Tuesday, November 18, 2008

Simple Explanation of Blue Ocean Strategy (Review)

Another interesting book that recommended by my very top-level boss – Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne

As usual, the Wikpedia explanation sometimes is just too comprehensive and I found a very good video summary in youtube. Let’s look at this video:



This reminds me the from “The Sun Sze Art of World” and the “Thick Face Black Heart” books mention that “Sometimes You Don’t Need to Fight to Win a War”. I personally love this statement. In short, the Blue Ocean Strategy is simply saying that “You Don’t Need To Fight to Win Your Competitor”.

Remember, the "BLUE" Ocean Strategy says:
  • Competition is Irrelevant.
  • Value Innovation – Ignoring the competition and focusing on the buyers.
Isn’t it saying a same thing? Provide what the customer really wants and create a new market for it rather than we compete and kill each other until all our blood spread out to the whole ocean which is called the “RED” Ocean Strategy.


Real Case Examples

(1) McDonald’s restaurant
Have you ever wonder why McDonald’s restaurant is so successful in worldwide? At least this is what I experienced in US, Malaysia and Europe. It always full during peak hour. Look at the graph below, does McDonald trying to compete with the rest?
source: www.csc.com

(2)
Apple's products (i.e. iTunes, iMac, iPhone)
Apple is so successful until today in my opinion is because of “Branding”. You feel cool and different status when using apple’s products. Using an Apple product is just like driving the “BMW” car on the road. This market is never exists and Apple creates for it.

(3) AirAsia Airline in Malaysia.
It eliminates over the counter booking system, free food/beverage on the plane, seating class booking system, and reduce "luxury" facilities provided by Airport Lounge, seat quality and many others. Think of it, are all these things a necessity for a customer? Although this is not something new in other countries but at least it is still new market in Malaysia. AirAsia creates this market.


Conclusion

Of course it is not as simply as I say but sometimes this makes a lot of common sense and it just that when we come into practice, it is a whole different story. Don’t you agree?

In summary this book provides a tool and mythology to create a new market space using the blue ocean strategy. You can buy the book yourself and learn the details.


I personally bought it but haven’t finished yet. The question that I have in mind is, will the book help in real business? Or it is just another educational business book? You tell me…

Related link:

11 Comments:

Alvin said...

I'm reading this book, around 40% now. Or should I say, I've been reading this book. Hhaha. I fell asleep while reading it!

Too technical for someone w/o any marketing knowledge. =_=

But some of the ideas are pretty simple.

For example, mobile phones are easily disposable and people change pretty fast - so they came out with a designer phone LG PRADA and became an instant hit. MP3 player and phone? Sony Ericsson combined both so that people don't need to carry 2 devices.

And who said uncle auntie cannot play video game? Nintendo WII came out and it's a big hit.

There are many things that people can do to create a new market. But the risk is there.

By the way, AirAsia didn't create the market. They copied it from the budget airlines from the West. :P

ChampDog said...

I have the same symptom every time I read a book. :D Of course including this as well... I've been reading too...

As for the AirAsia at least they create a new market in Malaysia even though they copied. Maybe cannot be called blue ocean strategy, but we can just call blue lake strategy. Haha…

Michael Tsen said...

I also fall asleep on many 'concept' books, but I find biography book about real case study are more interesting.

although i agree in principal, but I just want to counter-share that red sea strategy is not all bad. Its also one type of strategy and requires certain skill to be success in.

and afterall, its just one 'new' term to describe niche market. the real thing that really differentiate good n bad biz is how adaptive/innovative/creative the biz owner is ... whether in red or blue or yellow seas.

air asia is actually a red sea strategy and they win in lowering price, but ofcourse can be described into a 'blue lake' like u said if u look more in depth.

however, still a good post and good book recommendation. :)

HSOoi said...

Read the front chapters that described the concept. The rest are more on implementation and management tools to employ this strategy.

As commented by Micheal, this is a good book and a lot of interesting real life case studies.
However, I do not think that it is a 'new' term to describe niche market. Otherwise, it should be "blue pond strategy" and not "blue ocean" :)

The ocean here is refering to the creation of huge new market that may never exist before. The Ford did that to the car industry, the Apple creates the portable MP3 market, McD created the fast food culture, AirAsia serves the market for budget travelers who could only think of budget travelling as travelling by buses in the past.

Coming out with the right strategy in business is not simple, but once it is correctly devised and implemented, the rewards will be great.

ChampDog said...

I like the idea that read ocean strategy is not that bad and is also required skills to be successful in. I think all depends on the business owner how they want to play the game. It is just that red ocean is conventional but it doesn't mean is it a wrong strategy.

Hmm... as for the new term to define niche? Is it? This one I have to agree with HSOoi. Niche market is a market for minority and it is not a strategy. You can use blue or read ocean strategy or whatever strategy in niche or non-niche market. Don't you think so?

Thanks HSooi for the recommendation. Probably reading front chapter will be essential for most of the people. In business, I always think it is not simple. It is never simple until we have mastered it and experienced it.

Activities@home said...

TQ for the review. I find the book rather technical. It is not as easy as it is said or else everyone will be in a blue ocean.

ChampDog said...

I find it rather technical too. I absolutely agree with you. Saying is always than doing.

jamy said...

Kawan,
Long time no koawan your blog oleri, sorry,very busy nowaday.

I do not know what blue strategy but from the ziss of it, it kind of like do not compete with your enemy, like the both win win, give and take.

I think this apply to every aspect of life. A lot of women wanted to show to their mother in law they are better, they go head on battle with their mother in laws and husbands, turn out bleeding big time, ha ha ha ha. But instead they should read and copy your book review marketing strategy lah.

In the US where I live here, we have the best marketing strategies, that why so many Americans nowaday suday pokai, no money in pocket cos they spend all the $ shopping cos of very wonderful marketing people who can sell ice to eskimo and sun to Floridans, he he he he.

When my uncle was one of the vice president for Bank Utama , I told him to send his top managers to
America jalan jalan 3 months, breath the air here and see how marketers do their work. Just look at the junk mails I trash in my trash basket everyday, you know how pandai these people.

Nowaday, I blog how to save $ before I blog how to invest $ cos now most people sudah pokai in Amerika lah, so teach people how to save $ lah, so now my coupon business very laku cos every of my kawan kawan here keep printing coupons from my blog so I untung sajak lah, he he he.

Next year, my goal is to spend $1k in my annual grocery bill (from nasi to udang to shampoo, semua house hold barang and makan makan lah), so I can save the rest of my salary to buy cheap cheap duplex and rent them out, ha ha ha, very smart Cina we, he he he.

Talk to you later and nice to see you blog again.

ChampDog said...

Hi Kawan, long time no see too. I have been very busy nowadays too. I hope I can spend more time in blogging.

Hmm… it is not really like does not compete with your enemy. In fact, it is competing and also a win-lose game. It is actually compete until your enemy have no chance to fight back at all. Hahaha…

The way I look at this, BOS is more like 20/80 rule. In business, we should all also focus on the 20% of our work which can get the 80% of the output. So in this, we don’t direct compete with the enemy but instead is creating a new market that never exists but also a wanted market by everyone.

$1K grocery bill is really amazing. I hope your goal will become true one day. Somehow I can’t really go to find all these coupons and get the discount. Here we want to cut those coupons and then show it to the casher to get a discount. Is this the same there in Florida? I personally find it is very troublesome and the saving is not that much. I would rather spend on the time in more meaningful stuff. But if I can use only RM1K annually by cutting all these coupons, I definitely will consider that.

jamy said...

Kawan,

No, it is not like this in Florida (or America) "Here we want to cut those coupons and then show it to the casher to get a discount. Is this the same there in Florida"

Here,we can download our e-coupon unto our card (either credit card or shopping card), or we can print from internet.

I think only in America, we have such extensive usage of coupons, not even in UK, Australia or Europe.

This is how I do it:

When a store has sale on Buy 1 Get 1 free, then I will find relevant coupons related to the sales, for eg. I like coffee mate for my coffeee and if there is a Buy1Get1 free for the coffee mate at $2.49 (normally without sales, it is $2.49 each), I will look for manufacturer site to print out 2 $1Coupons, so I get my 2 coffee mates for 49cents :). And the best scenario is if there is a Buy1Get1 free sales and there is a Buy1Get1 free coupons, then that is terpaling bagus :).

Last week, I got 40 packs of Bird Eyes frozen vegetables for free !

I like frozen vegetables, they are frozen but still very cranchy; and extremely convieninet . I like to eat veg like onion, black peper, red peper, mushroom cos I can stir fry them with pork chops.

Last week, one of our stores here has 50% sales on Bird Eyes brand of frozen vegetables, it was $2.09 cents a pack, after 50%, it was $1.045 a pack and I print 40 $1 coupons on the internet, so I pay like $2 for my 40packs of frozen vegetables. Which can last me about 1 1/2 months.

A lot of times I even make $ out of my shoppings, for eg. last week, one of our stores here has buy $10 of Kellogg cereals, they will give you $5 back and Kellogg has a $10 rebate for every $10 you spend on their cereals, so I got 4 packs of Kellogg cereals not only for free but $5 back :).

Now I have a year supply of free shampoo, tooth paste, tooth brush, toilet paper, paper towels, man shavers, shaver cream, deordorants, laundry detergent, dish liquid, dish washer detergents and others. Now I am concentration on food produce.

Yes, it is possible to get $1k budget on household goods, this year I started around 6 months ago and I am getting pretty good about it, I have never buy anything full price. Even my over the counter medicine, I only paid like 10% of its retail price :).

My old strategy of shopping is get a list of shopping list for things I need and then I go to shop to get things I need. Now my shopping mentality turn 360 degree.

This is how I shop now.

I have an inventory list of things I need in the house, from makan to househould stuffs.

Then I will glance through what are the sales available , either buy1get1 free or 50%, then I will go to look out for coupons related to those sales and I will stock pile them.

(eg. when I know there is a buy1get1 free sales on bread or cereals, I will stock pile them, then I will go through the next items and so forth and so forth). I have a pretty big freezer :).

There are a lot of online coupons sites where you can print free or even buy at a very minimum price and there are a lot of sites that give preview of sales 1 month ahead, so one can plan ahead of what to buy and what coupons to get ready for those sales that are going to go one, so that is very useful for us consumers.

Just a little bit of my shopping tricks lah :)

In fact, I treat it like a part time job cos the money I saved is like I am working for a part time job :) (without tax :)).

footiam said...

Tagging you for a meme I had at http://dhammadelights.blogspot.com/2008/12/meme-7-facts-about-me.html. It's just a game where you have to write 7 things about yourself and if possible, get 7 other people to write about themselves.


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