SINGAPORE - The need to change the traditional corporate strategy of companies fighting out among themselves to win greater market share has been emphasised at a 3-day business journalists seminar held at the INSEAD Asia campus in Singapore recently. Outlining the ‘blue ocean strategy,’ Professor Narayan Pant, Dean of Executive Education of the campus said that a brave new strategic direction is now emerging and it enables companies to venture into the pristine blue waters of previously untapped markets, instead of battling in the bloody red waters of the existing market space.
He told a gathering of 20 practicing business journalists in the Asia Pacific region that this exciting new strategy framework is opening a fresh and vibrant way to earn strong profitable growth and win in the future.
Giving one example, he said despite a long-term decline in the circus industry, Cirque du Soleil profitably increased revenue 22-fold over the last 10 years by reinventing the circus. Rather than competing within the confines of the existing industry or trying to steal customers from rivals, Cirque developed uncontested market space that made the competition irrelevant, he said. In ‘blue oceans’, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid. In red oceans-- that is, in all the industries already existing—companies compete by grabbing for a greater share of limited demand. As the market space gets more crowded, prospects for profits and growth decline. Products turn into commodities, and increasing competition turns the water bloody.
Professor Narayan noted that in studying more than 150 blue ocean creations in over 30 industries, the authors observed that the traditional units of strategic analysis--company and industry--are of limited use in explaining how and why blue oceans are created. The most appropriate unit of analysis is the strategic move, the set of managerial actions and decisions involved in making a major market-creating business offering. Creating blue oceans builds brands. So powerful is blue ocean strategy, that a blue ocean strategic move can create brand equity that lasts for decades, he said. Explaining the methodology of the new concept he pointed out that there are two ways to create blue oceans. One is to launch completely new industries, as eBay did with online auctions. But it's much more common for a blue ocean to be created from within a red ocean when a company expands the boundaries of an existing industry. The difference between being an also-ran, a failure and a winner in the corporate marketplace could be a blue ocean strategy, he said.
But there is no permanently excellent company or industry. "You're only as good as your most recent strategic move," explained Professor Narayan Take Sony, which launched the Walkman and created a market for a personal stereo, which was so far non-existent - again, a blue ocean. But since then Sony has done many right and wrong things. However, the power of the blue ocean it created back then, still endures. And even today, Sony is top of mind recall for anyone who thinks of buying a music system or video recorder, he added.