Friday, April 12, 2013

Concerns About Blue Ocean Strategy


Initially, I intended to write about blue ocean strategy and where future blue oceans might be found. However, as I thought more about the ideas behind this strategy, the more skeptical I became of the realistic application of this approach. As others have noted, blue ocean strategy sounds pretty smart, but it starts to fall apart the more you think about it.
            Blue ocean strategy involves finding “uncontested market spaces where the competition is irrelevant.” Success here means new demand, high profits, and strong growth. Additionally, costs should be reduced even as you offer more value for customers. All of this sounds really great. Perfect, maybe. But if something sounds too good to be true…
            So where does the house of cards collapse? Well, for starters, this “strategy” seems more like a fairytale for business success. The logic behind the strategy sounds rather vapid and magically hopeful, while simultaneously undermining itself. For instance, the authors insist that “it’s not about technology innovation.” They then cite a “plethora of multi-billion dollar industries,” about half of which exist because they were major technological innovations (automobiles, petrochemicals, music recording, cell phones, home videos, etc…).
            The book review cited below provides an interesting critique of blue ocean strategy, but I want to highlight this issue: “Ultimately, the problem Blue Oceans attempts, and spectacularly fails to address, is the problem of creativity itself.” That seems like the big problem here: sure, any company would love to find new demand, have high profits and growth, reduce costs, and ignore their competitors. Since not many companies find these mythical blue oceans, there are a few possibilities we can consider:
  • ·         No one follows blue ocean strategy.
  • ·         Blue ocean strategy is not really a strategy.
  • ·         Blue ocean strategy is really hard to implement.
  • ·         Rigorous analysis shows that other companies (or their products) share similar functions, uses, technology, or customers.

My guess is that the last three bullets are in play here; it simply is not easy to make a groundbreaking, game-changing innovation that occupies an exclusive area in the market. Finally, the authors seem to ignore the likelihood that some, if not most, of their proof cases would have bankrupted their companies if they failed. Bold, innovative strategy is great but grasping at straws is not; to paraphrase one manager from this week’s readings, there’s a reason why a lot of ideas are left outside “the box.”
            I don’t like to criticize without having an alternative approach, but I don’t have something particular in mind right now. Do you buy into blue ocean strategy as a viable approach? If not, what is a more plausible alternative?

Sources:
Venkatesh Rao, “Book Review: Blue Ocean Strategy,” Ribbon Farm blog (6 August 2007), http://www.ribbonfarm.com/2007/08/06/book-review-blue-ocean-strategy/ (accessed 9 April 2013).
W. Chan Kim and Renee Mauborgne, “Blue Ocean Strategy,” Harvard Business Review (2007).

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