Blue Ocean Strategy - The future trend of Business strategy ?

Business Strategy : Blue Ocean Strategy - The future trend of Business strategy ? by Zigfred Diaz

I was in Star Bucks Club Ultima this afternoon to talk with a friend regarding a new business that he is planning to start.

One of the things that he mentioned was this unique business strategy that's quite different from what we traditionally learn in business school. According to him, this strategy sorts of deviates from normal business concepts that we hear and read from the usual management gurus. This strategy is called "Blue Ocean Strategy"

I was intrigued by the idea so I did a little bit of research on the subject. Blue Ocean Strategy is a corporate strategy that aims to tap unclaimed markets making competition irrelevant. The strategy is embodied in the book entitled "Blue Ocean Strategy" by Professors W. Chan Kim and Renee Mauborgne and Published by Harvard Business School Press. The authors claim that the Blue Ocean Strategy is a result of several years of study of strategic moves by over 30 industries in a span of 100 years.

In the book, "Blue Ocean" refers to an untapped market, a market wherein there is only little or no competition at all enabling anyone to claim the market for his own since it is not yet too crowded. In contrast, "Red Ocean" refers to a market where competition is very high. The market is considered as very crowded already since almost everybody is producing the same type of service and the same kind of goods.

The Blue Ocean strategy is simply to innovate something; something that makes people gives a higher value for a certain product or service. Since doing this would require additional cost, the cost that is incurred by the value added is reduced by eliminating product or service features that the market does not really care about.

In order that this can be understood well a "local" application must be cited. According to my friend a classic example of how the Blue Ocean Strategy was used here in the Philippines is the strategic moves of the Gokongwei group. As we all know, the Gokongwei group owns Mobile phone company, Sun Cellular and airline Cebu Pacific among other companies.

Since the market for mobile phones has already been saturated by both Smart and Globe, what Sun Cellular did is to create a "new market" by adding value to products already found in existing markets. As a result of this "added" value, (By making sun to sun calls free) a new untapped market was opened. It could be said that Sun Cellular is not competing directly with Globe and Smart but rather they have raised awareness among the people to buy into this "new market." As a result, most people now have two cellular phones or two sim cards in a dual sim phone. In this way Sun Cellular is not "out-performing" Smart and Globe but rather they have created a new market, making competition irrelevant.

In the airline industry, Cebu Pacific has managed to apply the Blue Ocean Strategy by adding "value" to what people really want, which is to "fly." People don't care about a newspaper, a hot meal or a fancily dressed flight stewardess. What people care about is that they can "fly." In order to do this airline fares must go down since this is what people care about. This in a sense allowed Cebu Pacific to tap into the "untapped" market. The existing market is referred to as "customers who can only afford to fly." The untapped market is "every can fly." This is embodied in Cebu Pacfic's advertisement "Now every JUAN can fly" (A play on the words "every juan" = "everyone", with "J" being pronounced as "H", Juan is the "universal" first name of Filipinos just like John is for the Americans) Cebu Pacific has managed to slash down fares by reducing cost on service features that most people do not really care about such as hot meals etc.
Being involved with the International Marketing Group (IMG), I can now clearly see that they have employed the Blue Ocean Strategy in the way they do business. I do not know if they have being doing this consciously or unconsciously. Instead of selling insurance products directly, IMG teaches it's clients and brokers the concepts of financial planning and management. (albeit not in a very organized manner) Product is not given primary importance. The financial broker shows his client his need for financial planning. The financial broker who is well versed in financial planning concepts then introduces products that suits the client needs. The untapped market of financial planning needs by the people is claimed by IMG and the added cost for this value service is compensated by reducing cost with regards to training agents and marketing efforts since IMG works on a model that allows insurance and financial services company to "outsource" their marketing and training. Other insurance companies have already followed this path. The trend now is that insurance agents are now becoming financial planners.

My friend's proposed business has a similar concept but it is something more than financial planning. He wants to introduce a value added service to clients that will enable him to add value to existing service in order to capture "untapped markets" However I could not discuss the details of the plan yet, but I am sure that employing the Blue Ocean Strategy would enable him to succeed in the new business that he is thinking. Perhaps in the proper time I could help him promote his business by writing an article on it, probably when the final details of the plan have been ironed out. However you might want to check out his website at www.premierebusinessinc.com

In Traditional Business strategy we talk about "crushing the competition" whereas in Blue Ocean Strategy we talk about "Creating new markets with little or no competition." Instead of "Strategic Planning" Blue Ocean Strategist resort to "Strategic thinking." Instead of "cutting prices" to capture a market, Blue Ocean Strategy is to add "value" to products and services to claim an untapped market.

I could personally say the Blue Ocean Strategy is a unique strategy. Critiques may say that the Strategy has already existed a long time ago and that principles that are said to be unique to the strategy can be found in other traditional business strategies as well. For me, the critics may just be jealous that they were not the first ones to embody the "strategy" in compact form. The critic's contention are not valid at all since our way of discovering something or learning something is to build upon the knowledge that has been universally accepted by the majority. A new theory is always built upon something that has already been long time accepted as a scientific principle or even theory. (Just like the theory of relativity rest upon the foundations of the principles of thermodynamics, electricity, gravity etc.) Whatever the Critics have to say, the strategy certainly is here to stay and is sure to have an effect on the way future entrepreneurs, managers and leaders will think and do business in the years to come.

About the Author
Zigfred Diaz is Vice president for operations for a group of family owned corporations. He is also a Financial & Real estate broker, lawyer, law professor & writer. He regularly blogs on diverse topics including business and entrepreneurship. Visit his blog today.

Source: Business strategy, blue ocean strategy articles at www.goarticles.com

Every Blue Ocean Will Eventually Turn Red; Create An Unfair Advantage Instead

Business Stragety : Every Blue Ocean Will Eventually Turn Red; Create An Unfair Advantage Instead by 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 www.businessinnovationinsider.com 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 we find a combination of the two. 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 I'm challenging you now: do not settle for just the Blue Ocean Strategy, go out there and get yourself an Unfair Advantage.

About the Author
Dr. Dan Herman, a globally renowned strategy consultant, an author and a lecturer, is the author of "Outsmart the MBA Clones: The Alternative Guide to Competitive Strategy, Marketing, and Branding" ( http://www.outsmart-mba-clones.com ).

Source: Business strategy, blue ocean strategy information at www.goarticles.com

How Strategic Is Your Business Plan?

Business Strategy : How Strategic Is Your Business Plan? by Adele Sommers

If you currently have a business plan, how much of it taps your most creative, strategic thinking? Many plans are static, formal documents designed to impress potential financial backers, but do not necessarily serve as dynamic, living visions.
And, if you already have sufficient business funding, should you skip strategic business planning altogether?

For any situation, this article describes seven essential exercises to contemplate. You can incorporate the answers into a traditional business plan, or create a flexible slide presentation that powerfully communicates your vision to others.

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1. What Are Your "Business Success Criteria"?
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Do you have a crystal clear idea of the types of business undertakings that align with your gifts, talents, passions, and strengths? Have you thought about what your business can be the very best in the world at doing?
If the answers are "yes," you are in an excellent position to choose the ventures that can give you the greatest satisfaction and results.
If you're not yet totally clear, developing a set of "business success criteria" can enable you to select worthwhile endeavors with much deeper insight, and thus set the conditions for successfully pursuing them.
Why is this so important? Many people wander into businesses, projects, and professions opportunistically, meaning that they grab something that comes along because it's available and convenient. At times, this may be necessary for financial reasons. But unless we understand our underlying success criteria, we might not recognize the options that truly fuel and inspire us -- those that are best suited to our passions and strengths.
Some of your criteria could be practical considerations, and others more lofty. But all of your criteria will be essential to achieving balance, fulfillment, prosperity, and higher contribution in your life.

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2. Who Are Your Target Audiences?
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Do you know which audiences are best suited to, or already seeking, what you plan to offer?
Identifying your market niche involves brainstorming a set of potential target markets, and then combining and narrowing down the lists by comparing them against various criteria.
After selecting a niche that clearly portrays your perfect client or customer, you'll want to research it further to gain a more comprehensive understanding of it.
The more you learn about the needs, wants, frustrations, pain, and challenges of your audience, the more precise your marketing and product development efforts can be.

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3. Who Are Your Competitors, Comparables, and Potential Collaborators?
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Competitors consist of other companies currently offering the same or similar products or services, companies that could offer the same or similar products or services in the future, and also companies that could remove the need for your products or services.
If you have no close competitors, look for comparable businesses offering similar products or services in related industries. If they produce complementary wares, they might become valuable affiliates or collaborators.
To ensure that you can compete or collaborate successfully with the very best providers in your market, you first want to identify the key features of your own offerings.
You'll also identify the value elements (the special, intangible qualities, such as top-notch expertise, satisfaction warranties, or stellar customer service) that your business offers or will offer.
You then perform a competitive analysis to see how your value elements compare with those of other companies.

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4. What Are Your Strengths, Weaknesses, Opportunities, and Threats?
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Have you thought about how well positioned you are to take advantage of all of the positive internal and external forces in your business?
In contrast, how well can you minimize or manage the risks associated with the negative forces?
You can determine the internal factors under your control (your business strengths and weaknesses) and external factors (opportunities and threats) via a "SWOT analysis."
You then devise strategies to harness your "strengths and opportunities" while reducing or working around your "weaknesses and threats."

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5. Is Your Business Navigating in a Highly Competitive Ocean?
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Are you planning to do business in a domain already filled with competitors, where there's only a small chance of thriving? "Blue ocean strategizing" can help you rechart the waters.
Derived from Harvard Business School's "Blue Ocean Strategy," this process repositions your business if it's in a highly competitive niche.
You can rework your offerings to include new features and eliminate, increase, or decrease others. You can also target new audiences. In so doing -- much like the wildly successful CNN, Cirque du Soleil, Curves fitness for women, Southwest Airlines, and many other businesses -- you can map new directions and ultimately sail away from your competition.

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6. What Are Your Vision, Mission, Values, and Core Beliefs?
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Have you identified a purpose, visionary goals, and a set of guiding values to aim your business endeavors toward the right targets? After developing your core philosophy, you can make periodic course corrections in relation to it.
Thomas J. Watson, Jr., former IBM chairman, explained it like this: "If an organization is to meet the challenges of a changing world, it must be prepared to change everything about itself except its basic beliefs as it moves through corporate life. . . . The only sacred cow in an organization should be its basic philosophy of doing business."
Importantly, your business values, once defined, can become screening tools to first attract, and then later evaluate, personnel, partners, and clients.

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7. Have You Crafted a Unique Selling Proposition (USP)?
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Do you know how to convey the benefits of your products and services? Based on the results of all preceding activities, this process entails creating and polishing a concise description of your offerings that differentiates you from your competition and positions you as the market leader.
Known as either a unique selling position or proposition, a USP is the unforgettable business promise you share with the world. For example: FedEx's classic, "When it absolutely, positively has to be there overnight."

In conclusion, when you've completed this process, you'll have a powerful business manifesto of guiding principles to inspire any financial backers and prospective employees, partners, or clients.

About the Author
Adele Sommers, Ph.D. is the author of the award-winning "Straight Talk on Boosting Business Performance" program. She helps people "discover and recover" the profits their businesses may be losing every day through overlooked performance potential. To sign up for more free tips, visit her site at http://LearnShareProsper.com

Source: Business Strategy, Blue Ocean Strategy articles at www.goarticles.com

Web 3.0 Social Profit Streams & The Blue Ocean Strategy

Blue Ocean Business Strategy : Web 3.0 Social Profit Streams & The Blue Ocean Strategy by Frank Quintanilla

Apart from the "get rich quick" fa sad that the home based business industry has become synonymous with, exists an entire population of real entrepreneur's who make full time livings online.

In spite of the economic climate, these savvy business men/women are quietly making a small fortune amidst a national recession. A large majority of these people make more money in a single month, then some people do in a single year!
While this fact may be very hard for some people to comprehend, it does not make it any less true.

However, there is also a huge percentage of the populous who is entirely frustrated with their efforts to make money online, despite an overly optimistic perspective, and a determined will.
So why all the frustration and confusion, and how can you skip past the heart ache, for a solid return on your business?

While many people would suggest focusing on certain individual aspects of the overall process to short cut success; such as: traffic generation, optimizing conversion rates, follow ups, up-sells, list building, etc. there really isn't one specific reason people fail, but rather the inability to properly implement multiple phases of their businesses.

Becoming a successful entrepreneur requires a great deal of personal development, while learning marketing, and various other nuances of the online world. However, the true power lies in not only acquiring this knowledge, but consistently implementing it.The bottom line is that information overload has replaced a clearly defined plan of action, and people spend hours on tasks that prove to be very unproductive.

New team mates become absolutely overwhelmed by the millions of different directions they are pulled in, that it becomes a real challenge to stay productive. If these reasons aren't enough to discourage most, there is also a serious lack of training and effective duplication across most people's organization's.

The internet has allowed people access to so many business opportunities that if people aren't making money immediately, they think that the grass is greener in another business opportunity & with another guru.

This constant sign up and drop out process has really led to a decline with even the most successful leaders online, as they attempt to play the role of trainer/coach/leader in attempt to maintain duplication.

There is little doubt that as more and more people turn to the internet to supplement their income, they will be met with a barrage of information that resonates a negative message that making money online is easy to do, but proves to hard too do it.

So back to my original question, how can you defy the percentages? The answer isn't as complex as it is, to simply locate a comprehensive vehicle that encompasses what is necessary.

First off,you have to back your purposes with more then just wants, because when opposition comes full on, (and it will) it is your ideals that will keep you forging ahead. Your foundation has to see you through your the learning curve you may face.

Once you have a concrete reason for becoming successful, it is critical that you align yourself with the the tools, automation, and technology that will enable you to play CEO, and leverage your time.

If you can position yourself with a platform that has global market appeal, and casts your net as wide as you can while offering valuable information/training for free that 95% of this industry is already desperate for, then you can expect a constant influx of new prospects/customers.

Next, if you can continue to offer people a safe environment to help them learn how to implement cutting edge, wealth building principles, that will prove to be the new direction the industry is heading in, you can really optimize a network of leadership.

Overall, being able to offer a professional environment that helps people virally build their lists, and monetize specific aspects of their businesses, where a great deal of their time is already being spent (social networks), you will certainly attract high character people to yourself.
And if you can teach them to build their current businesses online, by tapping into completely new market space, you all but have an irresistible offer.

As I stated earlier, the solution to these problems has been so evasive because nobody has had the vision (up until now), to offer all these variable in one opportunity.

About the Author
Discover what lies in store for the future of the home based business industry. Whether you are presently involved in MLM, Network Marketing, Direct Sales, or Affiliate Marketing
Succeed in whatever your current business is, by harnessing the power of internet, and utilizing the principles of the "Blue Ocean Strategy" featured in the Harvard Business Review.
Visit: Social Profit Streams

Source: Business Strategy, Blue Ocean Strategy articles at www.goarticles.com

Strategic Solutions To Small Business Problems: Differentiation

Blue Ocean Business Strategy : Strategic Solutions To Small Business Problems: Differentiation by Aaron Hoos

This is part of a series of articles on strategic solutions to small business problems.
PROBLEM: Lots of entrepreneurs start their businesses because of an interest or skill in delivering a service, or because they want to monetize a hobby, or because of a desire to take control of their financial future. Unfortunately, acquiring customers (and then acquiring more customers) can be a challenge and one of the reasons that small businesses struggle with this is because of a lack of differentiation.

When a business looks too similar to its competitors, it is not differentiated enough and won't attract customers. Some entrepreneurs might feel, "if it works for my competitors it will work for me", but this is a business-killing mindset because it destroys customer loyalty. If customers feel that they can get the same service whether they shop at store A, store B, or store C, they will barely notice if store D shows up on the scene to offer similar services and then folds later.
SOLUTION: A lack of differentiation can be a challenge for businesses. Fortunately, there are tools that businesses can develop strategies to differentiate themselves. One strategic tool was introduced by W. Chan Kim and Renee Mauborgne in the book Blue Ocean Strategy.

Kim and Mauborgne talk about the red ocean that most businesses compete in and then discuss the blue ocean that differentiated (and successful) businesses compete in. Then, they present a tool to help businesses move from the over-crowded red ocean to the opportunity-rich blue ocean.

The tool is called the "Strategy Canvas". Along the bottom of the Strategy Canvas, users list measurable categories practiced by businesses in the industry. These categories might include general categories like price, customer service, quality, as well as industry-specific categories, too (like meals and lounges in the airline industry or vineyard prestige in the wine industry). Then, users chart the industry players, comparing how some deliver varying combinations of the categories. Users also compare their own business with their peers.

Charting the current industry conditions highlights how businesses are competing. If they want to move from a lower-priced provider to a higher-priced one, they might need to increase how they deliver in each category. But doing that still only leaves them competing with others.
The concept of Blue Ocean Strategy suggests that businesses can add new categories - once that are not used by competitors - to move from the highly competitive red ocean into the preferable blue ocean.

EXAMPLES: In their book Blue Ocean Strategy, Kim and Mauborgne highlight several examples of blue ocean strategy in practice, including Southwest Airlines, Yellow Tail wine, and Cirque du Soleil.

Another example might be one company who saw that SMS and blogs could be combined to create the microblogging phenomenon we know as Twitter.

APPLICATION: So, how can you put this into practice?
1. Start by listing the categories in your industry that you compete on.
2. Compare how industry competitors are delivering combinations of those categories. Are they delivering higher amounts of (and investing higher amounts in) a certain category but ignoring others?
3. Then, determine additional factors not present in the industry.
4. Create a new combination of existing categories and new categories that competitors do not possess.

About the Author
Aaron Hoos is a business writer and strategist who advises small business owners, analyzes small business strategy, and accelerates small business performance. Aaron holds an MBA in Strategic Management and is the creator of the Business Diamond Framework(TM). Visit AaronHoos.com.

Source: Business Strategy, Blue Ocean Strategy articles at www.goarticles.com