INSEAD and Blue Ocean Strategy
There are far between the business books that really change the world – or at least our way of thinking about business. But Blue Ocean Strategy did when it came out in 2005.
Since then, many companies have set course for the promised blue ocean, devoid of competition and flowing with renewed strength and growth. Some have made the trip, several have capsized along the way, and even more have drifted off course. Because something was missing. A chart, a road.
Blue Ocean Shift
Now the INSEAD professors behind the Blue Ocean concept have published the book Blue Ocean Shift. A detailed process description, or a chart if you will, showing the way to the blue ocean. In this and the next three articles here on the blog, we take a closer look at how you and your company can succeed with Blue Ocean. We also explain why the processes behind it fit like a glove for the new generations of employees who are on their way to your company.
Blue Ocean Strategy – the book that became a movement
When INSEAD professors Chan Kim and Renée Mauborgne published the book Blue Ocean Strategy in 2005, they could hardly have imagined what they were setting in motion. The book and the concept became the starting point for a movement within the business world. A movement where companies are looking away from the blood-red oceans, or markets where they are constantly fighting bloody battles on price, costs and other parameters, and towards the blue ocean. A market devoid of competition, simply because there are no competitors yet. A new market, a new product or a new service that generates a new demand or fundamentally challenges the conventions of the industry the company is part of.
Blue Ocean Strategy is about creating new markets
This is what the Blue Ocean Strategy is essentially about. To create new markets instead of competing on the existing ones. To generate a completely new demand instead of competing with other companies to sell the same products and services to the same customers at a lower and lower price.
Heading towards the Blue Ocean
And it sounds both enticing, true and… not quite simple. Because how on earth do you do that? One is to think the thoughts and get the ideas. It can indeed be difficult enough. But how do you put them into practice? Many companies have tried to set course for the blue ocean. Some have found their way, but many have taken in water or capsized along the way. Because it has been learning by doing. The companies lacked tools and methods to achieve the goal.
From Strategy to Shift
Chan and Mauborgne’s first book, Blue Ocean Strategy, adequately explains why it is a good idea to embark on the journey, but does not go into depth about how. The first book also presented a toolbox, but did not thoroughly explain how to use the tools. Blue Ocean Shift does.
The two INSEAD professors have spent the past ten years studying and interviewing companies that have been successful in implementing a Blue Ocean Strategy and have created their own competition-free market. And those who have failed along the way. That research has now turned into the book Blue Ocean Shift. In it, the two professors describe a five-step process, which also includes the psychological insight needed to release employees’ creative potential and, just as importantly, gives them confidence and ownership of the process. And thus gets them on the journey.
Three critical factors for success with Blue Ocean Strategy
Kim and Mauborgne’s research shows that there are three decisive factors that must be present for a Blue Ocean Shift to be possible at all.
Factor 1: The Blue Ocean Perspective
Your organization must have a Blue Ocean perspective. It must learn to think beyond the conventions and best practices of the company, the branch and the industry. Seeing possibilities instead of limitations. You must be able to think beyond the competition in your existing markets and into the customers’ needs, demands and expectations. What do they need? What problems can your company solve for them? And again: It sounds both enticing and true… but difficult.
Motivate your key employees
It requires partly that you manage to implement that way of thinking yourself, and partly that you can initially inspire and motivate your key employees to do the same. In the book Blue Ocean Shift, Kim and Mauborgne describe a three-step process that shows the way. From breaking the challenge down into small concrete actions over a discovery phase that teaches you to view the challenges in a completely new way to recognition and release of the intellectual and emotional competencies of the organization and the individual employees.
Factor 2: Tools and guides to create new markets
But perspective and understanding are not enough in themselves. You and your organization must have concrete tools to create new markets and, not least, guidance on how you use the tools to transform perspective and strategy into concrete action. The tools are mainly about being able to ask the right questions both at the beginning and during the process and about being able to use the answers constructively.
Blue Ocean Shift contains concrete, visual tools that help you clarify the challenges and challenge the framework you are used to thinking within. You learn step by step how you open your eyes to new markets and new opportunities for growth – and how you create and utilize them.
Factor 3: Humanness in the process
The third factor that, according to Kim and Mauborgne, must be present is Humanness. The term covers what makes the entire organization participate in and take ownership of the Blue Ocean journey and thus promote an effective execution of the strategy.
It is about not seeing strategy and execution as two different disciplines and processes, but instead building execution into the strategy process.
Blue Ocean Shift also gives you the concrete tools and guidance on how to build humanness into your Blue Ocean process – the most decisive factor for success. It inspires and motivates the organization and releases its full creative potential and energy.
The three factors and the underlying research form the basis of the five-step process that forms the backbone of Blue Ocean Shift. Here you get a short introduction to the 5 steps and to the tools you need to use.
5 steps – get started
Step 1: Get (really) started
It may sound banal, but nevertheless, you have to be sharp on which challenge you want to solve. Kim and Mauborgne have developed the pioneer-migrator-settler map, which helps you identify the business area where you can achieve the greatest benefit with a Blue Ocean Shift. They also show you how to set and motivate the right team to solve the task.
Step 2: Understand where you are now
With the Strategy Canvas tool, you create a shared understanding of where the company is right now and what strategy you are working towards. Next, you create a common understanding of your position in the industry’s overall strategic landscape and gain an insight into how little your strategy (probably) differs from that of your competitors. This, of course, from the customers’ perspective.
Step 3: Imagine where you could be (what if…?)
When you have the broad overview of the state of affairs, it is time to take a closer look at how the world could look if now… Here you learn to challenge the frameworks and conventions that both your company and the rest of the industry are used to think and work within. Within that framework lie a number of pain points that are common to both your company and your competitors. The buyer utility map tool reveals these pain points and helps you see them as opportunities to break the mold rather than accept them as limitations that generate competition. It will take you further to understand who your potential customers (noncustomers) are and what has so far made them opt out of not only yours, but also your competitors’ products and services.
Step 4: Figure out how to achieve the goal
Now is the time to set course for your Blue Ocean. Time to break the boundaries and create new markets. The six paths framework is a systematic process that helps you redefine the framework and create your new market(s). Here you learn concretely to see blue possibilities, where others see blood-red limitations. In order to be able to translate it into a new strategy, you must use another tool, which is described in detail in the book, namely the four actions framework. It teaches your team to focus on how the business can eliminate competition, reduce costs, increase profits and create new markets. It all results in six potential strategic moves that you must choose from.
Step 5: Test and implement
Here you will learn how to choose the right strategic move, quickly test it in the market and refine it to exploit its full potential. The blue ocean fair is a concrete tool that must eliminate politics and hierarchy in the decision-making process and manifest the broad ownership of both the process and the strategy. Fair can best be translated as “market”. In the book you learn how to hold the “strategy market” and get the invaluable feedback that qualifies the execution of your newly created Blue Ocean Strategy.
