Tuesday, August 7, 2007

Even an Ocean Has Its Limits

I recently reviewed Blue Ocean Strategy by W Chan Kim and Renee Mauborgne. The book’s title is drawn from a colorful analogy. A red ocean is produced when too many firms compete in the same territory. The water is red both from the intensity of competition for limited opportunity and from companies attacking each other in the process.

Blue ocean strategies aim to take a firm away from the madding crowd of competitors and to new territories of opportunity which are more profitable and – at least in the medium term – uncontested.

The main thesis of the book is that value innovation lies at the heart of developing blue ocean strategies, and presents a systematic way for companies to examine a variety of perspectives outside of the trap of inner-category thinking to create a new vision. Three key themes stand-out:
• Focus on potential from consumer vs competitive frame of reference
• It requires more (r)evolutionary efforts than incrementalism
• It needs to be operationalized effectively within a company to be successful

Despite the strengths of the book, two limitations persist:

1. Adoption of blue ocean thinking must be undertaken with longer-term business and brand vision in mind. At least for this writer, the absence of making this point forcefully could encourage readers to pursue blue ocean strategies on the basis of the size of the opportunity at the expense of alignment with corporate mission.

2. The cost and pain to the organization for implementing blue ocean strategies varies greatly with the scale of the idea. While the author does devote a section of the book to the importance of internal adjustment and commitment within a firm to make the outcome a success, there is no clear sense of the degrees of organizational re-orientation required in implementing blue ocean strategies of different scale.

Here’s my sense of what form this takes……

Hopefully this can help companies have a better sense of where different kinds of strategic undertakings fall with regards to the degree of organizational re-orientation required, and better guide conversations about resources and timing required to make blue ocean strategies successful.

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