer many extras that add price without enhancing functionality. Stripping away those extras may create a fundamentally simpler, lower priced, lower-cost business model that customers would welcome. Conversely, functionally oriented industries can often infuse commodity products with new life by adding a dose of emotion and, in so doing, can stimulate new demand.
Two well-known examples are Swatch, which transformed the functionally driven budget watch industry into an emotionally driven fashion statement, or The Body Shop, which did the reverse, transforming the emotionally driven industry of cosmetics into a functional, no-nonsense cosmetics house.
Source: http://blueoceanstrategy.typepad.com/creatingblueoceans/2008/02/blue-ocean-st-4.html
