Blue Ocean Strategy

Blue Ocean Strategy - An article summary per Kim and Mauborgne

Written for Thunderbird School of Global Management - Summer 2011

Summary

Blue Ocean Strategy and Blue Ocean Strategy: From Theory to Practice, both authored by W. Chan Kim and Renee Mauborgne, identify industries by metaphoric ocean environments – red ocean versus blue ocean.  A red ocean is comprised of abundant competitors vying for market share of an established industry and demand, “…as the space gets increasingly crowded, profit and growth prospects shrink. Products become commoditized. Ever-more-intense competition turns the water bloody.”  Kim and Mauborgne campaign that by creating blue oceans a company can compete in “uncontested market spaces where the competition is irrelevant” by supplying customers with a giant leap in value, securing new, sustained demand.

            Cirque du Soleil, Ford and the Model T, Yellow Tail brand wine, Apple and many others have created blue oceans. Interestingly, these new, uncontested markets are not historically due to revelations of new technology.  The majority of cases, like all of those listed above, are the result of “value pioneering” – a leap in value offered to customers at the same or lower costs.

            To assist companies in developing blue ocean strategies, Kim/Mauborgne have “developed practical methodologies” like The Strategy Canvas.  The Canvas establishes the current competitive factors that industry players – characterized by differing business models – are investing in.  The Four Actions Framework, and The Eliminate-Reduce-Raise-Create Grid are tools utilized to ask and answer questions that may lead an organization in the creation of a blue ocean.  Fundamentally, what to eliminate, reduce, raise (increase), and create.

Application

            I’m certain epiphanies and “ah-ha” moments are typical when companies utilize the frameworks listed above in an effort to create their blue ocean.  In applying these tools to my company, which is my role as Director of Business Development, I believe I am on to something big.  Our company conducts crane, rigging, lifting, and load handling training for major corporate workforces.  After conducting a Strategy Canvas with a new value-addition I am envisioning, I see a giant opportunity to offer our customers an enormous leap in value.

            Customers like Boeing, NASA, and the US Army have large workforces.  They might send a couple people to our training center this month, and then we train 50 employees at their facility next month.  We have always managed the data and records (transcripts) of their students – much like a university does its students.  However, being that our customers are businesses (organizations), the “payer” is often managing dozens if not hundreds of people that come through our courses.

            The blue ocean is to open the records to the decision-makers via an online interface that not only supplies managers with all the data on their employees, but allows them to build out and apply “training paths” per employee, division, or even role.  This Training Manager Application allows customers to solve one of their biggest riddles: “How should we go about training all of these people, and how do we track the training they receive?”

            This may sound pity at the moment, but I have just requested an SOW to begin the IT work to create this application.  I will begin market research as well, however, several interactions with other customers has indicated that this is a major issue they are all facing.