Innovation has often been seen as a random experimental process. Blue Ocean Strategy challenges traditional innovation theories and offers systematic methodologies for creating blue oceans of uncontested market space and highly profitable growth. Blue Ocean Strategy challenges traditional innovation beliefs that innovation is trial and error must be done by an entrepreneur and opportunities and risks come together. Blue Ocean Strategy in contrast, offers analytical tools and frameworks that help organizations minimize risks while maximizing opportunities to achieve profitable growth.
In this composition we attempt to review and analyze the concepts Blue Ocean Strategy and Innovation. We look into the history of innovation, traditional theories, the development and the present state of the field in comparison with the systematic process Blue Ocean Strategy developed in 2005. By evaluating innovation and Blue Ocean Strategy as separate entities we hope to provide a comprehensive distinction in how the concepts are perceived. This would give us an in-depth understanding of the fundamental differences between traditional competition-based theories and the theories and methodologies of Blue Ocean Strategy.
In this section we provide the commonly used definitions and understandings of innovation, as well as its connection to the term entrepreneur. Peter Drucker, author and scholar, and Joseph Schumpeter, economist and political scientist, offer the most popular understandings of innovation and entrepreneur. The field of innovation is roughly fifty years old.
Drucker describes innovation as what entrepreneurs do - innovation represents the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or difference service. Innovation involves, changing the value and satisfaction obtained from resources by the customer. More specifically, Drucker defines innovation as the specific instrument of entrepreneurship…the act that endows resources with a new capacity to create wealth. Entrepreneurs are described by Drucker as inviduals who create something new or different or “opportunity seekers.”
Schumpeter defines innovation as the introduction of new goods, new methods of production, the opening of new markets, the conquest of new sources of supply and the carrying out of a new organization of any industry. Schumpeter is also popularly known for his theory of “creative destruction.” Schumpeter described creative destruction as brought on by entrepreneurs who constantly overturn the economic status quo.
For reference purposes other popular definitions include, “the act of introducing something new” (American Heritage Dictionary) and “a new method or device” (Webster Online).
In this section of the composition we provide the definition and brief background of Blue Ocean Strategy. The terms included in this section will be explained further as comparable to innovation pertaining to sections. Blue Ocean Strategy is the systematic approach for making competition irrelevant by creating new marketspaces through the simultaneous achievement of differentiation and low cost. The three key conceptual building blocks of Blue Ocean Strategy are value innovation, tipping point leadership and fair process. Blue Ocean Strategy is the result of a decade-long study of 150 strategic moves spanning more than 30 industries over 100 years (1880-2000). The concepts of Blue Ocean Strategy were developed by INSEAD professors W. Chan Kim and Renee Mauborgne and published in the form of a book by Harvard Business Press in 2005.
This section compares and contrasts the fundamental difference between the traditional innovation belief that innovation is random, driven by an entrepreneur and Blue Ocean Strategy as a systematic approach that is patterned. Although there is a need for constant innovation it has often been viewed as random – an idea dependent upon genius. Schumpeter argues that innovation is a random process where entrepreneurs and spin-offs are the primary drivers.
In contrast, Blue Ocean Strategy offers systematic and reproducible methodologies and processes in pursuit of blue oceans by both new and existing firms. The Blue Ocean Strategy research gathered suggests that value innovation was found to be the underlying logic behind all successful moves studied and formed the cornerstone of Blue Ocean Strategy. Value Innovation focuses on making the competition irrelevant by creating a leap in value for buyers and the company, thereby opening up new and uncontested market space. Value Innovation places equal emphasis on value and innovation. Innovation without value tends to be technology driven, market pioneering, or futuristic. Value innovation only occurs when companies are able to align innovation with utility, price and cost position.
Traditionally, innovation has been viewed to be trial and error – learn from failure. Innovation theories, welcome failure. You have to be willing to take the risk – you need to pursue failure if you want to innovate and consequently succeed. The thought – opportunities and risks come together and you learn from failure. Blue Ocean Strategy does just the opposite. Blue Ocean Strategy minimizes risks while maximizes opportunity for highly profitable growth because it is a systematic process.
Leading us to the next section of our analysis – the belief innovation is the result of DNA or a corporate innovation culture. The belief that you have to hire innovative geniuses to come up with an idea. The American Heritage Dictionary acknowledges the term, intrapraneur, as a person within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation. Intrapreneurship is now known as the practice of a corporate management style that integrates risk-taking and innovation approaches, as well as the reward and motivational techniques that are more traditionally thought of as being the province of entrepreneurship. Blue Ocean Strategy upends this traditional theory because it offers analytical frameworks that make up the systematic process. The tools and frameworks provided by authors Kim and Mauborgne include the strategy canvas, value curve, four actions framework, six paths, buyer experience cycle, buyer utility map and blue ocean idea index.
This section explores the belief that innovation relies on units of experimentation and the use of a subsystem approach. Companies experiment to find out what strategic approach works for them, rather than determining the appropriate structural condition in which to operate. In contrast, Blue Oceans Strategy emphasizes the systems strategic alignment as an integrated approach to strategy. Blue Ocean Strategy requires organizations to develop and align the three strategy propositions: value proposition, profit proposition and people proposition. Value proposition refers to the utility buyers receive from an offering minus the price they pay for it. Profit Proposition refers to the revenues an organization generates from an offering minus the cost to produce and deliver it. People Proposition refers to the positive motivations and incentives put in place for people needed to support and implement the strategy. By achieving strategy alignment companies eliminate units of experimentation. As a result, the right strategic approach for the company can be chosen.
In conclusion of this composition we attempted to create a comprehensive distinction between traditional innovation theories and Blue Ocean Strategy, Innovation has most popularly been viewed as a random experimental process driven by entrepreneurs, a trial and error process that accepts opportunities and risks come together and it must be within a corporate culture. While, Blue Ocean Strategy offers a systematic approach for making the competition irrelevant by creating uncontested marketspaces through the simultaneous achievement of differentiation and low cost.
