Category: Blue Ocean Strategy

Summary:

“Business Breakthroughs: Blue Ocean Strategy in Practice” by Andrew Foster illustrates how companies can achieve significant market gains by moving away from competitive markets (Red Oceans) to uncontested markets (Blue Oceans). The book elaborates on the process of creating value innovation that will allow businesses to break away from competition and tap into new demand. It provides practical steps, examples, and strategies to help readers effectively implement the Blue Ocean Strategy in their own businesses.

Major Point:
Red Oceans symbolize all the industries in existence today where companies compete by outperforming rivals to grab share in a limited market. Blue Oceans, in contrast, denote all the industries not in existence today—untapped market space, demand creation, and the opportunity for highly profitable growth.

Example:
Foster mentions the case of Cirque du Soleil, which abandoned the traditional circus market (a Red Ocean) to create a new form of entertainment that drew elements from theater, creating a Blue Ocean market.

Actionable Advice:
Identify saturated markets where competition is intense and contrast them with areas where consumer pain points indicate unmet demand. Systematically analyze your current market to find gaps or unexplored needs that could lead to the creation of a Blue Ocean.

Major Point:
Value innovation lies at the core of Blue Ocean strategy. It is about making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space.

Example:
The book explores the case of Apple’s iTunes, which combined the ease of online music purchasing with a seamless user experience, disrupting the traditional music sales industry.

Actionable Advice:
Focus on what elements of your product or service can be eliminated, reduced, raised, or created. Conduct a Value Innovation Workshop within your company to brainstorm and identify these elements.

Major Point:
Foster presents the Four Actions Framework as a tool to reconstruct buyer value elements in crafting a new value curve. The framework includes four actions: Eliminate, Reduce, Raise, and Create.

Example:
Southwest Airlines eliminated costly services like meals and lounges, reduced turnaround time, raised the frequency of point-to-point departures, and created a casual, fun travel experience.

Actionable Advice:
Create a strategy canvas for your industry. Identify the key competitive factors. Use the Four Actions Framework to determine which factors can be eliminated or reduced, and which ones could be raised or created to generate more value.

Major Point:
To maximize the size of their Blue Ocean, companies need to reach beyond existing demand and unlock new customer possibilities.

Example:
Foster describes how the Nintendo Wii attracted not only gamers but also elderly people and families by providing a simple and fun gaming experience that went beyond the traditional target base.

Actionable Advice:
Segment your non-customers into three tiers:
– First-tier non-customers: Closest to your market, they minimally use the product.
– Second-tier non-customers: Refuse to use your market offerings.
– Third-tier non-customers: Have never considered your market’s offerings as an option.

Create strategies to convert these non-customers into customers.

Major Point:
The book identifies various breakthrough techniques used by companies to create Blue Oceans, including technology adaptation, strategic alliances, and leveraging your company’s unique strengths.

Example:
The collaboration between Starbucks and PepsiCo to bottle and distribute Frappuccino drinks, creating a new ready-to-drink coffee market.

Actionable Advice:
Look for potential strategic partners in complementary industries. Evaluate new technologies that can be adapted to serve unmet needs or improve user experience dramatically.

Major Point:
For Blue Ocean Strategy to be successfully implemented, it is crucial that the whole organization is aligned around the goals of creating and capturing uncontested market space.

Example:
Zappos aligns its entire company culture around exceptional customer service, ensuring every department contributes towards this goal.

Actionable Advice:
Conduct alignment workshops across departmental lines to ensure that every team member understands and is motivated towards the new strategic direction. Establish a clear, compelling vision and communicate it constantly.

Major Point:
The book discusses ways to overcome organizational hurdles such as cognitive, resource, motivational, and political hurdles that impede the execution of the strategy.

Example:
Foster explains how the French utility company, EDF (Électricité de France), addressed cognitive hurdles by immersing its executives in the harsh realities of their market, which fostered a sense of urgency and the willingness to explore new strategies.

Actionable Advice:
Identify and map out potential hurdles in your organization. Deploy cross-functional teams to brainstorm and propose actionable solutions tailored to these challenges. Pilot initiatives in smaller units before full-scale implementation.

Major Point:
Tipping Point Leadership can help break through barriers to execution and get the workforce quickly aligned. It’s about focusing on key influencers within an organization who can turn the tide.

Example:
New York City’s Police Department, under Commissioner William Bratton’s leadership, focused initially on small crucial behavior changes and influential leaders to reduce crime rates drastically.

Actionable Advice:
Identify the key influencers in your organization who align with your blue ocean ideas. Mobilize them to become advocates in their respective areas, ensuring their buy-in and proactive engagement in implementing strategies.

Major Point:
Strategies must incorporate execution from the outset. This involves building trust, securing compromises, and rallying stakeholders around the strategic vision.

Example:
Foster cites how the cosmetics company L’Oreal included suppliers early in the new product development process, ensuring timely delivery and mutual understanding.

Actionable Advice:
Develop inclusive planning sessions involving not just top management, but also frontline employees, suppliers, and even customers. Create pilot projects to test strategy execution and gather actionable feedback.

Major Point:
Once a Blue Ocean is created, sustaining it necessitates continuous innovation and maintaining a competitive edge.

Example:
Tesla’s approach to continuously innovate on battery technology and rapid charging stations, ensuring their continued leadership in the electric vehicle market.

Actionable Advice:
Invest in ongoing R&D and foster a company culture of continuous learning and adaptation. Regularly review market trends, technological advancements, and customer feedback to keep your offerings relevant and ahead of the curve.

Andrew Foster’s “Business Breakthroughs: Blue Ocean Strategy in Practice” elucidates the principles and steps necessary to shift from competitive, crowded markets to uncontested ones, creating substantial growth and profitability. By leveraging real-world examples and providing practical advice, the book equips readers to identify, create, and sustain their own Blue Oceans. Whether through reconfiguring value propositions, tapping into non-customers, or aligning the organization around new objectives, the actionable insights offered here are invaluable for any business leader aiming to drive innovation and growth.