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Blue Ocean Strategy
Sales and marketing books
W. Chan Kim
Harvard Business School
February 3, 2005
Week: 4 All time: 140
manuellemos.netOnce I read something like this: in the Internet the number one company or site for a certain purpose is much better and successful than the number two.
Actually we can verify that it is the case in many areas. For instance, Google search is the number one search site. It is much more successful than Yahoo and MSN search.
The same goes for eBay as the number one auctions site, Paypal as the number one Internet based payments system, Skype as the number one Internet based phone application, Twitter as the number one micro-blogging site, and so on.
More recently I learned about this book "Blue Ocean Strategy" that talks about very successful practices that many companies have followed. Doing so they made their competitors practically irrelevant.
It is a fact that the companies mentioned above are number one in their fields and so they are much more successful their competitors. However that is not exactly a rule, but rather a consequence of a well thought and well executed business strategy that follows practices described in this book.
As a matter of fact, the strategy is not specific just for Internet or technology companies. It can be applied by companies in many other industries.
One example that is brought up frequently throughout the book is that Canadian company that conceived "Cirque du Soleil" to bring a new way of producing circus shows that attract masses and generate millions in revenue from their shows presented worldwide.
The book was published by Harvard Business School in 2005 and so far has been a best-seller in many countries.
The authors of the book, W. Chan Kim and Renee Mauborgne, have been distinguished professors in several reputed business schools and worked as board members of well known companies.
However, they did not really invent the blue ocean strategy practices. These practices exist ever since the man kind started organizing businesses activities.
What the book authors did was to name the strategy as blue ocean and then they have written this book as a way to describe what is the strategy, how it can be executed and maintained to keep businesses successful for a long time.
But you may ask, where does this name "Blue Ocean Strategy" comes from? A blue ocean is a peaceful ocean where the businesses are represented by ships that can sail at top speed without being affected by competitors or adverse circumstances.
It is the opposite of an eventual red ocean on which the fights with the competitors lead to bloody losses, thus the reference to red, as it is the color of blood.
The book itself is divided in three main parts: the first describes the concepts about the blue ocean strategy, the second teaches how to conceive a blue ocean strategy, and the last teaches how to execute the strategy properly.
This book is being used as reference material in many schools that provide MBA (Master in Business Administration) courses. However, you do not need to take a MBA course to understand and appreciate the book.
The theory is presented throughout the book giving real world examples of well known companies that applied the blue ocean strategy practices.
This is awesome because it helps you to understand how come certain companies became so successful, while their competitors are made irrelevant.
For instance, after reading this book, you may understand exactly why Google search became so successful. Even with competitors like Microsoft that has a very large budget to compete on the search market, Google leadership tends aggravate for a long time.
In practice, Google search competitors are made irrelevant because they do not seem to know what to do to steal market share from Google. Google search is one good example of well executed blue ocean strategy.
Talking about Microsoft, Windows marketing strategy can also be seen as a blue ocean strategy. Practically since the beginning Windows made almost irrelevant other operating systems for the desktop computers.
The book mentions that a well executed blue ocean strategy may keep a company leading its market well ahead for 15, 20 or more years. That seems to be true for Windows.
The book also mentions that successful blue ocean strategies do not last forever. Despite the book recommends practices to keep blue oceans for a long time, often new blue oceans may defeat companies that applied blue ocean strategies in the past.
This may explain why Microsoft seems to be so concerned now with these Web based operating system initiatives. If a Web based operating system implemented by Google or any other competitor becomes the next successful blue ocean strategy, desktop based Windows operating systems may end up becoming much less relevant.
Another interesting detail mentioned in the book, is that some people may think that just using innovation may be enough to implement a successful blue ocean strategy.
Innovation is important but certainly not enough. That is one of the things that you learn from this book. The book explains what other factors are relevant to execute a successful blue ocean strategy.
Although this example was not taken from the book, I remember particularly one story about great innovation that failed due bad strategy execution.
In 1995 Bill Gates, the well known founder and current chairman of Microsoft, published a book named "The Road Ahead". It is a book about his vision of the future of personal computing.
A chapter of that book that got my attention was one on which he mentioned about the homes of the future with advanced features. By then, he was trying to implement such features in his own house.
One of the proposed solutions would allow each person living in the house to listen to their favorite music to everywhere they go.
The first attempts to solve the problem were ridiculous, as he explicitly admitted in the book. It included speakers dropping from the ceiling to the place where each person was, in order to play the music they wanted. The approach was dropped, despite he tried hard to innovate providing a solution for something that people really want until today.
In 1998 Creative launched the first portable MP3 player. It was portable like Sony Discman but much lighter as it did not have a CD player device. The audio compression levels provided by MP3 made it possible to fit more music tunes in less memory.
Despite the innovation, it still did not quite make it. The recording industry did not like to make it easy for the users to play DRM-free music in the Creative MP3 devices.
What really made it a few years later was Apple iPod. Despite the innovations in the iPod design and ease to use, that was not either what made it successful.
What made iPod a success was iTunes. That piece of software solved several problems at once. It allowed people to buy they favorite music tunes and load them in the iPod without legal issues.
Napster was the first site to provide means to find and download music that people wanted, but it was based on illegal music sharing and recording companies brought it down.
The use of proprietary DRM technology allowed Apple to convince recording companies to sell music online, even if that meant cannibalizing their music CD sales business.
At the same time, it allowed the users to download only the specific tunes that they wanted to listen, instead of having to pay for whole albums with other tunes they were not interested.
Other player devices have been introduced since then by other companies, including Microsoft Zune. But not many people seem to care about, despite some very innovative features those players provide.
The iPod and iTunes story is just one example of a successfully executed blue ocean strategy. The prior and posterior attempts to solve the same problem just demonstrate how just practicing innovation is not enough.
The book does not help anybody finding what will be the next blue ocean. However, it covers many aspects that help evaluating in advance whether a candidate blue ocean strategy will be successful.
The book also helps determining whether a strategy execution plan will be successful, and what to do to make the blue ocean last as long as possible, providing a great source of revenue for a long time.
In sum, the Blue Ocean Strategy is a series of practices that help making companies so successful that their competitors become practically irrelevant.
This book can provide great insight, whether you dream of building the next Google or Apple-like company, or you just want to understand how companies like that became so successful.
The book is particularly recommended to everybody, business managers or not, that are working at startup companies, so they can quickly figure whether their companies are heading (or not) to a successful blue ocean with a very bright and lasting future.
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