Blue Ocean Strategy pinpoints market spaces ripe to be exploited

Professors at INSEAD believe Blue Ocean Strategy - a way of trying to create new demand for a company - is a robust approach that works. Just look at Apple and the iPod they say.

Michael Shiel, an adjunct professor of strategy at INSEAD, and member of the core team teaching the open-enrolment programme on Blue Ocean Strategy. Christopher Pike / The National

In crowded and competitive markets finding an edge that puts your business in a leadership position can be tough. But with the right guidance and tools, developing a new strategy may just get a little easier. That’s where Michael Shiel, a 59-year-old adjunct professor of strategy, believes that Blue Ocean Strategy can help. He has been teaching the ideas it encompasses for just on 15 years, as a member of the core team behind the open-enrolment programme on Blue Ocean Strategy at Insead, a business school based in France. The National caught up with him on his recent teaching visit to the UAE last month.

What is Blue Ocean Strategy?

Blue Ocean Strategy is a way of trying to create new demand. In particular it tries to find a market space which will be profitable and uncontested, a market space where a company has the possibility of achieving profitable growth.

What are the origins of the strategy?

My colleagues, professors W Chan Kim and Renée Mauborgne, have been researching this area for almost 20 years. Kim and Mauborge asked if we can understand the moves made by a range of companies that have been able to make significant leaps in the value of the products and services that they offer. They think they’ve found an approach which is pretty robust and of great interest to people in business and industry.

What makes Blue Ocean Strategy effective?

Kim and Mauborgne studied the moves that a lot of companies have made right back into the history of business, up to the present day. One of the things they discovered is that a lot of companies have been very astute in trying to understand not only their existing customers, but the people who currently don’t give business. Blue Ocean Strategy focuses not only on the existing customer group that we serve, but on trying to find new customers. We do that by exploring the people who don’t give us business. We have a way of identifying them and a way of understanding what their needs are. That’s where the possibility of growth is: the people who don’t give us business, but could become our customers if we were able to create a value offering, something they would be willing to pay for that would really meet their needs.

Can you give us an example?

If you look at the moves of Apple, around the development of the iPod and its introduction in 2001, what’s very interesting is that two years before that Sony attempted to introduce a small digital music player. The introduction of the product was not a great success. It was using proprietary technology and was a good product since Sony focuses on producing outstanding electronics. However, Apple is a very different kind of company; rather than starting with the product, they started with the customers. Or more accurately with the non-customers, the people who didn’t have MP3 players and asked why people didn’t buy them. Their idea was that product should work effortlessly and very simply. What Apple has done is spent their time, energy and focus deeply understanding the needs of the people who do not did not use MP3 players or anything like that. They developed an approach to strategy which doesn’t begin with the product, or existing customers, but instead starts with the question “who are the non-customers and why are they non-customers?”. What Apple has done is created a product that fits into your life.

Is it hard for executives to change their approach like this?

On the contrary, people at the top of organisations always have the basic questions of strategy in mind: what is the probability of profitable growth? Where do we play? And how do we win? The question that also arises is where is growth going to come from? This is the question that concerns all CEOs. When the concept is adequately explained to them they find it not only exciting and interesting, but quite intuitive.

What’s the effect on leadership?

One of the things we spend time on is not only what the concepts are, but how to work with your colleagues, or in many cases even how to work with customers. There’s no point in having a new idea if you can’t do something with it in your business. There’s no point in making a strategy if you can’t implement it and strategy is implemented by the entire of organisation. We spend a lot of time and effort helping the participants to gain an idea of how to convey these ideas to their colleagues, so that they develop an understanding and degree of comfort with where their organisation is going to go next.

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