Saturday, June 11, 2016

Innovator's Blue Ocean

The Innovator's Dilemma and "Blue Ocean Strategy" make for an interesting "compare and contrast" study. For companies evaluating what new markets to get into, is there any overlap? Can or should both approaches be used at the same time? Or are they mutually exclusive? What can the reader take away in aggregate?

These days, no industry or company is not a technology company. Technology provides some essential component for all of us and no company can afford to not be a technology company. That said, the two viewpoints differ in terms of the role of new and emerging technologies in strategy. The Innovator's Dilemma puts technology at the heart of its strategic focus, drawing a distinction between sustaining technologies that can be leveraged in traditional ways and emerging disruptive technologies that threaten traditional approach and require special handling. It argues that those industries facing a particular disruptive technology must completely re-think their strategy around the counterintuitive forces that will be unleashed by this technology. Those that do this properly can retain their dominant positions and potentially "leapfrog" ahead of rivals. Conversely, "Blue Ocean Strategy" argues that while "...technology is sometimes involved in the creation of blue oceans, but it is not a defining feature of them." Creating blue oceans requires an analysis of industry to create a new need that didn't exist before, and the technology follows after that. 

The two viewpoints also disagree on the extent to which incumbents are at a disadvantage. Innovator's major argument is that incumbents are typically at a major disadvantage because they usually evaluate disruptive technologies using a rubric more appropriate for sustaining ones and have difficultly investing in disruptive technologies at the right times and in the right ways. "Blue Ocean" argues that the creation of new markets typically comes from established companies. 

One aspect they both agree on is the fallacy of the perceived trade off been value and cost. (Or at least the dangers of assuming that trade off is the only metric at work.) "Blue Ocean" gives examples of how companies can pursue differentiation and low cost simultaneously (because they are reinventing or inventing industries that aren't bound by historical constraints). Innovator's explains that when established companies pursue differentiation over driving down costs (chasing the high revenue customers), they can often outpace the consumer's demand. This leaves them vulnerable when a disruptive technology appears with low costs AND good value to scoop up the customers the incumbent has left behind.

Overall, both approaches have important lessons to impart and show us that we shouldn't be too focused on traditional approaches that we miss out-of-the-box realizations that competitors may be more open too. Both viewpoints should be in the manager's toolbox to leverage when the situation calls for it. 

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.