IA Forum: How does the Blue Ocean Strategy methodology foster innovation?
Phillipe Latapie: Before the first Blue Ocean Strategy book was published in 2005 (an expanded edition was released in 2015), the body of research that went into it was called “Value Innovation”. And indeed, innovation is at the heart of Blue Ocean Strategy. From my years of practice coaching teams through the application of Blue Ocean Strategy principles, I have found that Blue Ocean Strategy fosters innovation in four distinct ways:
- First, Blue Ocean helps us to think differently by challenging us to “break” the value cost trade-off. The conventional strategy logic suggests that one can compete with high end, high performance offerings and charge a premium for them, or be a low-cost, low-price value player in the market. Blue Ocean Strategy encourages us to challenge this assumption and to look for ways to simultaneously increase customer value while lowering costs for the company (value up AND cost down). Once you start thinking that way, it’s amazing how many examples and ideas people come up with. Imagine for example that you are selling bottled water: by making a thinner bottle using less plastic, you can save cost and at the same time increase customer value, marketing your bottled water as greener than the traditional offerings.
- Second, Blue Ocean takes the focus away from the competition. When companies spend a lot of time tracking their competitors’ moves, they tend to imitate each other. This leads to commoditization and head-to-head competition, which can quickly turn into price wars. It is like swimming in shark-infested waters. Eventually, someone will get hurt and the waters will turn red from this bloody competition. This is how we end up in a Red Ocean. Instead, Blue Ocean challenges us to spend less time worrying about the competition and more time understanding customers. As people start exploring the unmet needs of not only customers but also noncustomers, it’s great to see how quickly they identify innovative ideas for their business.
- Third, Blue Ocean helps us to become aware of and to systematically challenge the conventional boundaries of our business. The research identified six boundaries that typically influence and narrow the way we define our “sandbox”. Yet, if we challenge our conventional wisdom, each boundary can become a path to creative thinking that can unlock a Blue Ocean of new customers. One example is having too narrow a view of your industry and your customers. For instance, Cirque du Soleil famously re-invented the circus business by targeting adults and considering the alternative entertainment options they have, as opposed to just focusing on families and traditional circus competitors.
- Finally, Blue Ocean helps organizations make room for innovation: through the “four-action framework” (Eliminate, Reduce, Raise and Create) it guides us to first eliminate and reduce activities that are not adding enough value so we have enough time and resources left to raise or create new activities that deliver more value.
IA Forum: What are some success stories about organizations that have implemented Blue Ocean Strategy?
Phillipe Latapie: What I find amazing with Blue Ocean Strategy is how quickly it has impacted so many people.
Samsung has been an early adopter of value innovation in their product development efforts. It initially helped them to cut costs by eliminating features. Eventually, the approach also helped their development teams come up with a simplified, more appealing design.
Nintendo was inspired by the Blue Ocean Strategy approach when developing their game changing Wii video game consoles.
Several entrepreneurs have embraced Blue Ocean Strategy. Brian Halligan is a case in point. Brian works at HubSpot, a high growth inbound marketing company he co-founded in 2006. In a 2013 blog, Brian wrote: "When we first started HubSpot, Dharmesh (HubSpot’s other co-founder) and I used Blue Ocean Strategy to map out our approach. The book is great at challenging you to differentiate from not only your competitors, but your alternatives." HubSpot targets small companies and does not worry so much about SalesForce.com. It expanded the market by making sure that for small businesses, inbound marketing could be an easy, effective alternative to having inside sales people making cold calls. Today, HubSpot continues to grow very fast and is part of the select group of “unicorns” , those startups that have reached a market value in excess of $1Billion.
I have had the privilege of working with many great companies on Blue Ocean Strategy workshops and projects. It is exciting to see that Blue Ocean Strategy resonates regardless of their industry and works across functions. For instance, Blue Ocean helped an oncology company find new ways to deliver value to patients, physicians and health insurance companies. A drinks and snacks powerhouse uses Blue Ocean Strategy to innovate commercials and campaigns with a focus on expanding the market for their brands. The commercial team of a leading electronics company identifies new revenue opportunities by targeting noncustomers.
For each project, we find that teams come up with several exciting ideas. Not all projects create true Blue Oceans. But they definitely go in the right direction of driving value up and cost down.
IA Forum: What are some common pitfalls/traps that strategists should be aware of – keep an eye on – for successful implementation of Blue Ocean Strategy?
Phillipe Latapie: One pitfall I see is the tendency to be overly analytical on the front end. Some companies spend more time “painting their red ocean” rather than inventing new ways to succeed. This is because companies have detailed information about the existing market and because they love to compare themselves to the competition. You have to keep an eye on this to make sure teams move on and that analytical thinking does not get in the way of the exploration phase: this phase is qualitative in nature, allowing you to spend time with customers and noncustomers to uncover insights.
Another pitfall to avoid is letting the old way of thinking creep in. Specifically, avoiding to make choices, coming up with too complicated offerings, adding new “whistles and bells” rather than eliminating features or stopping low value activities. One way to minimize this risk is to immerse teams in a Blue Ocean Strategy business simulation before they work on innovating their own business. In the risk-free environment of the simulation, teams typically make the mistake of creating too complex offerings. They realize the cost of doing so and are then better prepared to avoid this mistake when innovating their business.
IA Forum: Blue Ocean Strategy seeks to build execution into strategy. How so?
Phillipe Latapie: The Blue Ocean Strategy approach makes it easy to involve key stakeholders in the strategy forming process. Bringing cross functional teams together helps paint a picture of the current red ocean the company finds itself in. When most everyone agrees there is a problem (i.e. we are in a Red Ocean), it creates a good impetus for change. Next, the exploration phase benefits from cross functional talent as it is creative in nature.
In summary, by involving people in charge of execution in the strategy creation process, you build early champions for the implementation phase. In addition, the Blue Ocean approach uses visual tools, such as the strategy canvas which “paints a picture” of the new value proposition.
This facilitates internal communication and alignment in the organization.
IA Forum: How does Blue Ocean Strategy provide for adjusting to changing markets and competitors seeking to enter the area of innovation your organization created?
Phillipe Latapie: Blue Ocean Strategy often gives you a nice head start over the competition: it can take a competitor a long time to copy your Blue Ocean strategy because they are caught off guard at first and are typically reluctant to break the rules they have been playing by for so long. Consider the famous success story of Cirque du Soleil. They broke a key circus industry rule by not making animals part of their show. Despite the Cirque’s enormous success, how many circus companies have followed suite and done away with animals today?
Imitators eventually do appear. But true Blue Ocean thinkers look to re-invent their business on a regular basis, and do not rest on a single winning move. One of our clients shared with me that long after an initial Blue Ocean project is done, managers keep challenging each other in meetings by saying things like: “I am not sure this is Blue Ocean enough, let’s see how we can do better”
Philippe Latapie is Partner and Managing Director of StratX Boston. At StratX, he helps major corporations drive top line growth by building strong cultures of customer focus and innovation excellence. Philippe has gained extensive consulting experience in the healthcare, B-to-B, high-technology, and consumer goods sectors, including work with GE, Pfizer, P&G, J&J, Boeing, PepsiCo, and Samsung.
He was an early adopter of Blue Ocean theory and became one of the first Blue Ocean certified practitioners. Prior to joining StratX, Philippe worked as engagement manager and senior consultant with Roland Berger and Gemini Consulting in the U.S. and in Europe. He also worked with the Commercial Department of the French Consulate, where he led initiatives designed to expand bilateral trade between Germany and France in the electronics and electrical industries.
Philippe is a regular speaker at senior management events and has coached several thousand executives and managers around the world. His assignments have landed him in more than 30 countries, five of which he has lived in. In addition to his senior role at StratX, Philippe is also Board Member at the French American Chamber of Commerce of New England. He will be a keynote speaker at the Association for Strategic Planning Annual Conference in San Francisco in March 2016.
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