Most of the companies in the current economic scenario are obsessed with either deciphering the strategies of their competitors or constantly evaluating disruption by technology. It's refreshing to read W. Chan Kim and Renee Mauborgne challenging the two most common phenomena and leading the way towards creating completely new markets by looking at the customers in a different framework. The book is the result of decades of rich experience and research succinctly covering various case studies of Companies, NGOs and Government in how they reshaped the boundaries in creating blue oceans.
The companies and organizations which compete on value and cost frontier are defined as Red Ocean companies. It's a dog eat dog market, where the only way to survive is by either cutting costs or increasing the value. This either results in compression of margin or increases the cost of product for the customer. In contrast there are Companies and organizations who, rather than out beating their competition on value and cost frontier redefine and reshape the market boundaries. This can be achieved by not only focussing on existing problems but also identifying and solving brand new problems and value innovation. Simply put, these companies do not look at disruption but focus on non disruptive creation by finding new markets and new customers for their growth aspirations.
There are three case studies included to showcase how the companies without disrupting or competing on the set parameters redefined the value of product or service by adding two or three more completely new aspects in the process of their delivery value chain. Comic Relief, U.K. Charity rechristened the engagement by introducing an element of fun and game in order to capture more market share not only in the more crowded and competitive market but also adding a new set of customers.
In case of Groupe SEB, the French electrical appliances Company, which saw an opportunity in adding an aspect of health and launched ActiFry, a product which would not use oil for frying. By introducing Consciousness of health, the Company just did not capture more market share in an already overcrowded competitive market but also emerged as a choice to a much broader set of customers.
CRM platform required massive investment in technology in terms of software and servers for the massive data. It remained an investment only for large size Fortune 500 companies benefiting them in competing with cutting edge customer service. Salesforce.com by introducing the CRM on cloud opened a hoard of new class of customers from large to medium enterprises in serving their customers without investing in owning up massive infrastructure.
The process of shift to Blue Ocean requires a symbiotic mix of strategy and team. Atomization is the first process, by which the industry problem can be well deciphered. For this, the team must collect the insights from the market being closer to the customers. Once this exercise is completed the existing Strategy canvas can be drawn clearly indicating on what key aspects the product or service competes on a grid of low to high compared to the competitors. It is important to restrict the delivery process chain to a maximum of 5 or 6 aspects. It's essential to draw 2-3 competitors on the same strategy canvas to understand the difference in value chain.
Once the canvas is clearly laid out the next step is to do a PMS (Pioneer-Migrator- Settler) map, which essentially helps to understand the 'as is' position of the product or service in terms of whether the product or service is on the grid of Value settler, Value improvement or Value innovation as compared to the competitors. This helps understanding the shift that needs to be made in reaching to the right most side on the horizontal axis and top most side of the vertical axis in pushing the frontier towards Value innovation.
The Buyer Utility Map (BUM), is a 6x6 utility table where on one side the six aspects of the engagement cycle of customers is drawn and on the other side the total buyer experience cycle is drawn. For example in the case of Actifry, the six utility levers were Environmental Friendliness, Fun and Image, Risk Reduction, Convenience, Simplicity and Customer productivity. On the other hand the six stages of the Buyer experience cycle were, Purchase, Delivery, Use, Supplements, Maintenance and Disposal. The idea is to mark the pain points for the customers and the utility space that the industry currently focuses on. This gives a clear picture that while the competition may be obsessed with utility levers and customer experiences, that may not be at all, as important, for the customers.
Once the existing Strategy canvas, PMS grid and BUM is completed, the focus must shift on the six paths framework, which includes Looking at gross alternative industries, gross strategic groups, looking across buyer group, complementary product and service offering, rethinking the functional emotional orientation of the industry and lastly participating in shaping external trends over time. Once the six paths framework is done and the choices clearly emerge, it's important to focus on what would be the most relevant and important aspect of the product delivery cycle by simply focusing on aspects that may be completely irrelevant from customers point of view and enhancing those areas which improve the overall customer experience and delight. This can be attained by implementing a grid of ERRC (Eliminate, Reduce, Raise and Create) framework for the product or offering. This framework is to question the assumptions of factors that require attention in terms of degree of importance to the customer.
With insight of the exercise, a new strategic canvas can be drawn by adding three or four new value frontiers to the strategy canvas. This however, is only 1/4th the battle won. One of the key challenges then is to move the teams in implementing these strategies. These strategies achieved over a period of months are not a result of doctrine provided by consultants but by thorough collaborative and exploratory efforts of internal teams. One of the most important aspects is to add excitement and gamification right from choosing the right strategy for implementation and then owning up the decision.
Irrespective of the size of the Companies, the key challenge is to manage the implementation right within the people. People come with various biases and experiences. Most companies run risk of faltering to harness that mix of energies of naysayers to get goers. The game therefore is to assemble the right mix of personalities and let them excel in a conducive framework in achieving the blue ocean shift.
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