Blue Ocean Strategy

Some people have asked me where Blue Ocean Strategy (by Chan Kim and Renee Mauborgne, Harvard Business School Publishing 2005) fits into the framework advanced in the Innovation Manual. 

What is Blue Ocean Strategy?

First though a little about Blue Ocean Strategy (BOS).  To me BOS has one big idea and then two useful tools.  The big idea is that firms and industries mistakenly focus on what they know best—competing with other similar firms with other similar products—and often overlook groups of potential customers who are held back from buying a product or service because of some barrier.  [They call these groups “non-customers”].   If an astute firm can identify and remove these barriers, they can open up a significant new market just for themselves—the Blue Ocean or “uncontested market space” —and make substantial profits before others enter.   The classic examples of removing these barriers are Cirque du Soleil—which reinvented the circus and broadened its audience--and Accor’s Formula 1 hotels (not racing cars)—which opened up a new segment of the hotel business.  The useful tools are the strategy canvas and its associated value curves and the ERRC grid—ERRC stands for, eliminate, reduce, raise and create value to the customer.  To me these tools are useful because they help managers to discuss and debate what an innovative solution might be and to do so thinking outside current solutions.  [I don’t totally agree with the way Kim and Mauborgne generate these value curves but that is the subject for another blog post, and does not detract from the usefulness of these tools in helping managers see better customer value].

BOS is useful in helping teams set objectives for innovation projects

Now, where does this fit into the Innovation Manual?  Well, the two books have completely different purposes.  BOS to introduce this new thinking about competition and customer value, the Innovation Manual to integrate thinking across a wide range of business functions into one useful framework, as well as provide a range of tools across the whole innovation process.  Thus BOS fits into one chapter of the Innovation Manual, namely Chapter 3.  That chapter is about chartering innovation within the organization and chartering happens at two levels, the organizational and the specific project level.  To me the ideas of BOS are most useful for the latter; specifically in the preparatory stages of an innovation where the team is trying to define its objectives.  There BOS thinking, the strategy canvas and the ERRC grid are ONE set of tools that can help them define their objectives.  [Note: they are not the only tools; teams need to complement them with others that the Innovation Manual talks about].  In getting the project objectives right BOS makes a big contribution to better innovation.  However, there is much more to better innovation than this, much, much more—both before and after the preparation stage of an innovation project.  That is what the Innovation Manual talks about.  Including the solid theory and evidence on how customers perceive value and accept innovation that is a necessary background to using any of these ideas or tools. 

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