What Color is your Strategry?
By Zunaira Munir
Are you red or blue? What is the color of your strategy? Can strategy be identified by color? Which color is better than the other and why? Is there a way to change from one color to another? This short article addresses these questions and discusses two different approaches to business strategy, identified by two different colors : red and blue.
It is not difficult to notice that corporate strategy is heavily influenced by its roots in military strategy. The very language that is used is deeply imbued with military references - “chief executive officers” in “ head quarters”, and “troops” on the “front-lines”. Described this way, strategy is about confronting an opponent (or opponents) and fighting over a piece of land that is both constant and fixed. In corporate terms this fixed piece of land is the market demand. Taking market structure as a given, it drives companies to carve out a defensible position against the competition and building advantages over it - usually by assessing what competitors do and striving to do it better. Here grabbing a bigger share of the market can be seen as grabbing a bigger slice of a pie. This is a zero-sum game in which one company’s gain is achieved at another company’s loss. Firms principally seek to capture and redistribute wealth instead of creating it.
Companies have long engaged in such head-to-head competition in search of sustained profitable growth, they have fought for competitive advantage, battled for market share and struggled for differentiation. Yet, in today’s overcrowded industries, competing head-on results in nothing but a bloody red ocean of rivals fighting over a shrinking profit pool. So what can be the color of such a competition based strategy. It is red. Red, which is tainted with the competitors’ blood.
Two professors , W. Chan Kim and Renee Mauborgne , both based at INSEAD a top – notch business school in France have argued that such a traditional approach to strategy although necessary is not sufficient to sustain highly profitable growth. Based on their study of 150 successful corporate strategic moves spanning more than a 100 years and thirty industries, they have argued that tomorrows leading companies will succeed not be battling competitors , but by creating “blue oceans” of uncontested marketspace , where competition is rendered irrelevant. From a blue ocean perspective , the strategic challenge looks very different. Recognizing that industry and market boundaries exist only in the manager’s minds, practitioners of such a strategy do not let existing industry assumptions limit their thinking. To them the challenge is not to grab a bigger share of the market, but to create a bigger market. To them extra demand is out there, largely untapped. The crux of the problem is how to create it. It is about increasing the size of the pie, instead of getting a bigger slice of the existing pie. It is about creating new wealth, instead of capturing and redistributing existing wealth in the market.
Think about how Cirque du Soleil grew from a rag-tag group of street performers in Canada to a company pulling in nearly $1 billion in revenues, staging dozens of productions seen by over 40 million people in 90 cities around the world. How did they do this? Instead of trying to capture a larger segment of the existing circus customers (children and their parents) Cirque looked to noncustomers: adults. And instead of looking at competitors (other circuses), it looked to alternatives: theater. Instead of following the conventional logic of outpacing the competition by creating a circus with even greater fun and thrills, it reconstructed industry boundaries between circus and theatre, did away with smelly animals and star performers and combined circus acrobatics and fun with the intellectual sophistication and artistic richness of the theatre. It created a blue ocean devoid of any competition from either the circus industry or the theatre industry.
Similarly, Southwest did not compete head-on against other airlines in the short-haul industry by offering better meals or other incentives or by improving the efficiency of the conventional hub and spoke system- for that matter. Instead, they tried to find out why some people would prefer to drive rather than fly. They offered the speed of the airplane with the price and flexibility of driving, thereby bringing in loads of new customers in the airline industry.
Similar was the strategy of Callaway Golf in creating brand new demand for golf clubs. Whereas the rest of the Golf industry focused on producing golf clubs with finer precision, speed and distance – all targeted for the professional golfers. Callaway Golf created the Big Bertha with a bigger sweet spot that is easier to hit with. It greatly expanded the market from professionals golfers to include women ,children, non-pros and casual players.
What is common in all these examples is the fact that these companies were able to break out of competition in their particular industries and make it irrelevant. How did they do it? By re-thinking and challenging the competition-based assumptions of their particular industries, they were able to reconstruct industry and market boundaries and create new demand. They eliminated some of the factors that the their industry took for granted, reduced and raised some others and created some factors that the industry had never thought of before. They offered a quantum leap in value for the buyers and simultaneously lowered the cost structure for themselves. This simultaneous pursuit of high value and low cost for breaking out of competition is the corner stone of a strategy that can be called “blue”, and so the name “Blue Ocean Strategy”. It is blue, just like the vast and calm blue ocean , where there are no competitors – or sharks- and offers great potential for highly profitable growth.
This concept is not just relevant for corporations and business strategies, it is just as applicable at every scale right from a country’s national strategy, to a small business’s success, to a individual’s career development and even to personal relationships.
By taking a big picture view of your own and your competitors’ strategies and with a conscientious effort to make competition irrelevant to your success, you too can systematically break out of red oceans and turn your strategy blue. The first step is to start thinking about the simple questions: What Color is your strategy? Are your red or blue?
Zunaira Munir is the Founder and Managing Director of Strategize Blue, a strategy consulting and training company based in San Diego. She has worked with numerous big and small companies all around the world in their pursuit to create Blue Oceans of uncontested profitable growth. She holds a Ph.D. in Innovation Management.
