What Colour Is Your Strategy

As we are getting to the end of the year, many are starting to look
towards strategy for the New Year.

Strategy is an ancient art that has been talked about with great
philosophers, generals and business leaders each building their own
version of how to achieve the objective.

At its base level we have to ask what is strategy then? Strategy
comes from stratagem, which is the ploy that you choose to gain an
advantage or an end. Setting strategy is the art of defining how you
structure yourself best to achieve an objective.

One of the more interesting frameworks that are used to create
strategy and value maps is the red ocean vs. blue ocean strategy
concept, which is the focus of this article.

The basic idea is that we often find ourselves competing in a red
ocean where we fight hard to beat the competition, eke out an existence
in an overcrowded market and have to fight on price to make an
existence. The idea of a blue ocean strategy is to change the very
definition of what is valuable to people and to compete on a new value
curve. By choosing to redefine a product or market you are speaking
potentially to latent needs of individuals and can change the value
perception of a product or service.

The six paths

Red Ocean Strategy	Blue Ocean Strategy
Compete in existing market space	Create uncontested market space
Beat the competition	Make the competition irrelevant
Exploit existing demand	Create and capture new demand
Make the value-cost trade-off	Break the value cost trade-off
In areas in which you are better, choose to differentiate yourself from your competitors.	Be better; offer higher value and lower cost than your competitor.
In areas in which you compete, differentiate by low cost.	Use innovation to break cost barriers.

But blue oceans soon turn into red oceans. As other sharks start
swimming in your waters there is a lot more blood and the innovation
curve needs to be sustained.

A lot of organisations put a bunch of people in a room and ask them
to come up with a plan on how they are going to make the next blue
ocean.

Four actions framework

If you delve a little bit deeper into the framework of blue ocean
strategy you will see that there is four core activities that makes a
blue ocean organisation work

• Raise standards

• Create new products

• Reduce waste

• Eliminate unnecessary steps for the end consumer

These are incremental activities that make it more difficult for
competitors to enter and create a natural barrier to entry.

Sequence of blue ocean strategy

On a blue ocean strategy it is recommended that you must totally
rethink the utility that your product have for the end customer. If what
you come up with is very different from what customers are experiencing
now then you have crossed the first hurdle. The next phase is to ask if
you can deliver what you customer wants to experience within a
reasonable timeframe. If you can do that within cost and profit
parameters that make commercial sense, you are in the early phases of
building a sea change.

Creating a tipping point

Good blue ocean strategy does not get implemented in the mass market
initially. You need to excite the people at the fringes. It is no use to
take your new blue ocean product and submit it to your traditional
client as the next big thing. The idea is to excite a core of users are
trendsetters and that can fundamentally influence how things are being
thought about in this space. As the small flame of change burns – in
time it turns into a raging storm at which point you have already
resolved most of the challenges to making it appealing to everyone and
you can continue to fight on cost and value to customers, while your
competitors are playing catch-up.

The blue ocean strategy recommends that you need to work on your
product until you can convince people that are at the edge of wanting to
change, your worst critics and people that have not used your product at
all. If you can convince these three target groups then the rest is
simple.

Pioneers, migrators or settlers

To find out which products you want to be innovative with, a useful
exercise is to look at your current initiatives and place it on a grid
to see which of it is helping you become more innovative (pioneering),
which of it is helping you shift towards being more pioneering
(migrators) and which of these products are your settler products. In
the Blue ocean language you need to have initiatives in all areas and
maybe be looking at taking those settlers and starting to migrate them
to pioneering space. It will not happen overnight but by using the four
actions you can start iterating there.

Starting to look for innovation

To look for innovation it sometimes help to map the buyer experience
as a lifecycle and also look at the levers of value that the customer
perceives for your product.

Note that this is not what the executives perceive the customer
like about the product or could potentially like about the product (note
– you may actually have to talk to customers in this process).

The question is if we can improve the buying experience as much as we
can improve the product to speak to the desires of customers and at the
same time leverage items such as cost, utility and value to create a
better experience.

It may not be an easy process but will create innovation projects
that transform your business and continues to deliver break-through
results.

Hurdles to execution

In Blue Ocean Strategy – there is typically 4 hurdles that stand in
the way of successful execution. These are identified as

• The cognitive hurdle – people do not want to rock the boat in the
  organisation and cannot understand why we need to change. They want to
  be better at existing efforts and do not want to move to new
  frontiers

• The resource hurdle – getting enough resources allocated
  innovation is always difficult and invariably they do not have the
  skills required. If they are external they do not know your industry and
  if they are internal they are not always keen to drive change.

• The motivational hurdle – there is a core of people that need to
  get excited about a new idea, although it may not be close yet.

• The political hurdle – it may happen that ideas get shot down in
  an organisation and political manoeuvring is required before an idea
  even gets promoted to the next step.

Blue ocean strategy is about re-inventing the game while still making
sure that the business is intact. It is not about being reckless or risk
averse – it is about a good process to move your business to be more
relevant for the customer. The challenge is that innovation becomes its
own enemy and that without seriously keeping innovating; the super
profits of blue oceans cannot be sustained.

To some extent there are two risks inherent in blue ocean strategy –
innovation for innovation sake and innovation that is not better for the
customer. A customer may like integration between two systems – your
improvements show that you can make one component cheaper – but you lose
integration with the other system. You think the customer wants a
cheaper product (or you need to make it cheaper to keep the competitor
out of the market) and the customer has lost the one thing that was
important to them.

How do you counter against blue ocean strategy? Traditional wisdom
dictates that there are various responses to blue ocean strategy

• Innovate past you competitor – while they are “taking the
  market”, build the next big thing and take them out when they are in the
  heat of the battle.

• Imitate – make something that is close enough to your competitors
  to confuse your customer and ride on the wave of the new
  category.

• Capture the niche – you competitor would have alienated some
  customers – you can capture that niche and offer them superior
  value.

• Win in the shark tank – while your competitor is off chasing new
  markets – and other migrate to join them – pickup the pieces in the rust
  belt and turn that into a viable industry in itself. Leverage cheaper
  resources and known products to innovate in a different direction while
  bringing more customers along.

Conclusion

While some are boiling the ocean, others are trying to climb it. You
can decide if your ocean is green, blue, red or yellow. It does not
really matter – at the end of the day you need to focus on the customer
and decide what the best end is to reach that customer and execute your
solution. Execution is where most strategy fail and execution only work
when people get out of the boardrooms and from behind computers and into
the trenches.

In an age where big-data, the cloud and analytics can easily paralyse
and organisation – it is time to go out and start looking at how to
really serve your market. If you can do that – you will always be a step
ahead of your competitors and questions of strategy can focus on
creating more colourful solutions to practical problems.