Archive for August, 2009

Blue Ocean Strategy, a chance to think more creatively on your business

August 18, 2009

On 13th November 2009 I will do a workshop on ‘Blue Ocean Strategy’ for Kansdenkdag. The Blue Ocean Strategy is the international bestseller written by W. Chan Kim and Renee Mauborgne. The core idea in the book is to extend your business while making your competition irrelevant since the focus has to move to non-customers. At the moment this strategy is extensively hyped by marketing advisors and consultancies. They bring it as the method to save your business from extinction. But to me, this is certainly not the idea behind the book. Red and Blue Oceans don’t stand apart, they exist next to each other. Red Oceans are the cash flows you need to keep your cash cow (see Boston Consulting Group-matrix) alive in your product/service portfolio and the Blue Ocean is the healthy cash flow you will need to invest in your stars to come.

What is this strategy about anyway?
Most companies are in the Red Ocean, trying to extend their business while focusing on the competition who aim at the same customers. This mostly leads to price wars and lowers the status of your brand. In order to get out of this conventional way of thinking the authors W. Chan Kim and Renee Mauborgne propose to draw a Strategy Canvas to see the big picture of your market space. This means you draw a X and Y-axis. On the X-axis you name the key success factors from your business and on the Y-axis you rate them. Then you draw a value curve to combine the rating with your success factors. In the same canvas you draw this value curve also for your competitor(s).
To start the creative thinking you need to utilize the Four Actions Framework  to emerge the Blue Ocean Strategy from your canvas. This may sound difficult, but it simply means that you need to check which factors you can reduce or eliminate in order to gain insight how to drop your cost structure and which factors in your industry you can raise or create with the goal to lift buyer value and to create new demand. This should result into value innovation and the Blue Ocean of uncontested market space, making the competition irrelevant.

But what is so creative about lowering costs and higher customer value?
Therefore the authors suggested the six paths framework next to the framework mentioned above. This is quite a fun thing to do in a business environment during a brainstorm session. You will look at alternative (1+2+3) industries, across strategic groups within industries and across the chain of buyers you can approach for your business. Next to that you (4) look across complementary product and service offerings, and ask which products/services can I add to higher customer value? What are my customer doing before, during or after they utilize my product/service? Or you can think about strategic alliances, networks, co-creation opportunities which will enrich your business. The last two paths are (5) to look across functional or emotional appeal to buyers and (6) to look across time. With looking across time the authors mean to find insight in trends that are observable today. You need to ask yourself which trends have a high probability of impacting your industry, how will they do that and how can you open up for unprecedented customer utility? And that’s it!!

Red Ocean next to Blue Ocean
Of course in the book the authors explain far more about the above mentioned frameworks, but the essence is what I wrote just now. This will give you a start. The authors do realize there are quite some key organizational hurdles to overcome to execute Blue Ocean Strategy. But I think that you can at least start with a brainstorm and take the six paths framework step by step. To change everything at once is in my view too radical. And not taking the competition into account anymore is also an illusion. The competitive strategy theory of Porter is certainly not dead. I actually think that Blue Ocean is the combination of the differentiation and focus strategy of Porter with a pinch of cost leadership. They just gave another name to it. Smart indeed. The Red Ocean is the stuck in the middle position a business falls in when having no focus on the future cash flows.
Red and Blue Ocean do stand next to each other. The Red Ocean is your current position and the Blue Ocean is what you aim for in the future. For me this strategy is a combination of having passion for your business, to bring in some creative out-of-the-box thinking and to restrict the problems that keep your business from growing.

Kim C. and Mauborgne R., Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant, HBR Press 2005.
Interview with Chan Kim by Rick Nieman on RTLZ (introduction is in Dutch, interview is in English)

The marketing department is in danger

August 18, 2009

It occurs to me that during the time the internet bubble bursted (2001/2002), there was also a crash in the marketing value in companies. Both phenomenas focus on increasing market share at the expense of the bottom line: spending money but have no proof if there will enough income in return on investments done. Recently I read an article mentioning that only 10 percent of executive meeting time is devoted to marketing (Ambler 2003, p.62). Clearly respect for marketing in organizations is declining.

Lately I received a direct mail from Tele2, offering me a far lower price for internet and phone usage. Next to that they offered me the service that they will close my subscription with my former internet provider. All for free of course. So there was customer value involved, they were cheaper and they would save me time. Just to check I called my former internet provider and they told me they were not informed that I would leave them and move to Tele2. Then I called Tele2. The person from customer service admitted that no such service existed for the internet/phone bundle I took. Well, why mentioning it on the direct mail then, I asked? Yep, also in this company marketing is used as a tool to feed customers with propaganda. It has lost its role to take care of customers and is only able to report on my rage afterwards. This is when my complaint appeared on

A left-brain approach
But what to do about it? To me marketing is in itself a strong business driver and should be looked at as an investment. Most organizations though perceive it as cost. This is quite logic. First of all most marketers nowadays are engaged in more tactical decisions as advertising, sales support and public relations. Second, they don’t follow a left-brain approach to their activities. According to prof. dr. Verhoef (customer based marketing) and prof. dr. Leeflang (marketing) the two major drivers to increase marketing influence and respect within the company is accountability and innovativeness. Marketing plans should include a financial section that features the planned financial consequences of their marketing actions. To increase the innovativeness of marketing departments, marketers might capitalize on their market and customer knowledge to develop successful new product and service concepts. They could build on new trends, such as customer codevelopment and customer solutions (Verhoef & Leeflang, 2009).

Source: Verhoef P.C. & Leeflang S.H., Understanding the Marketing Department’s Influence Within the Firm, Journal of Marketing Vol. 73 (March 2009), 14-37.