Mastering Strategy and Blue Ocean Shift Framework for Competitive Superiority and Differentiation through Value Innovation.

The terms 'strategy,' 'strategic planning,' 'strategic thinking,' and 'strategic roadmap' are common buzzwords in business and management. However, there exists frequent misinterpretation and misapplication of their fundamental essence, which, at its core, is centered on achieving competitive superiority. While competition in the business world is a reality, the prevailing Volatile Uncertain Complex and Ambiguous (VUCA) environment makes the landscape more challenging. It is even more challenging for commodity products which are typically characterized by no obvious unique value proposition and intense price and profit margin wars. Navigating such a challenging competitive landscape requires more than just a race to the bottom; it demands a holistic and an integrated whole strategic approach to not only survive but sustainably thrive in the face of fierce competition.

While organizations dedicate substantial resources to strategic planning, it's crucial to recognize that strategy is far more than a blueprint for the future; it's a dynamic framework that demands a clear understanding of the problems at hand, the courage to make tough decisions, and a keen awareness of where to play and how to win.

This article introduces and discusses the Blue Ocean Shift, a strategy framework, and a transformative concept. By challenging conventional wisdom, norms, experimenting and embracing the innovative Blue Ocean Shift Strategy, companies can navigate a path towards both profitability and distinctiveness. Before discussing the Blue Ocen shift it is important to understand what is a strategy and how to differentiate a good strategy from a bad strategy.

Defining Strategy and understanding Good Strategy vs. Bad Strategy

Strategy is the art of finding a competitive advantage in the marketplace. For commodity products, devoid of apparent unique selling propositions, the challenge is greater. A good strategy serves as guiding principles, leading an organization toward its goals and competitive triumph [1]. Good strategy offers a meticulously crafted roadmap, built upon the bedrock of comprehensive market and industry insights and a clear understanding of an organization's strengths and weaknesses. Such a strategy fosters a path to not just surviving but thriving in a competitive landscape.

Bad strategy in contrast, often amounts to wishful thinking or a collection of vague aspirations and desire. It lacks the essential depth and specificity required to guide an organization towards concrete success. Instead, it contains generic statements, wishful optimism, or an undue reliance on past achievements that may no longer be applicable in the present landscape.

Good strategy has three core elements:

- Diagnosis: Conduct a thorough assessment to identify and articulate challenges and opportunities facing the business.

- Decision: ?Determine main challenges to mitigate and the key opportunities to capture and capitalize on strategic priorities

- Deliver: Implement a well-coordinated coherent series of actions to achieve sustainable advantages and superior returns based on the decisions made.

The key to formulating a good strategy lies in breaking free from tunnel vision, biases that restrict creative thinking and foster out-of-the-box thinking. It's essential to demystify common fallacies and biases to uncover the bigger picture.

Demystifying Fallacies: A Path to Strategic Clarity

In the scope of business decision-making and strategic thinking, fallacies, and cognitive biases often play a critical role. These cognitive pitfalls often manifest as tunnel vision, where decision-makers become myopically focused on certain aspects of the business landscape, neglecting the broader context. Recognizing and addressing these pitfalls is pivotal for making well-rounded decisions that take the complete business landscape into account.

In the context of commodity products and competitiveness, one common fallacy is the belief that success in a price-driven market is solely dependent on slashing prices to the bare minimum. This tunnel vision can blind organizations to alternative paths, innovative and creative solutions. Another fallacy is the assumption that innovation is the exclusive domain of groundbreaking technologies, overlooking the potential for innovation in business models, customer experiences, or value chains.

To demystify these fallacies and biases, organizations must engage in a process of introspection and critical thinking. This includes:

1. Broadening Perspectives: Encourage diverse perspectives within the organization, drawing insights from different departments, roles, and backgrounds. This helps in challenging narrow viewpoints and uncovering hidden opportunities.
2. Market Intelligence: Invest in robust market research and competitive analysis. Understand not only what competitors are doing but also the evolving needs and preferences of customers. This data-driven approach can shatter preconceived notions.
3. Scenario Planning: Develop scenarios that consider a range of potential futures, including disruptive changes in the market. This exercise can help organizations prepare for uncertainty and adapt more effectively.
4. Customer-Centricity: Prioritize understanding your customers' pain points, desires, and unmet needs. Innovation often stems from meeting these customer demands more effectively than competitors.
5. Continuous Learning: Foster a culture of continuous learning and adaptability. Encourage employees to question assumptions and explore new ideas, even if they challenge the status quo.
6. People-centric culture: Embrace humanness and establish a psychologically safe environment for open communication and organizational trust. Cultivate inclusiveness and collaboration via diversity initiatives, bias training, and prioritizing mental well-being. These integrated elements form a holistic approach, fostering motivated workforce and organizational success.

Tools and Frameworks for Strategic Analysis

Effective strategic analysis is the cornerstone of successful decision-making in today's competitive business landscape. A range of tools and frameworks exists to help organizations gain insights into their external and internal environments. Several well-known tools are discussed below [3], each accompanied by an examination of their limitations:

1. Five Forces Analysis: Definition: Developed by Michael Porter, this model assesses the five key forces that influence industry competition: the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, the threat of substitute products, and the intensity of rivalry among existing competitors. [2] is a good reference for foundational understanding with practical applications and examples. Limitations: While it's a valuable tool for understanding industry dynamics, the Five Forces model may not adequately capture rapid market changes, disruptive technologies, or non-traditional competitors. PESTEL Analysis: Definition: PESTEL stands for Political, Economic, Sociocultural, Technological, Environmental, and Legal factors. This framework helps organizations analyze external macro-environmental factors that can impact their business. Limitations: PESTEL provides a broad overview, but it may not offer the depth required to identify specific opportunities and threats, and it doesn't account for industry-specific nuances.
2. Competitor Analysis: Definition: Competitor analysis involves a comprehensive assessment of the strengths and weaknesses of rival companies, their strategies, and their market positions. Limitations: While it helps understand the competitive landscape, competitor analysis may not uncover emerging threats from disruptors outside the traditional competitive set.
3. SWOT Analysis: Definition: SWOT analysis examines an organization's internal strengths and weaknesses as well as external opportunities and threats. It provides a simple framework for assessing current capabilities and potential risks and rewards. Limitations: SWOT analysis can be overly simplistic and may not provide actionable insights without additional context or prioritization of factors.
4. VIRO Framework: Definition: VIRO stands for Value, Rarity, Imitability, and Organization. It assesses the competitive advantage of a company's resources and capabilities by evaluating whether they are valuable, rare, difficult to imitate, and well-organized. Limitations: VIRO is primarily focused on assessing a company's internal resources and may not fully consider external market dynamics or industry-specific factors.
5. 4Ps Marketing Mix Strategy: Definition: The 4Ps framework includes Product, Price, Place, and Promotion. It helps organizations develop a marketing strategy by considering these four key elements. Limitations: While it's essential for marketing strategy, the 4Ps framework may not capture the full complexity of modern marketing, which often involves digital channels and customer experience considerations.
6. Value Chain Analysis: Definition: Value Chain Analysis examines an organization's primary and support activities to identify where value is created and how costs can be minimized. Limitations: It primarily focuses on internal processes and may not adequately address external factors, such as changing customer preferences or disruptive technologies.

In today's dynamic and disruptive business environment, relying solely on these traditional tools may not provide a comprehensive view of the strategic landscape. To address this, consider complementing these tools with innovative approaches like Blue Ocean Strategy | Shift | Leadership, which can help organizations break free from conventional thinking and create uncontested market spaces, even in price-driven commodity markets.

The Blue Ocean Shift Strategy Framework: A Roadmap to Success

The concept, Blue Ocean Strategy, was first introduced by W. Chan Kim and Renée Mauborgne in 2005 [4]. It is a business strategy that focuses on creating and capturing new market space (Blue Ocean), rather than competing in existing markets (Read Ocean). It involves breaking away from the competition, creating new demand, and exploring uncharted territory.

The Red Ocean represents existing industries with intense competition, where companies fight for market share, leading to a saturated and bloody environment. In contrast, ?"Blue Ocean" represents untapped market space, where a company can innovate and create value in a way that makes competition irrelevant or non-existent. This involves shifting from a focus on outperforming rivals in a crowded market to making the competition irrelevant by offering unique value to customers. Blue Ocean Strategy advocates Value Innovation, through cost minimization and value maximization for both buyer and the enterprise.

Blue Ocean Shift [5], introduced in 2017 extends the original concept by providing a systematic approach and a framework for making the shift from a Red Ocean to a Blue Ocean. To businesses seeking differentiation, it provides tools for creating new markets or reshaping existing ones. It introduces a five-step process: "Get Started," "Understand Where You Are Now," "Imagine Where You Could Be," "Find How to Get There," and "Make Your Move."

Blue Ocean Shift focuses on empowering leaders to navigate the complexities of organizational change and drive innovation through human-centric approach. It values the creation of new markets, unlocking untapped demand, and achieving sustainable growth through differentiation. Based on the following three core components, it provides a structured path for companies to navigate the challenges of price-driven markets and carve out new market spaces.

1. Strategy Canvas: Mapping the Landscape

Definition: The Strategy Canvas, a foundational component of the Blue Ocean Shift Strategy, serves as a visual tool enabling organizations to chart their current market positions in relation to crucial competitive factors. These factors encompass product attributes, pricing strategies, customer service, and more. Through this comprehensive mapping, companies can gain clarity on their standing in the competitive arena.

Explanation: The Strategy Canvas serves as a pivotal starting point in the Blue Ocean Shift journey. It facilitates an in-depth examination of resource allocation across different dimensions, highlighting areas of overinvestment and underinvestment. This insight sets the stage for strategic adjustments to align with the organization's objectives.

2. Value Curve Analysis: Crafting Unique Value Propositions

Definition: Value Curve Analysis constitutes a central phase in the Blue Ocean Shift Strategy. It involves a meticulous evaluation of value curves, encompassing those of competitors and potential disruptors within the industry. A value curve illustrates how a company delivers value to customers across various dimensions when compared to rivals.

Explanation: Through a comprehensive analysis of these value curves, organizations can identify opportunities to create fresh, differentiated value propositions. This strategic endeavor may involve eliminating elements with low customer value, reducing certain dimensions to optimize costs, elevating aspects that resonate with customers, or even introducing entirely new dimensions of value. The ultimate objective is to reshape the value curve, crafting a distinctive and compelling value proposition.

3. Four Action Framework (ERRC): Guiding Strategic Moves

Definition: The Four Action Framework, often referred to as ERRC, serves as the practical engine powering the Blue Ocean Shift Strategy. This framework challenges organizations to question industry norms and embark on strategic initiatives across four key areas: Eliminate, Reduce, Raise, and Create.

Explanation:

• Eliminate: This action revolves around identifying and eliminating redundant factors or features that hold minimal customer value.
• Reduce: Companies are encouraged to explore avenues for cost reduction in areas that do not significantly impact customer value while maintaining or enhancing overall quality.
• Raise: The "Raise" component involves elevating aspects highly valued by customers, often surpassing industry standards.
• Create: Perhaps the most innovative aspect of the framework, "Create" urges organizations to introduce entirely new dimensions of value, pushing the boundaries of industry offerings.

André Rieu and his Johann Strauss Orchestra is a good example of the Blue Ocean Shift strategy [7]. ?

Rieu orchestrated a transformative Blue Ocean shift in classical music, strategically diverging from the traditional concert landscape. Central to his innovative strategy was the creation of an immersive and accessible experience, blending the sophistication of classical music with a lively and entertaining atmosphere. Rieu's visionary approach included active audience participation, breaking down musical barriers through collaborations across genres, and global tours that adapted performances to diverse cultures. Notably, his Johann Strauss Orchestra played a pivotal role, providing a unique sound and visual spectacle. Rieu's strategic use of this orchestra, along with innovative stage designs and multimedia elements, further set his concerts apart. By broadening the appeal of classical music and embracing a global audience, Rieu's Blue Ocean shift not only secured his long-term success but also redefined classical music as a vibrant and universally appreciated art form.

In conclusion, among the prevalent buzzwords in business and management, the essence of strategy, strategic planning, strategic thinking, and strategic roadmap is often misunderstood. A holistic approach is necessary for competitive superiority in the challenging VUCA environment. It is crucial to understand the essence of strategy and the distinction between good and bad strategies. Strategic planning must involve a dynamic framework rooted in problem understanding, courageous decision-making, and a keen awareness of market dynamics. This article emphasizes the significance of the Blue Ocean Shift, a transformative strategy framework that challenges conventional norms and fosters value innovation. By embracing this approach, companies can not only survive but also thrive in the face of fierce competition, steering towards both profitability and differentiation.

Acknowledgment:

I would like to thank Frederic Funck and all the members of The BookClub - studying strategy, Leadership and OD together, for the valuable discussion that helped to better understand the underlying principles and essence of strategy. Its a continuous learning journey that is ongoing and I look forward to implementing the concepts in real-life business scenarios and developing as an established Strategist!

[1] Good Strategy Bad Strategy: The Difference and Why It Matters, by Richard Rumelt, 2011.

[2] Understanding Michael Porter: The Essential Guide to Competition and Strategy, by Joan Magretta, 2011.

[3] Strategy in 3D: Essential Tools to Diagnose, Decide, and Deliver, by Greg Fisher, John E. Wisneski, Rene M. Bakker, 2020.

[4] Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market Space and Make the Competition Irrelevant, by W. Chan Kim & Renée Mauborgne, 2015.

[5] Blue Ocean Shift: Beyond Competing - Proven Steps to Inspire Confidence and Seize New Growth, by W. Chan Kim, Renée Mauborgne, 2017.

[6] Book Summary – Blue Ocean Shift: Beyond Competing – Proven Steps to Inspire Confidence and Seize New Growth, By Readingraphics

[7] A Maestro without Borders: How André Rieu Created the Classical Music Market for the Masses, by KIM, W. Chan, MAUBORGNE, Renée, JI, Mi., 2017, INSEAD

[8] The Flying Dutchman and the Blue Ocean Strategy, Post in Strategy, Transform & Grow, 2021.