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Kindle Notes & Highlights
by
W. Chan Kim
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April 17 - May 2, 2019
The companies caught in the red ocean followed a conventional approach, racing to beat the competition by building a defensible position within the existing industry order.16 The creators of blue oceans, surprisingly, didn’t use the competition as their benchmark.17 Instead, they followed a different strategic logic that we call value innovation. Value innovation is the cornerstone of blue ocean strategy. We call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company,
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To set a company on a strong, profitable growth trajectory in the face of industry conditions like these, it won’t work to benchmark competitors and try to outcompete them by offering a little more for a little less.
The kind of language used in the strategy canvas gives insight as to whether a company’s strategic vision is built on an “outside-in” perspective, driven by the demand side, or an “inside-out” perspective that is operationally driven. Analyzing the language of the strategy canvas helps a company understand how far it is from creating industry demand.
Challenging an industry’s conventional wisdom about which buyer group to target can lead to the discovery of a new blue ocean.
When companies are willing to challenge the functional-emotional orientation of their industry, they often find new market space.
Few employees deep down in the company even know what the strategy is. And a closer look reveals that most plans don’t contain a strategy at all but rather a smorgasbord of tactics that individually make sense but collectively don’t add up to a unified, clear direction that sets a company apart—let alone makes the competition irrelevant. Does this sound like the strategic plans in your company?
They also learned that buyers from all markets had a basic set of needs and expected similar services. If you met those common needs, customers would happily forgo everything else. Regional differences became significant only when there was a problem with the basics.
Samsung Electronics institutionalized the use of the strategy canvas in its key business creation decisions by establishing the Value Innovation Program (VIP) Center all the way back in 1998.
Tipping point leadership builds on the rarely exploited corporate reality that in every organization, there are people, acts, and activities that exercise a disproportionate influence on performance. Hence, contrary to conventional wisdom, mounting a massive challenge is not about putting forth an equally massive response where performance gains are achieved by proportional investments in time and resources. Rather, it is about conserving resources and cutting time by focusing on identifying and then leveraging the factors of disproportionate influence in an organization.
What actions consume your greatest resources but have scant performance impact? Conversely, what activities have the greatest performance impact but are resource starved? When the questions are framed in this way, organizations rapidly gain insight into freeing up low-return resources and redirecting them to high-impact areas.
Are you allocating resources based on old assumptions, or do you seek out and concentrate resources on hot spots? Where are your hot spots? What activities have the greatest performance impact but are resource starved? Where are your cold spots? What activities are resource oversupplied but have scant performance impact? Do you have a horse trader, and what can you trade?
it into bite-size atoms that officers at different levels could relate to. As he put it, the challenge facing the NYPD was to make the streets of New York City safe “block by block, precinct by precinct, and borough by borough.” Thus framed, the challenge was both all-encompassing and doable. For officers on the street, the challenge was to make their beat or block safe—no more. For the precinct commanders, the challenge was to make their precinct safe—no more.
It is never easy to execute a strategic shift, and doing it fast with limited resources is even more difficult. Yet our research suggests that it can be achieved by leveraging tipping point leadership.
By violating fair process in making and rolling out strategies, managers can turn their best employees into their worst, earning their distrust of and resistance to the very strategy they depend on them to execute.
The focus of blue ocean strategy is not on restricting output at a high price but rather on creating new aggregate demand through a leap in buyer value at an accessible price. This creates a strong incentive not only to reduce costs to the lowest possible level at the start but also to keep it that way over time to discourage potential free-riding imitators.
