Blue Ocean Strategy. Book in 15 minutes
After the publication of our first post, we were congratulated on going to the “scarlet ocean” of competitors (business sharks?) Tearing each other apart.
But we decided not to despair, not to waste time and to remember the ideas from the book “Strategy of the Blue Ocean”, useful for any
So…
"The only way to beat competition is to stop trying to win."
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Comparison of military confrontation and market competition is firmly rooted in the mass consciousness and seems quite logical. Competitor companies are enemies fighting each other on the battlefield. They are trying to regain their part of the territory - market shares, producing substitute products or offering similar services with minor modifications or at a lower price. The market, crowded with competitors, tearing each other apart, is like a blood-drenched scarlet ocean.
Many books and manuals have been written that describe business strategies and competition in the scarlet ocean.
The “Blue Ocean Strategy” book offers a different approach - to go beyond the well-known parts of the market and the paradigm of tough competition of the scarlet ocean and concentrate on untouched areas, the so-called blue oceans, where there are no competitors, but there is a huge potential for the development of the company.
In blue oceans, competition does not threaten anyone, since the rules of the game have yet to be established.
In order to demonstrate the idea of the blue ocean, the authors cite as an example the circus industry, which, due to the more modern hobbies of children, has rapidly lost its popularity.
However, Cirque du Soleil has achieved incredible success in a seemingly doomed industry. What is the secret of her success? The company did not go the beaten track and did not use such classic circus elements as round arenas, animals and clown performances. Cirque du Soleil absorbed the best elements of the circus and theater - acrobatics of the highest level and vivid conceptual ideas, and got rid of everything that did not fit into the framework of its new concept.
Moreover, the company changed the target audience of the circus, switching from children to solvent adults. In fact, Cirque du Soleil reinvented the circus, opening up a niche that nobody occupied. As a result of this original approach, Cirque du Soleil took less than 20 years to exceed the revenue that was achieved only in more than 100 years of its performances by such famous circuses as Ringling Bros. and Barnum & Bailey Circus.
There are a considerable number of other examples of the creation of blue oceans. For example, the natural cosmetics company The Body Shop or Southwest Airlines, which made budget flights fun and profitable.
It is important to understand that the concept of blue oceans does not negate the role of the usual competitive environment. But when in some industry supply begins to exceed demand, actions aimed at fighting competitors are no longer enough for full-fledged business growth. For further development, companies need to focus on creating blue oceans.
How to create a blue ocean
To create a blue ocean is not required to open a new industry, as most companies create blue oceans inside the scarlet, pushing the already existing industry boundaries in the way Cirque du Soleil or The Body Shop managed.
The blue ocean strategy is based on value innovation. Innovation of value is not a competitive advantage, but what makes competition simply unnecessary due to the company's entry to a fundamentally new level.
In contrast to the classic competitive approach, to use the value innovation strategy, it is not necessary to choose between low cost and high value. This strategy allows you to simultaneously create high value at low cost.
Strategic canvas
The main tool for building an innovation strategy of value is a strategic outline. Strategic canvas is a simplified industry model, clearly represented in the form of a graph. It allows you to assess the similarities and differences of their strategies with the strategies of competitors.
The construction of a strategic canvas is as follows:
First , you should highlight the key industry factors that are common to your offer and to the offer of competitors (and place them on a graph along the horizontal axis). For example, for food products it may be the cost, taste, assortment, packaging, prestige of a company, etc.
Secondly , it is necessary to estimate the costs or the volume of the offer (for example, a wide range or narrow, high price or low) for each characteristic selected in the first paragraph. The vertical axis and will show an assessment of these factors.
For example, the higher the price of the goods, the higher will be the location of this factor relative to the vertical axis.
Third , you need to connect the resulting points on the chart for each company. The resulting curves are, according to the terminology of the authors, “value curves”. They are a visual representation of the strategies of an organization or group of companies.
Images of value curves for competing companies from the scarlet ocean will have a similar shape (and may even overlap each other), unlike the value curves of those companies that have made value innovations.
Thus, the strategic outline is not only a reflection of the current state of affairs in a particular industry, which provides a visual representation of the actions of competitors.
It is also a convenient tool for developing a new alternative strategy for the company.
If you are aiming to create a blue ocean, then your strategic outline should not be similar to the strategic outline of competitors. How to do this?
Neither price cuts nor consumer surveys will be the way out. “Research has shown that consumers usually want to get more of what they already have. And regarding what else does not exist on the market, they cannot advise anything. ”
To create a blue ocean, deeper changes are required - reorientation from competition to the search for alternatives and reorientation from attempts to satisfy typical industry clients - to make clients those who had no relation to it before.
A case in point is the Australian company Casella Wines, which, having decided to enter the American wine market and, having studied the industry factors, did not repeat the model of the strategic canvas of competitors - sell expensive and seasoned wine to connoisseurs, and significantly changing the position of the strategic canvas factors, created a new industry - wine for people who do not understand it. The company began to produce wine for everyone - a wine that is convenient to drink at parties along with beer and cocktails.
As a result, in two years, [yellow tail] wine for parties has become the fastest growing brand in the history of the Australian and American wine industry, as well as the main, imported wine in the US, overtaking French and Italian wines.
Four Action Model
The four-action model is a logical continuation of the strategic canvas.
After analyzing your current market position and competitors, you should ask yourself four questions:
1. What factors of competition, defined and accepted in the industry, can be eliminated?
For example, the abolition of waiters in restaurants fast food.
2. What factors of competition should be significantly reduced compared with industry standards?
For example, the richness of taste of wine, the range and duration of aging, as in the example of Casella Wines.
3. What factors should be significantly improved compared to industry standards?
For example, when creating an online music store iTunes, Apple has significantly increased key factors such as high sound quality; wide range of tunes; the possibility of buying thematic collections of songs.
4. What factors from never before offered by the industry should be created?
For example, NetJets has created a unique offer for corporate customers - shared ownership of aircraft, which allows customers to save time that would be lost in queues on regular commercial flights and money, since the NetJets offer was much cheaper than maintaining its own aircraft.
The first two questions help to identify possible ways to reduce costs that competitors do not pay attention to. The last two questions are aimed at finding an increase in the value of your offer for the buyer and at creating a new demand.
Blue Ocean Principles
To create blue oceans, six principles are required.
Principle 1: revising the boundaries of the existing market
It can be implemented in several ways:
1. Pay attention to alternative industries.
Examples of alternative industries are restaurants and cinemas. These are different branches, but from the point of view of having a good time for the client, they are alternatives.
The key to finding a suitable alternative is to see and understand the factors that force buyers to choose between alternative industries.
2. The second way is to consider the so-called strategic groups - companies and industries that have similar strategies.
For example, in the automotive industry there is a strategic group of luxury cars and a strategic group of cheap ones. The competition goes within these groups: luxury and cheap cars compete only between companies of their categories.
The key to creating a blue ocean in such conditions is to find out what customers are guided by when choosing between one group or another.
A good example of successful implementation of this path is the network of inexpensive fitness clubs for women Curves. The company has created a popular format of fitness clubs, finding out that women want to look good and be in shape, and for this they prefer to visit fitness clubs rather than engage in video tutorials due to many factors that distract them at home. But at the same time in standard fitness clubs they are confused by the opportunity to look not in the most attractive way in the eyes of men attending fitness clubs. Curves offered a way out - low-cost fitness clubs exclusively for women with simple exercise equipment. Thus, the company adopted the key factors of the two strategic groups of the fitness market - expensive fitness clubs and video tutorials for independent sports.
3. The third way is to pay attention to the chain of buyers. In certain industries, companies are focused on certain segments of customers - someone focuses on large sales, and others on individual sales. Often, the buyer and the user are different individuals, which makes it possible to target the group of buyers with which competitors do not work. Thus, the Danish manufacturer of insulin, Novo Nordisk, thanks to its product NovoPen (insulin syringe pen), was able to work directly with diabetics bypassing the usual pattern of product sales through doctors.
4. The fourth way is to consider the possibilities for introducing additional products or services. For example, the large bookstores Borders and Barnes & Noble made visiting their store a more pleasant process by equipping their rooms with sofas and armchairs and opening café bars.
5. The fifth way is to analyze the functional and emotional attractiveness of the product to customers. The possibility of creating a blue ocean here appears due to the violation of the usual ways of competition, which appeal either to price and functions (functional attractiveness), or to the feelings and emotions of the buyer (emotional attractiveness).
It is possible to create a blue ocean if we add the emotional component to a model oriented to functionality or vice versa, and thereby push the boundaries of the market and stimulate new demand.
The two most famous examples are: Swatch, a company that influenced a functionally oriented industry of low-cost watch production turned into an emotionally oriented trendsetter, and The Body Shop, which came in exactly the opposite way, turned from an emotionally oriented cosmetics company into a functional, business-like style. house cosmetics.
6. The sixth and most difficult way is to try to look into the future. Its essence is not simply to predict future changes and adjust to them, but to analyze how the existing trend will change the market in the future and how it can affect the company's business model and the value of its offer to customers.
A good example of the implementation of this path is the company CNN, which was the first to switch to the round-the-clock broadcasting format, correctly assessing the global trends in the information market.
Principle 2: focusing on a holistic picture, not on numbers
This is not easy to do, since the strategy for building the strategy of most companies is firmly connected with the scarlet oceans of existing markets.
“Imagine a typical strategic plan. It begins with a long description of the existing conditions in the industry and the company's position in relation to its competitors.
Then there is a discussion on how to increase your market share, win new segments or reduce costs, then follow the outline of countless goals and initiatives. ”
In order not to get bogged down in statistical data, instead of the generally accepted approach to building a strategy, use a concentration on the general vision of the picture of your development. The most convenient and visual way for this is to build on the chart a strategic outline by the method described above. This will help to clearly demonstrate the strategic profile of the industry, the strategies of competitors and their own strategy at a given point in time and in the future.
In order for the chosen strategy to have potential for growth, it must correspond to three parameters:
1) the strategy should be focused on a specific factor of the industry, and not be sprayed on everything;
2) the strategy should be different from the strategies of competitors and, accordingly, the company's value curve should not overlap the competitors' value curves;
3) strategy can be expressed in the form of a clear and attractive motto.
Principle 3: go beyond existing demand
Most companies focus on meeting the needs of the traditionally established type of customer. However, as the authors emphasize, such a strategy ultimately leads to a deeper segmentation of the market, which is why business growth naturally slows down.
Therefore, for a company aimed at creating a blue ocean, it would be prudent to pay attention to non-customers in the industry. And instead of striving to satisfy all possible requests of existing customers, we need to find something in common that could be appreciated by those who are not at the present time among the customers of the industry. So, Cirque du Soleil switched from children - usual circus customers to solvent adults, and Cassella Wines began selling wine to those who did not drink it before.
Principle 4: The Right Strategic Sequence
The essence of this principle is to test the commercial viability of the idea of a blue ocean and determine whether your proposal is not just an innovation, but an innovation of value for the buyer.
In order to structure this process, the authors suggest asking themselves four questions in order:
1. Does your offer have exceptional utility for the buyer?
2. Is the price you set for the majority of customers?
3. Do costs allow you to make a profit?
4. What obstacles hinder the implementation of your proposal? Can I think of them in advance?
A successful blue ocean strategy implies positive answers to all four questions.
Principle 5: Overcoming organizational contradictions
The implementation of any strategy involves considerable difficulties, and the implementation of the strategy of the blue ocean is even more difficult, since it implies a change in the usual approach to transformation. Naturally, in such cases, companies, among other things, have to deal with internal resistance to innovations.
The authors name four main contradictions that impede the implementation of the blue ocean strategy:
1. Internal resistance of employees who need to be convinced of the correctness of the strategy change.
In order to overcome this contradiction, the authors recommend using the “purposeful leadership”, which allows for a more rapid and less costly way to carry out fundamental changes. The essence of purposeful leadership consists in the ability to encourage other people to adopt a new strategy, not through schedules, plans, numbers and abstract categories and appeals, but through their acquisition of their own experience. For example, New York Police Chief Bill Bratton, during the period of necessary reforms, forced the entire leadership to move only by subway.
The police leadership had to face every day aggression, begging and hooliganism, which ultimately accelerated the adoption of a new work strategy.
2. Limited resources. This refers to the widespread view that major changes require major expenditures.
In order to change the company's strategy, having only limited resources, you need to concentrate on the existing resources and direct them to the so-called hot spots - those areas of activity that bring the greatest return at the lowest cost (the opposite is cold spots). For example, New York Police Chief Bratton dispatched the largest number of police officers to the most dangerous subway stations, while earlier the police were evenly distributed among the stations.
3. Motivation - it is necessary to motivate key employees for actions that contribute to the implementation of the strategy.
To overcome the problem of motivation, the authors recommend focusing on three tasks:
- First, to find among the employees of companies born born leaders who are respected and respected.
- Secondly, according to the authors, these people need to be “placed in an aquarium”, that is, to create such working conditions for them that cause them to be visible and take responsibility for their actions.
- Thirdly, in order to make the tasks more feasible, complex tasks must be broken down into small ones.
4. Political intrigue - there is opposition from those whose interests are affected by transformations. "The main principle in the fight against intrigue - not to fight with them alone."
In order to overcome this serious obstacle, you need to advance:
- resort to the help of those who benefit from a change of strategy;
- neutralize and isolate those who lose the most from it;
- enlist the support of experienced staff, versed in political intrigues.
Principle 6: Embedding the implementation process in the strategy
Without the support of company employees, any strategy, no matter how good it may be, is doomed to failure. Therefore, it is necessary to overcome the possible mistrust of the company's employees. Standard methods of positive and negative motivation in this case will not work. The alternative proposed by the authors is “fair process”. Its essence is to attract employees at the stage of creating a new strategy at the expense of the principle of the three "E":
- Engagement - means that employees are involved in strategic decisions;
- Explanation - means that all interested employees of the company must understand the reasons for implementing the new strategy;
- clarity of expectations (Expectation) - means that employees should clearly understand their goals, responsibilities and responsibility for their implementation arising from the implementation of the new strategy.
Blue ocean life cycle
Of course, competitors and imitators are not asleep, and you need to be ready for their appearance, and for the fact that the blue ocean will sooner or later become scarlet.
In order not to lose sight of this process, the authors recommend regular monitoring of the value curves. If your curve starts to merge with the curves of competitors, then this is a sign that your performance is declining, and it is time to look for ways to create new market spaces.
You should always remember that the search for a blue ocean is not a one-time process, but a dynamic one.
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Source: https://habr.com/ru/post/296868/
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