Blue Ocean Strategy

This book, by the authors of Creating New Market Space (Harvard Business Review, January-February 1999, pp. 83-93) starts like many others written by management consultants. From their work, the authors formulate a hypothesis reflecting a novel perspective on business practices, industry trends, and strategic moves. They then test that hypothesis against what companies have actually done historically, to determine whether it is a good predictor of success. The results are worded in ways that make past strategies look deliberate when they are actually emergent. I’ve read enough of these books to conclude that the best strategy is a meta-strategy consisting of four rules that are easy to state and hard to follow:

  1. Ensure your employees are tightly connected with your customers
  2. Encourage employees to propose ideas for additional value, cost savings and business growth
  3. Rapidly move ideas through a consistent, transparent, objective, widely-understood evaluation process
  4. Execute wholeheartedly on the few initiatives that make it through the process

Getting back to Blue Ocean Strategy, Part One states the hypothesis that companies prosper by finding “blue oceans”–market definitions that render existing competition irrelevant. Companies that fail to find blue oceans get stuck in cutthroat one-upmanship against competitors–in oceans that are rendered blood red.

Part Two prescribes deliberate actions for managers to use in finding blue oceans. A key tool is the strategy canvas. This is a diagram in which the bases of competition are enumerated, and the company and its competitors are ranked or rated on those bases of competition. The company discovers a blue ocean by defining brand new bases of competition. It shifts its focus by deliberately abandoning or lowering its ranking on certain existing bases.

The gem in this book is the first chapter of Part Three, which describes ways to overcome the following organizational hurdles through tipping point leadership:

  • The cognitive hurdle, in which managers don't see problems or don't think they are severe enough to warrant change. This can be overcome by making managers experience first-hand the problems with the status quo.
  • The resource hurdle, in which managers have insufficient resources to devote to the new strategic initiative. This can be overcome by moving resources away from cold spots (activities with diminishing returns on invested resources) and toward hot spots (activities with multiplicative returns on invested resources).
  • The motivational hurdle, in which commitment to new strategic initiatives must be spread throughout the organization. This can be overcome when performance management focuses on kingpins who have strong influence or access to resources.
  • The political hurdle, in which vested interests resist change. This can be overcome by amplifying the voices of the "angels," silencing the "devils," and identifying a consigliere.

Tags: Business, Politics, Reading

Created at: 23 March 2006 12:03 AM