Friday, October 16, 2009

Blue Ocean Strategic Planning

Blue Ocean Strategy

I have just finished reading Blue Ocean Strategy: How to create uncontested market space and make the competition irrelevant by W. Chan Kim and RenĂ©e Mauborgne. It’s an engaging account of the steps businesses or organizations can take to expand their market by identifying new market opportunities rather than simply engaging in business as usual.

For example, Cirque du Soleil took the concept of circuses to an entirely new level by introducing elements of music, dance and theatre. They didn’t compete with other circuses by being bigger or cheaper; they created a new form of entertainment.

Southwest Airlines recognized that their competition was not only other airlines; it was other forms of transportation. They transformed their business by focusing on providing “the speed of a plane at the price of a car – whenever you need it.”

Strategic Planning
I found the chapter on strategic planning to be particularly useful as I think most strategic plans are of little or no value. There is often a disconnect between the abstract plan and the concrete reality of day-to-day operations. And very few plans capture the essence of the organization or provide a clear road map for the future.

As Kim and Mauborgne state, “Few employees deep down in the company even know what the strategy is. And a closer look reveals that most plans don’t contain a strategy at all but rather a smorgasbord of tactics that individually make sense but collectively don’t add up to a unified, clear direction that sets a company apart – let alone makes the competition irrelevant.”

Blue Ocean Strategy outlines a very different approach to strategic planning. The authors recommend focusing on the big picture by developing a strategic canvas that charts the competitive advantages of your company and its competitors. For example, Westjet might give itself a higher rating for customer service while Air Canada might have a higher rate for the number of cities it services.

The chart provides an overview of how you rate compared to your competitors and whether you stand out from the crowd. The next step is to go out into the field and to find out from customers and non-customers what they think about your business. Organizations are often surprised to discover that factors they believe are extremely valuable are of little or no importance to their customers. So it’s important to identify what people actually want and value.

Based on this information, managers are asked to plot new strategies that will meet customer needs and values. Not simply more of the same or business as usual but instead charting a fresh, new course so you’re no longer competing with other companies. You’re in a class of your own.

It’s an ambitious approach to strategic planning, but I like the focus on creating a unified vision rather than a long list of individual projects and on going out into the field to find out what people actually think and want.

1 comment:

John B. said...

As a student of evidence-based marketing (an unusual discipline in which the research group with which I am associated secialises)I find your very clear summary raises a whole volume of issues.

Let me take just one point - the uselessness of strategic plans. The object of the plan is in fact to justify the Marketing budget by predicting a sufficient increase in profit to cover the budget.

This is because the Finance Director asks by how much the Marketing Budget will increase profits. No one ever asks him by how much the Finance Dept. will increase profits. If someone did he would say you cannot survive without a Finance Dept. Ditto for Marketing.

RFemember in nearly every organisation the agenda of individuals is not that of the organisationand may indeed be in direct conflict with it. That is why small organisations where the owner is the Boss often do well. Bureaucracy is not as effective and costs.

As for Mission Statements.......