Pursuing market creating strategy with a mindset shift
Today business market is facing increasingly intense competition and margin pressure. In this market leaders often accept and act on two fundamental assumptions.
One is that market boundaries and industry conditions are given. You cannot change them. You have to build your strategy based on them.
The other assumption is that, to succeed within these given constraints, an organisation must make strategic choice between differentiation and low cost. Either it can deliver great value to customers at a greater cost hence a higher price, or it can deliver reasonable value at a lower cost. But it cannot do both.
Blue Ocean Shift is a systematic process to move your organisation from bloody competition in the red ocean to wide-open blue oceans, or new markets devoid of competition, in a way that brings your people along. Market competing moves called Red Ocean, market creating moves called Blue Ocean.
Growth can be achieved from two directions:
- Disruptive Creation – captures the full, not partial, opportunity space of market creation driven by displacement. e.g. Cassette was replaced by CD, then CD was replaced by MP3
- Non-disruptive Creation – create new market space without disrupting an existing market. e.g. Many men’s lives were revolutionized through Pfizer’s market-creating move of Viagra.
There are three ways of pursuing market creating strategy:
1) Offering a break through solution for an existing industry problem
Breakthrough solutions create new demands, convert non-customer into customer. Just think how many more people take photos today with digital photography then took pictures with film in the past.
2) Redefining and solving an existing industry problem
Problem redefinition allow any organisation to replace assumptions and reconstruct industry boundaries in new and creative way. Here disruptive and non-disruptive creation is in full play. For example Cirque du Soleil by redefining the problem focused on how to maximize the fun and thrill of the circus, how to combine the best of it – clowns, tents and amazing acrobats – with the best of theatre and ballet – their artistry, music, dance and story line and eliminated costly and controversial elements like animals. It created a new market space between these industries, drawing a slice of demand from each, pulling new people in e.g. adults without children, corporate clients, who never dreamed of going to a circus before.
3) Identifying and solving a brand new problem or seizing a brand new opportunity
Unlock new markets beyond existing industry boundaries. Sesame Street’s Muppets (Big Bird, Elmo, Ernie and Bert) teach preschool children to count, name colours, shapes, and recognize the letters of the alphabet in a way that they have so much fun that they hardly realize that they are learning. Sesame Street did not disrupt any prior market for childhood education. Rather it opened up a new value-cost frontier that unlocked a new market of preschool edutainment that, for the past, never existed before.
To create a Blue Ocean Strategy you need to have three components in hand: 1) have required mindset 2) follow through a systematic process (market creating tools) 3) inspire and builds people’s confidence to own and drive the process for effective execution.
Mindset of a Blue Ocean Strategist
- aim to make the competition irrelevant
- focus on creating and capturing new demands
- have and invite very different perspectives
- set out to reshape industry conditions
- expand their field of vision
- shift their thinking from constraints to new opportunities
- ask fundamentally different set of questions
- simultaneously pursue differentiation and low cost
Making a Blue Ocean shift is a transformational journey, can be achieved by any organisation; for profit, non-profit, public, big multinational companies and small enterprises as well.
- List of the key factors your industry currently competes on.
- Which of the factors that the industry takes for granted should be eliminated?
- Which factors should be reduced well below the industry’s standard?
- Which factors should be raised well above the industry’s standard?
- Which factors that the industry has never offered should be created?
Source: Blue Ocean Shift by W. Chan Kim & Renée Mauborgne