Blue Ocean Strategy is the marketing theory of a book published in 2004 written by W. Chan Kim and Renà © Å Mauborgne, professor at INSEAD. Based on a study of 150 strategic moves covering over a hundred years and thirty industries, Kim and Mauborgne argue that companies can succeed by creating "blue oceans" from an indisputable market space, as opposed to "red oceans" where competitors struggle to dominance, the analogy is that the ocean filled with violent competition turns red with blood.
They emphasize that this strategic move creates a leap in value for the company, its buyers, and its employees while unlocking new requests and making the competition irrelevant. This book presents an analytical framework and tools to foster an organization's ability to systematically create and capture blue oceans. The expanded edition of Blue Ocean Strategy was published in February 2015.
Video Blue Ocean Strategy
The layout and draft of the book
The book is divided into three parts: as another scenario different from the one mentioned below will be a completely separate story and vice versa.
1. The first section presents key concepts of blue ocean strategy, including Value Innovation - simultaneous pursuit of differentiation and low cost - and key analytical tools and frameworks such as strategy canvas and four action frameworks. The four action framework helps in eliminating trade-offs between differentiation and low cost within a company. The four action framework consists of the following;
- Upgrade: This is the question of which factors should be asked in the industry in terms of product, price, or service standards.
- Eliminate: This question which areas of the company or industry can be completely eliminated to reduce costs and to create an entirely new market.
- Reduce: This question is which area of ​​a company's product or service is not entirely necessary but plays an important role in your industry, for example, the cost of making certain materials for a product can be reduced. Therefore, it can be reduced without completely eliminating it.
- Create: It encourages companies to innovate with their products. By creating an entirely new product or service, companies can create their own markets through differentiation from competition.
2. The second section explains the four principles of blue ocean strategy formulation. These four principles discuss how an organization can create blue oceans by looking at six conventional boundaries of competition (Six Paths Framework), reducing their planning risk by following the four steps of visualization strategy, creating new demand by opening three noncustomer levels and launching the idea of ​​a commercial blue ocean by aligning unprecedented utilities with strategic price quotes and costing targets as well as overcoming adoption hurdles. This book uses many examples in various industries to demonstrate how to get rid of traditional strategic (structuralist) strategic thinking and to foster demand and profit for companies and industries by using strategic blue ocean (reconstruction) thinking. The four principles are:
- how to create unparalleled market space by reconstructing market boundaries,
- focuses on the big picture,
- reach out beyond existing demand and supply in new market space
- get the right strategic sequence.
3. The third and final sections describe two key implementation principles of blue ocean strategy including tipping point leadership and fair processes. These implementation principles are essential for leaders to address the four major organizational hurdles that can prevent even the best strategies for execution. The four major obstacles consist of cognitive, resource, motivational and political barriers that prevent people involved in strategy execution from understanding the need to get out of the status quo, finding resources to implement new strategic shifts, keeping your people committed to implementing new strategies, and from addressing the strong vested interests that can hinder change.
Proposition
In this book, the authors draw the attention of their readers to the correlation of cross-industry success stories and the formulation of strategies that provide a solid basis for creating unconventional success - a strategy called "blue ocean strategy." Unlike the "red ocean strategy", the conventional approach to business competition derived from military organizations, "blue ocean strategy" tries to align innovation with utility, price and cost positions. This book makes fun of the phenomenon of conventional choice between product/service differentiation and lower cost, but rather shows that both lower differentiation and lower costs can be achieved simultaneously.
The authors ask the reader "What is the best analytical unit of profitable growth? Corporate? Industry?" - a fundamental question without which a strategy for profitable growth is useless. The authors justify with the original and practical ideas that both companies and industries are the best analytical units of profitable growth; but rather a strategic move that creates "blue oceans" and sustained high performance. This book examines the company's experience in areas such as watches, wine, cement, computers, cars, textiles, coffee makers, airlines, retailers and even circus to answer this fundamental question and build an argument about "value innovation" blue ocean. Value innovation is the alignment of innovation with utility, price and cost position. This creates an indisputable market space and makes the competition irrelevant. The new chapters in this expanded edition of this book address the issue of how to develop and harmonize the three strategic propositions of value, profit and people, how to defend and update blue ocean strategy at both the business and enterprise levels, and how to avoid the red- making the organization anchored in the existing market space even as they try to create a new market space. The following sections discuss the concept behind the book in detail.
Maps Blue Ocean Strategy
Drafts
The red and blue ocean metaphors describe the market universe.
The red oceans represent all the industries that exist today - known market space. In the red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known. Here companies try to outperform their rivals to get a bigger share of product or service requests. When the market space is overcrowded, the prospect of profit and growth is reduced. Products become commodities or niches, and violent competition turns the oceans into blood; therefore, the term "red sea".
The blue ocean, by contrast, shows all industries that do not exist today - unknown market space, not contaminated by competition. In blue oceans, requests are made instead of contested. There are many opportunities for profitable and rapid growth. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. Blue ocean is an analogy to illustrate the wider and deeper market potentials that have not yet been explored.
The cornerstone of the blue ocean strategy is "value innovation", a concept originally laid out in Kim & amp; Mauborgne's 1997 article "The Value of Innovation - Strategic Logic of High Growth". Value innovation is a simultaneous search for differentiation and low cost, creating value for buyers, companies, and employees, thereby opening up new and undeniable market spaces. The purpose of value innovation, as articulated in the article, is not to compete, but to make the competition irrelevant by changing the field of strategy games. Strategic measures must enhance and create value for the market while simultaneously reducing or eliminating features or services that are less valued by today's market or the future. The Four Action Framework is used to help create value innovation and break the value-cost trade-off. Value innovation challenges Michael Porter's idea that a successful business is a low-cost provider or a niche-player. In contrast, blue ocean strategy proposes finding value that crosses conventional market segmentation and offers lower cost and value. Educator Charles W. L. Hill proposed a similar idea in 1988 and claimed that Porter's model was flawed because differentiation could be a means for companies to achieve low cost. He proposed that a combination of differentiation and low cost might be necessary for the company to achieve a sustainable competitive advantage.
Many others propose a similar strategy. For example, Swedish educators Jonas RidderstrÃÆ'  le and Kjell NordstrÃÆ'¶m in their 1999 book Funky Business follow a similar logic of reasoning. For example, "competing factors" in blue ocean strategy are similar to the definition of "unlimited and unlimited dimensions" in Funky Business . Just as blue ocean strategy claims that red ocean strategy does not guarantee success, Funky Business explains that "Competitive Strategy is a route everywhere". Funky Business thinks that companies need to create "sensational strategies". Just like the blue ocean strategy, the sensational strategy is about "playing different games" according to RidderstrÃÆ' ¥ le and NordstrÃÆ'¶m. RidderstrÃÆ'  ¥ le and NordstrÃÆ'¶m also claim that the company's goal is to create a temporary monopoly. Kim and Mauborgne explain that the company's goal is to create a blue ocean, which will eventually turn red. This is the same idea expressed in terms of analogy. RidderstrÃÆ'  ¥ le and NordstrÃÆ'¶m also claimed in 1999 that "in the slow growth of the 1990s, overcapacity is the norm in most businesses". Kim and Mauborgne claim that blue ocean strategy makes sense in a world where supply exceeds demand.
Blue sea vs. red oceans
Kim and Mauborgne argue that while traditional competition-based strategies (red ocean strategy) are needed, they are not enough to sustain high performance. Companies must go beyond competition. To gain new benefits and growth opportunities, they also need to create blue oceans. The authors argue that competition-based strategies assume that industrial structural conditions are given and that firms are forced to compete in them, assumptions based on what academics call structuralist views, or environmental determinism. To defend themselves in the marketplace, red ocean strategy practitioners focus on building a profit over the competition, usually by assessing what competitors are doing and trying to do it better. Here, grabbing a larger market share is seen as a zero-sum game in which one company's profits are achieved at the loss of another company. Therefore, the competition, the supply side of the equation, becomes the decisive variable of strategy. Here, cost and value are seen as trade-offs and companies choose different cost or differentiation positions. Since the industry's total profit rate is also determined by structural factors, companies are essentially trying to capture and distribute wealth instead of creating wealth. They focus on dividing the red oceans, where growth is increasingly limited.
The blue ocean strategy, on the other hand, is based on the view that market boundaries and industrial structures are not granted and can be reconstructed by the actions and beliefs of industry actors. This is what the author calls the reconstructionist view. Assuming that structures and market boundaries exist only in the minds of managers, practitioners who hold this view do not let existing market structures limit their thinking. For them, extra demand is out there, largely untapped. The whole point is how to make it. This, in turn, requires a shift of attention from supply to demand, from focusing on competing to focus on value innovation - that is, the creation of innovative values ​​to open new demands. This is achieved through simultaneous search of differentiation and low cost. Because the market structure changes by breaking the tradeoff value/cost, so is the rules of the game. Competition in old games is therefore considered irrelevant. By expanding the economic demand side, new wealth is created. Therefore, such a strategy allows companies to play non-zero-sum games, with a high likelihood of results.
Example
Examples that are documented in the book
Some examples of companies that may have created new market space in the opinion of Kim and Mauborgne include;
- Cirque du Soleil: Blends opera and ballet in a circus format while removing star and animal stars;
- Netjets: ownership of fractional jets;
- Southwest Airlines: offers the flexibility of a bus trip with air travel speeds using a secondary airport;
- Curves: defining market boundaries between health clubs and home exercise programs for women;
- Home Depot: offers price and range of wood pages, while offering consumer classes to help them with DIY projects;
- Dyson: Cyclonic Vacuum Cleaner.
Recent app instances
Business reports that use the concept of blue ocean strategy include: China Mobile: China Mobile CEO Wang Jianzhou talks about China's interior as a classic "blue ocean market", where it conducts extensive net casting without worrying about being tied to a rival net.
Reception
Since the Blue Ocean Strategy published in 2005 it has been translated into 43 languages ​​and has sold over 3.5 million copies. The book was named bestsellers by the Wall Street Journal, BusinessWeek, and Amazon.com. It was chosen as one of the "Best Books of 2005" by Fast Company magazine, won the "Best Business Book of 2005" Prize at the Frankfurt Book Fair, and achieved the best-selling book of the decade by the 800-CEO-READ (2000). -2010). Strategy Business magazine chose it as the # 1 manual in 2005.
In 2009, the Blue Ocean Strategy was selected by the China Daily and China Research Institute as one of 40 most influential books in the history of the People's Republic of China (1949-2009) along with Adam Smith? The Wealth of Nations? under the category "Economics and Finance." In 2010, the Polish ThinkTank group voted for the Blue Ocean Strategy as one of the top 20 books that have shaped the Polish Leadership. Blue Ocean Strategy won the Thinkers50 2011 Strategy Award for Best Business Books this decade and in the same year, introduced to the Fast Company Leadership Hall of Fame. In 2013, the book received a GoodBooks Award in the Management category by the Research Institute for Educational Development of Vietnam (IRED), selected as one of the 15 Best Business Books of the past decade in Russia by Kommersant.ru magazine, and was selected as one of three books the best management in Japan by Diamond Harvard Business Review.
The Wall Street Journal recommends Blue Ocean Strategy for top managers. Forbes calls it one of the top ten business trends for 2013 and argues that "blue ocean strategy is more influential than ever." BusinessWeek says that " Blue Ocean Strategy will make you wonder why the company needs a lot of persuasion to stay out of the shark-infested waters." The Business Strategy Review says the book "challenges everything you know about strategy", and Business Times asks companies to "adopt blue ocean strategy to stay ahead." Marketplace Magazine recommends Blue Ocean Strategy as the book "you need to read." In addition, the book has received numerous positive reviews from numerous publications including the Chicago Tribune, the Daily Herald, the Credit Union Journal, the Vancouver Sun, the Association Meeting, the Strategy & Leadership and Business First, among many others.
Criticism
While Kim and Mauborgne propose an approach to discover an indisputable market space, there are currently some success stories of companies that have actively applied their theory. One of the success stories available is Nintendo, who first implemented a blue ocean strategy to create a Nintendo DS handheld game system that was the first portable gaming system to offer dual screen and touch screen games in 2004. In 2006, Nintendo released the Wii, which using unique motion controls. The 3DS is Nintendo's third attempt for its blue ocean strategy. His first two attempts, the Nintendo DS and the Wii, were very successful, becoming some of the biggest sales platforms in history. Nintendo revealed their Blue Ocean Strategy during an E3 press conference during the build up of the Wii hype.
However, with only one case study, this hole in their data persists despite the publication of the concept of value innovation dating back to 1997. Therefore, the important question is whether this book and related ideas are descriptive rather than prescriptive. The authors present many examples of successful innovations, and then explain from their Blue Ocean perspective - basically interpreting success through their lenses.
The research process followed by the author has been criticized for several reasons. Critics include the claim that no control group is used, that there is no way of knowing how many companies are using blue ocean strategy to fail and the theory can not be justified, that the deductive process is not followed, and that the examples in the book are selected for " tell the story of victory ".
In addition, blue ocean strategy can not be identified as the real cause for success. The authors cite the strategies used by the NYPD Bratton Commissioner as a key example of Blue Ocean being applied in the public sector. They define this success as a significant reduction in crime in New York City after Bratton came to power in 1994. Many social scientists would disagree that it was Bratton's policy that led to crime reduction: instead, the city was merely part of a national trend in reducing crime.
Brand and communication are taken for granted and do not represent the key to success. Kim and Maubourgne took the marketing of value innovation as something given, assuming the marketing success would come as a matter of course.
It is said that instead of theory, blue ocean strategy is a very successful attempt to brand a series of existing concepts and frameworks with very "rigid" ideas. The blue ocean/red ocean analogies are a powerful and memorable metaphor, which is responsible for its popularity. This metaphor can be powerful enough to stimulate people to act. However, the concept behind Blue Ocean Strategy (such as competing factors, consumer cycles, non-customers, etc.) is not new. Many of these tools are also used by Six Sigma practitioners and proposed by other management theorists.
Many key book concepts previously discussed in Compete For The Future by Gary Hamel and C.K. Prahalad, published in 1996. The authors encourage managers to define a new marketing space, which they call the white space, to "create and dominate emerging opportunities".
See also
- Coopetition
- Disruptive innovation
- Economic Strategy
- Strategic Thinking
References
External links
- Blue Ocean Strategy's book website
Source of the article : Wikipedia
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