Two birds flying over water

Interview: W Chan Kim Ren�e Mauborgne 'Blue Ocean Strategy'

Surviving in the innovation space can be a ruthless business, where the water turns red with the blood of competitors feeding off each other. A reissued classic management book tells us how to make those waters blue again.

From time to time the world of management book publishing comes up with a real classic. It was 10 years ago when we first got line of sight of ‘Blue Ocean Strategy’, a book that was to sell 3.5 million copies internationally.Detailing the strategies for creating uncontested market space, it was a book that struck a chord with managers the world over. Its authors, W Chan Kim and Renée Mauborgne, set out to explore what they called a ‘Blue Ocean’ of innovation strategy that was to provide insight and methodology in a world where it is so easy to be hypnotised by the red waters of cut-throat competition.

On one level, the book’s central message could not be easier: stop competing and get innovating. But this doesn’t really offer any clues as to how to go about refining the innovation message. It’s tempting to think that while red equals bad and blue equals good, all we have to do is change the way we think. But, as engineering managers, we all know that to effect thought change is one of the hardest things we will ever do. Living in a technological evolutionary phase where it seems that everything changes every day, to keep ahead of the curve we have to keep up-to-date with our management thinking. Which is why the authors have revisited this extraordinary book and brought it up to date for the second decade of the 21st century.

Renée Mauborgne tells me that the revised edition, while adding new chapters and expanding themes, has been written to address the issue of the manager’s trouble-spots in putting the Blue Ocean strategy into practice.

An example of where the book has been brought into sharper focus is where for “organisations that struggle to align their organisational activities, we lay out a simple method to get key components of an organisation, from value to profit to people, working together to support the strategic shift Blue Ocean strategy requires.”

Dynamic renewal

Mauborgne goes on to say that this edition also presents a “dynamic renewal process, one that helps companies to make the creation of Blue Oceans a repeatable process and which helps business organisations balance both Red and Blue Ocean activities.”

Another key update outlines the 10 most common traps our authors see companies falling into when applying the method.

“Those traps – often created when companies embrace Blue Ocean strategy, but interpret and try to apply its tools using more unconventional conceptual models – keep companies anchored in the red, even as they attempt to set sail for the blue. With a proper grasp of the concept, we can avoid the traps and successfully apply its associated tools and methodologies.”

For businesses to be successful and sustainable, key internal divisions must work together or, as the authors say, “be in alignment”. At the highest level of strategic thinking there are three propositions essential to that success: the value proposition (developing an offering that attracts buyers), the profit proposition (creating a business model that enables the company to make money), and the people proposition (motivating the people working for or with the company to execute strategy).

Essentially, companies that adopt the highly competitive Red Ocean strategy are doomed to failure because they are not integrating these three propositions and are characterised by being ‘out of alignment’, as the authors put it.

Blue Ocean strategy companies are characterised by a desire to homogenise these propositions, which in turn allows them to come closer to the holy grail of unified market differentiation and low-cost delivery. “It is this alignment in support of differentiation and low cost that ensures a successful Blue Ocean strategy that has sustainability.”

Into the blue

So far, so good. Blue Ocean thinking is without doubt a very neat way of looking at how companies can manoeuvre their way into lucrative market niches. But what does it really mean? One of the most compelling parts of Blue Ocean Strategy is where the authors analyse the launch of Tata Motors’ Nano car in an illuminating case study.

When the Nano was first brought to market, it was hailed as the ‘people’s car’ and it seemed that nothing could go wrong. It received more media attention than any other automotive launch in the world at the time. It achieved the biggest sales uptake in the history of the global automobile industry. More than 200,000 orders poured in within two weeks of its 2009 launch.

“There was good reason for the Nano’s initial success,” says Mauborgne. “Tata had thought hard about what Indian buyers wanted, valued and lacked in India’s existing transportation options. Tata Nano, by providing a safe, comfortable, reliable and respectable all-weather means of transportation for Indian families at the price of a two-wheeler, put an automobile within the reach of most Indians for the first time. Tata Motors matched this compelling value proposition with the compelling profit proposition; a series of cost innovations in design, manufacturing, marketing and maintenance resulted in a profit proposition that was both differentiated and low cost.”

But despite its initial success, the Tata Nano failed to meet sales targets and public expectations, leading commentators to the reasonable and frustrating question: what went wrong?

“Despite its goodwill and intentions, Tata was unable to secure the cooperation of a critical community where it wanted to build manufacturing facilities. The dispute hinged on the leasing of arable land for industrial use and the level of compensation for local owners.” The company entered a phase of misalignment with its markets because it had been distracted from its original distribution plan. What had looked like a runaway success ended up not in failure, but something less than what the company had expected.

According to the authors, what had gone wrong was that the Indian car manufacturer had failed to focus on aligning the three propositions – a cautionary tale, and one that truly exemplifies how Blue Ocean strategic thinking works.

This is why I think Blue Ocean Strategy is a classic: while most management books today seem capable at proposing reasonable commonsense advice to managers, what we have here is a set of ideas that gets right inside real-world management issues, while offering penetrating insights into how to go about creating space rather than competing for it. As the saying goes: three-and-a-half million people can’t be wrong. Quite brilliant.

‘Blue Ocean Strategy’ by W Chan Kim and Renée Mauborgne is now out in hardback from Harvard Business Review Press, £20.00

Sign up to the E&T News e-mail to get great stories like this delivered to your inbox every day.

Recent articles