Blue Ocean Strategy

The first topic we’d like to discuss for this series is Blue Ocean Strategy.  It’s a great book written by W. Chan Kim and Renee Mauborgne in 2005 for the Harvard Business School Publishing Corporation.

In their book Kim and Mauborgne discuss the concept of red ocean vs. blue ocean.  To simplify, a red ocean is where companies compete directly with their archrivals, in the trenches, attempting to gain market share et cetera.  It’s our traditional view of business.  Creating a blue ocean is creating a business scenario where the company finds ways to not only survive well in their present environment but transition into other areas and becoming the new archetype.

My favorite excerpt from the book is page “What consistently separated winners from losers in creating blue oceans was their approach to strategy.  The companies caught in the red ocean follow the conventional approach, racing to beat the competition by building a defensible position within the existing industry order.  The creators of blue oceans, surprisingly, didn’t use the competition as their benchmark.  Instead they followed a different strategic logic that we call value innovation.  Value innovation is the cornerstone of blue ocean strategy.  We call it valued innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby, opening up new and uncontested market space.

Value innovation places equal emphasis on value and innovation.  Value without innovation tends to focus on value creation on incremental scale, something that improves value but is not sufficient to make you stand out in the marketplace.  Innovation without a value tends to be technology driven, market pioneering, or futuristic, often shooting beyond what buyers are ready to accept and pay for.”

Blue Ocean Strategy has been successfully applied in several situations. Kim and Mauborgne discuss Cirque du Soleil’s blue ocean strategy where Cirque rose from obscurity at a time when the conventional circuses were having problems being profitable.  In this example, without getting into great detail, you can see how an uncontested market space was developed (human based acrobatic show) and made the competition irrelevant.  The target demographic with different, the content is renewable and the scope is worldwide.  There are other great examples such as airlines, news agencies and a winery; the methods and practices discussed are impressive but seem, at points, to be little hard to translate to pharmaceuticals.  The authors then present a very relatable example.  When Novo Nordisk (NN) retooled how they thought of their insulin franchise, switching focus from the usual key influencer (traditionally physicians) and shifting the industry’s focus to the patient population they changed the world of diabetes sales.  NN went on to find what the patient’s needs and wants were, developing the Novo Pen – a much smaller, handier device that held the syringe and the cartridge of insulin and could be transported discreetly.  Novo Nordisk continued to revolutionize devices and dominated market share as a result.

So where does CI/MI fit into this picture? Well, like our favorite Sun Tzu quote from The Art of War states “If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.” While this might seem a bit red ocean – we have to swim through the red ocean to enjoy the blue! A complete deep dive study of the competition is first necessary – and this, in our estimation, would need to include seeking out unexpected competitors, possible merger and acquisition game changers and several other factors. Once this is done the focus needs to turn to your organization. We have seen time and again some of the larger more mature pharma companies have no idea the resources they can tap internally. There needs to be consolidation of intellectual property and ideas, resources and strategy. Research into what patient populations and/or end-user possibilities need to be established in order to find the value innovation. Plans need to be set in motion to continue the search after the immediate need is met.

All of us get caught up in our day to day job, our lives, and our families but there’s value in taking a step back and re-thinking what may become commonplace and see where we can strive for improvements.  Blue Ocean Strategy promotes this concept.  Blue Ocean Strategy teaches us to ”create uncontested marketplaces by making the competition irrelevant, creating and capturing new demand, break through the value-cost trade off and align the whole system of a firm’s activities in pursuit of differentiation and low cost.”

So now a blue ocean sounds promising in more ways than one.  Happy, healthy and prosperous 2013!

“Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant”. W. Chan Kim and Renee Mauborgne. Harvard Business School Publishing Corp, 2005.

“Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant”. W. Chan Kim and Renee Mauborgne. Harvard Business School Publishing Corp, 2005.