Features

From crisis to sustenance : Blue Ocean Strategy – In pursuit of differentiation

31 Mar 2013 - {{hitsCtrl.values.hits}}

Continuing with our Blue Ocean Strategy basics series, today we will highlight ‘Tipping Point Leadership’ and the ‘Four Organisational Hurdles’ to strategy execution.
A good Blue Ocean Strategy will have three defining characteristics:

The Blue Ocean Strategy will diverge from that used by other industry players – because you’re looking across alternatives rather than solely attempting to be better than the established players.
The Blue Ocean Strategy will be tightly focused – and everyone will understand on what factors the company is competing. This helps avoid the temptation to invest in things which are unrelated to those key competitive factors.
The Blue Ocean Strategy will be clear-cut and easy to communicate – meaning it will be able to be described in a tagline that is compelling and inviting. For example, Southwest’s tagline could be: ‘The speed of a plane at the price of a car – whenever you need it’. A great Blue Ocean Strategy will be so obvious your competitors will wonder why they didn’t think of those themselves.

Once a company has developed a Blue Ocean Strategy with a profitable business model, it must execute it. The challenge of execution exists, of course, for any strategy.
Companies, like individuals, often have a tough time translating thought into action whether in Red or Blue Oceans. But compared with the Red Ocean Strategy, the Blue Ocean Strategy represents a significant departure from the status quo. It hinges on a shift from convergence to divergence in value curves at lower costs. That raises the execution bar.

Hurdles
Managers have understood that the challenge is steep. They face four hurdles.

Motivation: How do you motivate key players to move fast and tenaciously to carry out a break from the status quo? That will take years and managers don’t have that kind of time.
Knowledge: Waking employees up to the need for a strategic shift. Red Oceans may not be the paths to future profitable growth, but they feel comfortable to people and may have even served an organisation well until now, so why rock the boat?
Limited resources: The greater the shift in strategy, the greater it is assumed are the resources needed to execute it. But resources were being cut and not raised, in many of the organisations we studied.
Politics: As one manager put it, “In our organisation, you get shot down before you stand up.”

Although all companies face different degrees of these hurdles, and many may face only some subset of the four, knowing how to triumph over them is key to attenuating organisational risk.

This brings us to the fifth principle of the Blue Ocean Strategy: Overcome key organisational hurdles to make the Blue Ocean Strategy happen in action.
To achieve this effectively, however, companies must abandon perceived wisdom on effecting change. Conventional wisdom asserts that the greater the change, the greater the resources and time you will need to bring about results.

Tipping Point Leadership
Instead, you need to flip conventional wisdom on its head using what we call Tipping Point Leadership.
Tipping point leadership allows you to overcome these four hurdles fast and at low cost, while winning employees’ backing in executing a break from the status quo.
The Blue Ocean Strategy introduces Tipping Point Leadership which allows you how to triumph over those hurdles.
This leadership skill can attenuate the organisational risk, moving fast at low cost, providing a break for the winning employees from the status quo.
Quite a lot of managers would like to introduce a new idea to change the existing selling method, product or service in the organisation. However, the top level of managers won’t have enough knowledge and experience to accept those ideas.

Meanwhile, the managers should implement the Tipping Point Leadership to overcome those hurdles.
First of all, they should research the data from the disgruntled customers. Sum up all the complaints from them and study the existing problems.
Then write up a report to the organisation and bring out a need for a strategic shift and a break from the status quo. The report should include the strategy canvas of transit. This strategy canvas graph can indicate the disproportionate influence with the new strategic plan.

Lacking in resources can be a very big hurdle in the new idea. The resource can be manpower, capital and facilities.
Professor W. Chan Kim suggests the managers should find out the hot spots and cold spots in the organisation.
Hot spots are activities that have low resource input but high potential performance gains. Cold spots are the activities that have high resource input but low potential performance.

The management level should relocate the resource and focus on hot spots rather and eliminate the cold spots.
For instance, iPod is the device which is cold spot in developing this product. Therefore, Steve Jobs relocates the resources in developing the iPad and iPhone.
Another way to cut the cost in executing the new idea, horse trading is very common in use within the Tipping Point Leadership.
For example, free store warehouse in an organisation can be traded with other vendors for electronic components.

Motivation
Several ways are there to motivate the employees in the organisation. The Blue Ocean Strategy introduces the kingpins and fishbowl management in human resources. Kingpins are the people inside the organisation who are natural leaders, who are well respected and persuasive, or who have an ability to unlock or block access to key resources.

Successful leaders should carry out transparency, inclusion and fair process in production. They can set clear expectation in performance from everyone.
Each department should respond in particular service or production. All the members should be having their clear duty role.

Atomization can be used to make sure everyone in the company is working under the specific department to deliver his or her capabilities in each section respectively.
Executing the Blue Ocean Strategy challenges conventional wisdom. Tipping Point Leadership brings out the disproportionate influence on performance to achieve a strategic shift fast at low cost. It can bring out the political hurdle. The managers should find out the angels, devils and consigliore (advisors to a mafia boss). They can spot all the landmines in the office. Then cooperate with the one who align to your idea and fight against the detractors with irrefutable facts and reason.
The Blue Ocean Strategies are more about risk minimization and less about risk taking. When the four guiding principles for the successful formulation are utilized, these principles will reduce search risks, planning risks, scale risks and business model risks.

For every company, there are literally hundreds of potential Blue Ocean Strategy possibilities. The challenge lies in determining which are commercially viable and which are not. In practice, the key is to look at familiar data from a new perspective.

In the next issue, we will study about the paths companies typically follow to reconstruct their market possibilities and open up Blue Ocean possibilities.
In brief, such companies look across (1) alternative industries, (2) strategic groups within an industry, (3) chain of buyers, (4) complementary product and service offerings, (5) functional or emotional appeal. We will go through them in detail.

(To be continued next week)

(The writer, a corporate director with over 25 years’ senior managerial experience, can be contacted at [email protected])

Features

From crisis to sustenance : Blue Ocean Strategy – In pursuit of differentiation

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