The chapters to be reviewed are Chapters 1, 2, 3, and 6 in the book of Blue Ocean Strategy.This review should be two single-spaced pages long, with a font type of Times New Roman, a font size of 12, and 1 inch page margins.This review needs to cover the following two components:A brief summary of the chapters.How are the chapters related to – different from or similar with – the strategic management theories and concepts in Hill, Schilling, and Jones’ textbook and other assigned readings?A review will be graded according to the following criteria:Quality of content.Quality of writing.
blue_ocean_strategy.pdf
Unformatted Attachment Preview
Copyright
Copyright 2015 Harvard Business School Publishing Corporation
All rights reserved
No part of this publication may be reproduced, stored in or introduced into a
retrieval system, or transmitted, in any form, or by any means (electronic,
mechanical, photocopying, recording, or otherwise), without the prior
permission of the publisher. Requests for permission should be directed to
permissi[email protected], or mailed to Permissions, Harvard Business
School Publishing, 60 Harvard Way, Boston, Massachusetts 02163.
First eBook Edition: February 2015
ISBN: 978-1-62527-449-6
To friendship and to our families,
who make our worlds
more meaningful
Contents
Copyright
Help! My Ocean Is Turning Red
Preface to the Original Edition
Acknowledgments
Part One: Blue Ocean Strategy
1 Creating Blue Oceans
2 Analytical Tools and Frameworks
Part Two: Formulating Blue Ocean Strategy
3 Reconstruct Market Boundaries
4 Focus on the Big Picture, Not the Numbers
5 Reach Beyond Existing Demand
6 Get the Strategic Sequence Right
Part Three: Executing Blue Ocean Strategy
7 Overcome Key Organizational Hurdles
8 Build Execution into Strategy
9 Align Value, Profit, and People Propositions
10 Renew Blue Oceans
11 Avoid Red Ocean Traps
Appendix A
Appendix B
Appendix C
Notes
Bibliography
About the Authors
Help! My Ocean Is Turning Red
“HELP! MY OCEAN IS TURNING RED” captures the sentiment echoed so
frequently by managers around the world. More and more people, whether
managers of companies, heads of nonprofits, or leaders of government, find
themselves up against an ocean of bloody competition and want to get out.
Maybe your business is seeing its margins shrink. Maybe competition is
getting more intense, driving commoditization of your offering and rising
costs. Maybe you know you are going to announce that salary increases
won’t be coming. That’s not a situation any one of us wants to face. And yet
that’s a situation that so many do face.
How can you address this challenge? The lessons, tools, and frameworks
of Blue Ocean Strategy will help you to meet this challenge, whatever
industry or economic sector you are in. It shows how you can get out of a red
ocean of bloody competition and into a blue ocean of uncontested market
space characterized by new demand and strong profitable growth.
When we wrote Blue Ocean Strategy, we used the metaphor of red and
blue oceans because red oceans seemed to capture the reality that
organizations increasingly face, while blue oceans captured the endless
possibility that organizations could create, as industry history has borne out
since its inception. Today, ten years later, more than 3.5 million copies of the
book have been sold. It has become a bestseller across five continents. It has
been translated into a record-breaking forty-three languages. And the term
“blue ocean” has entered the business vernacular. Over four thousand articles
and blog posts on blue ocean strategy have come out, with new articles
continuing to appear daily worldwide.
The stories they contain are fascinating. There are articles from small
business owners and individuals across the globe that discuss how the book
fundamentally changed their perspectives on life and took their professional
successes to all new levels. In other articles, executives speak of how blue
ocean strategy provided the insight to take their business out of the red ocean
and create all new demand. And yet other articles detail how government
leaders have applied blue ocean strategy to achieve high impact at low cost
with rapid execution in areas of social importance ranging from enhancing
the quality of rural and urban lives, to strengthening internal and external
securities, to breaking down ministerial and regional silos.1
As we have reached out to organizations that have applied the ideas and
have worked with many directly since the publication of the original edition
of Blue Ocean Strategy, we have learned a lot by watching the journey
people have made with these ideas. Their most pressing questions in
executing their blue ocean strategies are: How do we align all of our activities
around our blue ocean strategy? What do we do when our blue ocean has
become red? How can we avoid the strong gravitational pulls of “red ocean
thinking”—we call them “red ocean traps”—even as we’re pursuing a blue
ocean strategy? These are the very questions that have motivated this
expanded edition. In this new preface, we first outline what’s new here. We
then briefly summarize the key points that define and distinguish blue ocean
strategy and address why we believe blue ocean strategy is more needed and
relevant than ever before.
What’s New in This Expanded Edition?
This edition adds two new chapters and expands a third. Here are the
highlights that show the gist of managers’ key challenges and trouble spots
and how we address them.
Alignment: What it means, why it’s essential, and how to achieve it. A
challenge we have been told about and have seen organizations struggle with
is how they can align their system of activities—including a potential web of
external partners—to create a sustainable blue ocean strategy in practice. Is
there a simple yet comprehensive method to ensure that the key components
of an organization, from value to profit to people, are aligned to support the
strategic shift blue ocean strategy requires? This is important as companies
all too often focus on certain dimensions of their organizations, paying less
heed to other dimensions that must support the strategy to make it a
sustainable success. In recognition, this expanded edition expressly explores
the issue of alignment in the context of blue oceans. We present cases of
success and failure in alignment to show not only how it is achieved in action
but also how it can be missed. Chapter 9 addresses this alignment challenge.
Renewal: When and how to renew blue oceans over time. All companies
rise and fall based on the strategic moves they make or don’t make. A
challenge organizations face is how to renew blue oceans over time, as every
blue ocean will eventually be imitated and turn red. Understanding the
process of renewal is key to ensure that the creation of blue oceans is not a
one-off occurrence but can be institutionalized as a repeatable process in an
organization. In this expanded edition, we tackle how leaders can turn the
creation of blue oceans from a static achievement into a dynamic renewal
process both at the business level and at the corporate level for multibusiness
firms. Here we articulate the dynamic renewal process for creating
sustainable economic performance both for a single business that has reached
for a blue ocean and for a multibusiness organization that has to balance both
red and blue ocean initiatives. In so doing, we also highlight the
complementary roles that red and blue ocean strategies play in managing a
company’s profit for today while building strong growth and brand value for
tomorrow. Chapter 10 addresses this renewal challenge.
Red Ocean Traps: What they are and why they should be avoided. Lastly,
we show the ten most-common red ocean traps we see companies fall into as
they put blue ocean strategy into practice. These traps keep companies
anchored in the red even as they attempt to set sail for the blue. Addressing
these traps is critical to getting people’s framing right to create blue oceans.
With the proper grasp of the concept, one can avoid the traps and apply its
associated tools and methodologies with accuracy so that right strategic
actions can be produced to sail toward clear blue waters. Chapter 11
addresses the challenge of red ocean traps.
What Are the Main Points of Distinction?
The aim of blue ocean strategy was straightforward: to allow any
organization—large or small, new or incumbent—to step up to the challenge
of creating blue oceans in an opportunity-maximizing, risk-minimizing way.
The book challenges several long-held beliefs in the field of strategy. If we
had to zoom in on five key points of distinction that make the book worthy of
consideration, it would be these.
Competition should not occupy the center of strategic thinking. Too
many companies let competition drive their strategies. What blue ocean
strategy brings to life, however, is that this focus on the competition all too
often keeps companies anchored in the red ocean. It puts the competition, not
the customer, at the core of strategy. As a result, companies’ time and
attention get focused on benchmarking rivals and responding to their strategic
moves, rather than on understanding how to deliver a leap in value to buyers
—which is not the same thing.
Blue ocean strategy breaks from the stranglehold of competition. At the
book’s core is the notion of a shift from competing to creating new market
space and hence making the competition irrelevant. We first made this point
all the way back in 1997 in “Value Innovation,” the first of our series of
Harvard Business Review articles that form the basis of this book.2 We
observed that companies that break away from the competition pay little heed
to matching or beating rivals or carving out a favorable competitive position.
Their aim was not to outperform competitors. It was to offer a quantum leap
in value that made the competition irrelevant. The focus on innovating at
value, not positioning against competitors, drives companies to challenge all
the factors an industry competes on and to not assume that just because the
competition is doing something means it is connected to buyer value.
In this way, blue ocean strategy makes sense of the strategic paradox many
organizations face: the more they focus on coping with the competition, and
striving to match and beat their advantages, the more they ironically tend to
look like the competition. To which blue ocean strategy would respond, stop
looking to the competition. Value-innovate and let the competition worry
about you.
Industry structure is not given; it can be shaped. The field of strategy has
long assumed that industry structure is given. With industry structure seen as
fixed, firms are driven to build their strategies based on it. And so strategy, as
is commonly practiced, tees off with industry analysis—think five forces or
its distant precursor SWOT analysis—where strategy is about matching a
company’s strengths and weaknesses to the opportunities and threats present
in the existing industry. Here strategy perforce becomes a zero-sum game
where one company’s gain is another company’s loss, as firms are bound by
existing market space.
Blue ocean strategy, by contrast, shows how strategy can shape structure in
an organization’s favor to create new market space. It is based on the view
that market boundaries and industry structure are not given and can be
reconstructed by the actions and beliefs of industry players. As industry
history shows, new market spaces are being created every day and are fluid
with imagination. Buyers prove that as they trade across alternative
industries, refusing to see or be constrained by the cognitive boundaries
industries impose upon themselves. And firms prove that as they invent and
reinvent industries, collapsing, altering, and going beyond existing market
boundaries to create all new demand. In this way, strategy moves from a
zero-sum to a non-zero-sum game, and even an unattractive industry can be
made attractive by companies’ conscious efforts. Which is to say a red ocean
need not stay red. This brings us to a third point of distinction.
Strategic creativity can be unlocked systematically. Ever since
Schumpeter’s vision of the lone and creative entrepreneur, innovation and
creativity have been essentially viewed as a black box, unknowable and
random.3 Not surprisingly, with innovation and creativity viewed as such, the
field of strategy predominantly focused on how to compete in established
markets, creating an arsenal of analytic tools and frameworks to skillfully
achieve this. But is creativity a black box? When it comes to artistic creativity
or scientific breakthroughs—think Gaudi’s majestic art or Marie Curie’s
radium discovery—the answer may be yes. But is the same true for strategic
creativity that drives value innovation that opens up new market spaces?
Think Ford’s Model T in autos, Starbucks in coffee, or Salesforce.com in
CRM software. Our research suggests no. It revealed common strategic
patterns behind the successful creation of blue oceans. These patterns allowed
us to develop underlying analytic frameworks, tools, and methodologies to
systematically link innovation to value and reconstruct industry boundaries in
an opportunity-maximizing, risk-minimizing way. While luck, of course, will
always play a role, as it does with all strategies, these tools—like the strategy
canvas, four actions framework, and six paths to reconstruct market
boundaries—bring structure to what has historically been an unstructured
problem in strategy, informing organizations’ ability to create blue oceans
systematically.
Execution can be built into strategy formulation. Blue ocean strategy is a
strategy that joins analytics with the human dimension of organizations. It
recognizes and pays respect to the importance of aligning people’s minds and
hearts with a new strategy so that at the level of the individual, people
embrace it of their own accord and willingly go beyond compulsory
execution to voluntary cooperation in carrying it out. To achieve this, blue
ocean strategy does not separate strategy formulation from execution.
Although this disconnect may be a hallmark of most companies’ practices,
our research shows it is also a hallmark of slow and questionable
implementation and mechanical follow-through at best. Instead, blue ocean
strategy builds execution into strategy from the start through the practice of
fair process in the making and rolling out of strategy.
Over twenty-five years, we have written about the impact of fair process
on the quality of execution of decisions through many academic and
managerial publications.4 As blue ocean strategy brings to light, fair process
prepares the ground for implementation by invoking the most fundamental
basis of action: trust, commitment, and the voluntary cooperation of people
deep in an organization. Commitment, trust, and voluntary cooperation are
not merely attitudes or behaviors. They are intangible capital. They allow
companies to stand apart in the speed, quality, and consistency of their
execution and to implement strategic shifts fast at low cost.
A step-by-step model for creating strategy. The field of strategy has
produced a wealth of knowledge on the content of strategy. However, what it
has remained virtually silent on is the key question of how to create a strategy
to begin with. Of course, we know how to produce plans. But, as we all
know, the planning process doesn’t produce strategy. In short, we don’t have
a theory of strategy creation.
While there are many theories that explain why companies fail and
succeed, they are mostly descriptive, not prescriptive. There is no step-bystep model that prescribes in specific terms how companies can formulate
and execute their strategies to obtain high performance. Such a model is
introduced here in the context of blue oceans to show how companies can
avoid market-competing traps and achieve market-creating innovations. The
strategy-making framework we advance here is built based on our strategy
practices in the field with many companies over the last two decades. It helps
managers in action as they formulate strategies that are innovative and wealth
creating.
Why Is Blue Ocean Strategy of Rising Importance?
When we first published Blue Ocean Strategy in 2005, there were many
forces driving the importance of creating blue oceans. At the top of the list
was the fact that competition in existing industries was getting fiercer and
pressure on costs and profits was increasing. These forces have not gone
away. On the contrary, they’ve only intensified. But beyond these, over the
last ten years, several new global trends have kicked in with a speed few
could have ever imagined when our book first came out. We believe that
these trends make creating blue oceans an even more important strategic task
in the future. Here, we highlight some of them without intending to be
comprehensive in their coverage or content.
A rising call for creative new solutions. Just look at a broad swath of
industries that matter fundamentally to who we are: health care, K-12
education, universities, financial services, energy, the environment, and the
government, where demands are high yet money and budgets are low. In the
last ten years, every one of these industries has been seriously called to task.
There has hardly been a time in history when the strategies of players in so
many industries and sectors needed fundamental rethinking. To remain
relevant, all these players are increasingly being called on to reimagine their
strategies to achieve innovative value at lower costs.
The rising influence and use of public megaphones. It’s hard to believe,
but only ten years back, organizations still controlled the majority of
information disseminated to the public on their products, services, and
offerings. Today that’s history. The surge in social network sites, blogs,
micro-blogs, video-sharing services, user-driven content, and internet ratings
that have become close to ubiquitous around the globe have shifted the power
and credibility of voice from organizations to individuals. To not be a victim
but a victor in this new reality, your offering needs to stand out as never
before. That’s what gets people tweeting your praises not your faults; giving
five-star ratings; clicking the thumbs up, not the thumbs down; listing your
offering as a favorite on social media sites; and even being inspired to
positively blog about your offering. You can’t hide or overmarket your metoo offering when virtually everyone has a global megaphone.
A locational shift in future demand and growth. When people around the
world talk about the growth markets of the future, Europe and Japan hardly
get a mention these days. Even the United States, though still the largest
economy in the world, has increasingly taken a backseat in terms of future
growth prospects. Instead, today China and India, not to mention countries
like Brazil, top the list. In the space of the last ten years, all three have joined
the ranks of the top-ten largest economies. However, this new breed of big
economies is not like the large economies the world has historically looked to
and counted on to consume the goods and services produced by the world.
Unlike the relatively high per capita incomes enjoyed in the world’s
developed economies, these big emerging markets are the product of very
low, though rising, per capita income for very large populations of citizens.
This makes the importance of affordable low cost in organizations’ offerings
more critical than before. But do not be fooled. Low cost alone is not enough.
For these same large populations also have increasing access to the internet,
mobile phones, and TVs with global channels that raise their sophistication,
demands, and desires. To capture these increasingly savvy customers’
imaginations and wallets, both differentiation and low cost are needed.
The rising speed and easiness of becoming a global player. Historically,
the major global companies came predominantly from the United States,
Europe, and Japan. But that is changing at incredible speed. Over the last
fifteen years, the number of companies from China in the Fortune Global 500
has increased more than twenty times, the number of Indian companies has
increased roughly eightfold, and the number of Latin American companies
more than doubled. This suggests that these big emergin …
Purchase answer to see full
attachment
