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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  • How should public sector/ government owned firms (which are primarily run on social motives rather than commercial objectives) go about creating BOSs? Have you noticed any public sector/ government owned firm creating a blue ocean?
    While we cannot expose the specifics of government blue ocean strategy initiatives, currently we are working with several governments in Asia and Europe to develop public sector Blue Ocean initiatives.

    The challenges of governmental and corporate change are not equal, just different. Corporations are more willing to change but

    face stock market pressures and the need to show profits right away.The public sector tends to suffer from paralysis by analysis because each policy change affects so many people; moreover, particularly in todays economy, they are hampered by limited resources. But once it sees the positive effects of change, it can move rapidly, unhampered by short-term profit and result requirements.

    One case study thatmade us believers that bureaucratic government organizations can do successful turnarounds was the New York Police Department (NYPD). In the space of two years from 1994 to 1996, police commissioner Bill Bratton and his 38,000-strong force took New York City from the most dangerous to the safest city in the world. Despite budget cuts and wage freezes, it came out with its employees registering the highest motivation rate, enjoying the best reputation among the public and attaining the lowest crime rate ever in the city.

    What you need are people in the organization who have a commitment to change, as well as a clear strategy canvas. If you can engage people emotionally and intellectually, as we found in the NYPD example, you can even beat former General Electric (GE) chief Jack Welch. Mr. Welch took more than 10 years to turn GE around but Bratton did it in two years.

  • What are the critical success factors for creating Blue Oceans? How frequently should the Blue Oceans be revisited before they become red oceans, so that Blue Oceans are continuously created?
    A blue ocean strategy will have three key characteristics: the strategy must be focused, diverge from the competitions strategic profile, and have a compelling tag line that speaks to the market.

    We have to remember that industries never stand still. They continuously evolve. Operations improve, markets expand, and players come and go. If a blue ocean is created, it will not last forever. Eventually the competition will imitate and catch up. As rivalry intensifies, bloody competition commences and the ocean will eventually turn red. If you stay on this course, your strategy will converge with that of the competition and you will be stuck in the competitive trap once again. The example you mentioned of Dell computer, for example, dominated the blue ocean it had created for more than a decade. The company, however, is now in the middle of a bloody red ocean, with declining performance. The key is to monitor your competitors and as their value curve converges toward yours; you should begin reaching out for another value innovation to create a new blue ocean.

    Fortunately, the central tool we use in creating new blue oceans the strategy canvas is also a powerful tool for knowing when you need to innovate once again. The strategy canvas is a visual representation of a companys strategic profile versus its rivals. A breakthrough strategic profile has focus, divergence, and a compelling tagline. Yet once your competitors strategic profile begins to resemble your own, you know its time to start revisiting your strategy and redraw your strategic profile to create a newfrontierwhere there is no or little competition.

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