Strategy

Blue Ocean Strategy: Implementation examples

I have participated in leading strategy-building projects for various companies and corporations many times. The approach to developing a strategy was often similar—a series of strategic workshops led to the development of the company’s strategic plan. What I always found lacking in these strategies was a “breath of fresh air” and innovation. I often had the impression that the strategies merely interpolated the company’s past operations and projected them into the future with minimal strategic changes.

It is worth noting that even this approach is valuable, and a company with such a strategy is certainly better managed than those that do not create formalized strategies at all. From this approach, an entirely new concept emerged—the “Blue Ocean Strategy,” which disrupts conventional patterns. This article will focus on this strategy.

Developing a business strategy

A significant inspiration for me was the publication of the book Blue Ocean Strategy and later Blue Ocean Shift. In short, the concept of Blue Ocean Strategy addresses the need for companies to differentiate themselves significantly from competitors to create their own market space. It turns out that in many industries and market segments, there is still potential for innovation and the identification of unmet customer needs. Of course, this is not easy, but many examples show it is possible.

Currently, many companies associate innovation with new technologies, but this is not entirely true. Innovations include logistics, customer service, packaging, and many other areas.

Before the emergence of the Blue Ocean Strategy, it was assumed that a company had two extreme choices when developing a strategy. The first choice was high differentiation—offering high quality to customers relative to the company’s industry—at high costs. The second extreme was high cost efficiency, resulting in a product or service that did not stand out.

There are also intermediate choices, all of which are along the blue curve A-A, as shown in the diagram below. The Blue Ocean Strategy assumes that it is possible to construct customer value in such a way that, at a given cost, it offers significantly more, causing the entire industry’s strategic curve for this company to shift—the orange line B-B in the diagram below:

Example 1 – Innovation in organizational development

Several years ago, the CEO of a large real estate development company had the following vision for his organization: “In three years, we will build twice as many apartments as we do now, but with the same number of employees.”

When the company’s employees heard this vision, their initial reaction was that it was almost absurd, perhaps even something was wrong with the CEO. However, there was nothing wrong with him. In his strategic thinking, he questioned a fact that was considered obvious in the market—a paradigm, namely, that increasing sales requires increasing the number of employees because someone has to handle the growth.

What if processes within the company could be improved and significantly digitized so that the same employees could manage twice as many apartments effortlessly? As a result, numerous projects were launched within the company, each aiming to optimize and digitize critical organizational processes. Ultimately, the initiative proved to be a success.

Example 2 – A Company from the food industry

In this case, the company discussed is the French corporation Groupe SEB, which manufactures various kitchen appliances. The organization competed in the segment of deep fryers. All companies in this market competed similarly, providing customers with deep fryers that were barely distinguishable from each other. Thus, competition among firms was primarily based on offering competitive prices. Additionally, the process of making French fries was quite “complicated.” Large fryers required energy and large amounts of oil, and the disposal of used oil was cumbersome. Due to the nature of this production process, the market was shrinking by a few percentage points annually.

All companies assumed the same premise—that French fries had to be fried.

The then-president of SEB Group challenged this assumption. He considered the possibility of questioning the entire approach and assumed that French fries did not necessarily have to be fried or require oil at all. SEB Group pursued this idea, differentiating itself from the competition, registering numerous patents, and thus creating a new market—a blue ocean in its industry.

Implementing strategy in an organization through project execution

Many people might say that formulating a vision is easy—although I personally disagree—but that successfully implementing such a strategy within an organization is the most challenging part. In this case, visionary skills are no longer required; instead, effective organizational management is needed.

In the aforementioned example of the real estate development company, specific strategic objectives were formulated, and for each objective, projects were defined to help achieve it. To ensure that goals are being met through projects, developing Key Performance Indicators (KPIs) for each objective (not the project) and systematically analyzing them is advisable.

A clear example of the connection between a company’s strategic objectives and projects is shown in the illustration below, which comes from the project and portfolio management software FlexiProject. Subsequent illustrations demonstrate the linkage of strategic company objectives with projects, monitoring the status of individual objectives, and correlating strategic goals with KPIs:

Conclusion

I hope this short article will inspire some companies to differentiate their organizations in the market, challenge the surrounding reality, and seek their own Blue Ocean. A well-constructed strategy usually proves effective, provided that, first, it is well-developed, and second, it is well-implemented.