Executive Summary, Blue Ocean Shift
The first chapter takes a lot of time to establish the concept of blue ocean shifts, and how they're revolutionary for businesses and entrepreneurs. The first few key ideas to understand about a blue ocean shift (BOS) are that blue oceans are not synonymous with disruption, they're about creation; similarly, one's new gain does not equal someone else's loss in a BOS. A blue ocean shift is a systematic process of moving from a cutthroat market to a wide-open "blue ocean" which is a new market devoid of competition. BOS is a theory of market-creation.
The authors refer to the creation of the National Youth Orchestra of Iraq as a non-profit that benefited from a BOS, Groupe SEB and the ActiFry as a for-profit company that benefited from a BOS, and the Malaysian government, which used a BOS to revitalize their prison system by creating the Community Rehab Program to solve overcrowding, and treating petty criminals responsibly.
Companies such as HealthMedia, citizen, and Wawa are key companies that've benefited from BOS over the years, which Kim & Mauborgne will refer to constantly throughout the text. There are three key components to BOS: 1) adopt a blue ocean perspective to be able to learn to dismiss industry best practices, 2) garner and utilize practical tools and guidance for market creation (common examples include data visualization), and 3) adopt a humanistic process in order to inspire confidence in employees. The three ideas of perspective, humanness, and tools make a BOS.
There are several key concepts established in this chapter, such as disruptive innovation which begins with inferior technology which evolves to displace market leaders such as CD drives, and Uber. Another key idea is non-disruptive competition, notable because it does not affect existing markets but creates entirely new ones, such as Sesame Street, the micro-financing industry, Viagra, and eHarmony. The idea of non-disruptive competition is less threatening as it doesn't challenge existing players, or threaten the livelihood of people involved in current markets, but it does a lot in the way of job creation as new opportunities open up.
There are three pathos to achieve a BOS. The first is to offer a breakthrough solution. The second is to redefine a problem, then solve it using new ideas. The last is to identify and solve an entirely new problem, or similarly seize a new, unexplored opportunity (Kim & Mauborgne, 2017, pg 79). Consider music: We began with vinyl, which evolved into cassette tapes for convenience. Then new problems were addressed with the invention of CDs, and now, with MP3 files.
By answering new questions, BOSs do not destroy jobs, they create them. They focus on value innovation, not tech innovation. They can make the best product, not a new product, such as how Starbucks increased the value of coffee without new technologies.
In short, Chapter 3 lays out the thought process of BOS implementers, time is taken to discuss their line of thinking in an effort to illuminate the mental framework necessary for BOS formulation and implementation. Chapter 3 opens with a summary of the company Comic Relief and Red Nose Day in the UK, and how this redefined the charity industry's problem of reaching donors by helping to implement crowd-sourcing. This was only possible through these four BOS ideas: 1) reject industry best practices, 2) not benchmarking or emulating industry practices, 3) understanding customer needs and non-customers, and 4) not compromising on cost or uniqueness.
Big companies such as SAP, Oracle, and Microsoft dominate the CRM market with their software due to strong research and development, the expenses needed, the hardware needed, and the expertise needed. The company, Salesforce, disrupted this market. They created a market of CRM by removing licensing and replacing it with SaaS subscriptions. This helped them acquire non-customers in small and medium businesses.
Here are some valuable insights this chapter had to offer. Blue strategists aim to make competitors irrelevant. Blue strategists create and capture demand, rather than fight over existing customers. Blue strategists pursue differentiation and low cost in tandem, breaking away from the trade-off.
Chapter 4 examines "how the blue ocean shift process works. It expounds on the important concept of humanness and how it inspires and builds people's confidence in the process so that they own and drive the process and results. It also shows how the process builds people's creative competence along the journey."
Humanness builds the confidence to act by elevating emotional engagement. You need engagement and creative competence to achieve transformation. This is emphasized in the process of atomization, which is the process of breaking down the BOS into achievable steps that boost confidence and make progress steadily. The process of firsthand discovery involves "creating the conditions that will enable people to discoverthe need for change" (pg 138).
Fair process, at the core of BOS, is comprised of three steps. First, engagement, which is actively involving people in decisions that affect them; second, explanation fosters trust through transparency regarding the decision-making process; third, clear expectations foster confidence by defining roles and responsibilities at each step of the process.
Get started uses the pioneer-migration-settler map to ID the scope of the transformation and avoid pitfalls. Understanding where you are now involves getting people involved via the strategy canvas. Imagining where you could be introduces the buyer-utility map analysis tool. Finding out how you get there is accomplished using the Six Paths Map. Lastly, making your move introduces the Blue Ocean Fair as a process to reach a decision on how to move forward with an initiative.
This chapter revolves around Step One, which is "Getting Started" and on creating and using the pioneer-migrator-settler (PMS) map. In this process, it's understood that market share becomes value. Industry attractiveness becomes innovation. Excessive innovation lowers industry attractiveness to possible entrants.
So, what are the three elements of the PMS map The first is the pioneers, which are the businesses that present the value innovation of an industry; next, the migrators offer value innovation as well, as they piggyback off pioneers and are dependent on industry growth; lastly, migrators represent value improvement but don't offer innovation. Pioneers create new value-cost frameworks, settlers are high-revenue businesses and migrators are lower-revenue businesses.
Here's how to create a PMS map. Identity key businesses in one's portfolio. Then identify which product offerings are pioneers, migrators, and settlers given the information above. Plot the information. Keep in mind that customers follow value. It's important not to think in terms of corporate accounts, only goods and services. Next, draft a hypothetical map showing the company's "to-be" portfolio.
Chapter 6 focuses on building the right team for a blue ocean shift. Without the right team, it is too easy to dismiss new ideas and stick with industry best practices. Compose a team by inviting a key member from each department, such as IT, HR, R&D, finance, etc. A strong team typically consists of 10 to 15 members. All members must accept the stipulation that finances are never going to trump strategy. Devil's advocates are acceptable to ensure ideas are challenged. Appoint a group kingpin who outranks other members and who can act as a point of contact. This person must be influential and forward-thinking.
Chapter 7 focuses on understanding where an organization exists prior to the BOS. This can be visualized with the strategy canvas which contains four strategic elements: 1) competition factors, 2) the organizations strategic profile and cost structure, 3) competitors profile and structure, and 4) the offering level that buyers receive. Ensure that a BOS plot on this chart does not simply mirror a competitor's current plotline. The ideal BOS is defined, in this chart, by a clear and different shape, focused strategic profile, and compelling tag line, which is decidedly different than a marketing slogan. When creating a strategy canvas, identify 5-12 key factors the industry competes on (price is always a factor) and decide which key players to compare the Organization with. Rate your offerings and competitors' along these key competing factors. This will help develop an as-is strategy canvas to show where an organization is currently. Highlight overlapping plot pints. It is important that each member of the team utilizes their functional knowledge, this will boost employee morale and perceived value to the firm as its structure and strategy is discussed and developed.
This chapter focuses on uncovering boundaries and assumptions that limit the industry's current size. This chapter utilizes the buyer-utility map, and focuses on pain points, which are parts of a business that buyers must deal with. Pain points diminish the value and cause customers (CSTs) to seek alternatives. The authors make note of how this process can be adopted by the USA wine industry.
The buyer-utility map is a 6x6 (malleable) box chart which graphs the buyer experience cycle and the utility levels of a good or service. The six utility levels are described here: 1) Customer productivity - anything dealing with efficiency such as time or money invested; 2) Simplicity - that which eliminates mental hassle; 3) Convenience - having on-demand access to the product 24/7; 4) Risk reduction - avoiding emotional, financial, physical risk to the customer; 5) Fun & Image - Aesthetic look, feel, style, tone of a product; 6) Environmentally friendly - green matters! Eco-friendly products and organizations efforts to be green encompass this utility lever.
The map also marks the buyer lifecycle, including the purchase, delivery, use, purchase of supplemental items, maintenance, and disposal of the offering. It is import to assess whether or not a company's vision overlaps with what customers see when they think of the company's goods or services. Flush out any existing pain points for further analysis here. This chart and any identified pain points will be valuable in fieldwork and real-time buyer experience observation. Point-of-sale is a crucial moment to observe in the buyer lifecycle.
Chapter 9's key insights focus on discovering non-customers. It discusses the three tiers of non-customers, and how non-customers can present more value to a business than existing CSTs. Kim & Mauborgne argue that existing industry customers do not define total demand potential. Instead, they posit that total demand potential equals existing customers plus all three tiers of non-customers, outlined below.
The first tier of non-customers are the soon-to-be non-customers, those who are eager for alternatives to current offerings as they don't like the current goods or services they're being offered. Second tier non-customers are eager to use industry goods and services offered by one's organization but are unable to for reasons such as competitors being objectively better for their current needs, or one's company offerings are beyond non-customers' means. The third tier of non-customers represents all the non-customers out there who are completely ignored, those whose needs are not even addressed by the organization's current goods or services. When seeking out new customers, look for commonalties expressed across non-customers. Huge players who have utilized the three tiers to find non-customers are Starbucks, Salesforce, Apple, and Nintendo.
This chapter focuses on Step Four of the process, which revolves around the Six-Paths Framework. The first path of this framework allows businesses to shift from red oceans to blue oceans, from industry rivals to looking across alternatives and alternate industries. This framework helps to identify major industry problems and search for alternative industries and find which of those industries are best-in-class or has the most customers. It's important to understand why buyers traded across industries. Then, make sure you note all your key findings.
The second path allows for the shift from focusing on competitive positioning in strategic groups to looking cross strategic groups in industries. The action items in this path are identifying strategic groups, narrowing down to 2 key groups, interviewing CSTs on why they made their group choice, and note down all key findings including the highlights and negatives of customers' decisions.
Path three moves away from serving existing customers to looking across chains of buyers and redefining industry buyer groups. First, identify the chain of buyers such as the users, the purchases, and the influences. Identify the main buyer groups and the most-ignored non-customers. Talk to non-customers and find out the biggest costs and blocks preventing them from becoming customers. Note down these findings for future reference.
Path four moves away from maximizing product value within a given industry and enables looking across buyer-sought solutions which helps the firm understand complementary products, which affect product value. The action steps for this path are identifying how products are used by customers, observing real time product use, cross-referencing this info with the buyer-utility, and recording insights appropriately.
Path five moves away from solely improving price and performance and allows for rethinking the industry's functional-emotional value. This is accomplished by identifying industry orientation, obtaining insights on said orientation from customers and non-customers, highlighting any occurring commonalities, exploring reorientation potential, and documenting any team work in this area.
Path six moves away from simply adapting to external trends as they appear, and enables organizations to reshape influential industry trends. This can be done by identifying 3-5 trends in the industry currently, assessing trends' relevance, assessing if trends are irreversible, assessing if trends can evolve, identifying trends' implication from steps 2-5 focusing on how these affect buyer value, and lastly notating any key findings.
This chapter expounds on using the Six Paths Framework insights to make a blue ocean shift possible by incorporating the use of the E.R.R.C. (eliminate, reduce, raise, create) grid to break away from the value-cost trade-off.
The E.R.R.C. grid, referred to as the Four Actions Framework, enables businesses to easily convert Six Paths findings into manageable action items through eliminating, reducing, raising, or creating current industry factors. Throughout this chapter, Kim & Mauborgne refer to citizenM as an example of how these core concepts can be used. For example, citizenM eliminated concierge desks, reduced price as well as room sizes and room types, raised the sleeping environment (bed size and bathroom water pressure), and created self-check-in kiosks, as well as a 24/7 communal area for food, drinks, and computer use. Similar to what Wawa does when it comes to giving their employees dignified titles (see Ch 13), citizenM creates their employees as cross-functional "ambassadors, not simply front desk workers.
The last two chapters focus on the 5th step in the BOS process: making your move. A Blue Ocean Fair (BOF) is an event where senior leaders, the BO team, CSTs and non-customers get the chance to meet and learn about all of a company's blue ocean initiatives through presentations and Q&A sessions with members from each initiative. The authors present the following guidelines for hosting a BOF. Red oceans must be introduced first, along with as-is strategy canvases. Next, present all BOS ideas and any to-be strategy canvases, the Four Actions Framework, and emphasize valuable economic benefits of each BOS initiative. Attendees are encouraged to visit presentation booths for each initiative to learn more and ask questions. Then attendees get to vote on which of the team's initiatives they're most in favor of, and are encouraged to give senior leadership feedback on the processes behind their decisions. Executive teams then get to decide how to move forward with a BOS, using the presentations and attendees voting consensus as a guide. It's always important to conduct follow up field research with potential customers on blue ocean initiatives.
Chapter 13, the last chapter, uses previously mentioned corporations such as citizenM and Wawa to discuss launching a blue ocean shift, further developing the Fur Actions Framework, who to partner with, how to streamline operations, and continue to boost employee energy for continued engaged output. Companies like citizenM were able to partner with local businesses in building their hotels. Wawa was innovative in titling and treating employees with dignity, empowering customer service representatives, and providing generous employee stock options. The authors stress the importance of revisiting the to-be canvas and the Four Actions Framework to maintain a Big Picture business model.
Kim, W. C. & Mauborgne, R. (2017). "Blue Ocean Shift: Beyond Competing - Proven Steps to Inspire Confidence and Seize New Growth." New York: Hachette.