Blue Ocean Strategy: Long-term solutions for business trends
8 April 2013 04:56 am
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From crisis to sustenance
Last week, we briefly enumerated the five paths companies typically follow to reconstruct their market possibilities and open up Blue Ocean possibilities. Today, we begin with discussing those paths somewhat in detail.
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Look across alternative industries – and determine what products and services have different forms but achieve the same purpose. Customers commonly make trade-offs between alternative industries. The space between these industries may provide some significant opportunities for value innovation.
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Look across strategic groups within an industry – and understand which factors determine the customer’s decision as to which group they will belong to. By offering the key determining factors from each group and eliminating everything else, a Blue Ocean can open up.
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Look across chain of buyers – and combine their differing definitions of value. Purchasers, users and influencers will all have different definitions of good value. If you challenge conventional wisdom about who is the target buyer, Blue Oceans can open up.
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Look across complementary product and service offerings – and come up with a total solution. If movie theaters did this, they might create a Blue Ocean by offering a babysitting service so people could go to the movies.
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Look across functional or emotional appeal – and challenge the orientation of your industry. Inject some emotional elements into a product which has traditionally been marketed along functional lines. Or, you might go the opposite direction. Transform your industry from being emotionally driven to being functional and no-nonsense.
Every strategic plan ever written by a corporate planning department starts with a lengthy description of current industry conditions and the competitive environment.
Next up is usually an analysis of how to increase market share. In other words, the usual corporate planning process is very much Red Ocean oriented. There are even screeds of spreadsheets attached to back up every aspect of the plan. Little wonder strategic plans never lead to the creation of Blue Oceans.
Strategy canvas
To avoid this and do some outside-the-box thinking, you have to get people to focus on the big picture rather than letting the numbers confuse them. One way to do this is by drawing up your own company’s strategy canvas rather than producing a strategic plan.
A good strategy canvas:
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Will help everyone visualize accurately your current strategic position in the marketplace.
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Will allow you to chart what your future strategy can and should be.
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Helps everyone focus on the big picture rather than operational details.
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Specifies precisely what the current and future factors that affect competition within your industry.
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Shows where both you and your competitors differ in the investments you’re making for future success.
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Will stimulate dialogue between various business units about where the company should be heading.
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Will foster and enhance the transfer of strategic best practices across units within the firm.
Developing your firm’s own strategy canvas is never easy. For a start, there will be loads of disagreement over what exactly the various competitive factors are. People will have differing levels of sensitivity about how you compare with your competitors in various areas.
And many managers will be tempted to define utility and value from the perspective of internal users rather than using the customer perspective. Despite all this, if you want to find Blue Ocean opportunities, you’ll have to learn how to develop an effective strategy canvas.
Consider Nintendo Wii. Wii is a home video game console released by Nintendo on November 2006. When Satoru Iwata was selected the first non-family CEO of Nintendo, he did not like what he saw. He saw Nintendo placing a distant third behind Sony and Microsoft in the electronic games business.
After researching the market place and realizing that the typical buyer is a young, antisocial male, he wondered why everyone else didn’t play electronic games. So, he asked older males, girls, families and retirees why they didn’t play. He got an earful.
The games were too expensive, too complex, too antisocial and too high tech. So, using four questions from the Blue Ocean Strategy methodology, he challenged his team to get answers never asked before of non-gamers.
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What don’t you like about the electronic games? This question and others helped them decide what factors could be eliminated that the industry has taken for granted.
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What is OK but way overhyped? This helped them decide what factors could be reduced well below the industry’s standard.
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What features are there but you would like to see more of? This helped them decide what factors should be raised well above the industry’s standard.
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What is missing for you? What do we need to offer that would make you really enjoy playing games? What factors can be created that the industry has never before offered? This is the real key to the value.
Result
The result is that Nintendo Wii has broken all records for sales. Satoru Iwata made difficult decisions, often facing great ridicule, such as when he made the decision not to include a DVD player in the Wii console. This decision dramatically reduced the cost of Wii and his rationale was that DVD players are available everywhere. Most people didn’t need another one.
So, while Sony and Microsoft were reducing their prices below cost hoping to make profit on the games, Nintendo was selling at full price and couldn’t keep Wii on the shelves more than a few days. As of December 31, 2012, Nintendo has sold over 651.8 million hardware units and 4.08 billion software units.
Now let us see how you can develop your firm’s strategy canvas:
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Get everyone on the same page first – by developing a visual representation of where you are at present. Compare your business to your competition visually. Get everyone to see the bigger picture and not just their own vested interests. Draw up a proposed strategy canvas and debate it. Compare and contrast your strategy with that of your competitors. Invite everyone to fire up their imaginations and participate.
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Send a couple of teams of managers into the field – and get them to talk face-to-face with customers. Find out precisely how people use or don’t use your product or service. Don’t outsource this and rely on second hand reports. Get out and see what’s actually happening for you. This is the only way you’ll come up with any strategic insights. If at all possible, spend time with non-customers and learn why what you offer does not appeal to them.
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Hold a visual strategy fair – where each field team presents the suggested strategies plotted on a strategy canvas. Let each team present the proposed strategy in ten minutes or less. Put each strategy canvas on the wall. Give everyone present five sticky notes to vote for his/her favourites. Tell people they can put all five on a single strategy if they find it compelling. That way, whichever strategy is considered best will be immediately obvious. Decide on what your best future strategy can and should be.
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Communicate what you decide far and wide – by distributing your before-and-after strategic profiles. Put this on one page for easy comparison. Have the management walk employees through the changes. Make this new picture the centerpiece of everything that you do.
Next week, we’ll address the three most frequently mentioned wrong notions about the Blue Ocean Strategy and attempt to clarify what those are really all about.
(The writer, a corporate director with over 25 years’ senior managerial experience, can be contacted at lionwije@live.com)