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Almost ten years ago strategists around the world debated the terms “blue ocean” and “red ocean” as a way to describe their market position. The book Blue Ocean Shift is a sequel to the best seller Blue Ocean Strategy by W. Chan Kim and Rene Mauborgne. The authors are famed for their observation that most companies fiercely compete in overpopulated red oceans while they should be seeking the unexplored blue waters of unlimited market potential.
In Blue Ocean Shift, the authors provide a methodical framework to identify growth opportunities and create new markets.
The authors use powerful, real-life examples to reinforce their insights and make them easier to grasp. This review shares some of the insights from the book.
Groupe SEB, a small appliance manufacturer, was losing the battle for market share in the competitive market for French fry makers. It had a strong contender: Manager Christian Grob had created ActiFry, which uses only one tablespoon of oil, cleans easily, and makes crunchy fries that are healthier than traditional fries.
ActiFry made a “blue ocean shift,” by moving from “red oceans” of intense competition to “blue oceans” of opportunity. Red ocean tacticians seek market share by differentiating products by adding value or lowering cost. Blue ocean strategies create new markets, including a market for more healthful fries. Today, ActiFry is the global market leader.
The authors recommend ignoring the competition and focusing on market creation. Develop offerings that solve an existing industry problem, address overlooked problems, or create something brand-new.
To make that happen, follow the five steps of the blue ocean process:
1. “Get started.”
Confer with the “pioneer-migrator-settler” map, a blue ocean tool that diagrams the health of your portfolio. “Pioneers” are innovative offerings whose positions promise commercial success. “Settlers” are established products and services that stay relevant by making incremental improvements. “Migrators’ are strong performers that may not provide innovative value. Assemble a team to diagnose whether your offerings are pioneers, settlers, or migrators, using value and innovation as benchmarks. Plot the results on a pioneer-migrator-settler map, with the size of each circle reflecting the size of the offering’s revenues. The map reveals if the company’s portfolio is rich in pioneers, settlers, or migrators. The goal is to create a healthy balance and to have sufficient offerings in the pioneer category to ensure continued growth.
2. “Understand where you are now.”
Charity fundraising in the United Kingdom was once “redder than red.” Thousands of charities used the same strategies to compete for contributions. Comic Relief made a blue ocean shift by enabling everyone to participate in supporting charities in the United Kingdom on Red Nose Day.
The authors created the “strategy canvas” as a tool for diagraming an industry’s four primary components of the strategy. Strategy canvas for UK charities showed their similarities. An overlay of the strategy canvas for Comic Relief showed how it created a new market. It illustrates how the charity’s strategic profile split from its industry’s profile so it could work on different factors while offering greater value.
In this step, Kim and Mauborgne explain how to create an “as-is” strategy canvas as a self-assessment tool. Name the industry or product category in which you compete. Pinpoint five to 12 competitive factors. Choose an industry leader to compare yourself against. Plot its strategic profile and your strategic profile on the as-is diagram. The book’s illustration offers the best explanation of how to use this one-page tool; at its most effective, it can reveal the current state of your industry, its boundaries, and the condition of the competition.
3. “Imagine where you could be.”
Pain points are facets of a product or service that diminish their efficacy and harm customer satisfaction; they are blue ocean opportunities. Kim and Mauborgne developed the “buyer utility map” to diagram the buyer experience and identify pain points, which become hidden opportunities to open new markets. The map’s horizontal axis shows the six stages of the customer experience: “purchase, delivery, use, supplements, maintenance, and disposal.” The vertical axis lists the levers that provide greater utility for customers: “customer productivity, simplicity, convenience, risk reduction, fun and image, and environmental friendliness.”
Imagine your customers’ experience and conduct fieldwork to feel that experience firsthand in every stage of the buying cycle. Plot each activity at each stage. Go through each utility lever and ask, “What is the biggest block to customer productivity in this stage?” and “What are the key reasons for this block?” For example, the buyer utility map for French fry makers identified the difficulty of getting rid of used oil in the disposal stage.
Kim and Mauborgne teach you how valuable it is to understand your industry’s noncustomers. First-tier noncustomers patronize your industry because they don’t think they have better options. Second-tier noncustomers don’t use your industry because its offerings don’t meet their needs or are expensive. Third-tier customers are untargeted buyers an industry ignores due to its assumptions about their needs and requirements. Apply the three-tier framework to your industry to identify noncustomers who offer a potential blue ocean.
4. “Find how you get there.”
Generate a list of offerings that noncustomers use to fulfill the same need as your offering. Identify the most popular alternative and consider why people choose it over other options. Identify the “users, purchasers and influencers” in the buying process and shift your focus to untargeted customers. The authors advise you to study what takes place before, during and after customers use your offering. Determine if your product or service fulfills a functional need or an emotional need. Actively seek ways to drive trends in your industry.
The “four actions framework” challenges industry assumptions to escape the differentiation versus cost trade-off by using the “Eliminate, Reduce, Raise and Create” method. Eliminate add-ons that don’t contribute to your customer’s experience. Reduce unnecessary features. Raise standards that provide greater value to buyers. Create new offerings to entice the noncustomer group. Plot your insights on the ERRC grid again the book’s visuals are your best guide and develop six offerings with a “to-be” strategy canvas for each.
5. “Make your move.”
At this point, the authors suggest that you hold a blue ocean fair in your company. Invite department heads, corporate representatives, customers and potential customers. Present each option you’ve created, illustrate the benefits to buyers, and show the economic advantages for the firm. Invite attendees to ask questions, share concerns, and vote for their favorite option. After the voting, the executive team selects the option that the voting reveals to have the highest potential.
The big-picture business model “one more chart where you do need the book” displays the economic value of the blue ocean move. The left side of the chart shows the steps you take to achieve projected costs; the right side depicts the value to buyers. This one-page diagram communicates the economic viability of making a blue ocean shift and provides a road map for participating teams. With the to-be strategy canvas and big-picture business model in hand, roll out the initiative. Start small to test the concept and make modifications as you go.
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