3 key components of a successful Blue Ocean Shift
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W. Chan Kim and Renée Mauborgne, authors of the best-selling Blue Ocean Shift: Beyond Competing.
It was 12 years ago that the business landscape was changed with the release of Blue Ocean Strategy, igniting a movement among entrepreneurs, business owners and corporate leaders to shed “red ocean” thinking and seek out those “blue ocean” opportunities. The book has gone on to sell more than 3.6 million copies and is one of the all-time best-selling business books. The authors, W. Chan Kim and Renée Mauborgne, are following up with a new book: Blue Ocean Shift, detailing how business leaders can be empowered to succeed on their own “blue ocean” journeys. The book is now available and is already a New York Times and Wall Street Journal best seller. Below is an excerpt from their new book.
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Today tighter profit margins, rising costs, and market share battles are hitting companies and industries across the board, from construction to hair salons, advertising to law firms, paper mills to publishing. Even in public and nonprofit sector industries like post offices, museums, libraries, charities, and classical orchestras demand is down, costs and competition are up, and organizations are struggling financially.
In short, we are all paying for the cutthroat markets—what we think of as red oceans full of sharks—around us. To turn things around, we need to shift from competing in bloody red oceans to creating wide-open new markets devoid of competition, what we think of as blue oceans.
But, how?
That was the prevailing question we received from executives, startups, nonprofits and governments around the world after the publication of our first book, Blue Ocean Strategy, which went on to sell over 3.6 million copies.
Entrepreneurs and startups were looking for concrete steps and a systematic process they could follow to create and capture blue oceans at minimal risk. Established companies stuck in the red ocean sought to understand how to move to open water. Their reasoning went like this: Our culture is bureaucratic and resistant to change. Where do we start this process? How do I get people to buy into the idea and bring them along, when all they know and are comfortable with is how to compete along established industry rules? Past experience had taught them that however creative their ideas and change efforts, no shift would happen unless the people element was addressed. To ensure a successful shift, they wanted to know how to win their people’s confidence and cooperation to make a shift despite facing these organizational hurdles.
To meet this new challenge head-on, we spent over a decade analyzing and comparing the successes and failures of blue ocean projects across the globe that have sprung out of the movement we began nearly 30 years ago. In a variety of sectors from business- to-customer and business-to-business, to public, nonprofit, and even governments, we sought to understand the process of shifting from red to blue oceans and seizing new growth by unlocking people’s creativity as much as their confidence to act.
So, after over a decade of new study and analysis, we have arrived at a deeper understanding of what it takes to succeed in the blue ocean shift process. It comes down to three key components. Blue Ocean Shift shows you how to embrace and act on these three key components to carve your path from the red to the blue ocean in a way that people own and drive the process.
The first component is adopting a blue ocean perspective, so that you expand your horizons and shift your understanding of where opportunity resides.
Organizations that shift from the red to the blue ocean ask fundamentally different sets of questions, which in turn enable them to perceive and appreciate the fallacies behind long-held industry assumptions and best practices. They ask, for example: How to achieve both differentiation and low cost simultaneously rather than making a choice between the two. This allows them to conceive of different kinds and degrees of value to offer customers that others either can’t see at all or dismiss as impossible. Adopting the perspective of a blue ocean strategist opens your mind to what could be, instead of limiting it to what is. It expands your horizons and ensures that you are looking in the right direction. Without expanding and reorienting your perspective, striving to open up a new value-cost frontier is like running west looking for the sunrise. No matter how fast you run, you’re not going to find it.
The second component is having practical tools for market creation with proper guidance on how to apply them.
If the right perspective is a matter of shifting one’s strategic thinking by asking different questions, market-creating tools and guidance enable you to ask the right questions at the right point in the process and to see the significance of the answers. Taken together, they build people’s creative competence and provide the structure and parameters within which to organize your thinking so you can conceive and discover what others don’t see, and avoid the potential pitfalls that trip up most organizations.
Step-by-step, they guide you through the central questions for making a blue ocean shift: How do you challenge the explicit and implicit assumptions you hold regarding your business and your marketplace? How do you go about identifying the ocean of noncustomers to create new demand? How can you systematically redefine market boundaries to open up a new value-cost frontier that makes the competition irrelevant? How can you create offerings that stand apart while simultaneously achieving lower costs? And how do you go about building a supporting business model that your organization will follow to profitably bring your strategic vision to market?
The third component is having a humanistic process, something we have come to call “humanness”, which inspires people confidence to own and drive the process for effective execution.
How can you capture people’s hearts and minds and align them with your new strategy? Change, after all, is threatening, and asking people to make a blue ocean shift does just that by asking them to move away from what they know to a new frontier. Yet surprisingly, as we studied organizations that had made successful blue ocean shifts, we saw that people became more creative and more energized, and that execution wasn’t questioned—precisely what you want to achieve, but what’s typically so elusive. Why would that be?
The longer we thought, the more clearly we could see that there was something about the process that had less to do with manipulating the mechanistic levers of structure and incentives, and more to do with recognizing people, acknowledging their fears, their insecurities, their need to be treated with dignity, their desire to matter. We struggled to figure out what word could capture this something and best describe it. The closest we could get was what we came to term humanness.
Shifting an organization from competing to creating or from the red ocean to the blue does not happen in one day or after one off-site. But it also doesn’t take years. As organizations start to see evidence of initial change, energy climbs and momentum to move from the red to the blue ocean is unlocked in a powerful way. Blue Ocean Shift shows how this happens through inspiring, real-world examples and presents a systematic five-step process that anyone can apply to make a successful shift. From established organizations over 100 years old to startups, mid-size companies, nonprofits and even national governments you’ll learn how how they applied the tools and process outlined in the book to shift from competing to creating in a way that brought their people along.
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(Excerpted from BLUE OCEAN SHIFT–Beyond Competing: Proven Steps to Inspire Confidence and Seize New Growth (Hachette, now available) by W. Chan Kim and Renée Mauborgne, professors and the authors of the international bestseller Blue Ocean Strategy.)
