BLUE OCEAN STRATEGY - A BOOK REVIEW

Blue Ocean Strategy - A Book Review 

Turn back time to 1908 when American automakers built custom-made automobiles which were mostly novelty. The industry was small and unattractive with unreliable,  expensive cars which cost twice the median annual family income, this despite the large number of automakers competing at that time. With the Model  T, Henry Ford set out to make his competition completely irrelevant by offering  middle and upper class Americans a product that was reliable, easy to maintain and at price that was one fifth that of the nearest competition. Ford set a precedent for a strategy that has been deployed successfully across the history of many innovative companies.  A story closer to home and more recent is that of ‘Oyo Rooms’ .This 4-year-old start-up made a major shift and disrupted the Indian hospitality segment with the use of technology that helps travelers find budget hotels which are on par with star hotels in value offering. OYO Rooms has its presence in 174 cities in 3 countries with 4500+ hotels offering standardized stay experience. OYO eliminated extravagant features of 3-star and higher hotels, such as stylish lounges, sports club, spa, and so on but, at the same time retaining standardized services and hygiene of sophisticated hotels.  

Over the last decade authors Chan Kim and Renee Mauborgne have studied such unique cases  and ‘Blue Ocean Strategy’ is the amalgamation of their research , findings and recommendations . In the book they use the metaphor of red and blue oceans to describe the dichotomy observed in most markets. Red oceans represent  the familiar and thoroughly competed market space where  boundaries are defined and recognized . It consists of companies trying to gain a greater share of the demand and as it usually unfolds, market gets crowded and profits slowly decline when cost competition becomes the go to play in a bloody and cutthroat game.

Blue oceans, in contrast represent the unchartered space that is untainted by competition. Demand is created for a product whilst there is tremendous opportunity for profitable and rapid growth. Sounds too good to be true right? Imagine being a part of a project that sets the rules of the game with value innovation. A compelling case is laid out for the advantages of such an approach by the authors as they dissect many examples  of successful Blue Ocean strategies which are inspirational and thought provoking. When taking a closer look  we can see why  each of the businesses talked about in the book were quite special when they started. This has been done by scrutinizing the experience of companies in the industries such as watches, circus, wine, coffee, textiles, automobiles, airlines, computers, cement . Although written back in 2003, the central idea and tools described have become more popular today as companies are actively under more pressure than ever to turn their fortunes around and figure out how to make the ‘blue shift’. My favorite quote from book, “The only way to beat the competition is to stop trying to beat the competition” ,aptly hits the nail on the head  and is well supported by the principles and methods discussed in the practical section of the book.

Personally ,the real take away from Blue Ocean Strategy is the methodical approach of analysis that authors encourage . Over the years they have developed material to help companies look at ‘Value Creation’ that is simply reducing internal costs while increasing buyer value. They introduced the ‘ Strategy Canvas’, a simple tool to compare a business to a benchmark or similar industry.  The Strategy Canvas provides a highly visual tool to help look at future options and to decide what change of course needs to be taken. Blue ocean formulation principles are focused on reconstructing market boundaries and visualizing the big picture , not just numbers. Also worth appreciating is concept of getting strategic sequence right by evaluating your current strategy across criteria such buyer utility, price, cost and adoption. All in all it is an excellent study based on 100 years of competition across 30 different industries. This is a must read not just for executives but also for professionals in dedicated innovation teams .

Regards,

Siddhant Prasad 

Vehicle Technologies and Innovation 

Eaton Corp