Find Your ‘Blue Ocean’

The way author Renee Mauborgne sees it, most American companies swim in a "red ocean," fighting for limited market share amid bloody competition with very little room for growth. Innovative companies find a way to swim to a "blue ocean," where they provide so much unique value for their customers that they no longer have direct competition and the growth potential is vast.

Mauborgne explores her theories as the co-author of "Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant," the hottest-selling business book ranked by 800-CEO-READ, a Milwaukee-based business book distributor.

"I think most companies know that strategic planning is an imperfect process. There are certainly many books and articles criticizing it. But they have not had an alternative to it, so companies have kept on using it because it does allow for some degree of accountability," Mauborgne said.

"We offer a compelling alternative. We begin by giving companies three pointers on how to break out of the red and into the blue ocean. Number one: stop benchmarking the competition. The more you benchmark your competitors, the more you tend to look like them. That makes you a me-too organization, which is the opposite of what you want to achieve," she said. "Second: stop being content to swim in the red ocean. Many companies are caught up in competing and don’t even look to the horizon of the blue ocean. And third: don’t count on your customers for growth. Look to non-customers; they provide the most insights into how you can create new, uncontested opportunities-new demand for your products or services."

By studying 150 strategic moves in more than 30 industries spanning more than 100 years, Mauborgne and co-author W. Chan Kim set out to find a systematic pattern for achieving high growth that any company could replicate.

From Ford’s Model T to Apple’s iPod, they identified 150 strategic moves that had one thing in common: All of them made the competition irrelevant and created an uncontested market space with the limitless potential of a blue ocean.

So, how do you create a blue ocean? According to the book:

1. The aim of the blue ocean strategy "is not to out-perform the competition in the existing industry, but to create new market space or a blue ocean, thereby making the competition irrelevant."
2. Use "value innovation" to differentiate your company from competition. "Value innovation helps companies make giant leaps in the value provided to customers through the simultaneous pursuit of differentiation and low cost. It shouldn’t be a trade off between the two; exceptional value and innovation should be inseparable. Offer buyers a huge leap in value, and that will give rise to new markets. That’s how you make the competition irrelevant."
3. Stop benchmarking the competition. "The more you benchmark your competitors, the more you tend to look like them. That makes you a me-too organization, which is the opposite of what you want to achieve."
4. Stop being content to swim in the red ocean, doing what the competition does. "Many companies are caught up in competing and don’t even look to the horizon of the blue ocean. Don’t count on your customers for growth. Look to non-customers; they provide the most insights into how you can create new, uncontested opportunities-new demand for your products or services."
5. Reach out beyond traditional customers. "Focus on non-customers – those in the marketplace who are not using the company’s products or services at all."
6. The blue ocean strategy needs to be understood and embraced throughout all levels of the organization. "We stress how to build a blue ocean strategy through dialog that is inclusive. We talk about how to build execution into strategy from the beginning by getting not only the top few people involved, but people across the organization. Then they are all part of it, have ownership of it, and therefore feel a commitment to execute on the ideas."

Mauborgne’s book has been well-received by the business community, and many companies are adopting its strategies.

"Blue Ocean Strategies," which is published by the Harvard Business School Press, was listed as one of the Top 10 Business Books of 2005 by Amazon.com and was selected as the No. 1 Strategy Book of 2005 by Strategy + Business, Booz Allen & Hamilton’s leading business magazine.

In addition, the book is listed as one of Fast Company magazine’s Best Books of 2005 and has received several other awards of distinction.

Mauborgne is a fellow of the World Economic Forum and a professor of strategy and management at INSEAD, France, the world’s second-largest business school. Mauborgne and Kim co-founded the Value Innovation Network (VIN), a global community of practice on the Value Innovation family of concepts.

"Blue Ocean Strategies" has broken the Harvard Business School Press record for the highest number of foreign licenses ever obtained, as the book is being published in 30 languages.

Mauborgne’s book also was selected by 800-CEO-READ president Jack Covert as one of his "Jack Covert Selects" titles of recommended reading.

"There are plenty of books that deal with developing strategy for competing in your existing markets, but what caught my attention with this book was Blue Ocean Strategy’s focus on developing strategy in new, nonexistent markets," Covert said. "Kim and Maubornge are big fans of the strategy canvas tool (a graphical tool for comparing customer-defined attributes among companies). You’ll find out how to leverage the six types of buyer utility and understand the price corridor of the mass. They also spend time telling you how to talk to your employees, your shareholders and your customers about blue ocean changes. I don’t recommend very many hard-core strategy titles, so that should give you some idea of what I think about the book."

Editor’s note: Each year in our "Ventures" special report, Small Business Times examines the best practices outlined in a hot-selling business how-to book and finds southeastern Wisconsin companies that are engaged in the principles of the book. This year’s featured book is "Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant."

Author to Headline Expo

Author and consultant Renee Mauborgne will be the featured guest of a breakfast to kick off the second annual Wisconsin Business & Technology Expo on Wednesday, May 3.

Mauborgne, co-author of "Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant," will share her insights at the Expo, which will take place May 3-4 at the Wisconsin Exposition Center at State Fair Park in West Allis.

The Expo is presented by Small Business Times, with The Schroeder Group S.C. serving as premier sponsor. More than 3,000 people attended the inaugural Expo last year.

At the Wisconsin Business & Technology Expo kickoff breakfast, sponsored by TDS Metrocom, Mauborgne will explain to business owners and other top executives how to rise above and beyond their competition to points of unique distinction.

For more information about the event, visit www.biztimes.com/expo or call Sarah Wilson at (414) 277-8181, ext. 129.

Tale of Two Oceans:

Red Ocean Strategy

• Compete in existing market space
• Beat the competition
• Focus on existing customers
• Exploit existing demand
• Make the value-cost tradeoff (create greater value to customers at a higher cost or create reasonable value at a lower cost)
• Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost

Blue Ocean Strategy

• Create uncontested market space
• Make the competition irrelevant
• Focus on non-customers
• Create and capture new demand
• Break the value-cost tradeoff (Seek greater value to customers and low cost simultaneously)
• Align the whole system of a firm’s activities in pursuit of differentiation and low cost

Breakthrough:

Red Ocean

• Airline industry price wars result in bankruptcies and low profit margins.
• Prime-time television entertainment industry competes with
• indistinguishable shows for declining viewership.
• Golf equipment industry competes to win a greater share of existing golf customers.
• The cosmetic industry creates a red ocean with models, expensive advertising, and promises of youth and beauty.
• The wine industry gluts the market with a red ocean of thousands of brands competing on the finest oaks and tannins and legacy winery names.

Blue Ocean

• Southwest Airlines creates a new market by offering the speed of air travel with the low cost & flexibility of driving.
• HBO produces "Sex and the City" for a new market of television  consumers: single, urban professional women.
• Callaway Golf creates "Big Bertha," a golf club with a large head that attracted new customers to golf that had been frustrated by the difficulty of hitting the ball.
• The Body Shop creates a blue ocean that lasts more than a decade by creating functional cosmetics that defied the industry which sold emotionally appealing cosmetics.
• Casella Wines creates [Yellow Tail], a blue ocean wine that succeeded by eliminating complexity, elitism and consumer confusion and creating a fun simple image that non-wine drinkers could enjoy.