Executing Blue Ocean Strategy with Solid Project Management

The Blue Ocean strategy framework has become popular since around 2005, on the initial publication of “Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant“, by W. Chan Kim and Renee Mauborgne. It was conceived as a way to forward execute on some of the latest thinking on innovation, particular the idea of disruptive innovation. It provides a methodology to find or redefine competitive landscapes where the competition is low and the value is high.

And, as is the case with most strategies, the key is to execute well – which in large part takes effective project, program, and portfolio management.

The Basics of Blue Ocean Strategy

The Blue Ocean Strategy is based on the observance that there are two types of competitive environments: red oceans and blue oceans. Red oceans, where the focus is more on markets and market share, are highly competitive environments where it is hard to grow revenue and profit. By contrast, blue oceans are where the focus is more on customers and customer experience, tend to be where most revenue and profit growth occurs.

Here is a summary of key differences between blue ocean and red ocean.

Blue ocean vs Red ocean:

• Create uncontested market space vs compete in existing highly competitive marketplace
• Make the competition irrelevant vs need to beat the competition
• Create and capture new types of customers vs try to expand existing demand
• Add value while reducing costs vs trade off between value and cost
• Focus on both differentiation and low cost vs choose between differentiation and low cost

‘Value innovation’ is the cornerstone driver behind blue ocean strategy. The focus of value innovation is on making the competition irrelevant by creating a leap in value to customers by decreasing or eliminating the higher cost components that are not valued so high, while enhancing or even creating other attributes that are more highly valued. This takes innovation – hence the term ‘value innovation’.

There are eight foundational principles, in two groupings, of blue ocean strategy:

Grouping #1: Formulation principles

• Reconstruct industry borders to free the organization of predefined constraints
• Focus on the big picture with a clean, fresh canvas, not based on real or perceived notions
• Reach beyond existing customers to alternative needs and desires
• Reimagine the business model

Grouping #2: Execution principles

• Reckon with organizational culture challenges
• Make execution part of the strategy
• Align value, profit, and resources (especially people)
• Be prepared to shift to new blue oceans

These principles highlight how blue ocean strategy minimizes key risks to organizations.

—————————————-

I recommend these strategy resources (paid link):

—————————————-

Blue Ocean Tool #1: The Strategy Canvas

Let’s jump straight in with the basics of the Strategy Canvas:

The generic canvas shown captures the current competitive environment visually. It shows:

• All the Product or Service attributes – numbered theoretically as Attribute #1 to #10 – along the horizontal axis. These attributes are the basis for competition.
• The vertical axis shows the relative values for the attributes on a scale from Low to High.
• The upper red line represents an aggregated profile of the high end competitors in the market – with relatively high values for the attributes.
• The lower red line represents an aggregated profile of the low end competitors in the market – with relatively low values for the attributes.

A typical Strategy Canvas for an industry might start out like this, where the competitors at the high end tend to have very similar offerings, and competitors at the low end of the market also have similar offerings to each other within that group. However, the canvas will vary, depending on the situation.

Note that the both the high end and low end competitors are competing only on Attributes #1 to #6. Attributes #7 to #10 are either ignored by both groups or have yet to be understood, discovered, or invented, which we will cover further below.

Finally, note the color red for both the high end and low end competitors – which was chosen based on the idea that rivals are competing based on these several factors only, with similar strategies. Competitors are forced into a tight race in a Red Ocean environment, where growth and profitability is limited.

Blue Ocean Tool #2:  The Four Actions Framework

Given the Strategy Canvas above, how can a competitor break out of the pack and move from competing in a Red Ocean to competing in a Blue Ocean?

Blue Ocean Strategy offers four actions that a competitor can take:

• Which factors that the industry takes for granted should be eliminated?
• Which factors should be reduced well below the industry’s standard?
• Which factors should be raised well above the industry’s standard?
• Which factors should be created that the industry has never offered?

Asking these questions enables a competitor to think through the possibility for a whole new value proposition for customers in the market – and one for which it will at least initially have virtually no competition.

Let’s say that you work for Competitor A, and that the team rethinks its position based on the Strategy Canvas using the Four Actions Framework. You may end up with a vision for your company’s position, in blue on the Strategy Canvas, that looks something like this:

Competitor A has created a new position on the Strategy Canvas by applying the Four Actions Framework, creating an offering with product and service attributes that vary greatly for the existing Red Ocean competitors.

• Attribute #1 – this could be price – is higher than for the low end grouping but still well below the high end.
• Attributes #2, 3, and 4 are completely ignored as they add to cost but do not add sufficient value for customers.
• Attributes #5 and #6 have lower values than is standard for the low end and high end groups.
• Attributes #7 to #10 are not even offered by current competitors, but the team found that a certain substantial group of customers, currently underserved, would value them.

The resulting line in the Strategy Canvas is blue, representing Blue Ocean positioning.

Blue Ocean Tool #3:  Eliminate-Reduce-Raise-Create

This tool complements to the four actions framework above, simply to make it easy to apply because it is a visual tool.

The grid provides space to brainstorm ideas for identifying actions to be taken. It forces the team to consider all four actions: Eliminate, Reduce, Raise, and Create.

This process, and those outlined above, is simple to explain, but that does not mean they are trivial to accomplish. They take tremendous execution to achieve success, but they can provide good strategic underpinnings for that success. Execution challenges that will be faced, as outlined in the principles above, include:

• Reckon with organizational culture challenges
• Make execution part of the strategy
• Align value, profit, and resources (especially people)
• Be prepared to shift to new blue oceans

Executing a Blue Ocean Strategy is a PM Challenge

—————————————-

I recommend these PM templates (paid link):

—————————————-

This post outlined the basics of the popular Blue Ocean Strategy framework.

Executing a Blue Ocean Strategy is different from many other older frameworks in that it forces the team to look outside the current standard competitive landscape – Red Oceans – to more attractive and less competitive, more customer driven landscapes – Blue Oceans. Managers and executives need to make execution part of strategy when facing cultural challenges, aligning resources, and preparing to eventually shift to new blue oceans.

Execution, like with most good strategic initiatives, is key, and probably the hardest part. Here are some things I think project managers need to keep in mind related to Blue Ocean Strategy in executing projects.

• The Blue Ocean strategic framework can be applied not only to for-profit industries, but for non-profit and government organizations as well.
• ‘Blue Ocean’ is a way of thinking. It will affect how you deliver projects if you think of attributes of products and services in terms of adding value and reducing cost.
• Using the ideas and tools of the Blue Ocean strategic framework can make you a strategic asset to your organization and substantially increase the value of what you personally have to offer.
• A picture is worth a thousand words. Consider how you might use the Blue Ocean tools to show value and cost related to your projects visually.
• Ensure that the portfolio of projects is consistent in supporting cultural and resource challenges, and that the approach is agile and can shift as required.

Resources:

Word/Excel/PowerPoint strategy templates that include Blue Ocean Strategy