W. Chan Kim on BLUE OCEAN SHIFT

Summary

In this interview, INSEAD professor Chan Kim discusses the concept of Blue Ocean Strategy, a business approach that emphasizes finding untapped markets rather than competing in existing ones. He explains the three key factors for success: adopting a 'blue ocean' perspective, utilizing market-creating tools, and focusing on people. Kim also talks about the follow-up book, 'Blue Ocean Shift,' which provides a five-step process to systematically create new market spaces. He highlights examples of successful companies and stresses the importance of non-disruptive innovation to foster growth without major internal disruption.

Takeaways

• 💡 Blue Ocean Strategy encourages companies to focus on creating new market spaces, rather than competing in crowded markets.
• 🌊 The concept of 'Blue Ocean Shift' builds on Blue Ocean Strategy by providing a systematic process for finding uncontested markets.
• 🚀 Three key factors for a successful Blue Ocean Shift include a broad perspective, market-creating tools, and people involvement.
• 🔑 Companies often fail to innovate because they focus too much on existing customers and neglect potential new markets.
• 🏆 Blue Ocean Strategy is applicable to startups, established companies, governments, nonprofits, and even individuals.
• 📊 Disruption is only one form of innovation; 'non-disruptive creation' can also drive growth without destabilizing the current market.
• 🎯 Many companies have successfully applied Blue Ocean principles, such as CitizenM, Wawa, and SAP, leading to significant market growth.
• 🏅 Non-disruptive innovations, like micro-financing and Sesame Street, solve new problems without replacing existing solutions.
• 📚 Traditional business schools often focus on competition, but the Blue Ocean approach advocates teaching creation and innovation in a structured way.
• 🤝 Employee engagement and humaneness, including confidence-building, are critical for the success of a Blue Ocean Shift strategy.

Q & A

What is the main concept behind the book 'Blue Ocean Strategy'?

The main concept behind 'Blue Ocean Strategy' is to encourage companies to focus on creating new markets rather than competing in existing, saturated markets. This approach is referred to as finding 'blue oceans,' where there is less competition and more opportunity for growth.

What are the three factors that determine whether companies can successfully find new areas of growth?

The three factors that determine whether companies can successfully find new areas of growth are: having a 'blue ocean perspective,' having the right market-creating tools, and effectively managing the people element.

Why do many companies fail to create new markets?

Many companies fail to create new markets because they lack a blue ocean perspective, fail to use appropriate market-creating tools, and often ignore the importance of bringing their people along in the shift.

What is the difference between 'red ocean' and 'blue ocean' strategies?

'Red ocean' strategies focus on competing within existing market spaces, which often leads to intense competition and limited growth opportunities. In contrast, 'blue ocean' strategies emphasize creating uncontested market spaces, which offer more significant opportunities for growth without direct competition.

Can the 'blue ocean shift' approach be applied to all types of organizations?

Yes, the 'blue ocean shift' approach can be applied to all types of organizations, including startups, established companies, individuals, governments, and nonprofit organizations.

What is the difference between disruptive and non-disruptive creation, according to Chan Kim?

Disruptive creation involves innovation that replaces existing products or services, which can be disruptive to the market. Non-disruptive creation, on the other hand, involves creating new demand without disrupting existing products or services, thereby providing growth opportunities without causing market disruption.

What are some examples of companies that have successfully used the blue ocean shift?

Examples of companies that have successfully used the blue ocean shift include CitizenM, which offers affordable luxury hotels, and SAP in France, which created a French fry maker without using oil. Other examples include Wawa, which transformed from a gas station to a restaurant that also sells gas.

How can companies add new products or services without causing too much disruption internally?

Companies can add new products or services without causing too much disruption by focusing on non-disruptive creation, which allows them to expand their product lines or market presence without directly challenging or replacing existing offerings.

How does the blue ocean shift approach differ from traditional business school teachings on strategy?

Traditional business school teachings on strategy often focus on how to compete, while the blue ocean shift approach emphasizes how to create new market spaces. This shift moves strategy from a competitive focus to a creative one, aiming for growth through new opportunities rather than competition.

What is the significance of the 'confidence to act' in the blue ocean shift process?

The 'confidence to act' is crucial in the blue ocean shift process because it ensures that people within the organization have the belief and competence to execute the strategy. It's not just about having a roadmap but also about empowering people to take the necessary actions to create new markets.

Outlines

00:00

📘 Introduction to Blue Ocean Strategy

More than a decade ago, Chan Kim and Renée Mauborgne introduced the concept of Blue Ocean Strategy, encouraging companies to explore untapped markets instead of competing in saturated ones. Kim highlights three major factors that determine whether companies successfully create new markets: having a 'Blue Ocean perspective,' utilizing market creation tools, and engaging people effectively. Many companies focus too much on their current customers and competitors, which limits innovation. Kim emphasizes the importance of a mindset shift to create uncontested market spaces.

05:02

🔄 The Challenges of Blue Ocean Shifts

Chan Kim discusses the practical challenges companies face when transitioning to a Blue Ocean Strategy. He shares insights from 12 years of research, noting that some companies succeed while others fail. By studying both success and failure patterns, Kim's new book 'Blue Ocean Shift' provides tools to help minimize risk and maximize success. The process is systematic and scalable, applicable to businesses of any size, including startups, established companies, nonprofits, and even governments.

10:02

💡 Real-World Examples of Blue Ocean Success

Kim offers examples of companies that have successfully implemented a Blue Ocean Strategy. These include CitizenM, which provides luxury hotel comfort at affordable prices, and Wawa, which transformed its business by adding a restaurant element to its gas stations. Other examples include SAP, which innovated with oil-free fryers, and smaller businesses like PediaCare that expanded rapidly by following Blue Ocean principles. These cases demonstrate how the strategy can lead to significant growth across various industries.

15:05

🚀 Innovating Without Disruption

A listener from a software company asks about integrating new product lines without disrupting the sales force. Kim responds by distinguishing between disruptive innovation and non-disruptive creation. He emphasizes that while disruption can bring growth, non-disruptive innovation—such as micro-financing or the creation of entirely new markets—often leads to significant opportunities without internal turmoil. He encourages entrepreneurs to explore non-disruptive innovations as a way to grow without upsetting existing business operations.

20:07

🧠 Rethinking Disruption

Kim addresses the concept of disruption, which has become a buzzword in business. He explains that disruption, rooted in the idea of creative destruction, is only one approach to innovation. While disruptive solutions replace old ones, non-disruptive creations, like micro-financing and Viagra, address new problems without disrupting existing markets. Kim argues that too much focus on disruption limits opportunities for growth and points to non-disruptive creation as a vital strategy for long-term success.

Keywords

💡Blue Ocean Strategy

Blue Ocean Strategy is a business concept introduced by professors Chan Kim and Renée Mauborgne that emphasizes creating new, uncontested market spaces, known as 'blue oceans,' instead of competing in overcrowded markets, or 'red oceans.' In the video, this strategy is discussed as a way for companies to move away from competition and focus on innovation and growth by exploring untapped markets.

💡Red Ocean

Red Ocean refers to the traditional competitive marketplace where businesses fight over existing customers and market share, often leading to intense competition and reduced profitability. The video contrasts red oceans with blue oceans, emphasizing that companies focused on red oceans often struggle with 'bloody competition,' limiting their ability to grow.

💡Blue Ocean Shift

Blue Ocean Shift refers to the strategic process of moving from a red ocean to a blue ocean, where companies can find new growth opportunities. This concept is discussed in the video as a systematic approach introduced in Chan Kim and Renée Mauborgne's newer book, providing tools and processes for companies to innovate and create new market spaces.

💡Non-Disruptive Creation

Non-Disruptive Creation is a concept introduced in the video that highlights innovation without causing disruption to existing markets or industries. Unlike disruptive innovation, which displaces competitors, non-disruptive creation focuses on addressing new customer needs or creating entirely new markets, as seen in examples like micro-financing or the creation of LinkedIn.

💡Creative Destruction

Creative Destruction is an economic concept introduced by Joseph Schumpeter, which refers to the process of innovation where new products or methods replace old ones, leading to progress. The video contrasts this concept with non-disruptive creation, suggesting that while creative destruction leads to growth, it often involves significant market disruption.

💡Market-Creating Tools

Market-Creating Tools refer to the frameworks and strategies businesses use to find and develop new markets. The video discusses how these tools are essential for companies looking to make a successful Blue Ocean Shift, helping them systematically create new demand and opportunities instead of focusing on competition in existing markets.

💡Disruption

Disruption is the process by which new products or technologies displace existing ones, often forcing industries to change rapidly. The video explores how disruption is a common path for innovation but notes that it is not always necessary for growth. Blue Ocean Shift emphasizes the potential of non-disruptive creation as a complementary path to disruption.

💡Strategic Shift

Strategic Shift refers to the change in direction a company takes to achieve new growth, particularly by moving from competition-based strategies to innovation-focused ones. In the context of the video, companies are encouraged to shift towards blue oceans, adopting new approaches to create uncontested markets rather than competing in saturated ones.

💡Uncontested Market Space

Uncontested Market Space refers to new or untapped markets where there is no competition, allowing businesses to grow without the pressure of competing with rivals. The video emphasizes that Blue Ocean Strategy helps companies find and create these uncontested spaces, offering greater potential for sustainable growth and innovation.

💡Human Element

The Human Element in the context of Blue Ocean Shift involves considering how people within the organization are involved in the strategy execution. The video discusses how successful strategic shifts require not just tools and processes but also employee engagement, confidence, and alignment with the company's vision. This is a crucial factor in ensuring the effectiveness of a Blue Ocean Shift.

Highlights

The original concept of 'Blue Ocean Strategy' was about finding uncontested markets for growth rather than competing in existing markets.

'Blue Ocean Shift' expands on the original concept by offering a systematic process for companies to create new market spaces.

Three key factors for companies to successfully create new markets: having a 'blue ocean perspective', possessing market-creating tools, and involving the people in the organization.

The 'blue ocean perspective' means focusing on untapped customers, rather than just existing ones, to avoid excessive competition.

Successful companies balance market-creating tools with a strong focus on people and organizational alignment when executing strategies.

One example of a company using Blue Ocean principles is Citizen M, a hotel brand that offers five-star comfort at a three-star price.

Non-disruptive creation is a key concept in 'Blue Ocean Shift', where companies grow without causing market disruption.

Micro-financing and innovations like Sesame Street are examples of non-disruptive creations that opened new markets without replacing existing ones.

Entrepreneurs are encouraged to look for non-disruptive growth opportunities to avoid direct competition with larger, established players.

Companies can minimize internal disruption when adding new product lines by focusing on non-disruptive innovations, as these are less likely to challenge the existing business model.

Disruption is not the only path to growth; non-disruptive creation presents vast, underutilized opportunities.

Business schools typically focus on teaching how to compete, but 'Blue Ocean Shift' emphasizes the need to teach how to create new markets.

'Blue Ocean Shift' introduces a five-step process to systematically create new markets, similar to how Six Sigma revolutionized quality management.

The human element is critical in Blue Ocean strategies. It’s not just about tools and processes but also about giving employees the confidence to act on new ideas.

Employee engagement and confidence are key factors in successfully executing a Blue Ocean Strategy, beyond just financial incentives.

Transcripts

more than a decade ago our next guest

combined to bring forth a book that

suggested the company should not

necessarily worry about competing but to

find new markets for growth

the idea was called finding blue oceans

the book blue ocean strategy was written

by NCI professors Chan Kim and Rene mo

born and now the duo have circled back

to look at the next iteration of this

story with the new book blue ocean shift

and it's a pleasure to have chan Kim

joining us today he is a professor of

strategy at INSEAD but today he is

joining us from Malaysia Chan great to

have you with us today thank you I want

to start with the question of why some

companies succeed to find these new

areas of growth and others don't is it

business philosophy what factors are

involved here yes I think I can say

three factors involved in there one is

about lack of gloss on perspective and

second factor is about lack of their

market creating tools the way to think

about to execute their strategy and also

people elements involved so in fact in

diversely we can think about what are

the key success factors blush and shift

for example what I mean by plosion

perspective is that we say for example

focus on one customer to create new

market space but they keep on focusing

on existing customer end up competing

each other for example in terms of

creating but they lack of the tools

roadmaps sometimes also they ignore

people because when you want to shift

you need me bring you people alone so

these are practice they're meeting so

that they are failing in creating new

markets so do you think then I would

imagine in several cases companies that

really could be innovators end up just

kind of being part of the crowd yes they

could but many occasions

some some company's missing all three of

them some companies meet getting one

right - wrong so what we found in in

making blows and shipped these all three

elements are the key key success factors

to be all day why the concept of blue

ocean to begin with I'd be interested to

know well in the beginning for example

in business school we define strategy of

how to compete even until today many

many B schools define strategy is how to

compete because competing and and when

supply by exceeding demand by winning a

beating your neighbours have certain

limited margin to produce so that if you

don't create the demand there is no way

you can grow any more beating your

neighbors not enough so we found red

ocean as defined by crowded market space

with a bloody competition on the other

hand lotion being the uncontested space

there are lots of girls come from this

uncontested space so we found blue ocean

is way to grow in systematic fashion

that's what lotion was all about in the

beginning okay we're joined by Chan Kim

who's a professor of strategy at INSEAD

he is the co-author of the book blue

ocean shift with Rene mo born your

comments are welcome at 844 Wharton

eight four four nine four two seven

eight six six or if you'd like you can

send us a comment via Twitter and we

will bring it up on the show that way

either at biz radio 111 bi z radio 111

or my twitter account which is at dan

Loney 21 so then if you're following

kind of this blue ocean shift this is a

principle that really could be used by

people or companies of any size correct

yes correct

it can be start-up he can be establish

the company it can be individual it can

be even government nonprofit drop it

because this is Martin Eric application

for all sorts of types of organizations

he's a systematic process how to move

from revolution so therefore it is

scalable concept how difficult or I

should say how easy or difficult is it

to make that shift in your mind I mean

obviously mindset is one thing action is

probably another well I think obviously

there are many many companies ever since

let's say 2005 when portions ready came

out and many people was experimenting

our tools and processes and concepts and

over the 12 years we have many many

company followed so many many succeeded

some failed we actually have studied

what made them fail what made them

succeed

so we under strike we have studied the

pattern of failure pattern over success

by contrasting failures and success now

we found pattern how make a successful

blouson shift so if you question is how

easy how difficult obviously distortion

shift that new book can give them higher

maximum opportunity succeed to minimize

risk of failure

well you mentioned what qualify the

answer can be put to your question you

mentioned Chan that that you're seeing

more and more companies kind of take

this this mindset this philosophy since

your first book came out can you provide

examples of companies that have done

this and and how they have how they have

benefited from this from this new

mindset sure for example citizen M in

Time Square is a obviously studied a

hotel with a portable luxury is a main

it simply put his price first five-star

comfort him at the three-star price so

these are example also Wawa it happened

to the gas station who happened to sell

food in restaurant but they now changed

it it's restaurant also sells gas so is

a huge quantum gross

this company has killed up also

interesting companies SAP in France when

the pity is old very very old the

company and they were making electronic

friend a prince fry maker and everybody

assumed that producing french fry maker

require oil right

they make french fry maker without using

the oil obviously in fact is a very

marginal law obviously opera loves this

this machine yeah so that she actually

put it that's right pushed up the fiber

can hug a shell and high so these are

type of examples who followed also

pedicle in in the small entrepreneur who

took over the company

six million was and within two years he

sold his company isn't a sixty million

to Johnson and Johnson these are

companies who adopted and follow the

process to make ablution shift soap

lotion ship documented those successful

examples by by tracking what was they

used in what way they have done

what kind of growth consequences they

are produced eat for many many examples

of entrepreneur non profits profits also

even government so these are motion

shifters fascinating many many of those

examples how they made ablution shift in

action the phone number for you to join

in with your comments or your questions

is eight four four wharton eight four

four nine four two seven eight six six

or if you can't get your phone you can

ask your question via twitter and we'll

bring it up on the show that way either

at biz radio 111 bi z radio 111 or my

twitter account which is at dan Loney

ello NE y21 we go to Bozeman Montana Joe

is on the line Joe welcome to the show

thank you so I've got a question here

regarding adding new product lines or or

going into these new markets I work for

a software company and we're have a very

strong footprint of complementary

product but one of the challenges that

we face is that whenever we add a new I

could say pillar to the product

footprint it can be disruptive to the

sales force as well as internally with

the company because we have to start

learning how to sell a new product how

to develop a new product go to market

strategy and things like this so I was

wondering if you had any recommendation

on how you can add these new blue oceans

without causing too much disruption

internally all right this is actually

good question what I want to say that

there are two forms of innovation and

growth one point certainly disruption

disruption requires an adjustment as you

described but we should not forget one

of the more important HAP we call

non-deceptive creation meaning there are

many many innovations that drive learn

disruptive in a very creation example

obviously when you talk about

non-deceptive creation like a

micro-financing indus

for example and obviously the poor

people has no access to capital but

these are known customers who were never

there before but now because of micro

financing taken they were able to access

to capital like a light coaching

industry 2 billion never exist

25 years ago for example Sesame Street

quiskal edutainment for example linked

on there are many many possible lines

you can add without disruption so

therefore as an entrepreneur or as

business executives you should not only

think in disruption but issue what I'm

addressing here whenever we talk about

adding people think disruption that's

obviously one part but smaller part

bigger part is huge growth opportunity

occur by having learn disruptive

creation adding that entire to the

portfolio I just want to emphasize point

of the gnome disruptive creation is

underleveraged

totally never use the concept in our

business for cavalry so it's important

the pollution shift introduce this

concept into it to minimize disruption

in the marketplace Joe great comment

thank you very much for calling you and

greatly appreciate it the phone number

is thank you eight four four eight four

four wharton eight four four nine four

two seven eight six six or if you can't

get your phone send us a comment via

twitter either app biz ready-o 111 or my

twitter account which is at dan loan e21

so you mentioned disruption let me bring

up that topic for a second Chan how do

you view disruption as a whole because

it is obviously something that has been

you know it's been kind of the catch

word and kind of the catch area in

business for for the last several years

dan that is really the question of the

brilliant question I want to address it

is so important actually some majority

of over

no Joseph Schumpeter who is a father of

the innovation say that whenever you

want to create something new you need to

destroy something that's why new things

are replacing all the things the upper

replacement was the concept behind of it

he called creative destruction so the

creative destruction was way to creating

the Apple we took for granted this is a

notion and then over time of course

recently constable disruption came along

then disrupt is disrupted their poor in

in public or private sector speech or

talking or the teaching disruption it

has taken for granted a concept for

creating anything new obviously what we

found implosion shipped it is a partial

conception of a creation we found that

obviously some innovation create

disruption such as when you offer a

breakthrough solution for an existing

industry problem obviously new things

replace old but when you identify and

solve a brand new problem or see the

brand new opportunity this doesn't have

to disrupt existing ones it's about we

call when the subject creation occur as

I gave example like micro-financing

ringtone Sesame Street for example even

viagra it didn't disrupt anything what

existed because it totally new brand new

problem the result what we found in

engine of growth to making cross happen

this notion of the Lin disruptive

creation is so critical therefore what

we want to obviously one implication

example and as an entrepreneur ap1 not

disrupt nowadays almost

mantra of the Silicon Valley for

entrepreneurs disruptive disruptive but

think about it you are the small guy in

the industry just big guy out there you

are the David you are attacking Goliath

what is probability versus succeed when

you think about it

statistic shows us that eight nine out

of ten cases you fail we took for

granted this acceptable level of success

in enterpreneurship but for us is never

acceptable can you imagine your

anti-business your ratio success is only

10 to 20 percent that too long this

understanding of disruption always he

thought so difficult to achieve success

therefore what we found important

concept of non-deceptive creation was

born through the research process

plosion shift

you mentioned chann a little while ago

you talked about business schools and

I'm guessing to a degree does this have

the opportunity to impact how business

schools teach in the future yes

certainly

that's what obviously now we ran to be

in school in quality level strategy but

now today we define what is the strategy

many professors still say is how to

complete but how to create it's missing

topics why is that so because now today

how to create is taught has been taught

in the class of enterpreneurship

innovation course why is that so it's

because creating a scene at sea then dip

it has a serendipity so they thought it

random chance trial and error process

but we lack systematic tools to be

produced a creativity and also we don't

understand how to go guard it motion

shift produces a shows five-step process

how to how to create once we know how to

go about creating

in systematic way it should be part of a

core curriculum or strategy in the

caucus we believe in a future post

coming decades when we're supply part

exceeding demand creating its important

strategic tasks without creating you end

up raising to the bottom by pitting your

neighbors continuously there has a limit

so therefore our core curriculum in

business school should teach how to

create in systematic way so we believe

lordship has big room to for the

contribution it's almost like a tan you

know the Six Sigma right yes because we

always say Quality Management abstract

concept right

but when Six Sigma came with the

systematic process and tools quality

management is no more no longer abstract

notion it became very powerful process

to make that happen

same as creativity innovation creating

things

explosion shift can contribute to the

building how to creative how to create

things in more systematic way

I think there's huge implications for

how strategy qua qua should be taught in

business school that we hope lotion

shipped make good contribution towards

that change eight four four nine four

two seven eight six six is the number if

you'd like to join in to the phones we

go again La Quinta California sherry is

on the line sherry go ahead hi thanks

for having dr. chan on I had resolution

strategy my question is for the

companies that are operating with this

strategy and the ones that are

successful and younger you talked about

how it's a culture and the organization

and the communications the

interdepartmental communication is very

important like my curiosity is how

our employees brought in to begin with

power they compensated that would match

up with the Blue Ocean Strategy and Chan

I'm gonna say we got about a minute and

a half left if you can do it in that

timeframe

sure I think gluten shipped suggest that

is more than payment or incentives it's

about the humaneness

in the end of what is most essential

Haven is obviously important but

essentially humaneness

about competence to act we can a

beautiful roadmap how to do it but if

you don't have a confidence to act

you're missing this entire dimension of

a human is in the process we call this

confidence this rebound is very

important to make things happen

it's basically for creating things

rather than competing things so these

questions very good question to bring

about importance competence weeds many

times even or this dimension only

talking about tools so we have in the

beginning as then you ask the question a

portion perspective market creating

tools with guidance are also very

important elementals humanism practice

process we call it building a company

greatly appreciate the call sherry thank

you very much

Chan unfortunate I have to end it there

thank you very much for your time we

wish you all the the best with the book

between you and Rene and we look forward

to talking to you again when there is a

next blue ocean shift or whatever that

that next piece is thank you again Dan

thank you very much to introduce me to

talk about blue Sun shift our new book

thank you very much for all of the

questions Thank You Chan Kim the book

blue ocean shift is available in

bookstores and online