Blue Ocean or Red Ocean? This is the question. But really what do these terms mean, who have been able to apply them? Is it something real or an illusion? Those are the typical questions that might come to our mind when we first hear this term.
And it is that if it were not for W. Chan Kim or Renée Mauborgne, we would never know that there is more than the ocean that we already know. However, it is through these gurus in Administration that this new concept arrives that will revolutionize our way of thinking and we will no longer see things as we used to, because given the circumstances, our concepts of what a business and success are, they are about to change radically as soon as we become familiar with the term Blue Ocean Strategy.
In this article, we will explain what this strategy consists of, who were the creators of it, and the tools it uses. Some companies in which this type of strategy has already obtained tangible results will also be briefly mentioned.
Currently the term innovation is the maximum that both organizations and people want to achieve, but Ocean Blue Strategy, fulfills the purpose, by proposing a new way of doing business and proposing new possibilities to make it grow. And with this new concept, it seems that the world has expanded, although the reality is that it has always been that size, the difference is that before we were not able to see it for ourselves.
GETTING TO KNOW THE AUTHORS
- Chan Kim is Professor of Strategy and International Management at INSEAD, France (the second largest business school in the world), representing The Boston Consulting Group Bruce D. Henderson. He is also Co-Director of INSEAD, the Blue Ocean Strategy Institute. Before joining INSEAD, he was a professor at the University of Michigan Business School, USA He served as Director and as an advisor to different multinational companies in Europe, the US and the Asia Pacific region. He is an advisory member of the European Union and serves as an adviser to several countries. He was born in Korea.
Kim is co-author of The Blue Ocean Strategy: How to Develop a New Market Where Competition is Irrelevant (Harvard Business Review Press). The Blue Ocean Strategy has sold over 3.6 million copies and is recognized as one of the most iconic and impactful strategy books ever written. It has been published in a record number of 44 languages and is number one in sales on five continents. Blue Ocean Strategy has received numerous awards, such as the Best Business Book Award 2005 from the Frankfurt Book Fair. It was also selected as one of the "Top Ten Business Books of 2005" by Amazon.com and as one of the 40 Most Influential Books in the History of the People's Republic of China (1949-2009) along with The Wealth of the Nations of Adam Smith and Libre to choose from Milton Friedman.Click here to see a list of the top awards the book deserved.
Kim is ranked in the top 3 on the Thinkers List50 of the World's Top Business Administration Gurus. In 2014, Kim, along with his colleague Renée Mauborgne, received the Association of Management Consulting Firms' Carl S. Sloane Award for Excellence for the impact his business management research has had on the global consulting industry.
He also received the 2011 Thinkers50 Award for Strategy. Kim was selected for the Leadership Hall of Fame in 2011 by Fast Company magazine and was named among the top five business professors in the world in 2013 by MBA Rankings.
Kim received the 2008 Nobel Prize in Colloquia for Leadership in Business and Economic Thought 2008 and is a winner of the Eldridge Haynes Award, awarded by the Academy of International Business and the Eldridge Haynes Memorial Trust of Business International for the best original work in the field of international Business. He is the winner of the 2009 DCF Prix in the Strategie d'entreprise category. L'Expansion also named Kim along with his colleague Renée Mauborgne as “the number one gurus of the future. The Sunday Times (London) called them "two of the brightest business thinkers in Europe," and noted: "Kim and Mauborgne represent a major challenge to the way managers think and practice strategy. Kim has been awarded several Case Center Awards,among them «The Global Top 10 Bestselling Case Writers (2015/2016)», «Top 40 of all time» Best-selling cases «in 2014,» Best Overall Case «in 2009 in all disciplines and» Best Case in Strategy « in 2008.
Renée Mauborgne is an Outstanding INSEAD Fellow and Professor of Strategy at INSEAD, the second largest business school in the world. She is also Co-Director of the INSEAD Blue Ocean Strategy Institute. She was born in United States.
Mauborgne served on President Barack Obama's Board of Advisors on Historically Black Colleges and Universities (HBCUs) for the President's two terms. It is also a member of the World Economic Forum.
Mauborgne is co-author of The Blue Ocean Strategy: How to Develop a New Market Where Competition is Irrelevant (Harvard Business Review Press). The Blue Ocean Strategy has sold over 3.6 million copies and is recognized as one of the most iconic and impactful strategy books ever written.
Mauborgne is ranked in the top 3 on the Thinkers List50 of the World's Top Business Administration Gurus. She is the highest ranked woman in history at Thinkers50. In 2014, Mauborgne, along with colleague W. Chan Kim, received the Association of Management Consulting Firms' Carl S. Sloane Award for Excellence for the impact her business management research has had on the global consulting industry. She also received the 2011 Thinkers50 Award for Strategy. Mauborgne was selected for the Leadership Hall of Fame in 2011 by Fast Company magazine and as one of the World's Top 50 Business School Professors in 2012 by Fortune.com. She was also nominated among the top five business professors in the world in 2013 by MBA Rankings.
OCEAN BLUE
The Blue Ocean Strategy was developed by W. Chan Kim and Renée Mauborgne. They noted that companies tended to engage in head-to-head competition looking for sustained profitable growth. Yet in today's overcrowded industries, competing head-on produces nothing more than a bloody red ocean of rivals fighting for a shrinking stock market. Lasting success comes, increasingly, not from struggling competitors, but from the creation of blue oceans of unexplored market spaces ripe for growth.
Blue Ocean Strategy is a new way of thinking about a movement away from a competitive mindset. The blue oceans denote all the industries that do not exist today: The unknown space of the market, unstained by competition. In the blue oceans, Demand is created instead of fighting for it. There is ample opportunity for profitable and rapid growth. At Blue Ocean, competition is irrelevant because the rules of the game are waiting to be set. Blue Ocean is an analogy to describe the broadest, deepest potential on the market that has yet to be explored. Like the Blue Ocean, which is vast, deep, powerful in terms of profitable and infinite growth.
Ocean Blue Strategy has 8 key points presented below:
- Based on data: The Blue Ocean Strategy, developed by W. Chan Kim and Renée Mauborgne, is based on a decade-long study of more than 150 strategic movements spanning more than 30 industries for more than 100 years. Look for differentiation and low cost: The blue ocean strategy is based on the simultaneous search for differentiation and low cost. It is an inclusive, not exclusive strategy. It creates a new and unknown space in the market: The blue ocean strategy is not intended to outperform the competition.
It seeks to make competition irrelevant by rebuilding the boundaries of the industry.
- It empowers you through tools and schematics: The Blue Ocean Strategy offers systematic tools and schematics to distance yourself from the competition and create a blue ocean of new and unfamiliar space in the market. Provide a step-by-step process: From status assessment current gaming in an industry, to exploring the six paths to a new market space and understanding how to turn non-customers into customers. The Blue Ocean Strategy provides a clear four-step process to create your future Blue Ocean Strategy.Make the most of the opportunity while minimizing the risks: The Blue Ocean Idea Directory allows you to test the commercial viability of your ideas and shows you how to refine them to maximize their benefits while minimizing risks.Build execution on strategy: The process and tools are inclusive, easy to understand and communicate, and visual, all of which make the process an effective and not intimidating way to bring execution to a company's strategy and collective wisdom. shows how to create a mutually beneficial outcome: As an integrated approach to strategy, the blue ocean strategy shows how to align the three strategy proposals - value, profit and people - to ensure your organization is tuned in to your new strategy and that creates a profit for the buyers, the company, the employees and the shareholders.all of which make the process an effective and not intimidating way to bring execution to a company's strategy and collective wisdom. It shows you how to create a mutually beneficial outcome: As an integrated approach to strategy, the blue ocean strategy shows how to align the three strategy proposals - value, profit and people - to ensure that your organization is tuned in to its new strategy and creates profit for buyers, the company, employees and shareholders.all of which make the process an effective and not intimidating way to bring execution to a company's strategy and collective wisdom. It shows you how to create a mutually beneficial outcome: As an integrated approach to strategy, the blue ocean strategy shows how to align the three strategy proposals - value, profit and people - to ensure that your organization is tuned in to its new strategy and creates profit for buyers, the company, employees and shareholders.profit and people - to ensure that your organization is tuned in to its new strategy and that it creates profit for buyers, the company, employees and shareholders.profit and people - to ensure that your organization is tuned in to its new strategy and that it creates profit for buyers, the company, employees and shareholders.
TOOLS USED IN OCEAN BLUE
- Chan Kim and Renée Mauborgne created an extensive set of analytical tools and schematics that any organization can apply to create new market spaces and make competition irrelevant.
The tools, methodologies and diagrams of the blue ocean strategy give structure to what has historically been an unstructured problem in the ability of organizations to inform strategies to create new market spaces in a systematic way. With the tools and analytics of the blue ocean strategy, companies can now search and create blue oceans of new and unknown space in the marketplace in a way that takes full advantage of opportunities and minimizes risk. The best way to beat the competition is to stop trying.
Source: (Mauborgne & Kim, 2016)
Each of the tools used in Ocean Blue Strategy are listed below.
- The Red Ocean Strategy vs. The blue Ocean Strategy.
- Chan Kim and Renée Mauborgne coined the terms red ocean and blue ocean to denote the universe of the market. Red oceans are all industries in existence today, the well-known market space where industry boundaries are defined and companies try to outperform their rivals
to take a bigger share of the existing market. The fierce competition returns bloody to the red ocean. Hence the term "red" oceans.
Blue Oceans denotes all industries that do not currently exist, that is, the unknown, unexplored and untouched market space by competition. Like the 'blue' ocean, this space is vast, deep, and powerful in terms of opportunity and profitable growth.
| Red Ocean Strategy vs. Blue Ocean Strategy | |
| Competing in existing markets | Create a new and unknown space in the market |
| Beat the competition | Make competition irrelevant |
| Exploit existing demand | Create and capture a new demand |
| Make a balance between value and cost | Break the balance between value and cost |
| Align the entire activity system with your own strategic option of differentiation or low cost | Align the entire system of activities in search of differentiation and low cost. |
Own elaboration. Source: (Mauborgne & Kim, 2016)
• Innovation in Value
- Chan Kim and Renée Mauborgne developed the concept of value innovation, the cornerstone of the Blue Ocean Strategy. It is the simultaneous search for differentiation and low cost, creating a jump in value for both buyers and the company. Since the value to buyers comes from the utility of the offer minus its price and the value to the company is generated from the price of the offer minus its cost, innovation in value is achieved only when the entire utility system matches, price and cost.
Source: (“Value Innovation - Blue Ocean Strategy Tools and Frameworks”, 2017)
• Visualization of the Strategy
At the core of formulating the blue ocean strategy is a four-step structured process created by Kim and Mauborgne that involves a visual exploration to unleash people's creativity to push a company's strategy into a blue ocean. Visualizing strategy can also to a large extent inform the dialogue between individual business units and the corporate center in transforming a company from a red ocean into an actor in the blue ocean.
When business units present their strategy charts to another unit, they deepen their understanding of the other businesses in the corporate portfolio. In addition, the process also encourages the transfer of strategic best practices across all units. The four main steps to visualize the strategy are:
| Visual awakening | Visual exploration | Visual Strategy Exhibition | Communication
Visual |
| Compare your business with that of your
competitors drawing your strategy chart “such which one". See where you need to modify your strategy chart . |
Go field to explore the six
paths to create blue oceans. See the distinctive advantages of alternative products and services. See what factors should eliminate, reduce, increase, create or change. |
Draw your future strategy chart based on the
perceptions of observations in the ground. Get feedback and comments about Alternative strategy charts from clients, customers from competitors and not customers. Use them to build the best future strategy. |
Distribute your strategic profiles from before
and the after on a page for a simple comparison. Support only those projects and movements operations that allow your company to close the gaps to make the new strategy a reality. |
Own elaboration Source: (“Four Steps of Visualizing Strategy - Blue Ocean Strategy Tools and Frameworks”, 2017)
Strategy Chart
The strategic picture is a central diagnostic tool and action plan developed by W. Chan Kim and Reneé Mauborgne to develop an attractive blue ocean strategy. Capture graphically, in a single image, the current strategic landscape and future prospects for a company.
The strategy chart has a double function:
- Capturing the current state of the game in the familiar space of the marketplace, allowing users to clearly see the factors in which the industry competes and where the competition is currently investing.Pushing users into action by redirecting their focus from competitors to alternatives and from customers to non-customers in the industry.
The horizontal axis in the strategy chart captures the variety of factors in which an industry competes and invests, while the vertical axis captures the level of supply that buyers receive in all of these key competing factors.
The value curve or strategic profile is the basic component of the strategy chart. It is a graphic representation of the relative performance of a company in all the competition factors of its industry. A strong value curve has focus, divergence as a compelling motto.
Source: ("Strategy Canvas - Blue Ocean Strategy Tools and Frameworks", 2017)
Four Actions Scheme
The Four Actions Scheme developed by W. Chan Kim and Renée Mauborgne is used to reconstruct the buyer's items of value by creating a new value curve or strategic profile. To break the pros and cons between differentiation and low cost in creating a new value curve, the scheme poses four key questions, shown in the diagram, to refute the strategic logic of an industry.
Source: (“Four Actions Framework - Blue Ocean Strategy Tools and Frameworks”, 2017)
ERIC matrix
The Eliminate-Reduce-Increase-Create Matrix (ERIC) developed by W. Chan Kim and Renée Mauborgne is a simple matrix-type tool that encourages companies to simultaneously focus on eliminating and reducing, as well as increasing and creating, the time they release a new blue ocean.
This analytical tool complements the Four Actions Scheme. It encourages companies not only to ask the questions asked in the Four Actions Scheme, but also to act on all four to create a new value curve (or strategic profile), which is essential to unleash a new blue ocean. The parent company provides companies with four immediate benefits:
- It drives them to simultaneously seek differentiation and low cost to break the balance between value and cost. It immediately highlights companies that focus only on increasing and creating, consequently, increasing the cost structure and often over-devising products and services, a A serious and common situation for many companies. It is easily understood by managers at any level, creating a high degree of commitment in their application. Since filling the matrix is a complex task, this pushes companies to fully examine each factor in the that the industry competes, helping them discover the variety of implicit assumptions they unconsciously make when competing.
Source: (“Eliminate-Reduce-Raise-Create Grid (ERRC Grid) - Blue Ocean Strategy Tools and Frameworks”, 2017)
Six Path Scheme
To win in the future, companies need to stop trying to beat the competition. The Six Way Scheme developed by W. Chan Kim and Renée Mauborgne allows managers to face the search risk many companies struggle with. It enables them to successfully identify, from the haystack of existing possibilities, commercially attractive blue oceans by rebuilding market boundaries.
Source: (“Six Paths Framework - Reconstruct Industry Boundaries - Blue Ocean Strategy Tools and Frameworks”, 2017)
Map of Pioneer- Migrator- Settler (PMC)
A useful exercise for a corporate management team looking for profitable growth is to plot the company's current and projected portfolios on the Pioneer-Migrator-Settler Map created by W. Chan Kim and Renée Mauborgne.
This exercise is especially valuable for managers who want to see beyond today's performance. Income, profitability, market share and customer satisfaction are all measures of a company's current position. Contrary to what conventional strategic thinking suggests, these measures cannot point the way to the future; changes in the environment are too fast. Today's market share is a reflection of how well a business has historically performed.
Source: ("Pioneer-Migrator-Settler Map - Portfolio Mapping - Blue Ocean Strategy Tools and Frameworks", 2017)
Settlers are defined as copycat businesses, migrators are businesses with better offerings than most on the market, and company pioneers are businesses that offer unprecedented value. They are the strategic moves of a company's blue ocean and are the most powerful sources of profitable growth. They are the only ones with a massive customer following.
If both the current portfolio and the projected offering consist primarily of settlers, the company has a low growth trajectory, is largely confined to red oceans and needs to drive value innovation. Although the company could be profitable today, since its colonists still make money, it may well have fallen into the trap of competitive comparisons, imitation, and intense price competition.
If current and projected offerings consist of large numbers of migrators, reasonable growth can be expected. However, the company is not taking advantage of its growth potential and risks being marginalized by a company that innovates value. In our experience, the more an industry is populated by settlers, the greater the opportunity to innovate value and create a blue ocean of a new market space.
Obviously, what companies should be doing is tip the balance of their future portfolio towards pioneers. That is the path to profitable growth.
Three Levels of Non-Clients
- Chan Kim and Renée Mauborgne created the three levels of non-clients. Typically, to increase their market share, companies strive to preserve and expand their existing customer base. This often results in more detailed segmentation and better adaptation of offerings for
better cover customer preferences. The more intense the competition, the greater the average specialization resulting from the offers. As companies compete to capture customer preferences through finer targeting, they often risk creating too small target markets.
To maximize the size of their blue oceans, companies need to take a different course. Instead of focusing on customers, they need to focus on non-customers. And instead of focusing on differences between customers, they need to develop powerful matches on what buyers value. This reorientation allows companies to go beyond existing demand to free up a new mass of customers that did not exist before.
Although the customer universe generally offers blue ocean opportunities, few companies have a deep understanding of who non-customers are and how to free them. To convert this huge latent demand into real demand in the form of new customers, companies need to deepen their understanding of the universe of non-customers.
Kim and Mauborgne describe the three levels of non-clients that can be transformed into clients. They differ in their relative distance from the current market.
The first level of non-customers is the closest to the current market, located right on the margin. They are buyers who minimally buy an offer from the industry out of necessity, but mentally they are not customers of the industry. They are waiting to leave the ship and leave the industry as soon as the opportunity presents itself. However, if they were offered an increase in value, not only would they stay, but their frequency of purchases would also multiply, releasing enormous latent demand.
The second level of non-customers is people who reject an industry's use of supply. These are buyers who have seen the current offer as an option to meet their needs, but have decided not to participate.
The third level of non-customers is the furthest from the market. They are non-customers who have never considered offering the market as an option.
By focusing on the key matches between all of these non-customers and existing customers, companies can understand how to attract them to their new market.
Source: ("Three Tiers of Noncustomers - Convert Noncustomers into Customers - Blue Ocean Strategy Tools and Frameworks", 2017)
Blue Ocean Strategy Sequence
Companies need to build their blue ocean strategy in the sequence of buyer utility, price, cost, and adoption. This enables them to build a viable business model and ensure that a company takes advantage of the blue ocean it is creating. W. Chan Kim and Renée Mauborgne argue that with an understanding of the correct strategic sequence and how to evaluate ideas
Of the blue ocean against the key criteria in that sequence, companies can dramatically reduce business model risk and ensure that both the company and its customers win as it creates new business ground.
Source: ("Blue Ocean Strategy Business Model - Blue Ocean Strategy Tools and Frameworks", 2017)
Here Kim and Mauborgne structure the strategic sequence of the Blue Ocean Strategy and a commercially viable blue ocean idea. The starting point is the utility for the buyer. Does your offer unleash exceptional utility? Is there a compelling reason for the bulk of the market to buy it? Lacking this, there is no blue ocean potential to start with. There are only two options here. Stop the idea or rethink it until you reach an affirmative answer.
The second step is to set the correct strategic price. The key question here is this: Does your offer have a price that appeals to the bulk of target buyers so that they have a real ability to pay for it? If not, they will not be able to buy it. And the offering won't create irresistible enthusiasm in the market, either.
These first two steps address the revenue side of a company's business model. They ensure that you create a jump in net worth for the buyer. To ensure the profit aspect, you need to evaluate the third element: cost. The cost aspect of a company's business model ensures that it creates a jump in value for itself in the form of profit, that is, the price of the offer minus the cost of production. The key question here is: Can you produce your bid at the target cost and still make a healthy profit margin? You shouldn't let costs control prices. Nor should you proportionally reduce profit because high costs block your ability to make a profit at the strategic price. When the target cost cannot be reached,You must either give up on the idea because the blue ocean will not be profitable, or you must innovate your business model to achieve your target cost.
The last step in the sequence is to address adoption impediments. What are the impediments to adoption in implementing your idea? Have you addressed them directly? The blue ocean strategy formulation will be complete only when you can address adoption impediments early on to ensure a successful realization of your idea.
Buyer Utility Map
The Buyer Utility Map, developed by W. Chan Kim and Renée Mauborgne, helps put managers to think from a demand perspective. It describes all the levers that companies can move to provide exceptional utility to buyers, as well as the diverse experiences that buyers can have.
with a product or service. Attitude helps managers identify the full range of utility spaces that a product or service can potentially fill. It has two dimensions: The Buyer Experience Cycle (CEC) and the utility levers.
The Buyer Experience Cycle (CEC): A buyer's experience can generally be broken down into a six-stage cycle, which occurs more or less sequentially from purchase to disposal. Each stage comprises a wide variety of specific experiences. Shopping, for example, could include the experience of browsing Amazon.com as well as the experience of pushing a shopping cart down the aisles of Wal-Mart.
Utility Levers: Taking shortcuts between stages of the buyer experience is what we call utility levers - the ways that companies release utility to their customers. Most of the levers are obvious. Simplicity, fun and image and respect for the environment require little explanation. Nor does the idea that a product could reduce a customer's financial, physical, or credibility risks require explanation. And a product or service offers convenience simply by being easy to obtain, use, or dispose of. The most commonly used lever is customer productivity, in which an offer helps you do something faster and better.
By locating a new offer in one of the spaces on the buyer's utility map, managers can clearly see if the new idea creates a different utility proposal and how it does it from existing offers but also removes the biggest obstacles to the usefulness that hinders the conversion of non-customers into customers. In our experience, managers too often focus on delivering more of the same stage of the buyer experience. This approach may be reasonable in emerging industries, where there is plenty of room to improve a company's profit proposition. However, in many existing industries this approach is unlikely to produce a blue ocean strategy that will shape the market.
Source: (“Buyer Utility Map - Buyer Experience Cycle - Blue Ocean Strategy Tools and Frameworks”, 2017)
The Market Thickness Price Band
The Target Market Thickness Price Band developed by W. Chan Kim and Renée Mauborgne is a tool that managers can use to determine the correct price to free up the bulk of target buyers. When determining a strategic price for a product or service, managers must evaluate the advantages and disadvantages that buyers consider when making their purchase decision, as well as the level of legal and resource protection that will prevent other companies from imitating their offer.
Source: (“Price Corridor of the Target Mass - Strategic Pricing - Blue Ocean Strategy Tools and Frameworks”, 2017)
To define the strategic price, first identify the price band of the bulk of the target market, that is, the price range that attracts the bulk of the target buyers. In determining strategic pricing, it is critical that managers understand the price sensitivities of buyers who compared the new offering to a wide variety of different-looking products and services offered outside of the traditional competitor group. For example, shoppers can choose from several movie theaters, but they can also decide to go to restaurants and bars. Managers must consider two categories of products / services that are beyond the boundaries of an industry when identifying the price band of the bulk of the market: products and services that take different forms,but they perform the same function, and products and services that have different forms and functions, but serve the same purpose.
Next, determine how high or low the in-band strategic price should be set without inviting imitation by the competition. A company must consider two sets of factors: the level of legal and resource protection that the new offering has to block imitation, and second, the degree to which the company owns some exclusive asset or fundamental capacity that can also block imitation. imitation. The higher the level of protection against imitation, the higher the strategic price may be within the price range that still appeals to the bulk of target buyers. For example, if the product or service has strong patents and difficult-to-imitate service capabilities, one can use strategic upper-limit pricing to appeal to the bulk of buyers.On the other hand, if a manager is unsure about his patent and asset protection, he should consider pricing somewhere in the middle to the lower end of the band.
Four Barriers to Strategy Execution
Once a company has developed a blue ocean strategy with a profitable business model, the next challenge is executing the strategy. The challenge of execution certainly exists for any strategy. Companies, like people, often have a difficult time translating thought into
action in either the red or blue ocean. But, compared to the red ocean strategy, this can be especially difficult for the blue ocean strategy as it represents a substantial change in the status quo.
To varying degrees, companies can face four types of barriers to strategy execution. Knowing how to overcome these organizational barriers is basic to a successful execution of the strategy. W. Chan Kim and Renée Mauborgne developed four barriers to executing the strategy:
- The Cognitive Barrier: Awakening employees to the need for strategic change. Red oceans may not be the pathways to future profitable growth, but historically they may have served the organization well, so why complicate matters? The Resource Barrier: It is presumed that the greater the change in strategy, the greater amount of resources will be required for its implementation. The Motivational Barrier: How do you motivate key actors to act quickly and tenaciously to implement a breakdown of the status quo? The Political Barrier: As one manager put it, "In our organization they reject I join the initiatives even before I have proposed them ”.
Source: ("Four Hurdles to Strategy Execution - Blue Ocean Strategy Tools and Frameworks", 2017)
Although all companies face varying degrees of these barriers, and some may face only a subgroup of the four, to effectively overcome them, companies must abandon perceived wisdom about how to effect change.
Conventional wisdom maintains that the greater the change, the greater the resources and time it will take to bring about results. Instead, the blue ocean strategy turns this conventional wisdom on its head by employing what we call turning point leadership. Key Momentum Leadership enables you to overcome all four barriers quickly and inexpensively, while earning the support of employees in executing a break with the status quo.
Key Moment Leadership
The conventional theory of organizational change rests on the transformation of the mass. So change efforts focus on moving the masses, which requires considerable resources and long periods of time, luxuries that very few executives can afford. In contrast, the key momentum leadership developed by W. Chan Kim and Renée Mauborgne requires a reversal path. To change mass focuses on transforming extremes: people, acts, and activities that exert a disproportionate influence on performance. By transforming extremes, key moment leaders are able to change the core quickly and cheaply to execute their new strategy.
Therefore, contrary to conventional wisdom, conducting a mass defense is not about implementing an equally massive response in which performance gains are achieved through proportional investments in time and resources. Rather, it involves preserving resources and shortening time by focusing on identifying and then leveraging factors of disproportionate influence on an organization.
Source: (“Tipping Point Leadership - Blue Ocean Strategy Tools and Frameworks”, 2017)
Equitable Process
Equitable process is a concept developed by W. Chan Kim and Renée Mauborgne that integrates execution into strategy by directly creating the identification of people. When a fair process is practiced at the strategy formulation stage, people are confident that there is a level playing field, inspiring voluntary cooperation during the implementation stage.
There are three mutually reinforcing elements that define an equitable process: participation, explanation, and clarity of expectations. Whether people are top-level executives or floor employees, everyone sees these elements. Kim and Mauborgne call them the three principios principles of a fair process.
| Participation (Engagement) | Explination | Clarity of Expectations
(Expectation Clarity) |
| Participation means involving people in strategic decisions
that affect them, requesting their opinion and allowing them refute the foundation of ideas and assumptions of others. Participation conveys respect for the management by people and by their point of view. He result are better strategic decisions of the management and the genuine commitment of everyone involved in its implementation. |
Explanation means that everyone involved and affected
they must understand why final strategic decisions are made. An explanation of the rationale builds trust among employees that managers have considered their opinions and taken decisions impartially in the general interest of the company even if your own ideas have been rejected. It also acts like a powerful circle of feedback that improves learning. |
Clarity of expectations requires that, once a strategy is defined, managers express the
new rules of the game clearly. Although expectations can be demanding employees know in advance the standards under which your work will be judged and the consequences of failure. When people clearly understand the expectations, the political manipulations and favoritism, and people they can focus on carrying out the strategy without distraction. |
Own Preparation Source: ("Fair Process - Blue Ocean Strategy Tools and Frameworks", 2017)
It should be noted that any subset of the three criteria is insufficient. The three criteria collectively lead to fair process judgments.
EXAMPLES OF STRATEGIC MOVEMENTS OF THE OCEAN BLUE
CANYON
Canon's strategic move, which created the desktop personal copier industry, is a classic example of blue ocean strategy. Traditional copier manufacturers were targeting purchasing managers who wanted large, durable, fast, and low-maintenance machines.
Contrary to the logic of the industry, the Japanese company Canon created a blue ocean with a new space in the market, by changing the type of customer in the copier industry, from corporate buyers to users. With its small and easy-to-use copiers and printers, Canon created a new space in the market by focusing on the key competitive factors sought by the mass of non-customers, that is, the secretaries who used copiers.
By challenging conventional definitions of who the target customer can and should be, companies can often see fundamental new ways to get value. Path Three of the Six Path Scheme of the Blue Ocean Strategy encourages companies to analyze the buyer chain of their industry. By shifting focus to a pool of buyers previously ignored, companies can gain new value and create a new and unknown space in the market.
CEMEX
Cemex, one of the world's largest cement producers, created a high-growth, high-profitability blue ocean in the cement industry that historically competed only on price and functionality. He did this by changing the orientation of his industry from functional to emotional.
In Mexico, cement sold in bags at retail to people who make their own arrangements at home represents more than 85% of the total cement market. However, as it stood, the market was unattractive. There were many more non-clients than clients. Despite the fact that most poor families have their own land and that cement was sold as a relatively inexpensive building material, the population of Mexico lived in chronic overcrowding. Few families build extensions, and those that took an average of four to seven years to build a new single room. The reason? Most of the money left over from families goes to village festivals, "quinceañeras" (girls' fifteenth birthday), baptisms and weddings.
As a result, most of Mexico's poor inhabitants had insufficient and inconsistent savings to buy construction materials, although having a cement home was the dream of many in Mexico.
Cemex's response to this dilemma came with the launch of the Patrimonio Hoy program, which changed the orientation of cement from a functional product to a dream gift. When people bought cement, they were on their way to build love rooms, where they could share laughter and happiness. What better gift could there be? The basis of the Patrimonio Hoy program was the traditional Mexican tanda system, a community savings program. In a batch, a group of people contributes a small sum each week for ten weeks. In the first week, a draw is made to determine who “wins” the amount in each of the ten weeks. All participants win 1,000 pesos one time, but when they do, they receive enough money for a large purchase.
In traditional tandas, the "winning" family used to spend the pot at a major festival or religious event, such as a baptism or marriage. In the Heritage Today program, the winner is guided to build extensions of her house with cement. It can be considered as a list of wedding gifts, except that instead of giving silver cutlery, for example, Cemex positioned cement as a gift of love.
Initially, the Patrimonio Hoy club of construction materials created by Cemex was made up of a group of just 70 people who contribute an average of 120 pesos per week for 70 weeks. However, the winner did not receive the full sum of pesos but received the equivalent in construction materials necessary to build a new room. Cemex complements the profits with the delivery of cement to the winner's home, classes on how to build rooms correctly and a technical advisor who established a relationship with the participants during his project. The result: Heritage Hoy club participants build their homes or extensions three times faster and at less cost than the norm in Mexico.
While Cemex's competitors sold cement bags, Cemex sold a dream, with a business model that included innovative financing and its construction experience. Cemex went even further and organized small parties for the town when a room was completed, thus reaffirming the happiness it brought to people and the tradition of the tanda.
Since the company launched this new emotional orientation for Cemex along with its financing and technical services, the demand for cement has skyrocketed. For more than 15 years, Cemex has contributed to solving the housing shortage in marginalized areas through its Heritage Today program. The program has won multiple awards, including the 2006 UN World Business Award for its endorsement of the UN's New Millennium Development Goals, and the 2009 UN Habitat Award for Best Practices in Housing Solutions Affordable.
Overall, Cemex created an emotional blue ocean for cement, and managed to differentiate itself cheaply. He did this by questioning the functional-emotional orientation of his industry to create a new market space, as recommended by way five of the six-way scheme of the blue ocean strategy.
CIRQUE DU SOLEIL
Cirque du Soleil conquered the world. It created a blue ocean with a new market space. Its strategic blue ocean move defied the conventions of the circus industry. Cirque productions were seen by more than 150 million viewers in more than 300 cities around the world. In less than 20 years since its inception, Cirque du Soleil achieved a level of profit that Ringling Bros. and Barnum & Bailey, the then world champions of the circus industry, had achieved after more than a hundred years.
What makes this rapid growth even more admirable is that it was not achieved in a declining industry in which traditional strategic analysis suggested limited growth potential. The power of suppliers by the main players was strong. So was the power of the buyers. Alternative forms of entertainment, from various types of live urban entertainment to sporting events and home entertainment, are increasingly projected. Children insistently asked for video games, rather than a visit to the traveling circus. Partly as a result, the industry suffered from constantly shrinking publics and in turn from increasingly weaker earnings and profits.There was also growing concern about the use of animals in circuses by animal rights advocates. Ringling Bros. and Barnum & Bailey set the standard and smaller competitor circuses basically followed suit with reduced versions. From the perspective of a competition-based strategy, the circus industry was unattractive.
Another defining aspect of Cirque du Soleil's success is that it did not win by taking clients away from the downed circus industry and traditionally targeting children. Instead, it created a new and unknown space in the market where competition was irrelevant. He addressed an entirely new group of patrons - adults and corporate patrons willing to pay a much higher price than traditional circuses for an unprecedented show. Very significantly, one of the first Cirque productions was called «Reinventing the Circus».
Cirque du Soleil was successful because it realized that, to win in the future, companies had to stop competing in red oceans. Instead, they must create blue oceans of new and unfamiliar space in the marketplace and make competition irrelevant.
ACKNOWLEDGMENTS AND THESIS THEME
I thank God for all his blessings, also for the opportunity to work in the process of improving myself. I thank the Orizaba Technological Institute, the Master of Administrative Engineering, the subject of Fundamentals of Administrative Engineering, for challenging me every day to be better as a professional.
Theme: Ocean Blue as a strategic tool to enter new markets.
Objective: To analyze the market niches that exist, classify them and generate relevant information, which, using the Ocean Blue tools, allows the organization to venture into them in a new way.
BIBLIOGRAPHY
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FUNDAMENTALS OF ADMINISTRATIVE ENGINEERING
MARIELA DENISSE REBOLLO ALTAMIRA
INSTITUTE OF TECHNOLOGY OF ORIZABA - MASTER'S DEGREE IN ADMINISTRATIVE ENGINEERING
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