What is a blue ocean strategy? Blue ocean strategy: from Apple to Cirque du Soleil What is a blue ocean in marketing.

English Blue Ocean Strategy 2005

Reads in 14 minutes, original - 25 minutes

The blue ocean strategy is designed to minimize possible risks. It is based on three principles:

• minimizing search risk - reconsidering market boundaries;
• minimizing planning risk - focusing on the big picture, not on numbers;
• minimizing the risk of scale - going beyond existing demand.

To effectively implement a blue ocean strategy, direct the organization's activities towards its implementation. There are two principles for reducing organizational and management risks.

• Minimizing organizational risk - overcoming organizational obstacles.
• Minimizing management risk - monitoring the implementation of the strategy.

Customer value innovation is the foundation of a blue ocean strategy

The main goal of the blue ocean strategy is value innovation, that is, improving consumer qualities and reducing costs. This can be achieved if the company maintains a balance between utility, price and costs.

In most cases, the company strives to gain market share. This is the traditional approach of enterprises - the red ocean strategy.

A new product is created only 14% of the time, which accounts for 61% of total profits. This shows that companies that choose a blue ocean strategy have a much greater chance of success.

But modern business is characterized by a number of trends.

• Thanks to technological progress, productivity has increased and supply exceeds demand.
• Due to lower trade barriers and globalization, specialized market niches with high prices have disappeared.
• Global demand for many products is falling along with population decline in developed countries.

As a result, profits decrease and many products become standardized mass products. To avoid fighting for market share, companies are trying to create a new market space that is highly profitable and free from competition.

Companies creating new customer value strive to achieve both differentiation and cost reduction. To do this, you need to offer customers a new product at an affordable price. Over time, economies of scale will take effect and costs will fall even further.

How to develop a blue ocean strategy?

Tool #1: Strategy Canvas.

The strategy canvas shows the key drivers of competition in an industry and allows you to analyze what firms are investing in and what benefits they offer to their customers.

Using this method, you need to pay attention to alternative products. Create an offer for customers that includes elements of the consumer value of products from other industries. This way you can develop new ideas, rather than offering customers analogues of existing products.

Tool No. 2. Four Action Model.

To find the weaknesses in the way an industry operates, there are four key questions.

1. Which customer value factors should you exclude?
2. Which factors should be reduced?
3. Which factors should be increased in importance?
4. What new sources of value should be created?

Every industry has the necessary factors to penetrate the market. But consumer preferences are changing, and current products and services may be too complex and expensive for consumers.

These questions will help identify irrelevant competitive factors. Try to identify the hidden trade-offs that consumers were forced to make.

Tool No. 3. Lattice.

Grid method: the company fills out a table that allows you to understand the differences in its actions from industry standards. Thanks to this method, managers will be able to act in a coordinated manner.

When completing the grid, carefully examine the factors that are considered necessary for an industry player and evaluate whether they are justified.

An effective blue ocean strategy has three distinctive features.

• Having priorities. Rely on a limited set of competitive factors. Do not invest in development areas that are not related to these priorities.
• Deviation from the standard. Consider alternative options rather than industry-standard approaches.
• Clarity and intelligibility. A good and obvious strategy can be described in one capacious slogan.

Principles for developing a blue ocean strategy

There are four principles for creating a blue ocean strategy.

Principle 1: Redefining Market Boundaries

There are six ways to find attractive blue ocean ideas.

1. Analyze alternative industries and determine which products and services look different but serve the same purpose. The consumer often chooses between offers from different industries. Take advantage of the space between these spheres.

Example. NetJets offered customers a scheme that combined the speed and convenience of private jets with the low cost of fractional ownership found in other industries.

2. Consider the different classes of firms in this industry and determine what factors influence client choice. Borrow the core benefits of each class and discard the excess.

Example. Lexus vehicles combine the quality of luxury brands such as Mercedes, BMW and Jaguar with the price of inexpensive Cadillac and Lincoln models.

3. Study different buyer groups and connect their perceptions of value. Change the traditional perception of your target buyer.

Example. Canon developed desktop copiers by shifting from corporate buyers to users who wanted to have their own photocopier at home.

4. Consider complementary products and services and come up with a combined solution.

Example. Bookselling chain Barnes & Noble has shifted its focus from selling books to creating a conducive environment for reading and learning.

5. Evaluate the attractiveness of the product and reconsider the traditional industry solution. Add emotional appeal to a functionally useful product or shift the balance from the emotional component towards functionality.

6. Predict what the market will be like when the development of a particular technology is completed. You will discover new opportunities if you identify what needs to change today.

Example. Apple was inspired to create the iTunes online store by the success of the file-sharing network Napster. It has become clear that consumer demand for technology that allows digital music downloads is high. Then Apple developed a legal, simple and inexpensive way to access audio files and captured the market.

Principle 2: Focus on the big picture, not the numbers

The typical strategic plan imposes a red ocean strategy on the company and never creates blue oceans. To avoid this mistake, you need to focus on the big picture rather than getting lost in a sea of ​​numbers. To do this, draw a strategic outline for your company that:

• accurately and clearly represents the company’s position in the market;
• allows you to build the future strategy of the company;
• helps employees focus on the big picture;
• determines factors influencing competition in the industry;
• shows what areas your company and its competitors are investing in;
• promotes dialogue between company divisions on issues of further development;
• activates the dissemination of strategically successful methods and the exchange of experience between departments.

Creating a firm's strategic canvas is not easy. Disagreements in the choice of competitive factors and their assessment in relation to your company are inevitable. Many managers tend to define utility and value in terms of internal users rather than customers.

How to build a strategic outline for a company?

Achieve complete understanding. Clearly compare your company with its competitors. Let everyone see the big picture and look beyond personal interests. Draw a proposed strategic outline, discuss and compare it with competitors' strategies. Encourage everyone's participation and creativity.

Send managers to conduct on-site research. Let them interact with customers personally and find out exactly how people use your product or service. You should not entrust this to third parties or rely on other people's reports.

Talk to non-customers and determine why your product doesn't appeal to them. Analyze what alternatives they are currently using. Assign this task to two teams. Let everyone offer their own version of a new strategy and slogan.

Hold a concept competition in which each team will present a version of the strategy canvas based on the results of their “field research.” Let each “judge” vote for their favorite concept. This will immediately determine the most successful strategy.

Communicate the approved strategy to everyone. Distribute graphs to employees that compare the company's old and new strategic profiles. Managers should discuss these changes with their subordinates.

Principle 3: Going beyond existing demand

By creating a blue ocean, the company strives to make it as large as possible, and therefore reduce the risk associated with establishing services for this market. To do this, try to interest as many non-customers as possible with your offer, who can be divided into three categories.

Level 1 non-customers- buyers located on the border of your market. They will abandon your products as soon as something more interesting comes along. Offer them a radically new customer value, and they will buy more often.

Tier 1 non-customers also include people who use your products for lack of better options. Find something in common between non-customers and borderline clients and you'll know what to focus on.

Find out what they like, find out what solutions attract them. Often more ideas about discovering and expanding the blue ocean come from non-customers than from regular customers.

Level 2 non-customers- customers who don't use your product because it's too expensive or complicated. Find out why these people don't buy your products or use your industry's products and services, and try to find commonalities between these reasons.

Level 3 non-customers- Buyers who have not considered your industry offerings because their needs lie in other markets. Try to reach beyond industry boundaries and tap into a vast ocean of previously untapped demand.

Principle 4. Commitment to the chosen strategy

When developing blue ocean strategies, you need to create a sustainable business model that will effectively implement your idea. It is important to adhere to the chosen strategy - this will reduce possible risks associated with the business model.

Optimal strategic sequence.

1. Usefulness for the buyer.
2. Affordable price.
3. Costs and possible profits.
4. Promoting ideas and solving possible problems.

What are the differences between useful goods and services?

• They are easy to buy.
• They are delivered quickly.
• No special training is required to use them.
• They do not require expensive auxiliary products.
• They are easy to maintain.
• They are easy to dispose of at the end of their service life.

It is necessary to determine what price will allow you to quickly conquer the mass market. Go to market with an offer that customers can't refuse, and then try to retain that audience.

There is a price corridor, which is determined by comparison of alternative products. If it will be difficult for competitors to copy your work methods, you can set the price near the upper limit of this corridor. But if you are not protected from imitators, it is better to set the price at the lower limit of the corridor, limiting the number of competitors. Setting an affordable price will trigger the “word of mouth” mechanism and make the product popular.

Next, you need to understand whether you will make a profit at the target price. Here you need to start from the strategic price, subtracting the desired profit from it and getting the planned cost, and not determine the price based on costs. The following methods will help you meet these stringent requirements.

Streamlining the production process and introducing innovations to reduce costs, for example, replacing raw materials with non-traditional but more affordable alternatives.

The use of other materials and new production methods, for example through more modern and cheaper technologies.

Entering into partnerships with other suppliers that perform production and sales functions more efficiently. The partnership also allows you to benefit from the professional knowledge of another company.

Changing the pricing model, for example, switching from selling a product to renting or leasing. Some firms are very successful in providing their products in exchange for equity participation and a share of future profits.

Your product won't succeed if people aren't willing to accept it. Therefore, it is important to overcome the resistance of the three main groups.

1. Employees who will unknowingly sabotage any innovation if they see it as a threat to their income.
2. Business partners who need to be assured that a new product or service will not affect their income and market position.
3. A wide audience that has difficulty accepting new ideas.

Principles for implementing a blue ocean strategy

To implement a blue ocean strategy, it is necessary to direct the company’s activities towards its implementation, for which there are two principles.

Principle 1. Overcoming organizational obstacles.

The implementation of a blue ocean strategy faces three obstacles:

• most employees are against change;
• the company has a limited amount of resources;
• employees do not want to change their usual working methods.

The “spot activation” method helps to overcome these obstacles: the leader focuses on the people and activities on which the work of the entire organization depends.

To convince employees of the need to change strategy, have them independently assess the market situation and understand that change is necessary. Get employees to interact with unhappy customers.

To solve the problem of lack of resources, properly allocate the resources you already have. Determine what requires the least investment but still improves the organization's performance, and direct resources to those hot spots. Exchange unnecessary resources for necessary ones. Identify areas of inefficient use of resources (“cold spots”). Transferring resources from “cold spots” to “hot spots” can significantly facilitate the implementation of a blue ocean strategy.

To encourage employees to adopt more effective work practices, tell them about the future. Don't issue orders that force everyone to think differently from now on.

Work with opinion leaders. Get the support of influential people in your company - their willingness to revise the way they work will convince others.

Encourage transparency. Emphasize the importance of inclusiveness and honest, open discussion. Explain to employees the need for change. This allows you to smooth out doubts that arise among ordinary employees.

Break down the task. Using the “point activation” method, break the overall goal into small components that are feasible for the performers.

Provide support to those who will benefit most from a change in strategy. Build a broad coalition of change advocates and convince them to support you.

Neutralize those who stand to lose the most from a change in strategy. Refute the attacks of skeptics with facts and irrefutable logic.

Add a respected, knowledgeable employee to your team. This advisor knows the situation from the inside and will help you solve the problems of intra-company intrigue.

Principle 2. Formation of commitment to the strategy.

A blue ocean strategy must be developed through open, collaborative discussion. Seeing that the development of the strategy is being carried out honestly, employees will voluntarily participate in the implementation of the plan in the following stages.

• Strategy Development: involve employees in the discussion and explain the essence of the proposed strategy.
• Formation of installations: Show your employees that you take their opinions into account - this is how you will win their trust and loyalty.
• Stimulating desired behavior: Encourage voluntary participation in strategy implementation.
• Implementation of the strategy: Create conditions for employees to show personal initiative.

Brand image prevents competitors from borrowing innovative ideas. The implemented blue ocean strategy sometimes covers all available demand, so that imitation becomes unprofitable. Patents or licenses can be used to protect against copycats.

When your value curve starts to converge with your competitors', you'll need to innovate again. Step outside your strategy canvas and look for a new blue ocean. An organization's long-term success depends on its ability to repeatedly create blue oceans.

Chan Kim
Rene Mauborgne Chapter from the book “Blue Ocean Strategy. How to find or create a market free from other players"
Publishing house "Mann, Ivanov and Ferber"

Overcoming key organizational barriers

Having developed a blue ocean strategy and a profitable business model, the company must turn its ideas into reality. Of course, the implementation of any strategy has its difficulties. Companies and individuals alike often have a difficult time turning thought into action, whether it's in the red or the blue ocean. Compared to the red ocean strategy, entering the blue ocean involves a major disruption to the status quo. This strategy is based on moving from convergence to divergence of value curves while reducing costs. This is what makes its implementation much more difficult.

Managers assured us that this test was not easy. They need to overcome four obstacles. The first is the emergence of internal dissonance among employees. It is necessary to convince them of the correctness and necessity of making a strategic change. While red oceans may never lead your company to profitable growth, they do make people feel at ease.

If the red waters have served the organization well so far, why rock the boat?

The second obstacle is limited resources. It is believed that the more serious the changes an organization undertakes, the more extensive resources are needed to carry them out. However, in many of the organizations we studied, resource use was decreasing, not increasing.

The third obstacle is motivation. How can we motivate key actors to act quickly and purposefully to break out of the status quo? This can take years, and managers don’t have that kind of time.

And the last obstacle is political intrigue. As one manager put it, “It’s like this in our company: you haven’t even had time to say anything, but they’ve already dealt with you.”

Although these obstacles vary in complexity in each case, and many companies face only a few of these four, the ability to overcome them is essential to reducing organizational risk. This brings us to the fifth principle of blue ocean strategy: overcome key organizational barriers so that blue ocean strategy is translated into action.

To effectively achieve this, a company must abandon the traditional view of implementing change. Conventional wisdom holds that the bigger the change, the more time and resources you need to invest to get results. We need to turn this view on its head through what we call purposeful leadership. Purposeful leadership allows you to quickly and cost-effectively address these four obstacles while gaining employee buy-in as you challenge the status quo.

Purposeful Leadership in Action

Take for example the New York Police Department (NYPD), which implemented a blue ocean strategy in the public sector in the 1990s. When Bill Bratton was appointed New York Police Commissioner in February 1994, he faced an adversity the likes of which few have seen. In the early 1990s, New York was sliding into anarchy. The number of murders broke all records. The newspapers were filled with reports of street robberies, mafia raids, lynchings and armed robberies. New Yorkers were under siege. Bratton's budget was miniscule. Moreover, after a continuous increase in the crime rate in New York for 30 years, many sociologists concluded that the police would not be able to cope with it. New Yorkers were crying out for help. The New York Post's front page headline screamed, "Dave, Do Something!" — this was a request to then-mayor David Dinkins to quickly reduce the number of crimes. With pittance wages, dangerous working conditions, long hours, and little prospect of promotion under the police promotion system, the mood among New York City's thirty-six thousand police officers was at its darkest. Let's not even mention the harmful effects of budget cuts, deteriorating equipment and corruption.

In business terms, the NYPD was a cash-strapped organization whose thirty-six thousand employees were resigned to the situation, unmotivated, and paid meager wages; its dissatisfied customer base united all New Yorkers; performance was steadily deteriorating, as evidenced by rising crime, fear and disorder. The picture was completed by hardware fuss and political games. In general, the desire to lead changes in the strategic course of the NYPD could not have been dreamed of by most of its then leaders even in an unimaginably nightmare. And competitors - criminals - became more and more powerful, and their number grew.

Yet in less than two years and without increasing the budget, Bratton transformed New York into the safest major city in the United States. He emerged from the red ocean armed with a blue ocean policing strategy that revolutionized the way American policing was perceived at the time. Between 1994 and 1996, the organization began to win, its “profits” increased sharply: the number of serious criminal offenses fell by 39%, murders by 50%, and thefts by 35%. The “clients” won: according to opinion polls conducted by the Gallup Institute, trust in the police among city citizens jumped from 37 to 73%. Employees also benefited: internal surveys showed unprecedented satisfaction with their jobs as police officers. As one patrolman put it, “We'd go to hell and back for this guy.” Perhaps most impressively, the change outlived the leader and resulted in a fundamental transformation of the NYPD's culture and strategy. Even after Bratton left in 1996, crime rates continued to fall.

Few corporate leaders have faced as many organizational obstacles as Bratton in challenging the status quo. There are even fewer who, under any organizational conditions, would have been able to achieve the dramatic leap in quality that Bratton achieved, much less under the unprecedented difficulties that he had to face. Even Jack Welch took ten years and tens of millions of dollars in reorganization and training to turn GE into a powerhouse.

Moreover, by defying public opinion, Bratton achieved such impressive results in record time and with very few resources, while lifting employee morale and ensuring a “win-win” for all concerned. This was not Bratton's first change of strategy, but his fifth, all of which were successfully implemented despite having to overcome all four obstacles that managers say typically limit their ability to implement blue ocean strategies. These barriers include a lack of understanding among employees of the need for radical change; limited resources, characteristic of almost all companies; low motivation, discouraging and demoralizing staff; political machinations, the product of which is internal and external resistance to change (Fig. 1).

Rice. 1. Executing Strategy: Four Organizational Barriers

Main lever: disproportionate influence factors

The idea of ​​purposeful leadership comes from epidemiology and tipping points theory. It is based on the idea that in any organization, fundamental change occurs quickly when the convictions and energy of a critical mass of people create an epidemic movement towards an idea. The key factor in initiating such movement is concentration, not diffusion.

Purposeful leadership is grounded in the rarely used corporate reality that every organization has people, actions and activities that have a disproportionate impact on performance. Thus, contrary to the traditional view, overcoming a major obstacle does not involve organizing an equally major response, where performance is achieved through a proportionate investment of time and resources. Rather, it is about conserving resources and reducing time by focusing on identifying the disproportionate influence factors in the organization and then acting on them.

The key questions that goal-oriented leaders answer are: What factors or actions have a disproportionate positive impact on changing the status quo? What about getting the maximum return from each unit of resources? To motivate key actors to actively drive change? To remove political barriers that constantly threaten even the best strategies? By fully focusing on the points of disproportionate influence, a focused leader can overcome all four barriers to implementing a blue ocean strategy. He can overcome them quickly and without great expense.

Now let's look at how we can target disproportionate influences to remove all four barriers to moving a blue ocean strategy from thought to action.

Breaking through the barrier of misunderstanding

Very often during changes of course and corporate transformations, the main challenge is to get people to recognize the need for a change in strategy and understand the reasons for it. Most company executives, when explaining the reasons for change, show numbers and insist that the company must set ever larger goals and achieve them: “There are only two alternative paths: meet the goals or exceed them.”

However, as we all know, numbers can be manipulated. By insisting on increasing the values ​​of target indicators, the manager can provoke abuses at the budgeting stage. This, in turn, creates hostility and suspicion in various parts of the organization. Even when the numbers are not manipulated, they can lead to undesirable consequences. For example, salespeople who receive a commission on sales rarely pay much attention to the costs of their transactions.

Moreover, an idea expressed through numbers rarely sinks into a person’s soul. The reason for change seems abstract and divorced from the tasks of line managers, but it is their commitment that the head of the organization needs to win. Managers whose departments are performing well believe that criticism does not apply to them and this is all a problem for senior management. Managers of poorly performing units think that they are being “made to look like,” and those who are worried about the guarantees of their own employment would rather study the job market than strive to resolve the company’s problems.

Purposeful leadership does not rely on numbers to overcome employee misunderstanding of the need for change. To quickly overcome this obstacle, purpose-driven leaders like Bratton focus on harnessing disproportionate influence: giving people first-hand experience of harsh realities. Research in neuroscience and cognitive psychology shows that people remember better and respond more effectively to what they have seen and experienced: “Seeing is believing.” As we experience something, positive stimuli reinforce behavior, while negative stimuli change attitudes and behavior. Roughly speaking, if a child puts his finger in the jam and then licks it, then the tastier the jam turns out to be, the more times the child will repeat this action. He will not need parental advice to reinforce this behavior. And vice versa, after touching a hot stove, a child will never repeat the experiment. Having received a negative experience, children change their behavior of their own free will, and again, they do not require any parental teaching. On the other hand, if during the acquisition of experience a person did not see, feel, or experience the direct result of his actions, but, for example, he was simply shown a series of abstract numbers, this will not have any effect on him and the experience gained will be easily forgotten.

This is what purposeful leadership is all about. His task is to quickly make changes in a person’s consciousness, which this person will make solely of his own free will. Instead of relying solely on the impact of numbers to combat misunderstanding, purposeful leaders make people feel the need for change in two ways, discussed below.

Take a ride in the "electric sewer"

To disrupt the status quo, employees themselves must face their worst workplace problems head-on. Do not allow senior, middle or any other authorities to start theorizing about the current situation. You can argue about numbers, numbers are not inspiring, but direct confrontation with ineffective work is shocking, you cannot run away from it, it requires action. Such direct experience has a disproportionate impact in helping to quickly resolve misunderstandings.

Let's consider this example. In the 1990s, the New York subway smelled so strongly of fear that it was nicknamed the “electric sewer.” The townspeople boycotted this type of transport, and profits fell quickly. At the same time, the officers of the New York City Transit Police did nothing. Why? Only 3% of major urban crimes took place in the subway. Therefore, no matter how much the townspeople cried out to the authorities, they remained deaf. No one recognized the need to rethink police strategies.

Bratton was then named police chief, and within just a few weeks he had completely changed the mindset of the city's police force to change the situation. How did he do it? Not by force or with the help of numbers. He simply ordered that top and middle management - starting with himself - only travel in the "electric sewer" at any time of the day. This practice did not exist before Bratton.

While the statistics may have convinced police that the subway was safe, they now saw with their own eyes what every New Yorker experienced every day: a subway system on the brink of anarchy. Gangs of youths were hanging around the carriages, people were jumping over the turnstiles, passengers had nowhere to escape from graffiti, aggressive beggars and drunks sprawled on the seats. The police could no longer remain ignorant of such an ugly truth. No one had any doubts that it was urgent to change the strategy, to break the status quo, and quickly.

Showing your managers the worst side of reality can also quickly change their perceptions of the status quo. Likewise, leaders can force those above them to agree to their demands. However, very few leaders use this quick and powerful means of “awakening.” More often they do the opposite. They try to gain support through digital displays that do not create a sense of urgency or provide an emotional boost. Or they resort to stories about their most successful projects. While these alternative methods may work, none of them overcome the prevailing lack of understanding at the top of the need for change as quickly and effectively as demonstrating the worst.

For example, when Bratton ran the police department of the Massachusetts Bay Transportation Authority (MBTA), MBTA management decided to purchase small police cars that would be cheaper to buy and operate. This did not fit with Bratton's new strategy. But rather than challenge the decision or demand an increase in the budget—a proposal that would have taken months to consider and would likely have ultimately been rejected—Bratton invited the MBTA general manager to take a tour of his department's area of ​​responsibility.

To give the general manager a taste of all the horrors that Bratton was trying to fight, he put him in a small car, very similar in size to the ones ordered. Bratton pushed the seats all the way forward so that the manager could feel how little legroom the six-foot-tall cop would have. Bratton drove his boss for a long time, driving around all the holes that could be found in the area. He also put on a belt, handcuffs, and a gun holster, so the general manager could see how little room there was for police equipment. Two hours later the manager asked to come outside. He said he didn't understand how Bratton could drive for long periods of time in such a cramped car, even alone - what if there was a criminal in the back seat? And Bratton got the larger cars he needed under the new strategy.

Deal with dissatisfied customers

To overcome misunderstandings, you should not only get managers out of the office, give them the opportunity to see all the inconveniences at work, but also force them to listen to what the most dissatisfied customers have to say. Do not rely on market research. How often does your senior management personally observe what is happening in the market and interact with the most dissatisfied customers and listen to their complaints? Have you ever thought about why sales don't match your confidence in your own product? Simply put, there is no substitute for actually meeting and talking with a dissatisfied customer.

In the late 1970s, Boston's Precinct 4, home to Symphony Hall, the Christian Science Mother Church, and other religious and cultural institutions, was experiencing serious crime problems. Residents of the area were in fear; many sold their homes and moved away, thereby only further complicating the situation. However, despite the exodus of residents, the police, led by Bratton, believed that they were doing a good job. The performance metrics that police officers have always relied on to compare their own performance with other police departments have been fairly consistent: 911 calls have fallen and the number of violent crime arrests has risen. To deal with this paradox, Bratton organized a series of meetings between police officers and area residents at City Hall.

The reason for the misunderstanding quickly became clear. Although the police took great pride in their quick response to incidents and their record of solving major crimes, their efforts were not noticed or appreciated by the citizens; Few were afraid of large-scale crimes. Much more fear and anxiety was caused in them by constant minor irritants: drunkards, beggars, prostitutes, graffiti on the walls.

As a result of meetings with citizens, police priorities were completely revised, and police activities focused on a blue ocean strategy called “broken windows” 2. The number of crimes fell and residents of the area regained peace.

When you need to wake up an organization to make strategic changes and change the status quo, do you rely on numbers? Or do you force managers, employees, and management (and yourself) to confront your most pressing work issues head-on? Do you force managers to get to know the market personally and listen to complaints from dissatisfied customers? Or do you outsource your own eyes and send out market research questionnaires?

Overcoming the lack of resources

Once a company's employees have recognized the need for a change in strategy and have more or less agreed to the outline of the new strategy, most leaders are faced with the same thing: limited resources. Do they have the money to implement the necessary changes? At this stage, most reform leaders do one of two things. Either they limit their ambitions and further demoralize workers, or they try to get more resources from bankers and shareholders - a process that can take a long time and divert attention from immediate problems. This is not to say that this approach is not needed or does not make sense, but obtaining additional resources is often time-consuming and politically challenging.

How can you change a company's strategy with only limited resources at your disposal? Instead of focusing on finding more resources, goal-oriented leaders focus on adding value to what they already have. When it comes to resource scarcity, there are three disproportionate influence factors that a manager can take advantage of to both free up significant resources and increase their value. These factors include hot spots, cold spots, and favorable exchanges.

Hot spots are activities in which few resources are invested, but have a high return potential. Cold spots, on the other hand, are activities in which a lot of resources are invested, but have little impact on performance indicators. In any organization, cold spots and hot spots usually abound. During the exchange, you give away excess resources available in one of the areas of your division, and in return you receive excess resources from another division, allowing you to fill the resource gap you have. Having learned to properly use available resources, a company can often easily cope with their shortage.

Which activity consumes the most resources but has little impact on operational efficiency? Conversely, which activities have the greatest impact on performance while requiring the least resources? By asking questions this way, a company quickly learns to free up low-impact resources and redirect them to areas of maximum impact. In this way, it simultaneously achieves lower costs and higher value.

Redirect resources to hot spots

At the New York City Transit Police, Bratton's predecessors argued that subway safety required a police officer on every line and a patrol at every entrance and exit. Increasing “profits” (reducing crime) would mean increasing “costs” (police) in amounts not possible within the available budget. The logic of this approach was obvious: increased efficiency can only be achieved through a proportional increase in resources. A similar logic guides many companies' thinking about how to achieve better performance.

Bratton was able to achieve the record reduction in crime, fear and disorder in the history of the transit police not by increasing the number of police officers, but by distributing them to hot spots. From his analysis, it became clear that although the underground system was a labyrinth of lines, entrances and exits, most of the crimes occurred in only a few stations and on a few lines. In addition, Bratton found that these hot spots were not given enough attention, even though they had a disproportionate impact on overall crime rates, while lines and stations where virtually no disturbances were reported were manned by the same number of police officers. The solution was the redistribution of police forces, concentrating them in hot spots in order to suppress crime. Crime began to decline rapidly, although the total number of police officers did not change.

Things were exactly the same in the narcotics department until Bratton came to the NYPD. The department operated from nine to five and only on weekdays, using less than 5% of the police department's human resources. To identify resource hot spots, in one of his first meetings with NYPD department heads, Bratton's deputy in crime strategy, Jack Maple, asked those around the table how many crimes they thought were drug-related. Most answered 50%, some - 70%; the lowest estimate was 30%. Maple noted that based on these numbers, it was clear that the narcotics department, which employed less than 5 percent of the NYPD, was seriously understaffed. Moreover, most drug squads were found to work from Monday to Friday, despite the fact that the vast majority of drugs were sold on weekends and that was when drug-related crimes typically occurred. Why is that? Yes, because it has always been this way; it became a traditional modus operandi that no one questioned.

After laying out these facts and identifying hot spots, Bratton's proposal for a major reallocation of personnel and resources within the NYPD was quickly accepted. Accordingly, Bratton redirected personnel and resources to the hot spot, and drug crimes fell sharply.

Where did he get the resources necessary for this? At the same time, Bratton assessed his organization's cold spots.

Free up resources from cold spots

The leader looks for cold spots to free up resources. Again, in the case of the subway, Bratton found that one of the coldest points was escorting criminals to court. On average, it took a police officer sixteen hours to take a person downtown, even if it was for a minor crime. At this time, the policeman could not patrol the subway and thereby add value.

Bratton changed the whole system. Instead of transporting criminals to court, he, on the contrary, began to deliver the pre-trial processing center for minor criminal charges to criminals using mobile police stations - old buses converted for this purpose and parked near subway stations. Now, instead of transporting a criminal across the city to court, the police only had to take him out into the street and escort him onto the bus. This reduced the time it takes to process charges from sixteen hours to one hour and freed up more police officers to patrol the subway and apprehend criminals.

Make a profitable exchange

In addition to reallocating available resources within the unit, goal-oriented leaders successfully trade resources they don't need for those they do need. Let's remember Bratton again. Anyone who has managed a public sector organization will know that the size of its budget and the number of employees are always hotly debated, as public sector resources are notoriously limited. Therefore, the heads of organizations in this sector do not like to talk about the excess resources they have, much less allow other divisions of the organization to use them: this creates the risk of losing control over these resources. As a result, some organizations are simply overwhelmed with resources they don't need while lacking the resources they need.

After Bratton became chief of the New York City Transit Police in 1990, his chief adviser and strategy consultant Dean Esserman (now the police chief of Providence, Rhode Island) played a major role in organizing the exchange. Esserman discovered that the transit police, which lacked office space, had a mass of unmarked cars, the number of which exceeded the needs of the department. New York's probation department, on the other hand, had a shortage of vehicles but an abundance of office space. Esserman and Bratton proposed a very profitable exchange, the idea of ​​​​which was greeted with gratitude by the probation officers. The transport police workers were glad to have the first floor of a beautiful building in the city center at their disposal. This deal strengthened Bratton's authority in the organization, which later made it easier for him to make much more serious changes. At the same time, his politically powerful bosses saw him as a problem solver.

In Fig. Figure 2 shows how Bratton radically redirected the TPD's resources to break out of the red ocean and implement his blue ocean strategy. The vertical axis shows the relative level of resource allocation, and the horizontal axis lists the various elements of the strategy in which investments have been made. By making some areas of transit police less important, or even eliminating them altogether, while increasing the importance of others or creating new ones, Bratton achieved major changes in the allocation of resources.

Rice. 2. Strategic canvas of transformation: how Bratton regrouped resources

If the steps taken to eliminate or reduce entail a reduction in the organization’s costs, then increasing certain elements or creating new ones, on the contrary, requires additional investments. However, as can be seen in the strategy canvas, the overall level of resource investment has remained virtually unchanged. At the same time, the value offered to citizens began to grow. By eliminating the practice of broad subway coverage and replacing it with a targeted strategy of focusing on hot spots, transit police have been able to more effectively and efficiently combat crime in the underground transit system. Reducing the involvement of police officers in making arrests or being stationed in cold spots, as well as the creation of mobile police stations, greatly increased the value of the police force by allowing officers to focus their time and attention on subway patrols. Increasing the amount of investment directed toward tackling violations of the law that affect quality of life, rather than against major crimes, has allowed police resources to be reallocated to focus on crime that continually impacts the daily lives of citizens. With these techniques, the New York City Transit Police greatly increased the efficiency of its officers, who were now freed from annoying administrative activities and had clear responsibilities and instructions regarding what offenses to deal with and where.

Do you allocate resources based on outdated considerations, or do you try to identify hot spots and concentrate resources there? Where are your hot spots? Which activities have the greatest impact on performance but are resource constrained? Where are your cold spots? Which activity has an excess of resources, but has little impact on operational efficiency? Do you have someone who knows how to organize an exchange, and do you have anything to offer in exchange?

Taking the motivational barrier

For your organization to reach its tipping point and implement its Blue Ocean strategy, it is necessary to awaken employees to the need for change and clearly define how it can be done with limited resources. For a new strategy to be implemented, people must not only understand what to do, but also act on this knowledge, continuously and consciously.

How can you motivate employees quickly and inexpensively? In an effort to disrupt the status quo and transform their company, most business leaders create a grand strategic vision and initiate grassroots, top-to-bottom mobilization initiatives. Leaders operate under the belief that in order to obtain a mass response, appropriate massive steps must be taken. However, such steps are often labor-intensive, time-consuming and expensive, given the variety of motivational needs in most large companies. Top-down strategic vision usually results not in action but in insincere expressions of commitment. Is there another way? Instead of scattering change efforts everywhere at once, a focused leader does things differently and achieves mass concentration. In motivating employees, he focuses on three factors of disproportionate influence, which we will give the following names: “headpins,” “fishbowl management,” and “atomization.”

For strategic change to produce real results, employees at every level must move together. However, in order to launch an epidemic movement of positive energy, there is no need to scatter efforts. You should concentrate your efforts on working with the head pins, that is, those who have the greatest influence in the organization. “Headpins” are employees who are natural leaders, respected, persuasive, or have the ability to open or close access to key resources. It's like bowling: if you hit the head pin, everyone else goes down with it. This way you don't have to deal with everyone individually, and yet everyone will eventually go through change. And since in most companies there are only a very small number of those who have the ability to influence and share common problems and concerns, it is not difficult for a leader to identify and motivate them. For example, in the NYPD, seventy-four heads of police departments became Bratton’s main sources of influence and “head pins”. Why? Each of them had from two to four hundred policemen under his command. Thus, as a result of the “electrification” of each of the seventy-four chiefs, a natural chain reaction occurred, and already three thousand six hundred police officers at the next level were motivated and “charged” to implement the new strategy.

Place the headpins in the aquarium!

For long-term and conscious motivation of head pins, it is necessary to highlight their actions especially brightly, constantly and in every detail. This is what we call aquarium management, where the actions and inactions of the headpins are as clearly visible to everyone else in the company as everything that happens to the aquarium fish is visible. By placing head skittles in your aquarium, you will greatly reduce the likelihood of them going dormant. Those who are left behind come under scrutiny, and those who quickly drive change have the potential to become stars. Aquarium management will only work when it is based on transparency, inclusion and a fair process.

At the NYPD, Bratton's fishbowl was a biweekly crime-fighting strategy meeting called CompStat (CompStat - Computerized Statistics), where city leaders gathered to discuss the performance of all seventy-four police chiefs in implementing the new strategy. plots. All heads of police stations were required to attend meetings; in addition, they required the mandatory presence of all three-star police chiefs, deputy commissioners of police chiefs of all five boroughs of New York. Bratton himself visited there as often as he could. As each police chief answered questions from management and staff about the rise or fall in crime posed in accordance with the organization's new strategic guidelines, huge computer-generated maps and graphs were displayed that visually illustrated his progress in implementing the new strategy. The site manager had to provide explanations for the maps, tell how his subordinates solved certain issues, and explain why work efficiency increased or decreased. These comprehensive meetings ensured that the performance and responsibilities of each police department head were transparent and clearly visible to everyone in the organization.

As a result, in a matter of weeks—not months, much less years—an intense work culture was created, because none of the headpins wanted to embarrass themselves in front of the rest, but wanted to distinguish themselves in front of their colleagues and superiors. In such an aquarium, incompetent site managers could no longer hide their miscalculations by blaming the poor results of the work of the site entrusted to them on the shortcomings of their neighbors, since these neighbors were present in the hall and could answer the accusation thrown at them. The first page of the handout featured an image of the head of the police department being grilled during a crime strategy meeting, emphasizing that the head was accountable and responsible for the results of the department's work.

On the other hand, the aquarium also allowed high-performing workers to receive recognition for the good work they did in their own area and for helping others. In addition, the meetings provided an opportunity for police leaders to exchange experiences; Before Bratton's arrival, section heads rarely met together and worked as a group. Over time, aquarium management began to be applied at the next level, when section heads tried to conduct their own versions of Bratton meetings with their subordinates. Because their work was widely publicized, site managers were highly motivated to lead their subordinates in implementing the new strategy.

For this to work, companies need to simultaneously implement a fair business process. What it is? This involves involving all stakeholders, explaining to them the rationale behind decisions, what the criteria are for promoting or removing an employee, and clearly setting out expectations for employee performance. At the NYPD's crime-fighting meetings, no one could complain that the game was being played unfairly. All the head skittles ended up in the aquarium. The assessment of the performance of each boss, as well as the promotions or demotions made on its basis, were completely transparent; At each meeting, precise wording was given of what was expected of all employees in terms of performance.

Thus, a fair process shows employees that the game is fair and that leaders value the intellectual and emotional strengths of subordinates, no matter what changes may occur. This allows you to largely get rid of the suspicions and doubts that employees almost always have when a company tries to change its strategy. The fair process support that aquarium management achieves, coupled with an emphasis on operational efficiency, pushes people to action and supports them along the way, demonstrating the intellectual and emotional respect managers have for employees.

Break the task down into parts so the organization can change itself.

The final factor for disproportionate influence is the breakdown of the strategic task into its components. Essentially, “chunking” is a framing of a strategic task that requires the appropriate skills of a focused leader. If people do not believe that the strategic objective can be achieved, the necessary changes will never be made. On the surface, Bratton's strategic task regarding New York looked so impossible that it was hard to believe. Indeed, who would have believed that one person could turn a huge city from the most dangerous place in the United States into the safest? And who would want to waste time and energy trying to accomplish the impossible?

To make the task manageable, Bratton broke it down into small components that were within the capabilities of every level of police officer. As he put it, the NYPD's mission was to make New York City's streets safe "block by block, neighborhood by neighborhood, county by county." Framed in this way, the task seemed both comprehensive and completely feasible. For cops on the streets, it was about keeping their route or neighborhood safe. For police station commanders, the task was to ensure security at the station, and nothing more. The heads of the New York police districts were also given a specific task within their capabilities: to ensure security in the district, and nothing more. No one could say that too much was being asked of him or that the completion of the task was practically independent of the performer: “This is beyond my capabilities.” Thus, responsibility for implementing Bratton's blue ocean strategy was shifted from Bratton himself to each of the thirty-six thousand NYPD police officers.

Are you trying to motivate all employees without exception? Or do you focus on those who have influence - the headpins? Do you publicize how the work is going, do you set up a fair process aquarium for the head pins? Or do you demand high results and then “knock on wood” waiting for the next quarter’s results? Are you creating a grand strategic vision for your people? Or do you break the task down into parts so that you can make it manageable at each level?

We destroy political machinations

Will youth and talent always triumph over old age and treachery? True or false? Wrong. Even the best and brightest are thrown overboard every now and then as a result of political intrigues and insidious plans. Politics is an integral part of corporate and social life. Even if an organization has reached a point of irreversible change, there are still powerful entrenched interests that stand in the way of change. (See also Chapter 6 for a discussion of the difficulties associated with adopting a new strategic idea.) The more likely change is, the more fiercely and vociferously these sources of negative influence—both internal and external—will fight to defend their positions. and their resistance can seriously damage the process of implementing the strategy, or even completely destroy it.

To cope with these political forces, goal-oriented leaders focus on factors of disproportionate influence: calling on angels, pacifying demons, and seeking a consigliere among senior leaders. Angels are those who stand to benefit from a change in strategy. The demons are the ones who stand to lose the most from this. A consigliere is an insider skilled in political intrigue, respected and influential in the company, who is aware of all the pitfalls in advance and knows who will fight against you and who will support you.

Get yourself a consigliere on your senior management team

Most leaders focus on building a senior leadership team with strong functional skills—marketing, operations, finance—and that's important. However, a focused leader also includes one more “position” on the list that other leaders usually forget about: consigliere. Thus, Bratton always ensured that the top management team had a respected person who would understand all the obstacles that would be encountered in implementing the new police strategy. At the NYPD, Bratton appointed John Timoney (now Miami Police Commissioner) as his deputy. Timoney was a cop of a cop who was respected and feared for his dedication to the NYPD and the sixty plus orders, medals and crosses he was awarded. Twenty years of service taught him not only to recognize the main players, but also to have a good understanding of how they conduct their political games. One of Timoney's first tasks was to report to Bratton on how top management would likely feel about the NYPD's new policing strategy, specifying who would fight the innovation or quietly sabotage it. This brought about serious changes.

Call upon the angels and pacify the demons

To overcome political obstacles, it is useful to ask yourself the following two sets of questions.

Who are they, my demons? Who will go against me? Who has the most to lose in the future due to blue ocean strategy?

Who are they, my angels? Who will willingly become my ally? Who benefits most from a change in strategy?

Don't fight alone. To fight, enlist the support of influential superiors. Determine who will go against you and who will support you—forget those in the middle—and try to ensure a win-win outcome for everyone. However, hurry up. Without waiting for the battle to begin, isolate your opponents and team up with your angels. This way you will end the war before it even begins or begins to gain momentum.

One of the most serious threats to Bratton's new policing strategy came from the New York courts. Believing that Bratton's new strategy to combat quality-of-life crime would overwhelm the system with minor offenses such as prostitution or public drunkenness, the courts opposed it. To overcome this resistance, Bratton made it clear to his supporters, including the mayor, district attorneys, and prison wardens, that the court system could handle the increased number of cases and that by focusing on these crimes, the long-term benefits would be this, on the contrary, will help relieve the burden on the courts. The mayor decided to intervene in the matter.

Then Bratton's coalition, led by the mayor, sent a simple and clear message to its opponents through the press: if the courts could not cope with the required workload, then the crime rate in the city would not fall. By forming an alliance with the mayor and the press, Bratton successfully isolated the courts. They would no longer be able to publicly oppose an initiative that would not only make New York a more attractive place to live, but would ultimately lead to a reduction in the number of crimes they themselves consider. With the mayor speaking out forcefully in the press about the need to combat quality-of-life crime, and the city's most respected—and liberal—newspapers endorsing the new policing strategy, any opposition to the Bratton initiative would be too costly. Bratton won the fight: the courts conceded. And he won the war: the crime rate began to fall.

The key to defeating your opponents, or demons, is to know all of their likely lines of attack and be able to construct counterarguments backed by hard data and logic. For example, when New York police chiefs were first asked to collect detailed data on the facts and geography of crimes, they resisted, arguing that it would take too long. Anticipating a similar reaction, Bratton himself performed similar work in advance to check how long it took; it turned out to be no more than eighteen minutes a day, which he told police station commanders was less than one percent of their daily workload. Armed with hard facts, he was able to overcome the political obstacle and end the battle before it began.

Do you have a consigliere—a highly respected insider—or just the head of finance and other senior executives leading core functions? Do you know who will fight you and who will support the new strategy? Were you able to create a unified coalition with your allies to surround the dissidents? Did your consigliere help you defuse the biggest “infantry mines” so that you yourself don’t have to waste your energy on those who don’t want and won’t change?

Challenging the Traditional View

As shown in Fig. 3, the traditional theory of organizational change relies on the transformation of the masses. Therefore, change efforts are aimed at moving the masses, and this requires enormous resources and time - a luxury that very few leaders can afford. But a focused leader, on the contrary, chooses the opposite course. To transform the masses, he concentrates his efforts on transforming the extremes: the people, actions and activities that have a disproportionate impact on performance. By transforming these extremes, a focused leader can quickly and inexpensively change the core to implement the new strategy.

Rice. 3. Traditional View vs. Purposeful Leadership

Implementing a change in strategy is always difficult, and doing it quickly and with limited resources is even more difficult. However, our research shows that this is entirely possible if you master the skills of purposeful leadership. You can overcome obstacles to implementing a new strategy if you consciously direct your strength and energy to combat them, while focusing on the factors of disproportionate influence. Don't conform to the traditional point of view. Not every difficult obstacle requires proportionate action. Focus on cases of disproportionate impact. This is a critical component of leadership needed to implement a blue ocean strategy. She organizes the actions of subordinates in accordance with the new strategy.

In the next chapter, we'll go even deeper, to the next level, to show how a new strategy can capture the minds and hearts of people by creating a culture of trust, commitment and volunteering to implement it, as well as supportive leadership. Solving this problem allows us to see the difference between the forced implementation of a strategy and the voluntary one, when people act of their own free will.

Integrating the implementation process into strategy

A company is not only top management and not only middle management. A company is all its employees, from the director to those who receive phone calls from clients. And only when all employees of the organization unite around the strategy and support it “through thick and thin”, then the company stands out from the crowd and declares itself as an outstanding and consistent implementer of ideas. Overcoming organizational obstacles to the implementation of strategy is very important when moving towards the finish line. This removes difficulties that can bog down even the best strategy. Ultimately, a company needs to activate the most fundamental basis for action: the attitudes and behavior of all employees in the organization. You must create a culture of trust and commitment that motivates people to implement the agreed upon strategy—not the letter, but the spirit. It is necessary that the strategy captures the minds and hearts, so that it is accepted by each individual employee, who, in the course of its implementation, would go beyond the scope of forced fulfillment of duties and begin to work on the principles of voluntary cooperation.

When it comes to blue oceans strategy, the challenge increases. As soon as you ask employees to leave their comfort zone and work differently than before, tension begins to build. People are wondering: what are the real reasons for the changes? Is management telling the truth about future growth as a result of the strategic change? Or is it trying to make us redundant and fire us?

The further an employee is from the company's management and the less he was involved in the process of creating a strategy, the more the tension that controls him grows. Those who work at the front line, that is, at the very level where strategy must be implemented day after day, may reject a new course that is dictated from above without any regard for their opinions and feelings. Just when you think you've done everything right, a problem suddenly arises on the front line.

This brings us to the sixth principle of blue ocean strategy: building the implementation process into the strategy to gain the faith and commitment of employees and inspire their voluntary cooperation. By implementing this principle, the company will be able to minimize the management risk associated with people's distrust, unwillingness to cooperate, and even sabotage. This risk occurs in both red and blue ocean strategies, but is more likely to occur in blue ocean strategies because implementation requires greater change. Reducing such risk is extremely necessary in the process of implementing the new course. To do this, companies must move beyond their usual carrot-and-stick policies and rise to the level of a fair process.

Our research has shown that a fair process is the key variable that distinguishes successful from unsuccessful strategic moves towards a blue ocean. Depending on the presence or absence of a fair process, a company's best efforts to implement a strategy can lead to success or complete failure.

A bad process can ruin your strategy.

Let's take for example the case of a large company, one of the leaders in the supply of water-based coolants for the metalworking industry. Let's call this company Lubber. Because there are many different types of processing in the metal products industry, the number of different complex types of refrigerants is in the hundreds. Selecting the right variety is not an easy task. First, before purchasing, the product should be tested on production machines, and further decisions are often based on very vague logic. As a result, machine time and money are wasted on samples, which is costly both for customers and for Lubber itself.

To offer customers a leap in value, Lubber developed a strategy to eliminate the complexity and costs associated with the testing phase. Leveraging advances in artificial intelligence, Lubber developed an expert system that reduced coolant selection errors to less than 10%, compared with the industry average of 50%. In addition, the system reduced wasted machine time, simplified control and improved the overall quality of machined parts. For Lubber, its sales process has become significantly simpler, freeing up sales reps' time to close new deals and reducing sales-related costs.

Yet such a strategic move to achieve win-win value innovation was doomed from the start. The problem wasn't that the strategy was bad or that the expert system didn't work—it worked great. The strategy was doomed because the sales force rebelled against it.

Sales representatives who did not participate in the creation of the strategy and did not receive information about the reasons for the change in strategy saw in the expert system a threat that none of the strategy developers or managers thought about. Sales representatives considered their most valuable contribution to their work to be the endless search for the right coolant during testing. None of the sellers appreciated all the great benefits - the opportunity to get rid of the hustle and bustle, get more time to conduct sales, conclude more contracts by acquiring special status in the industry.

Feeling threatened, sales representatives often worked against the expert system, expressing to clients their doubts about its effectiveness. As a result, sales did not increase. Cursing their arrogance, having experienced first-hand the importance of taking steps from the outset to remove management risk by introducing an appropriate process, management was forced to remove the expert system from the market and begin to restore confidence among sales representatives.

The Power of a Fair Process

So what is a fair process then? And how does this process allow companies to build execution into strategy? The topic of justice and impartiality has excited the minds of writers and philosophers for centuries. However, the fair process owes its origins directly to two social scientists, John W. Tibaut and Lawrence Walker. In the mid-1970s, they combined their interest in the psychology of justice with the study of process, creating the term “procedural justice.” Using lawsuits as the subject of their research, scientists have tried to understand what makes people trust the law to obey its demands without coercion. Research has revealed that people care about both the court decision itself and the fairness of the process during which it is made. People's satisfaction with the decision and their willingness to comply with it increased when there was procedural fairness.

Fair process is the application of procedural justice theory to practice by managers. As in legislation, a fair process builds implementation into strategy by getting employees on board from the start. When a fair process is in place at the strategy creation stage, people believe in fair play. This inspires them to volunteer together to implement the final strategic decisions.

Voluntary cooperation is more than mechanical work, where people do only what is necessary. In voluntary cooperation, a person goes beyond his duties, gives the maximum of his strength and abilities - and even subordinates his personal interests to this - in order to act in accordance with the strategy. In Fig. Figure 4 shows the cause-and-effect relationship we observed in the areas of fair process and people's attitudes and behavior.

The Three E's of Fair Process

The key to a fair process are three mutually reinforcing elements: Engagement, Explanation and Expectation. From the senior executive to the store clerk, they all pay attention to these elements, which we have combined into the Three E's of Fair Process.

Engagement means involving employees in making strategic decisions that will impact them. They not only give their suggestions, but also have the opportunity to meet and discuss the ideas and proposals of their colleagues. Engagement communicates the manager's respect for employees and their ideas. Encouraging discussion sharpens the thinking process and allows a common effort to come to a wise decision. As a result of involvement, management makes informed strategic decisions, and everyone who has to implement them becomes committed to the chosen course.

Rice. 4. How does a fair process influence people's attitudes and behavior?

Explanation means that all participants and stakeholders must understand why the resulting strategic decisions are made as they are. By receiving explanations about the motivations behind decisions, people can be confident that managers have taken their views into account and made a fair decision that is in the overall best interests of the company. Explanation allows employees to believe in managers' intentions, even if their own ideas have been rejected.

In addition, explanation serves as a powerful feedback loop that spurs learning.

Clarity of expectations requires that once a strategy is chosen, managers clearly lay out the new rules of the game. Although expectations may be high, employees must know exactly by what standards their performance will be measured and what penalties will follow if they fail to meet targets. What are the strategic goals? What are the tactical goals and milestones of the plans? Who is responsible for what? To ensure a fair process, it is not so important what the new goals, expectations and responsibilities may be; it is much more important that they are fully understood by employees. When people clearly understand what is expected of them, there is less political manipulation and favoritism, and nothing prevents them from quickly concentrating on implementing a new strategy.

Taken together, these three elements provide evidence of a fair process. This is important because no combination of fewer of these elements provides this capability.

A tale of two factories

How does the Three E's of Fair Process impact strategy implementation within an organization? Let's take an example of an elevator manufacturer, which we'll call Elco. In the late 1980s, sales in the elevator industry began to decline. The excess of empty office space in some major US cities was up to 20%.

As domestic demand fell, Elco decided to offer customers a jump in value while lowering its costs to stimulate new demand and break away from the competition. While exploring opportunities to create and implement a blue ocean strategy, the company came to the conclusion that it needed to replace the batch production system with flexible production, which would allow self-managing teams to work extremely efficiently. The management team agreed on this issue among themselves and was ready to take action. To implement a key element of the strategy, top managers decided to take the path that seemed to be faster and better than others.

They initially planned to implement the new system at Elco's Chester plant and then expand it to a second plant in High Park. The logic was simple. The management of the Chester plant had an exceptional relationship with the staff - so good that the workers abandoned their own union. Management was confident that they could count on their cooperation in implementing the new production strategy. According to the company itself, “these were ideal employees.” Elco then planned to expand the process to the High Park plant, where there was a powerful union that was expected to block this or any other change. Management hoped that there would be a "running start" in Chester, which would likely have a positive impact on the High Park plant.

In theory, everything seemed great. In practice, things took an unpredictable turn. The introduction of a new production process at the Chester plant quickly sparked unrest and protest. In just a few months, cost and quality indicators began to deteriorate continuously. Employees began talking about reviving the union. Losing control, the desperate plant manager turned to an industrial psychologist who worked at Elco for help.

In contrast, at the High Park plant, despite the poor reputation of its workers, the change in strategy in the production process went smoothly. The plant manager waited every day for a protest, but it never came. Even when workers didn't like the decisions, they felt they were being treated fairly, so they willingly participated in the rapid implementation of the new production process—a central component of the company's new strategy.

A closer look at how the change in strategy occurred reveals the reasons for these apparent anomalies. At the Chester plant, Elco managers violated all three pillars of the fair process principle. First, they failed to involve employees in strategic decisions that directly affected them. Lacking sufficient experience in flexible automated manufacturing, Elco turned to a consulting firm to develop a conversion master plan. The consultants were asked to work quickly and ensure that the plan would cause as little hassle as possible for employees and ensure a quick and painless implementation of the new strategy. The consultants strictly followed the instructions they received. Arriving at work, employees of the Chester plant found strangers who were not only unusually dressed - in dark suits with ties and white shirts - but also quietly talking to each other. In order not to interfere, these people did not communicate with the workers. Instead, they quietly appeared behind them, taking notes and drawing graphs. There was a rumor that in the evening, when the workers had gone home, the aliens crawled around the plant, were looking for something in the workplace and were having heated arguments.

All this time, the plant manager visited his work less and less. He spent most of his time at Elco headquarters meeting with consultants—meetings deliberately held outside the plant so as not to distract workers. However, the manager's absence from work had the opposite effect. As people became increasingly worried, not understanding why the ship's captain abandoned his ship, the rumors grew and spread. Workers were convinced that the consultants intended to reduce the size of the plant. People had no doubt that they were about to lose their jobs. The fact that the plant manager was absent from the site without any explanation was probably hidden from his subordinates! - could only mean one thing: the management, as the workers believed, “wants to deceive us.” The trust and loyalty of the employees of the Chester plant was melting before our eyes.

Soon people began showing each other newspaper clippings about how other factories in the country were closing after consultants appeared there. The workers decided that they would inevitably become victims of management's hidden desire to downsize the plant and carry out mass layoffs. In reality, Elco managers had no intention of closing the plant. They wanted to eliminate unnecessary operations, allowing workers to produce high-quality elevators quickly and cost-effectively, thereby breaking away from the competition. Unfortunately, the employees knew nothing about this.

Among other things, the managers of the Chester plant did not explain the reasons for making these and not other strategic decisions, and also did not tell how these decisions would affect the adopted work methods and the future careers of workers. The change master plan was presented to workers during one thirty-minute meeting. The audience only heard that time-tested ways of organizing work would be eliminated, and in their place would come something called “flexible manufacturing.” No one explained why the strategy needed to change, how the company could break away from its competitors to stimulate new demand, or why changing the production process was a key element of the strategy. The stunned workers were silent, not understanding the meaning of all these changes. Managers mistook this silence for agreement, forgetting how long it had taken them in the previous months to accept the idea of ​​moving to flexible manufacturing in order to implement the new strategy.

With a master plan in hand, managers rushed to remodel the plant. When employees asked what the purpose of this activity was, the answer was the same: “increasing efficiency.” Managers didn’t have time to explain why efficiency needed to be improved, and they didn’t want to worry employees. However, being unable to explain what was happening to them, some employees did not feel the best when they came to work.

In addition, managers did not explain in detail to workers what would be required of them in the new production process. They only said that now it would be the performance of the group, rather than individual performance, that would be assessed. Managers also said that those who work faster or have more experience will have to take in tow their less experienced and slower colleagues. However, the managers did not go into detail and explain the principle of working in groups.

Violations of fair process principles undermined employee confidence in the change of strategy and in management. In fact, the new division into groups gave workers great advantages - now, for example, the distribution of vacations became easier; there was an opportunity to expand skills and do more varied work. However, the workers themselves saw only the negative side of the matter. They began to take out their fear and anger on each other. Fights broke out at the factory - people refused to help “lazy people who can’t finish their work,” or cut off those who “interfered,” offering help: “That’s my business. You have your own place, work there.”

The exemplary personnel of the Chester plant deteriorated before our eyes. For the first time in the entire time the plant manager worked in this post, his subordinates began to refuse to carry out his instructions, declaring that they would not do this, “even if you fire me.” They felt that they could no longer trust the once popular leader, so they began to bypass him, complaining directly to the head office. Due to the lack of a fair process, employees at the Chester plant were resistant to change and unwilling to participate in the implementation of the new strategy.

In contrast, management at the High Park plant adhered to all three fair process principles when implementing the new strategy. When the consultants arrived at the plant, the plant manager introduced them to all the workers. Management engaged employees through a series of all-hands meetings in which leaders openly discussed deteriorating business conditions and the company's need to shift its strategic direction to differentiate itself from competitors while creating greater value and lowering costs. They talked about how they visited other companies and saw that productivity could be increased by organizing workers into groups. Executives explained that this would have a critical impact on the company's ability to implement its new strategy. To relieve workers from the completely natural fear of being fired, a policy of proactive action was introduced to try out innovations. Since the old ways of evaluating performance were no longer suitable, managers worked with employees to create new ones and also establish new responsibilities for each group. Goals and expectations were made clear to employees.

By implementing all three principles of a fair process together, management gained the understanding and support of the plant workers, who in turn spoke with respect for their plant manager and sympathized with the challenges that Elco management had to face in implementing the new strategy and transition to operating under groups. Employees realized that the impending changes bring necessary, valuable and useful experience.

Elco managers to this day recall this situation as one of the most difficult in their entire career. They made sure that lower-level employees were just as concerned as their superiors about making sure the process was running properly. By violating a fair process when developing and implementing a new policy, managers can turn their best employees into the worst, causing them to distrust and resist the new strategy, the successful implementation of which depends entirely on them. On the contrary, if managers introduce a fair process, the worst performers can become the best and willingly, devotedly work towards changing strategy, increasingly believing in it.

Why is a fair process so important?

Why does fair process play such a role in shaping people's attitudes and behavior? In particular, why can ensuring a fair process during strategy creation make the difference between the success or failure of its implementation? All these issues ultimately come down to the intellectual and emotional recognition of employees.

Each employee emotionally seeks recognition of his value not as a “workforce,” “staff,” or “human resource,” but as a person who is treated with respect and dignity and valued on the basis of individual merit, regardless of position in the hierarchy. On the intellectual plane, each individual seeks recognition of his ideas; he needs to be interested in his thoughts, to carefully discuss them, and for those around him to have a fairly high opinion of his intellect and to discuss their ideas with him. Frequently encountered phrases in answers to our questions such as “this is how it is with everyone I know” or “everyone wants to feel this”, as well as constant references to “people” or “person” once again confirm the opinion that the manager must be aware of the almost universal value of intellectual and emotional recognition that a fair process serves to create.

Theory of intellectual and emotional recognition

The use of a fair process in strategy building is closely related to intellectual and emotional acceptance. In a fair process, management demonstrates through concrete actions its commitment to trusting and caring for people and its deep faith in the knowledge, talents and experience of each employee.

When people feel recognized for their intellectual potential, they are willing to share knowledge; in fact, they themselves want to impress and actually confirm their high opinion of their intellectual abilities by actively offering ideas and sharing knowledge. In the same way, when employees experience emotional recognition, they feel emotionally involved in the creation and implementation of the strategy and are ready to exert all their strength. Frederick Herzberg's classic study on motivation notes that recognition generates strong intrinsic motivation that causes a person to go beyond what he or she is required to do and engage in voluntary cooperation. Therefore, since a fair process is aimed at providing intellectual and emotional recognition, under these conditions employees will be more effective in applying their knowledge and experience, and also strive to voluntarily cooperate in order to successfully implement the company's strategy.

However, there is a downside to this phenomenon that deserves equal, if not more, attention: the violation of a fair process and the concomitant lack of recognition of a person’s intellectual and emotional merits. This type of thinking and behavior can be described as follows. When people's knowledge is not valued, it causes "intellectual resentment" in which people are reluctant to share their ideas and experiences; rather, they will hide their best plans and creative ideas, not considering it necessary to make them public. Moreover, they will deny the presence of intellectual merits in other people. It’s as if they were saying, “You don’t value our ideas, so we don’t value yours, and we don’t trust or care about your strategic decisions!”

In the same way, if there is no recognition of the emotional strengths of employees, then this leads to bitterness, an unwillingness to invest energy in their actions; most likely, they will slow down work and create all possible obstacles, including sabotage, as happened at the Elco plant in Chester. Often, a lack of emotional recognition can lead people to demand the abandonment of policies that are introduced in an unfair manner, even if these policies themselves are quite reasonable - they depend on the success of the company or they provide benefits to both employees and management. If people don't have trust in the strategy creation process, then they won't have trust in its results. Such is the emotional power of a fair process. In Fig. Figure 5 provides a visual representation of these cause-and-effect flows.

Rice. 5. Consequences of the presence and absence of a fair process during the implementation of the strategy

Fair Process and Blue Ocean Strategy

Loyalty, trust and voluntary cooperation are not just attitudes or behavior. This is intangible capital. When there is trust, people are more confident in each other's intentions or actions. If there is loyalty, they are even ready to sacrifice personal interests for the sake of the interests of the company.

If you ask any company that has created and successfully implemented a blue ocean strategy about the reasons for its success, the first thing its managers will tell you is the invaluable role this intangible capital played. And managers of companies that failed to implement a blue ocean strategy, in the same way, will first draw your attention to the lack of this capital and the fact that it was precisely because of this that they failed. These companies failed to make a shift in strategy because they lacked the trust and commitment of their employees. Thanks to the dedication, faith and voluntary cooperation of employees, companies are able to stand out from the crowd with the speed, quality and consistency of the strategy implementation process. They are the ones who manage to change the strategic course quickly and at low cost.

Here's the question that all companies struggle with: How do you build trust, loyalty, and willing cooperation deep within the organization? It will not be possible to do this by separating strategy creation from implementation. Although this approach is typical for most companies, it is a sure sign of slow and uncertain implementation and, at best, mechanical progress. Of course, traditional incentives, power and money—carrots and sticks—can help. However, they are not able to inspire a person to do things that go beyond the satisfaction of purely personal interests. Where there is no possibility of reliable monitoring of behavior, there is wide scope for laziness and sabotage.

Ensuring a fair process circumvents this dilemma. By organizing strategy creation according to fair process principles, you can build implementation into the strategy from the very beginning. Because of a fair process, people tend to loyally support the resulting strategy, even if it doesn't look good or diverges from their understanding of what is strategically right for their particular business unit. People understand that to build a strong company you have to make compromises and sacrifices. They accept the need for short-term personal sacrifice to achieve long-term corporate interests. However, this is only possible under conditions of a fair process. Whatever the context in which a blue ocean strategy is implemented—whether it's working with a joint venture partner to outsource component manufacturing, refocusing sales, transforming a manufacturing process, moving a call center from the United States to India—the dynamic is at work. We have observed this more than once.

Conclusion. Sustainability and Blue Ocean Strategy Renewal

Creating blue oceans is not a one-time achievement, but a dynamic process. Having created a blue ocean and studied its powerful impact on operational efficiency, the company faces the fact that imitators will sooner or later appear on the horizon. The question is: how soon (or not soon) will they appear? In other words, how easy or difficult is it to imitate a blue ocean strategy?

As the company and its early imitators succeed and expand the blue ocean, more companies are jumping into it. This brings up a second question related to the first: when should a company create its next blue ocean? In this final chapter, we look at sustainability and updating the blue ocean strategy.

Barriers to imitators

The blue ocean strategy contains serious barriers to imitators. Some of these barriers are purely operational, others are cognitive. Most often, for the first ten to fifteen years, owners of the original blue ocean strategy do not face any serious problems; this happened with Cirque du Soleil, Southwest Airlines, Federal Express, The Home Depot, Bloomberg and CNN. This persistence is explained by the following obstacles that arise in the path of imitators, rooted in the blue ocean strategy itself.

Value innovation makes no sense based on traditional strategic logic. For example, when CNN came out, NBC and CBSHABC ridiculed the idea of ​​24/7 real-time news coverage without popular anchors. CNN has been nicknamed Chicken Noodle News. The one who causes ridicule does not have imitators soon.

The resulting conflict with brand image prevents companies from emulating the blue ocean strategy. For example, The Body Shop's strategy of abandoning beautiful models, promises of eternal beauty and youth, and expensive packaging forced the world's largest cosmetics companies to remain inactive for several years, since imitation would be a sign of the failure of their business models.

If the market, due to its small size, cannot accommodate one more player, a natural monopoly prevents imitators. For example, the Belgian film company Kinepolis created the first megaplex cinema in Brussels and, despite its enormous success, had no imitators for more than fifteen years. The reason was that the size of Brussels simply would not allow it to accommodate a second megaplex - its appearance would be unprofitable for both Kinepolis and its imitator.

Patents or legal barriers block imitation.

Large volumes resulting from value innovation lead to rapid cost reduction, which places potential imitators at a distinct disadvantage, clearly inferior to the leader in this regard. The significant economies of scale that Wal-Mart achieved in purchasing goods turned out to be the reason why other companies abandoned the idea of ​​imitating its blue ocean strategy.

Network externalities also make it difficult for companies to simply and accurately copy the blue ocean strategy that online auction company eBay is protected from. The bottom line is that the more online customers eBay has, the more attractive the site becomes to sellers and buyers of various products, which in turn discourages them from switching to a potential copycat.

Because imitation often requires a company to make significant changes to its own business practices, political reasons often come into play and delay the decision to imitate a blue ocean strategy for years. So, for example, when Southwest Airlines created a new service—offering customers the speed of an airplane for the price of a car—imitating this blue ocean strategy would require a major overhaul of flight routes, retraining of staff, and changes in marketing and pricing, not to mention culture. — that is, significant changes that a rare company is able to implement in a short time.

By offering a leap in value, the company quickly achieves brand awareness and a loyal following in the market. Even aggressive imitators with large advertising budgets rarely have the strength to overcome the brand hype of a value innovator. Thus, Microsoft tried for many years to survive from the Quicken market - the result of Intuit's value innovation. Ten years were wasted - despite all the efforts and expenses, Microsoft did not achieve success.

In Fig. Figure 6 provides a short list of these barriers to imitators. As shown in the figure, these barriers are high.

Rice. 6. Blue Ocean Strategy: Barriers to Imitation

Value innovation is meaningless from the perspective of traditional company logic.

The blue ocean strategy conflicts with the brand image of other companies.

Natural monopoly: the market often cannot accommodate a second player. Patents or legal barriers to imitators.

High volumes lead to the rapid emergence of a cost advantage for the value innovator, preventing imitators from entering the market.

Network externalities discourage imitators.

Imitation often requires significant political, operational and cultural changes.

Companies that create value innovation generate buzz for their brand, and their loyal customers tend to reject imitators.

This is why we have rarely seen the rapid emergence of imitators from those who created blue ocean strategies. Plus, the blue ocean strategy is a systematic approach that requires not only the correct implementation of each element of the strategy, but also combining them into a single system to obtain value innovation. Simulating such a system is a rather difficult task.

When is value innovation needed again?

However, in the end, almost any blue ocean strategy will have its imitators. When they try to conquer some of your blue ocean, you usually go on the offensive to protect your hard-won customer base. However, imitators are often persistent. Obsessed with maintaining your market share, you can fall into the trap of competing against new rivals. Over time, the competition, rather than the customer, can become the basis of your strategic thinking and actions. If you go with this flow, your value curve will begin to resemble the value curve of your competitors.

To avoid falling into the competitive trap, you need to monitor the value curves on the strategy canvas. By tracking the value curve, you can learn when to pursue value innovation and when not to. That way, once your value curve starts to merge with your competitors', you can determine that it's time to move on to another blue ocean.

In addition, this method will keep you from leaving for another blue ocean when your current offer can still generate sufficient profit. If the company's value curve still has focus, divergence, and a compelling tagline, then the temptation to reinvent value innovation should not be succumbed to. Instead, the focus should be on lengthening, broadening and deepening revenue streams through operational improvements and geographic expansion to achieve maximum economies of scale and market reach. You need to swim as far into the blue ocean as possible, become a moving target, move away from the first imitators and interfere with them in the process. The goal is to maintain a dominant position in the blue ocean for as long as possible, surpassing your imitators.

As rivalry intensifies and demand exceeds supply, fierce competition will develop and the ocean will turn red. When your competitors' value curves begin to merge with yours, you should begin the journey of new value innovation to create a new blue ocean. Thus, by mapping your value curve onto the strategy canvas, periodically recreating your competitors' value curves and comparing them with yours, you can visually see how close your imitators are to you, figure out how exactly your curves match, and understand the extent to which blue the ocean turned scarlet.

For example, The Body Shop dominated the blue ocean it created for over a decade. However, now this company is already in bloody scarlet waters and the efficiency of its work is declining. It did not pursue new value innovation when its competitors' value curves converged with its own. Still floating in the clear blue waters of the new market. This company managed to break out of the circle of competition and, as a result, began to grow and its profits to increase. However, the real test of Casella Wines' long-term profitable growth will be its ability to pursue new value innovation when its imitators enter the competition and aggressively and precisely copy its value curve.

The six principles of blue ocean strategy proposed in this book should be important beacons for any company thinking about its future development - if that company wants to become a leader in the increasingly crowded business world. We don't mean to say that companies should suddenly give up competition or that competition will suddenly stop. On the contrary, competition will increase more and more and will continue to remain the most important factor in market reality. What we are suggesting comes down to this: to be highly effective in a crowded market, a company must not compete for market share, but go beyond that and create a blue ocean.

Since, after all, blue and red oceans have always existed side by side, practical reality requires that a company succeed in both oceans and master strategies appropriate for each. But since companies are already familiar with competing in red oceans, they need to learn how to break out of the competitive cycle. This book is written to balance the scales so that creating and executing a blue ocean strategy becomes as systematic and feasible as competing in the red waters of a known market space.

Blue Ocean Strategy is one of the most valuable business development books ever written. This is a practical guide for those who strive to build a powerful, uncompetitive market.

In this article you will learn 4 stories of companies that, thanks to strategy, emerged from the battle of competitors and achieved incredible success.

The usual way to achieve success is. Or you can go the other way: create a market in which there are no competitors, and there cannot be. This way you kill two birds with one stone: you increase the value of the company for customers and its employees and create such demand that competition makes no sense.

Sounds good, but not entirely clear? A little more detail from this point.

The market is two oceans. Red - everything that exists at the moment, all sectors of business. The boundaries here have long been defined, as well as the rules of the game. In the red ocean, each player tries to defeat his competitor. The more people there are in the market, the fewer opportunities for growth and success.

In a blue ocean, demand appears on its own; there is no need to fight for it. Growth here is vigorous, profitable, generous.

There are two ways to create a blue ocean. First, come up with a new business area, as eBay did, for example, in its time. Secondly, break out of established limits, following the example of Cirque du Soleil.

Cirque du Soleil is the one who managed to create their own blue ocean. In 1984, the circus almost closed: business was in decline as TV shows appeared. The target audience - children - preferred to play video games rather than watch clowns and acrobats.

However, du Soleil managed to regain popularity and increase profits. How? They relied on an adult audience: theatergoers and fans of ballet art and completely changed the program. The company managed to destroy the boundary between circus and theater and create its own blue ocean.

How to go beyond the red ocean?

You need to stop looking back at your competitors. Look for alternatives and don't try to fool old clients. This is how Cirque du Soleil did it: they combined theater and circus to cater to an adult audience.

Another example is the American budget airline SouthWest. The company decided to stop chasing air passengers and relied on car enthusiasts. Flying our planes is as easy as driving a car! - that's what they told clients. SouthWest offered customers the speed of an airplane combined with the low cost and comfort of a car.

It's actually not hard to get off the beaten path.

If you don't sell a tangible product, think about whether you help your clients achieve success, are you ready to take their business to the next level? Or are you just selling a product without thinking about where it will lead consumers? In other words, are you preparing a clearing for? Think about it.

More examples.

Casella Wines, an Australian wine producer. They managed to go beyond the boundaries by offering party wine to consumers.

For many years, the wine industry has positioned itself as a market for elite drinks that only a true gourmet can understand and love. At the same time, many ordinary people preferred simpler drinks that did not require serving or any special serving of food.

Wine from Casella Wines has become accessible - you can bring it to a regular party and drink it easily, without ceremony. This is how the company gained a market where other winemakers have almost no presence.

Curves. An international network of fitness clubs for women was born in Texas, USA. The company has moved away from the traditional concept of fitness clubs, which have a lot of visitors and a lot of different exercise equipment. Often women simply give up the race, unable to compete with pumped-up regulars or constantly stand in line at the gym.

Curves proposed a revolutionary approach: there are no mirrors or few of them, all exercise machines are as simple as possible, and training involves circular movement on a certain type of exercise equipment. They are based on the principle of hydraulic resistance, shock loads can be avoided and the load range can be changed smoothly.

Just two full circles on six machines - it's easier than ever. Curves spread all over the planet and reached, including Russia.

This is absolutely a classic. During the years when Nokia waged brutal wars with Samsung, Apple entered the mobile phone market. The company released only one smartphone model, different versions of which remain popular to this day. It was only later that competitors and similar products appeared, but in 2007 Apple, without any doubt, found its blue ocean.

Have fun and high sales!

Blue Ocean Strategy aims to encourage companies to break out of the red ocean of competition by creating a market niche for themselves where they do not have to fear competitors. The blue ocean strategy suggests refusing to share existing - and often diminishing - demand with others, while constantly looking at competitors, and instead dedicating oneself to creating new, growing demand and avoiding competition. The book not only encourages companies to take this step, but also explains what needs to be done to achieve this. Our goal is to make blue ocean strategy as effective as competition in the red waters of the market we already know.”

"Blue Ocean Strategy" W. Chuck Kim, Rene Mauborgne

Regardless of my personal attitude towards the idea of ​​“blue oceans”, I would like to first impartially talk about the idea presented by the authors of this strategy, so that those who are not familiar with this theory or are only vaguely familiar with it can formulate some kind of their own opinion about this approach to strategy. And after reviewing this work, in response to the reader’s already formed opinion, I will express my own opinion about this strategy.

The essence of the blue ocean strategy proposed by Chen Kim and Mauborgne is that at the current pace of development and copying of technologies, head-to-head competition is irrelevant and, in the long term, destructive for the company. Allegorically speaking, the authors call competitive markets “red oceans” full of the blood of competitors “grabbing” each other. In the “red ocean,” the boundaries of the market and the operating principles of the industry are clearly defined and uniform for all participants. Competing companies' products have similar characteristics, and the differences between them become blurred with time and benchmarking efforts.

“Blue Ocean” is an unoccupied niche in the market that the company creates based on:

• unmet needs of different consumer groups united by it;
• concentration on key criteria for consumer selection and evaluation of a product;
• orientation towards attracting “non-customers” of the company to consume the product.

In a blue ocean, a company does not have to choose between a low-cost or high-value strategy; it can offer both.

Blue Ocean Strategy is the result of fifteen years of research and data examining the market strategies of 108 companies in 30 industries over the past 100 years. As a result, the authors found that 86% of business ventures during this period were linear expansions, that is, improving work in “red oceans.” At the same time, such undertakings accounted for 62% of total income and only 39% of profit. In other words, it is in the “blue oceans” that the company’s prospects for obtaining the greatest profits lie. And there are no competitors there at all - since the company that created the “blue ocean” is the first and, for a long time, the only one in it. It is important to note that Blue Ocean is not measured by an industry or a specific company - rather, it is a strategic move, a company's winning decision for its market situation.

The main tool of a blue ocean strategy is the “strategy canvas” - it serves to diagnose and build such a strategy. To build a “strategic canvas,” a company needs to identify the key characteristics of products—its own and those of its competitors—that are subject to competition within a given industry. The company also analyzes the level of supply received by the consumer for each factor. A high indicator means large investments in the development of a specific factor area.

The authors provide a way to visually depict the “strategic canvas” to facilitate its analysis and presentation. Analysis of the "strategy canvas" allows a company to determine how similar its market strategy is to the strategies of competitors. Using the example of a strategic canvas, such similarities are easy to determine - the graphical forms of the “strategic canvas” of companies with similar approaches to competition have a similar shape.

After analyzing the “strategic canvas” and the importance of different competitive factors for different companies and for the customers themselves, Chen Kim and Mauborgne suggest that company management ask themselves four questions:

1. What competitive factors, identified and accepted in the industry, can be eliminated? For example, McDonald’s positions itself as a restaurant, but such an integral “sign” of a restaurant as waiters was initially deliberately abolished - costs are lower, service is faster.

2. What competitive factors should be significantly reduced from industry standards? For example, after analyzing the “strategic canvas” of the US wine market, Cassela Wines concluded that factors such as the richness and complexity of the wine, the prestige of the winery and the choice of wine names, so cherished by winemakers, are not particularly important for American consumers. All three factors were reduced by limiting the product range, shifting the emphasis of communications from the history and prestige of the winery to other factors, and producing wines with a more pronounced and simple taste.

3. What factors should be significantly improved above industry standards? Thus, Apple's creation of the iTunes online music store is based on improving a number of key factors in the music file sharing industry: high sound quality; a wide range of melodies, including works from previous years; possibility of purchasing thematic selections of songs.

4. What factors should the industry create that have never been proposed before? Virgin, for example, has left even major competitors behind by offering an unconventional but sought-after range of services to passengers, including in-flight massages. Another airline, NetJets, offers corporate clients the service of using a private jet for a fixed annual fee, which differs significantly from the cost of actually maintaining such an aircraft at the company's expense.

The book outlines approaches and tools for developing and implementing a blue ocean strategy, including six ways to create one and approaches to interpreting the resulting strategic canvas. Despite the popularity of the described idea of ​​\u200b\u200bthe perception of competition, it was Chen Kim and Mauborgne who were the first to offer a clear and practical toolkit for applying the blue ocean strategy in practice. The language of presentation is simple, the examples are modern and understandable. The book contains appendices with background information on the industry and conceptual features of the blue ocean strategy.

It is worth noting that the methodology for creating blue oceans has been reduced to a simple graphical representation and several easy-to-remember rules. For example, it is proposed to pave the way to the blue ocean using a matrix called “abolish-lower-increase-create.” To work with a team, it is proposed to use the rule of three E: Engagement (involvement), Explanation (explanation), Expectation (clarity of expectations). This presentation of the theory is convenient for businessmen who are hungry for new knowledge but do not have free time.

The first way is to consider as competitors not only representatives of your industry, but also companies operating in alternative industries. For example, cinema and restaurants are completely different types of business. However, on a Saturday evening they are equally valuable alternatives for a pleasant pastime. And most often it is in the space of such alternatives that value innovation can be created.

The second way is to examine the underlying strategies of companies within an industry. Typically, differences in strategies come down to whether a given company chooses low prices or high quality. In fact, we need to abandon this alternative and understand what other factors, in addition to price and quality, influence customer choice.

The third way is to look at the customer chain. The person who makes the purchasing decision is not always the end user of the product.

The fourth way is to consider additional products and services that provide value to the customer.

The fifth way is to analyze the functional and emotional appeal of the product for buyers

The sixth way is to look to tomorrow and see the possibilities for creating a blue ocean.

I would also like to cite one of the wonderful methodological tables given in the book.

The chapter “Focus on the Big Picture, Not the Numbers” in Creating a Blue Ocean Strategy outlines four steps to visualize your strategy.

Now we can say that we have achieved a brief introduction to the content and principles of creating a blue ocean strategy. I gave a review of the text that was as objective as possible, or rather positive, but now I would like to add a couple of fly in the ointment to this huge barrel of honey.

Let's try to understand what the popularity and all the hype is about this theory about "blue oceans" - the basic concept of a "blue ocean" is that a company that, guided by the methods given in the book, can create its own "blue ocean" which, in fact, is the “Grail of immortality” in the business world, because the creation of a “blue ocean”, according to the authors, leads to the company forever leaving the “red ocean” of the competitive environment and ensuring eternal prosperity at the expense of a huge army of customers, excess profits and lack of competitors.

This idea of ​​“eternal life”, flavored with the author’s terminology “blue and scarlet oceans”, “visualization”, etc., looks less like a business work, and more like a book by modern esotericists, promising “enlightenment” and “eternal life” . Again, in this terminology lies a deep impact on the reader’s subconscious - every top manager or business owner has a dream of a “blue ocean”, workaholics who dream of a vacation on the shores of a “blue ocean”, and “red oceans” of competition, “ full of blood”, on the contrary, affect typical human fears and cause disgust. Here are the words of one Russian entrepreneur about the reasons for his acquisition of this publication: “Blue Ocean is an excellent term for a new market where your company is the first, where there are no competitors, where you can make high profits. Escaping competition is the dream of entrepreneurs. This is probably why the title of the book, Blue Ocean Strategy, immediately intrigued me.” Again, the authors of this book also play the Messiah, who has come to save this world from the blood of competition and lead it to the blue oceans of happiness, as illustrated by a quote from Chen Kim’s speech during his visit to Ukraine: “Ukrainians, wake up. I came to you with hope. Like a farmer who sows grain in the spring and hopes for a big harvest, I came to Kyiv to sow grain (to give new knowledge). I hope it will grow here, and I will water it. And I will be proud of what Ukraine has become!”

But it’s good, it’s clear that, first of all, the popularity of a book is caused by a beautiful “wrapper”, PR and so on, but this is not bad, the main significance in any scientific or business work is assessed by its usefulness, but this is a different question... But I would prefer to divide the work into 2 parts (idea and methodology) and accordingly evaluate the usefulness based on this division.

The usefulness of the blue ocean idea is most likely close to “0”, why? Because the initially utopian idea of ​​a “blue ocean” cannot be used and therefore be useful in a pragmatic business world. Its utopianism lies in the fact that the declared withdrawal from the competitive field with the help of the “blue ocean”, like anything else, is impossible! And the examples of “blue oceans” given by the authors are, to put it mildly, far-fetched. After all, the creation of the “blue ocean” McDonalds, cited as an example of a successful “blue ocean”, did not take this network of “restaurants” out of the competitive field of catering, fast food, etc. The “blue oceans” of American auto giants, given as examples, have not taken them out of the competitive field; moreover, they do not help them get ahead of competitors, for example, Japanese automakers. On the contrary, while they are actively losing to them... Here is a quote: “Blue oceans are not technological innovations. Advanced technologies are sometimes involved in creating blue oceans, but are not their hallmark. This also applies to technology industries. Blue oceans are often created by older players within the confines of their core business. For example, Crysler and GM were established companies when they created blue oceans. Research has shown that most blue oceans are created within, rather than outside, the red oceans of existing industries. Blue oceans are near you in every industry.

A blue oceans strategy is so powerful that it can create a brand that will last for decades. Think Ford (Model T), Crysler (minivan), IBM (electronic computer). The leaders of these companies can attest that the key to creating new market space is not large R&D budgets, but the right strategic actions. That is, the creation of a blue ocean is a product of strategy and, in many respects, a product of management actions.”

Let’s say that the companies cited by the authors created “blue oceans,” but we can easily recall the recent problems of each of these companies - Ford, Chrysler, and IBM. Accordingly, it can be understood that the “blue ocean” theory does not exist.

The methodology is definitely useful, but, unfortunately, it is secondary... Michael Porter wrote about the possibilities of protection from market competition in his work of the same name. He proposed two strategies for such protection:

a) create a “reliable defense against the power of competition”;

b) take a position where the company will be least vulnerable to competitive forces.

Of these strategies, it is the second that is increasingly resonant with modern management thinkers and practitioners.

And most of all, the methods of the authors of “Creating a Blue Ocean Strategy” are similar to the classic works of D. Trout - “Differentiate or Die!” and his other works. By the way, despite the fact that W. Chuck Kim and Rene Mauborgne constantly repeat that benchmarking and focus on competitors are the exclusive prerogative of the “red ocean” of competition, and are fundamentally not applicable in creating a “blue ocean”, nevertheless, in their own methods actively use these approaches, which we can see in the table above in the text “Four stages of strategy visualization” (places of use of competitive benchmarking are underlined).

To make the “blue ocean” methods more convincing, I would like to give a brief analysis of the works of D. Trout.

As competition intensifies, it becomes more and more difficult for companies to find points of difference (in Chuck Kim’s words, this would sound like “finding blue oceans is increasingly difficult”). But there is no other way.

“Differentiate or die!” This slogan, proclaimed by Jack Trout in 2000 in his book of the same name, opened a new page in the development of modern marketing. According to some experts, the word “differentiation” is actually just a new version of the term “positioning”, to which Trout personally and co-authored (with Al Ries and others) devoted many books. Which again shows the love of the “classics” of the business genre to use new terminology to describe old concepts.

The essence of the theory of differentiation is extremely simple and boils down to the following: in order to survive in conditions of fierce competition and commodity saturation in the markets, you need to loudly declare your difference, or, in other words, about the blue ocean. At the same time, the main sign of both product and market differentiation is the image that consumers have of the company and its products. Another sign is the methods by which the company provides itself with advantages over its competitors.

In Differentiate or Die, Jack Trout and Steve Rivkin outline the basic steps to achieving differentiation. First, you need to know the situation in your market and be aware of the positions of your competitors. Secondly, find an idea that would qualitatively distinguish the company or its product from similar ones. This idea must then be effectively implemented and instilled in the minds of the target audience. Those. the company must understand its position, the positions of direct and indirect competitors and non-competitors close to it, on the basis of this, develop its qualitative difference from them (“blue ocean”), which subsequently loudly declare on the market (brand itself and its own difference (blue ocean) ocean), inform about it, explain the value of this difference to the target audience).

“It’s better to be first than to prove that you are better,” says the first principle of J. Trout’s bestseller “The 22 Immutable Laws of Marketing.” However, experts question this postulate, just as they now question even more the postulates of the authors of “Creating a Blue Ocean Strategy.” In most cases, this approach works when products from brands in the same segment have tangible differences between them. Over the past two years, we have observed a trend toward gradual equalization of product quality in all markets. Without a strong brand and equally well-established distribution, most consumers are unlikely to choose a brand with the same quality as others but at a higher price.

In an increasingly competitive environment, it is becoming increasingly difficult for companies to find a point of differentiation when building marketing strategies. The successful implementation of this task largely depends on whether the company can place an image or quality characteristic of the product in the buyer’s mind. Today, leaders have simply dismantled the values ​​generally accepted by the target audience: quality, reliability, simplicity, sophistication. In this context, it is worth citing the example of the Finnish company Raisio Group and its brand of instant porridge. Among all the positive characteristics of this product (healthiness, affordability, ease of preparation, high taste), the category “speed of preparation” was chosen when building a marketing strategy. The slogan “More time to communicate” perfectly expresses the main idea of ​​​​positioning this brand. If this case were considered in “Creating a Blue Ocean Strategy”, it would be cited as one of the most successful examples of creating a “blue ocean”, because Before that, none of their direct or indirect competitors identified “communication” as their competitive advantage, i.e. From the highly competitive field of food products, these instant porridges moved to the sphere of communications and leisure, where they are also outside the competitive field, because there were no porridges in this market segment yet.

A classic example of the Rolls-Royce strategy demonstrates how to segment a market and achieve a dominant position in its segment. The consumer was offered additional car finishing and after-sales service to ensure the reliability of the cars. Thus, a stable idea of ​​the product was created as an item of luxury, comfort, designed for the snobbery of buyers. It is worth noting that Rolls-Royce does not often offer innovative technical developments, remaining in the shadow of the auto giants. Again, here we can talk about a “blue ocean,” right? But once upon a time it was called positioning, or differentiation...

Well, I think that I have examined the concept of blue oceans strategy quite clearly and objectively.

From all this, I concluded for myself that the book is good, but as an exciting business fiction about a business utopia with more than vague and not clear recommendations for using the hackneyed, but always burning topic of competition in the key of “wishful thinking.”

But again, even though this is a “fairy tale”, and the given methods of avoiding competition or competitive struggle are “secondary” and are based on the earlier works of such classics as M. Porter, D. Trout and others, but this is not the main thing...

The main thing is that the beautiful “wrapper” and the ease of presentation of the material in the form of a “serious fairy tale for adults” attracted the attention of a very wide audience of readers who, perhaps, had not read either D. Trout or M. Porter, respectively, the authors of the book found their “ blue ocean”, selling his work not only to potential clients, but also to lovers of light reading, esotericism, etc., introducing a very large readership to the basics of strategic marketing, differentiation and positioning, creative marketing in the form “for dummies”, without giving readers feel like that.

Moreover, “advanced” readers were able to enjoy easy reading and repetition of what they had learned in classical works in a new form. Whatever you say, “repetition is the mother of learning”!

Despite all the fly in the ointment, this book can be considered a barrel of honey, because it quite well presents previously known methods and ideas, but in a beautiful and intelligible form. The authors cannot be called “creators,” but their “tuning” of ideas and the creation of a beautiful myth “about milk rivers and jelly banks” deserves all praise.

The idea of ​​a blue ocean is not new at all and has been touched upon in one form or another by many marketing specialists. But it was this name that stuck in people’s minds, instead of “new niches”, “free cells”, “unoccupied segments”. And it sounds, you see, much better. So what is a blue ocean strategy? This question is explored in detail in the book of the same name by Chan Kim and Renee Mauborgne.
The authors consider all markets as scarlet, i.e. highly competitive (association with bloody battles in fiercely competitive markets) and blue, i.e. free, deep, where there is no one but you.

What is the idea of ​​a blue ocean and that you are the smartest? It is clear that anyone wants to find such an ocean. Why do some find it while others get more and more bogged down in competitive wars? The point is that we need to move away from the usual views and assess the situation as a whole, from the outside.
Well, for example, in the book I really liked the example with wines. Wine, as you know, is a noble drink and very few people can truly appreciate it. When evaluating wine, they look at the year, grape variety, aftertaste, aroma and much more. And if you consider that there are also many varieties of each type... in general, it’s easier to take beer.
One company decided to do just that - they made simple wine of just a few types, in simple bright bottles. Now the buyer did not have to walk for a long time between the aisles, from one variety and manufacturer to another. They took one of two types (sweet or dry) and went to the checkout.
To create a new blue ocean, you need to have a clear understanding of the consumer value scale and where each competitor stands. To better understand this situation, consider a hypothetical example.
Let’s say our task is to find a blue ocean in the printing services market of our city. First of all, you should highlight the key customer values:

• speed of order processing;
• print quality;
• order status information;
• transparency of payments;
• — price;
• work with the customer;
• layout approval process;
• quality assurance.

Let's say there are several competitors in the market (often similar competitors with the same strategy can be combined into one group).
Each of the characteristics can be divided into scales (high/medium/low), and competitors can be displayed on this graph. It will look something like this:

Those. For each of our competitors, we give scores based on these parameters and look at available niches. As you can see, at the moment in this market no one is engaged in urgent inexpensive orders. At the same time, calculations are not transparent, and customers do not know the status of the order until it is completely ready. This could be our blue ocean. The main thing is not just to declare these values, but also to convey them to our clients and actually implement them.
As can be seen from the example, there is nothing complicated about this. The main thing is a well-drawn map of competitors and a real assessment of your values ​​in the eyes of clients. If you are in doubt or speculating, do additional research. Just don't ask closed questions. Let your client talk. She will probably tell you where to look.
Another option is to look at related areas: what can be borrowed from there? Or perhaps how to apply their achievements to your market (wine like beer).
Of course, you should calculate everything, and not rush to every free niche (for example, the niche of low-quality and very expensive goods is probably free. But is there a demand for such goods?). In other words, a blue ocean strategy shows you the possibilities. And their implementation is entirely on your shoulders.
I hope this article helps you decide on your strategy and helps you find your blue ocean.
By the way, you can buy the book for Russians here.