Business Case Studies, Executive Interviews, W Chan Kim & Renee Mauborgne on Blue Ocean Strategy

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Executive Interviews: Interview with W Chan Kim & Renee Mauborgne on Blue Ocean Strategy
December 2008 - By Dr. Nagendra V Chowdary

W Chan Kim & Renee Mauborgne
Co-Founders and Co-Directors of the INSEAD Blue Ocean Strategy Institute.

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  • BOS suggests that it depends on value innovation not competitive advantage and must try to attract non-customers (markets not currently served). Can you elaborate on what is the distinction between value innovation and striving for a competitive advantage and their connection to BOS?
    The natural strategic orientation of competitive advantage is toward retaining the existing customers and seeking further segmentation opportunities. This often leads to finer segmentation and greater tailoring of offerings to better meet customer preferences. The more intense the competition is, the greater the resulting customization of offerings.

    Although this might be a good way to gain a focused competitive advantage and increased share of the existing market space, it is not likely to produce a blue ocean that expands the market and creates new demand.

    To create and capture blue oceans, companies need to take a reverse course. Instead of concentrating on customers, they need to look to noncustomers. And instead of focusing on customer differences, they need to build on powerful commonalities in what buyers value. This allows companies to reach beyond the existing demand to unlock a new mass of customers that did not exist before.

    Although the universe of noncustomers typically offers substantial blue ocean opportunities, few companies have keen insight into who noncustomers are and how to unlock them. To convert this huge latent demand into real demand in the form of thriving new customers, companies need to deepen their understanding of the universe of noncustomers. The book outlines the three tiers of noncustomers so that companies can understand how to identify the universe of their noncustomers. Once identified, companies should look across to the commonalities across noncustomers. If you focus on these, and not on the differences between them, you will glean insight into how to desegment buyers and unleash enormous latent untapped demand.

  • Your work on BOS does not highlight as many illustrations from emerging markets as developed markets. Was it a well considered exclusion or out of BOS research's purview? Do you also notice emerging markets companies doing a good job in creating Blue Oceans?
    No, not at all. We have numerous examples from both developed and emerging markets. When we talk about blue oceans, most people skip past value and think of new territories, new technologies, new products, new ventures, market pioneering or first-mover advantage. But blue ocean strategy is really about challenging assumptions about strategy, redefining market boundaries and making the competition irrelevant rather than competing on established ground regardless of whether you are a first mover in a developed or developing marketplace. In our work we have found that it is possible to create and capture blue oceans in just about any setting independent of geography, competitive environment, economic outlook, or industry. And this is why blue ocean strategy is being executed around the globe in some of the worlds largest and smallest companies across industries as diverse as cosmetics to financial services.

  • Do you believe that effective BOSs emerge from desperate situations rather than from comfort zones? After all, sticking to status quo seems to engage the companies than seeing whats written on the wall?
    Our research has revealed that creation of blue oceans is not restricted to either successful companies who are comfortable or companies with their backs against the wall. Companies, such as Nintendo (with the Wii) and Chrysler (with the minivan in the 1980s), have seemingly come back from the dead to create new markets and dramatically reshape industry dynamics. On the other hand, comfortable incumbents such as 3Ms Post it Notes or IBM with the System/360, IBM 650, and countless other strategic moves were top suppliers of their industry when they created blue oceans. We have found that the creation of blue oceans is a product of strategy and as such is very much a product of managerial action, and not the health, size or age of the firm. The point is, a blue ocean will be created if a companys strategic move achieves value innovation, the simultaneous pursuit of differentiation and low cost, by aligning its utility, price, cost, and people propositions. If these criteria are met, a blue ocean will be created regardless if it is in peril or on top of the industry

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