Blue Ocean Strategy - A Synopsis part 2- W.Chan Kim, Renee Mauborgne

Blue Ocean Formulation Principles

  

1.  Reconstructing market boundaries - by analyzing six paths: alternative industries, strategic groups within industries, the chain of buyers, complementary product and service offerings, functional and emotional appeal to buyers, and time (trends).

2.  Focusing on the big picture, not on the numbers - Too often, organization's fail to see the big picture because they are so overwhelmed with number crunching.  The four steps to helping leadership focus on the big picture include:

Visual Awakening - visualizing your current strategy on a strategy canvas.Visual Exploration - going into the field to explore the six paths identified above; what alternatives exist for your product or service and what are their advantages; what needs to be eliminated, reduced, raised, or created.Visual Strategy Fair - taking the results from the visual exploration and drawing new alternative strategy canvases for group feedback, discussion, and observation; be sure to get feedback from different stakeholders; from the feedback, build the best strategy.Visual Communication - Incorporating and distributing the before and after strategy canvas to your team; going forward, only approve projects and initiatives that will help make the new strategy canvas a reality.

3.Reaching beyond existing demand - Don't limit your thinking to existing customers.  Determine the commonalities of three tiers of non customers and develop strategies to generate mass appeal:

First Tier - soon to be customers who are waiting to jump ship for a better option; find out what that better option is that they are waiting for; look for commonalities.Second Tier - individuals that refuse to use the product or service because the price or other features are unacceptable; learn more about why they refuse to use your product or service; look for commonalities.Third Tier - these are truly unchartered waters that competition typically ignores; what possibilities exist?

4.   Getting the strategic sequence right - To confirm that you have a blue ocean idea, evaluate it against four criteria in the following sequential order:

Buyer Utility - Determine if there is exceptional buyer utility (productivity, simplicity, convenience, risk, fun and image, and environmental friendliness) across the six stages of a buyers experience cycle: purchase, delivery, use, supplements, maintenance, and disposal.Price - Determine the strategic price that will generate the volume necessary for critical mass; price should not be based on the traditional cost plus approach but rather on customer value, form and function, and the ease at which your idea can be copied.  The price calculation should be:  (SP) strategic price - (PM) desired profit margin = targeted costs.

Cost - Determine if you can design the product and/or service to meet the targeted cost.  This will allow you to strategically create a profit and cost structure that is difficult to mimic.  Achieving the targeted cost may mean streamlining, costs innovations, partnering or outsourcing, and price innovation (developing a new model).

Adoption - Determine the adoption hurdles buyers will go through and address them up front.

If the idea passes through all these steps, you most likely have a blue ocean idea.

  

5. Overcome key organizational hurdles - Use tipping point leadership to help people understand the need for change.  This isn't accomplished through stories or force but instead by going out into the field and facing the realities.  This includes talking to disgruntled customers and letting your team experience and appreciate the need for change. 
Organizations have limited resources so pursuing the blue ocean strategy will require strategically reallocating resources to the most important areas. 
To increase accountability and motivation, leadership should utilize the concepts of kingpins, fishbowl management, and atomization.

Kingpins - Get the key influencers on board and behind the blue ocean strategy.Fishbowl - Make strategy progress reporting an open group process where peers are reporting in front of peers.  Not many people enjoy explaining their inaction to a group of peers and colleagues.Atomization - Don't overwhelm your team by dumping a large and seemingly unattainable strategy in their laps.  Break it down it manageable chunks that are realistic and attainable.

6. Building execution into strategy - Like any strategic planning initiative, involve all stakeholders in the process early and often including front line staff - the ones who will most likely be implementing the plan.  Employees will champion the new strategy if the organization has done everything they can to ensure a fair process.  A good way to ensure a fair process is to follow the three E's - engagement, explanation, and clarity of expectation. 

ENGAGE your team as part of the planning process and hear them out.  Make sure they know you have actively listened to their ideas and input.  Be honest and sincere in your actions or you will not gain their trust and support.  EXPLAIN to them why you have chosen the strategy you have chosen and state very clearly what the new EXPECTATIONS will be.  By using this approach, employees will feel respected and will be dedicated to fulfilling the expectations you have established - even if they do not agree with your final decision.