In this article: Our author reviews how Blue Ocean Strategy and its follow-up, Blue Ocean Shift, address a key challenge facing virtually every organization today: how to move yourself, your team and your organization from competing to creating breakthrough value.
WHY DO SOME COMPANIES SUCCEED IN CREATING NEW MARKET SPACES WHILE OTHERS FAIL?
In 2005 INSEAD professors W. Chan Kim and Renée Mauborgne, published Blue Ocean Strategy, one of the most impactful strategy books ever written. Selling over 3.6 million copies and published in 44 languages, the book has become a byword for any organization that is looking to create new market spaces ripe for growth. The study includes research of over 150 successful new market creations, across more than 30 industries, including less successful competitors. What they found is that most companies focus on how to beat the competition in existing markets. They described this as a red ocean, often over-crowded and with shrinking profit margins and limited growth opportunities. They have now taken the principles of the original work and today publish their follow-up, Blue Ocean Shift. The book provides a step-by-step guide to identifying untapped growth opportunities, whether you are a startup, small business, or Fortune 500 company.
Blue Ocean Shift addresses a key challenge facing virtually every organization today. How to move yourself, your team and your organization from competing to creating or, from cutthroat markets to wide open new markets in a way your people own and drive the process. Think about it. What industry today doesn’t face intense competition? Take retail. It’s getting decimated. The competition is fierce. It’s tough. It’s rough. It’s what we refer to as a bloody red ocean. However, the successful companies are not in those red oceans. They are moving into and creating new markets, what we think of as blue oceans. The question is, how can all of us do that too? This book lays out the path anyone can follow to get there, using proven steps. How to make a successful shift? The authors said that “You need two things to shift. Without them you are going to struggle. First, you need a roadmap. Because we all want to shift from compete to create, but we don’t know how. So you need a roadmap with tools and guidance that anyone can apply. Second, you need people. And by that, we mean you need people’s confidence to act. If people don’t have the confidence to act, your roadmap means nothing. And that’s what the book does. It gives you that roadmap and it shows you how to build people’s confidence at every step so that they own and drive the process for success.”
Blue Ocean Shift shows real-world examples of organizations facing the same constraints we all face – be they politics, bureaucracy, limited resources – and applied the very tools and process outlined in the book to shift from competing to creating. You will learn, for example, how a musical conductor applied the blue ocean shift process to create the “bravest orchestra in the world.” He redefined what a youth orchestra means, from music excellence to ambassadors for peace, even inspiring Shiite, Sunni and Kurdish musicians to play together, all the while dealing with resource constraints, historical ethnic divides, and poorly trained musicians.
There is the example of a hotel chain that applied the proven steps outlined in the book to break out of the highly competitive hotel industry – which is ‘redder than red’– to create the new market of affordable luxury hotels offering five-star comfort at three-star prices. Today it has 90 percent occupancy rates, guest ratings called it ‘superb’ and ‘fabulous’ on booking sites, and described it as the lowest costs in the most chic locations. It is rolling out to major cities across the world.
The book also explains how a global, small-appliance company with more than 100 years of history turned an industry, whose value was declining by 10 percent a year, into a high-growth one. The company did that by redefining its offering to such an extent that it allows all of us today to make mouthwatering French fries with no frying and almost no oil. The upshot of its shift: Not only did demand grow by 40 percent, its stock price lifted by 5 percent. Oprah fell in love with the new offering and started tweeting that the product had “changed her life.” From prisons to toilet paper, healthcare to convenience stores, national governments to small nonprofits, new companies to established ones, Blue Ocean Shift shows you how they applied the process outlined in the book to shift from competing to creating in a way that brought their people along.
New markets or disruption? Disruption matters. But as we discuss in the book, that’s only half the picture of how new markets are created. The other half, and we would argue the more important half, is what we call non disruptive creation. What we mean by that is creating new markets where there once wasn’t any market at all. Take the example of life coaching. Today it is a $2 billion industry. Life coach is the second fastest growing profession in the United States after IT professional. But twenty years ago it didn’t exist. That market didn’t exist until someone had the idea to create a brand-new opportunity for people to improve the quality of their lives in a way they couldn’t get from anywhere else. Life coaching didn’t disrupt anyone. No one lost a job because of it. No company went out of business. Microfinance, Viagra, online dating, Sesame Street – those are just a few of the many market-creating moves created by non-disruptive creation. As we lay out in the book, the opportunities for non-disruptive creation are huge. No executive or entrepreneur can afford not to understand that this is important as they are missing half of how new markets are created. That would be like shutting yourself from half of your opportunities to seize new growth, which no one should do. From a macroeconomic perspective, understanding non-disruptive creation is equally vital since it generates new growth and jobs without destroying existing jobs or companies, which is key.
Big companies are increasingly buying their innovations, like the Dr. Pepper Snapple Group, which recently purchased Bai Brands. It’s great that a top Company like Dr. Pepper Snapple recognizes that it needs to go beyond competing to seize new growth and stay relevant. But instead of empowering its own 19,000 employees to do what it takes to move the Company forward, which is to create, it empowers them to do what increasingly doesn’t move the needle, which is to compete. That’s why the company had to shell out close to $2 billion to purchase Bai Brands and stay relevant. This mismatch between what employees are empowered to do and where profit and growth increasingly come from is something that we believe many large companies need to address. While the world has changed, employees in many companies remain aligned with the path to success in the past, which is competing. What firms would need to do now is to shift and get their people attuned to the new market reality where creating new markets is the ticket to seize new growth. Just think of the message you are sending your employees about their value in the company and if every opportunity to grow comes from people outside the company. How will they feel that they are a vital part of their company’s future? Blue Ocean Shift lays out the path to turn this around and shift.
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