Friday, April 10, 2015

Blue Ocean Strategy – a ‘must know Strategy’

Until this week, we discussed the suitable strategies for the Existing companies and organizations, where companies try to outperform their rivals in order to grab a greater share of existing demand. But, this week’s reading exposed us to a new form of Strategy – ‘The Blue Ocean strategy’, which is all about the industries not in existence today. It is a strategy for the unknown market space, untainted by competition and an ample opportunity for growth that is both profitable and fast. This week’s article by Chan Kim presented a new perspective called Blue ocean strategy and assessed the profit and growth consequence of this strategy. The author strongly believe that ‘an understanding of this strategy will help today’s companies as they struggle to thrive in an accelerating and expanding business universe’. I totally agree with him. When reading further, a company from my field (healthcare) crossed my mind – Intuitive Surgical, Inc.

Intuitive Surgical is a medical technology company that manufactures the da Vinci Surgical System, a line of robotic surgical equipment used to conduct minimally-invasive surgeries. The da Vinci Surgical System translates a surgeon's hand movements at the controls into corresponding micro movements of surgical instruments positioned inside a patient on the operating table, allowing for precision movement and fine surgical manipulation. The company primarily intended to develop the device for Trans-atlantic surgeries. But it soon realized its potential market scope for robotic surgeries and moved into the market with no competitors. With its advanced technology innovations, it became a monopoly enjoying the benefit of fixing high price (~ $ 1.5 million for a device) and also created a high barrier for other companies to enter. Like General Electric, this company also expects recurring revenues from service contracts and instrument accessories to contribute a larger percentage of total revenue in the future.

From the year 2000, for more than 15 years the company is the dominant player in the industry with its stock value at $530.36 (as of 04-10-2015).  Speaking of competition, Medtronics, TransEnterix and Titan Medical will be introducing their own robotic surgery platforms. But by the time FDA approves their product, Intuitive Surgical will be far ahead to reach with its technology and high market share. Also, unlike most other medical device companies, Intuitive Surgical’s products have no problems qualifying for healthcare reimbursement because the company targets surgeries that are considered non-experimental and non-cosmetic, which qualify for full reimbursements from government and private insurance plans. Like the other side of the coin, the company may face with other obstacles like doctors debate over trusting robots, Hospital’s budget constraints and competitors. But I believe with over two thirds of U.S. adults overweight and more than half of those obese, there remains a growing need in the future for precise, robotic based treatments.

It is always interesting to analogize the concept that I learned to a real world Industry!!!!

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