Chan Kim is considered one of top business strategy thinkers of our age. I am ashamed that his famous book “Blue Ocean strategy” has been on my to-read list since 2005 when it was highly recommended by my MBA professor, but I was too busy at that time juggling a full-time job and a full time MBA program. Recently, I felt a need to update my knowledge of business strategy which happens to be my actual job! So, I finally picked it up.
The book starts with overpromised, sustainably growing, profits. Rolling my eyes, I kept reading. It is a short book after all, and I could afford a short timewaster. Soon, my rolled eyes flipped back into an intense gaze as I realized how profound and insightful this book really is. Here are the nuggets:
At a philosophical level, strategy had its origins in the military, a field that is, literally, a red ocean of bloody battle over a limited, specifically defined victory. Kim proposes a different origin story that is based on adventurous exploration of new continents and gold mines where companies do not fight for market share, but, instead, create new industries that never existed before.
The second insight in the book is that most business research focuses on the Company (GE, 3M, Apple, etc.) or the entrepreneur (Welch, Jobs, Elon, etc) as the indivisible unit of analysis. Kim realized that the true units of measure are the strategic decisions those businesses made (the T model, the personal computer, scotch tape). The book is a manual on how to replicate such strategies in any other company or industry.
Reminder of the blue ocean strategy development process (only helpful to those who read the book):
A) Two Analytical tools: (1) “The strategy canvass” and (2) the four forces to Re-examine value proposition: Eliminate, Reduce, Raise, and Create, then follow the following six principles for strategy formulation and execution:
B) Four principles to Formulate strategy:
1. Redefine market boundaries (six paths): (1) Alternative industries (Net Jets, NTT Docomo’s iMode, Cirque Du Soleil, Home Depot, SouthWest, Intuit), (2) Strategic group e.g., luxury versus value (Curves women fitness, Polo Ralph Lauren, Lexus, Champion group quality pre-fab houses), (3) Buyer group (Novo Nordisk’s NovoPen, Bloomberg terminals, Canon copier versus SAP ERP), (4) Complementary offerings (Nabi bus with low TCO, Dyson bagless cleaners, Philips filter Kettles), (5) Functional-emotional orientation (EtoF: QB House/GreatClips, DirectLine Insurance, FtoE: Cemex, Viagara, Starbucks), and finally (6) External trends over time (iTunes vs Napster, Cisco, CNN, Sex in the City)
2. Focus on the big picture not the numbers: Visual Awakening-> Exploration -> Strategy Fair -> Communication (e.g., Samsung corporate strategy development process, Value Innovation Program – VIP center in S. Korea)
3. Reach beyond existing demand : “Soon-to-be” (Pret a manager) , “Refusing” (Galloway big Bertha), and “Unexplored” (JCDecaux street furniture, Tooth whiting solution, the Joint Strike Fighter-JSF fighter Jet F35)
4. Get the strategic sequence right: Buyer utility (technology/luxury does not equal value, Six stages of buyer experience from purchase to disposal, buyer utility map, Ford model T) -> Price (price corridor of the mass including same function different form (auto) and same objective different function (Theater v. Restaurant) more protection = more price -> cost (price minus) streamline operations (Ford), partnership (SAP v. Oracle) and changing the pricing model (Blockbuster) -> adoption hurdles Employees (Merrill Lynch eBrokerage Vs. Morgan Stanley’s), business partners (e.g., A-SAP), and the general public (Monsanto).
Finally use the blue ocean idea index to rank the strategy across all above four principles.
C) Two principles for strategy implementation
5- Overcome four types of organizational hurdles (NYPD): 1- Cognitive: Ride the electric sewer and talk to disgruntled customers, 2- Resources: from cold to hot spots + horse trading, 3- Motivational: Kingpins, fishbowls, atomize scope, and 4- Political: Consigliere, angles, and devils.
6- Build execution into strategy using a fair process. Engagement, explanation, and expectations clarity. (Coolant selection, elevator factory)
Must read for both strategy practitioners and managers.