Monday, January 01, 2007

Resolutions and Blue Ocean Strategy

I spent too many hours today catching up on the backlog that happens when I take time off. Normally, I like to spend most of the day on goals or New Years resolutions. There is still time tonight for that and I am traveling this week which also gives me uninterrupted time.

I recently read, "Blue Ocean Strategy - How to create uncontested market space and make the competition irrelevant" by Chan Kim and Renee Mauborgne. The title really tells it all. The book talks about creating uncontested market space on the theory that contested market space is very difficult to make money on. It is now one of my favourite books.

There is no such thing as riskless strategy. Strategy always has to involve both opportunity and risk but the present playing field is dramatically unbalanced in favour of tools and analytical frameworks exceeded in existing businesses. As long as this remains true, existing businesses will continue to dominate companies’ strategic agenda even if it is a business imperative for creating new initiatives and takes on a new urgency.

One thing that I like about the book is that it uses multiple examples of companies who have revolutionized the industry that they are in by creating brand new markets and brand new spaces. For example, they talk about the automobile business moving from the Model T to General Motors, to small fuel efficient Japanese cars to the Chrysler mini-van, etc.

One of the most interesting stories was about the Japanese hair cut that used to cost $40 to $50 and included everything from a shoulder and scalp massage to shampoo, etc., but generally took an hour and subjected the customers to long waits. When a chain of barber shops went into Japan offering no appointments and traditional haircutting like we are accustomed to in North America, the chain thrived in a big way.

This example explains part of what the book proposes. The key is to look at what is really being offered and look at what parts you can dramatically improve. Often you can end up with lower costs while at the same time adding more value to the customer. In the case of the barbershop, they were able to reduce the cost by not having to spend as long on each customer, not serving tea, etc. While at the same time, reducing the customers' waiting time which is an important commodity. The customers were not valuing the extras as much as they were valuing having their hair cut.

Have a great New Year!


At 9:07 AM, Anonymous Anonymous said...

And yet there are probably many old-timers who say "That's NOT a proper haircut. Haircuts have always included tea and shoulder massages."

It's so easy to innovate and come up with "great" ideas, like the young man you mentioned in a previous post.

But great innovative ideas are a dime a dozen. They are nearly worthless, and most of them never see the light of day, rightfully so.

We don't need "great" ideas or "more" innovation.

We need great implementations of all the good ideas we've already got. We need innovation to be a natural part of the company, pervasively, so the mail room guy can criticize the IT dept head and get away with it.

We need the sales clerk to complain directly to the CEO about a screwed up policy that annoys the customers, and expect the CEO to jump right on it.

In one company I know of, certain mediocres waste hours a day gossiping, discussing their ailments and grand kids, and what their dogs got for Christmas.

Upper management walks right by, never saying "Don't you ladies have something to do?"

So, as Tom Peters declares constantly and more eloquently than I: fire all your mediocres today.

That is the #1 most important change that needs to be made in every organization: fire the mediocres, the lazies, the under-achievers coasting to retirement, the whiners who have zero love for the company or customers.

Dump them as quickly as possible.

At 2:42 AM, Anonymous Anonymous said...

This a good article There is no such thing as riskless strategy. Strategy always has to involve both opportunity and risk but the present playing field. If you are interesting visit the site business strategy

At 11:40 AM, Blogger miriamtuerk said...

Jim, I just heard about this book and was going to send you an email saying you should review it. thought i would check to see if you had already done so, and of course, you already have! Great review.


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