Book Review: Blue Ocean Strategy by W. Chan Kim & Renee Mauborgne

I just finished reading Blue Ocean Strategy, a fantastic business book for anyone interested in creating breakthrough product with a market of their own far away from any competition. It is clear that a fantastic research job has been done to come to the findings of the book, and probably an even bigger job at reducing the book to digestible core essentials, illustrated with real business cases that the reader can relate to.

I am not sure I have ever read a better business book. Warmly, warmly recommended.

Below are key extracts from the book that I have captured for you to quickly absorb its concepts.

Analytical Tools and Framework

The Strategy Canvas

The strategy canvas is both a diagnostic and an action framework for building a compelling blue ocean strategy. It serves two purposes. First, it captures the current state of play in the known market space. This allows you to understnad where the competition is currently investing, the factors the industry currently competes on in products, service, and delivery, and what customers receive from existing competitive offerings on the market.

Figure 2-1 captures all this information in graphic form.

Once you have established the strategy canvas for your company / product, you need to use the four actions framework to differentiate yourself.
The Four Actions Framework

 
If you apply the four actions framework correctly, you should be able to establish a differentiating value proposition for your product, as for instance, the Australian brand [yellow tail] in the wine market



 

 
3 Characteristics of a good strategy
Focus + Divergence + Compelling tag line

Formulating your Blue Ocean Strategy

 
” Reconstruct Market Boundaries

Companies tend to narrow down their competition and addressable market to its existing playing field. It is important to look out of the box for untapped consumer needs, untapped niche, and differentiating factors that draw from a larger perspective.”

(…)

“To guide this research, 6 paths are proposed:
1 – Look across Alternative industries
Ex: Netjets : shared time private jets.
2 – Look across Strategic groups within industries
Ex: Curves: cheap suburban gyms
3 – Look across the Chain of Buyers
Ex: Novo Nordisk, focusing on end users (diabetics) versus prescriptors (doctors)
4 – Look across Complementary Product and Service offerings
Ex: Barnes & Nobles, offering cultural experience on top of book selling, with lounges and coffee bars….
5 – Look across Functional or emotional appeal to buyers
Ex: QB House switching haircutting from highly emotional to functional one. Or inversely Cemex cement company turning the purchase into promise of well-being for families.
6 – Look across Time
Ex: iTunes saw the inevitable rise of digital music or CNN 24 hours information channel riding on globalization trend.

Once you have established a differentiation formula, you need to get the strategic sequence right, in particular through a strategic pricing-to-cost tactic, and through thinking about adoption upfront.

To make sure you are providing excellent value at all stages of the customer experience, evaluate your product through the Buyer Utility Map

In order to price your product right, look across alternative form and function of your product, identify the price corridor of the mass, and then set your ideal price within the corridor depending on the sensible positioning of your value innovation.
Your product mix is now set, but several hurdles might lie ahead of you. To be successful, you need to exercise what the authors call “tipping point” leadership.

Executing the Blue Ocean Strategy

My take on this is that you could also call this 20-80 leadership.

Basically, you need to:

– Understand where the misunderstanding gaps are (if any)

– Identify what the disproportionate influence factors lie (your 20% that influence 80% of your results)

Overcome key organisational hurdles
Lack of resources: redistribute resources to your hot spots, from your cold spots
Lack of team motivation: Identify your kingpins (key influencers), put them in a fishbowl (making their actions and inactions visible) and atomize your objective (break it down into attainable, bite sized smaller objectives)

Political hurdles: Secure a consigliere in top management, leverage your angels and silence your devils.

Et voila! 
Here were the key points from Blue Ocean Strategy, but I could not recommend more the reading of this book, which is really pleasant thanks to the amount of real life examples used.

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