The Basic Indepth Concept Of The Red Ocean and The Blue Ocean Strategy.Part-II

RED OCEAN STRATEGY	BLUE OCEAN STRATEGY
Compete in existing market space	Create uncontested market space
Beat the competition	Make the competition irrelevant
Focus on existing customers	Focus on non-customers
Exploit existing demand	Create and capture new demand
Make the value-cost trade off (create greater value to customers at a higher cost or  create reasonable value at a lower cost)	Break the value-cost trade off (Seek greater value to customers and low cost simultaneously)
Align the whole system of firm’s activities with its strategic choice of differentiation or low cost	Align the whole system of a firm’s activities in pursuit of differentiation and low cost.

This time I will be discussing about the in depth of the Blue Ocean strategy which was formulated by the Insead Business School Professors Kim and Mauborgne clearly explains that tomorrow’s leading companies success will not by fighting competitors, but by creating “blue oceans” of uncontested market space which will enhance in terms of market share and profitability and market capitalisation growth. 

There should be a complete paradigm shift which the smart management requires as pioneered in the Blue Ocean strategy as –  “value innovation” leveraging value for both the firm and creating the new customers, outsmarting competitors and unleashing latent demands.

Insead original text where the concepts of Blue Ocean has been given:http://www.insead.edu/blueoceanstrategyinstitute/BOS/index.cfm

The real challenge  lies with the service companies to be in the blue ocean, they should constantly try to come up with innovative ideas and create tangible vales for the product or services to the customers and un served customers.

If not properly managed it can slip down from The Blue Ocean to  The Red Ocean and starts bleeding.Yes it is an intelligent and a very tight walking for the top management guys to keep the firm in The Blue Ocean.

Courtesy: Insead ,France.

The Blue Ocean Strategy :The New Business Mantra For Business Survival

Renee A. Mauborgne, W. Chan Kim pioneered the concepts of The Blue Ocean Strategy is firms innovative thinking specially identify product or services some what different that it is doing at present and creating new rules for value additions through an innovative business re modeling.

The Blue Ocean is a new market place an absolutely new space for firms to cater to the un served customers.

The Red Ocean is a highly competitive market with lot many players operating in that market place and firms margins are under pressure

All new innovative technology are Blue Ocean , say Youtube of Google Inc, Iphone , iPod of Apple Computers Inc to name a few is absolutely Blue Ocean a new market place a virgin global market territory .

Firms has to have a practical market and customer analysis and in-depth understanding of the market dynamics and system in business process thinking must introspect the present conditions the new opportunities lying ahead

Of course it is an enhancement strategy piggy bagging on strategic drifts, SWOT analysis, Michael Porter's generic competitive strategies, Porter's five forces, Porters Differentiation Strategy, BCG Matrix,and other systems adopted in strategic planning and process of change management.

If we track back to Late Dr Michael Hammer’s basic 3C’s( Customer, Competition, Change) while analyzing Business Process Re engineering for a firm, Blue Ocean is indebted to the 3C’s and BPR.

Now in the world of globalization, competition is the name of the game, and to win the game firms must innovate or perish.

It is not only to innovate the product and services but also to innovate a new market segments the product and services can be catered.

An Example: Global Automakers are looking a segment of sub US$3000 car market using alternative source of energy, existing auto makers are getting in to Blue Ocean with sub US$3000 cars focusing for the emerging markets in Asia, Africa and Latin America. Of course not shifting focus from existing market place like EU and North America which are slowly becoming red ocean both product wise and market segment wise.

Yes ,Blue Ocean can become Red Ocean ,back to the basics of Free Market Economics( Free Entry and Free Exit , no firm can operate in a super normal profits or abnormal profits but only can operate in normal profits in long run), new entrant can replicate the firms practicing Blue Ocean and can make the Blue Ocean a Red Ocean.

Markets over which the competition is fierce have turned red. In the bloody red ocean, even the organizations which manage to stay afloat, and command a sizable market share might often face the mind baffling problem of diminishing profit margins for every increase in the pie of the business market share. Markets( bundle of un served customers) still not explored or non existent markets to be precise, are blue (they are yet to turn bloody where firm can operate in super normal profits) and firm’s management smartness should in fact go about identifying and creating such new markets.

Blue oceans are created when there is a perceptible change, an improvement, in value addition. There needs to be value innovation.

When Blue Ocean strategy happens, it makes competition irrelevant as it has created an uncontested market space

Please Click to read the article in HBR.

http://www.courtenayhr.com/images/Blue%20Ocean%20Strategy.pdf

The major concept made in the Blue Ocean Strategy is that firms compete in red oceans( crowded market, large number of competitors a typically monopolistic market tending towards hyper competition ) which are markets that are blood red due to wars( price, market share, human capital shortage, etc) amongst the existing players.

The Blue Ocean Strategy is all about encouraging leaders to develop pristine blue markets, which have not yet been tapped.

Strategy Canvas: Strategy Canvas which is the very core and primary tool used to define a new high level business plan and approach. Strategy Canvas meticulously identify the factors that are the building blocks of the overall strategy of each company competing in that industry. This provides a clear visual representation and enables one to construct a strategy which breaks away from the pack by addressing a different market using a different business model.

Mauborgne, and Kim have taken a many real life examples such success as South West Airlines, CNN, McDonald's, primarily is the service industry.Sustaining and consistency both are important in Blue Ocean strategy.

I Am Coming Back Soon

I was not posting for last four months , I will be coming back soon with lot of posting on Change and Contemporary management thoughts taking place in the current business world.

The topics that I want to write will be on 

1) Blue Ocean Strategy.

2)HR Score Card.

3)Inorganic Growth Culture through Merger and Acquisitions.

4)India in 2025.

5) How to keep the core competence Intact.

 There has been lot of turmoil in the global economy in the last two to three months , high inflation , fall of Lehman Brothers, AIG, slowing down of the global economy coupled with political instability and terrorism. Bailing out the U.S. economy with a package of US$700Bn which will give a breather to the U.S. economy along with the global economy where change management will play the most important role.

Specially the BRIC economy is not insulated to the U.S. economic melt down,still there is a silver lining behind the dark clouds. 

I will discuss all these in my posting shortly. 

Change Management Delimma, Marketing Myopia Verses Technological Myopia.

Management concept guru late Prof Theodore Levitt

talked about the Marketing Myopia http://casadogalo.com/marketingmyopia.pdf in the early sixties.
In the mid sixties he came with the theory of Product Life cycle. PLC is considered to be one of the most talked about
Marketing concepts of product management. It is the starting of life cycle management of any products, proper value addition of product and the product portfolio management.

With technology taking a very aggressive role in PLC the life cycle has become smaller and it span is for 6-9 months in most of the technology business.

Technology life cycle (TLC) in product management is equally important to survive in a highly competitive market place.

PLC is totally dependent on TLC.

Be it in the microprocessor, auto, aviation, pharmacy, energy, software etc business it the TLC which drives the PLC or extends the PLC.

Management should properly usher in Technology life cycle management in a proper way to leverage the technological assets through all six stages of their life cycle—planning, acquisition, deployment, management, support, and disposition.
Management should implement with proper way keeping in mind the above six stages of TLC.
Success of a product depends upon not only the technological excellence but also the marketing excellence.
It a balancing act the management has to make between the technology, marketing and user experience and expectations.
Be it Airbus A380, Apple Computers iPod or Linux Red hat OS it is mix of PCL and TLC.
A change management dilemma Marketing Myopia verses Technological Myopia.

Change Management and Drucker

Management concept guru Late Peter Drucker, once said, "Every three years, an organization should challenge every product, every service, every policy, every distribution channel with the question: If we were not in it already, would we be going into it now?"

It is the self introspection that the management should discuss in their board room about the management concept strategies regarding the enhancement of product portfolios, geographical territories, HR planning, improvisation of latest Information technologies systems and customer satisfactions, and delighting the customers.

Change management is a continuous process and the evolution takes place in the business along with the change in society.

Reaching out to the customers at the same price and through drop shipments with a powerful supply chain system along with high dynamic logistic operations.
With globalization in place and e commerce ruling the world market, competition has increased by leaps and bound.

Management finds very vulnerable with the introduction of modern cutting edge technologies, which has become an integral part of every business success.
Sitting tight with the existing technology, customers, market size can prove dangerous and can be suicidal for any corporations.

Management think tanks continuously work on change management projects that can enhance products and services in order to accelerate market penetration along with the business effectiveness and efficiency.

Change management experts probe different questions and simulates different market unforeseen situations in order to avoid business failures.
Management success depends upon to what extent successfully the management can implement change and at what speed it can change.
There is one thing, which is certainly certain that, is uncertainty, change can only defeat uncertainty.

Human Capital In 2012 A Report By Mercer Consultants.

Management consultant www.mercer.com has recently published a report on the Human Capital shortage in the year 2012.

They have made an analysis four years before what will be the situation like in 2012.

The workforce participation is going to decrease by 0.7% in 2012.

Higher proportion of workers will be of 55 years plus.

More female worker will take part in job.

U.S. Economy will work with more temp jobs.

The management has to look after the retention of talents and work force, better medical facilities has to be given for the Gen Y ,baby boomers.

Demographic shifts and gender imbalance will be a major problem in the developed countries.

Employers should work on the work life balance of the employees.

Employees will ask for more rewards and can look for better opportunities.

Human Capital will be a scare resources ,identify the critical talents and key value drivers with in the business.

CEOforum.com news

www.ceoforum.com.au/article-detail.cfm?cid=8860&t=/Peter-Promnitz--Asia-Pacific-Mercer/Get-ready-for-the-2012-work-force/

given the exhaustive report on this.

Miniaturization Is The Buzz Word.

Miniaturization started in Japan, in the late sixties. It was Sony, Panasonic that started with miniaturization. The Japanese products took the market by storm.
Toady we find portability and mobility is the way of life.

It was Toshiba the first to introduce the Laptop computers, Psion PLC,U.K. was the first to come out with Palmtop computers it was well accepted as Psion Organizer.

Martin Cooper, a Motorola researcher and executive, invented mobile phone. Martin made the first call on a handheld mobile phone on April 3,1973.

Later the value additions were made with camera and many advance features.
Of course the iPod of Apple Computers have revolutionized the miniaturization with its precession technology.

GE came up with miniaturization of MAC 400 electrocardiograph machine; the GE engineers have squeezed the same technology macro electrocardiograph machine into a portable device weighing less than 3 Lbs and can be held with one hand.

In the remote places of rural India, in the sub Saharan Africa mobile hospital vans can come up and the cost of health care can come down with economies of scales.

Affordable medical services can be of great help to developing countries round the world.

Miniaturization is the buzz word in the true sense through technological revolution.