What colour is your strategy?

Published: 10 October 2013

As we approach the end of the year, many are starting to look towards a strategy for the New Year. In this week's newsletter we look into which strategy will work best for your organisation.

Great philosophers, generals and business leaders have studied the ancient art of strategy and each created their own version of setting strategic objectives.

At base level we have to ask: "What is strategy?" Strategy comes from the word ‘stratagem', and refers to the ploy you choose to gain an advantage or reach an end. Creating strategy is the art of defining how to achieve your objective.

One of the more interesting frameworks to creating strategy and value maps is the Red Ocean vs. Blue Ocean Strategy concept, which is the focus of this article.

The basic idea of this concept is that we often find ourselves competing in a red ocean where we have to fight hard to beat our competitors. Our red ocean is in an overcrowded market where we have to fight on price to survive. The idea of Blue Ocean Strategy is to change what people value and to then compete on a new value curve.

In Blue Ocean Strategy, we choose to redefine a product or market. We potentially speak to individuals' latent needs. In doing so, our value-perceptions of a product or service change.

The fact of the matter is that blue oceans soon turn into red oceans. As other sharks start swimming in your waters you see a lot more blood. This means your organisation has to sustain the innovation curve.

Many organisations put a group of people in a room and ask them to come up with a plan on how to produce their next blue ocean.

The four actions framework
If you delve a little bit deeper into the framework of Blue Ocean Strategy, you will see that the following four core activities make a Blue Ocean Organisation work:

    Raising standards
    Creating new products
    Reducing waste
    Eliminating unnecessary steps for the end consumer

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

The sequence of Blue Ocean Strategy
Blue Ocean Strategy recommends that you totally rethink the utility of your products for the end customer. If you come up with something very different from what customers are currently experiencing, you have overcome your first hurdle. The next phase is asking whether or not you can deliver what your customer wants to experience within a reasonable timeframe. If you can do that within the cost and profit parameters that make commercial sense, you are in the early phases of building a sea change.

Creating a tipping point
Blue Ocean Strategy is not initially implemented into the mass market. Firstly, you need to excite the people on the fringes of the market. It is useless to submit your new Blue Ocean Product to traditional customers or clients as the next big thing. The idea is to rather excite a core of users as trendsetters so that they can fundamentally influence how people think. The small flame of change will eventually turn into a raging storm. At this point you have already resolved most challenges in making your product appealing to everyone. You can now continue to contest cost and value to customers, while your competitors play catch-up.

Blue Ocean Strategy recommends you work on your product until you convince those at the edge of desiring change, as well as your worst critics, and those who have never used your product. If you can convince these three target groups, the rest will be simple.

Pioneers, migrators or settlers
To find out which products you can innovate, a useful exercise is to look at your current initiatives. If you place your initiatives on a grid, you will find out which ones contribute towards becoming more innovative in terms of pioneering or migrating. You will also find out which initiatives are your settler products. In Blue Ocean Strategy, you must have initiatives in all areas. You may also have to consider taking those settlers and migrating them into pioneering space. This will not happen overnight, but by using the four actions mentioned above, you can start reaffirming from there.

Starting to look for innovation
In searching for innovation it sometimes helps to map the buyer's experience as a lifecycle. You can also look at the customer's perception of your product.

Note: Executives do not see this as an indicator of what the customer likes or potentially likes about the product. You may actually have to talk to customers in this process.

The question is whether we can improve the customer's buying experience as much as we can improve the product to speak to the customer's desires. At the same time we need to be leveraging items such as cost, utility and value to create a better experience.

This may not be an easy process, but will create innovation projects to transform your business and continue to deliver break-through results.

Hurdles to execution
There are typically four hurdles in Blue Ocean Strategy that stand in the way of successful execution. These are:

    The cognitive hurdle - people do not want to rock the boat in the organisation and cannot understand why there is need to change. They want to improve in their existing efforts and refuse to move to new frontiers

    The human resource hurdle - it is always difficult to get enough resources allocated. Innovation is always difficult and invariably there is a lack of required skills. External resources are not always familiar with your industry while internal resources are not always keen to drive change

    The motivational hurdle - there is a core of people who need to get excited about new ideas, even though such ideas are still far-fetched

    The political hurdle - it may happen that ideas get shot down in an organisation. In such cases political manoeuvring is required before an idea can even be 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. Instead it is about a good process to move your business to become more relevant for the customer. The challenge is that innovation becomes its own enemy. Also, without maintaining innovation, 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 does not benefit the customer. A customer may like integration between two systems, while your improvements show that you can make one component cheaper, you may lose integration in the other system. You think customers want a cheaper product or you make the product cheaper to keep competitors out of the market. Yet in the process, the customer may lose the one thing that was important to them.

How do you counteract Blue Ocean Strategy? Traditional wisdom dictates that there are various responses to Blue Ocean Strategy:

    Innovate past your competitors - 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 - create something that is useful enough for your competitors to confuse your customers and ride on the wave of this new category

    Capture the niche - your competitors would have alienated some customers - capture that niche and offer them superior value

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

Conclusion
While some heat up the ocean, others try to conquer it. You can decide whether 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. Most strategies fail during the execution stage. Execution actually only works when people get out of the boardrooms and move from behind their computers into the trenches.

In an age where big-data, the cloud and analytics can easily paralyse an organisation, it is time to go out and start looking at how you can indeed serve your market. If you can serve your market, you will always be one step ahead of your competitors. Your strategy will then create more colourful solutions to practical problems.

- Regenesys