25 - Blue Ocean Strategy Part 3

Surpass the Organizational Barriers, the Fifth Principle After the definition of the blue ocean strategy and checked the accomplishment of the idea, now it needs to be implemented. Its execution is also a challenge and some issues need to be addressed. There are some barriers, the must be overcome. One is the cognitive factor, which is the resistance to changes. People like to keep the status quo, it is an environment that they know and control. Any changes that move them from the comfort zone will generate a natural resistance. They need to be aware of the importance and necessity of the strategic change. The second point is the limited resources. Usually, the greater is the change, the greater are the resources needed. But it is not the reality. Actually, it is exactly the contrary. The third issue is the motivation. It is important to have the key players motivated to go faster and change the status quo, quickly. Last point is politics. Paraphrasing the authors of the Blue Ocean Strategy book, making a reference to a sentence from a manager that they heard, when they quote: “In our organization you get shot down before you stand up.” It says everything about this point. Building Execution into Strategy, the Sixth Principle The organization is everyone from top to front lines. This means that organization is made by people and everyone is important. So, they all need to be aligned around the strategy and support it. It is fundamental to create a culture of trust and commitment to implement the agreed strategy. This it is not done by a written document but with an alignment of spirit and mind of people with the new strategy. The objective of this principle is to mitigate management risk of distrust, noncooperation and even sabotage. A key aspect, to achieve success, is that processes need to be fair and transparent. A fair process and implications related with attitudes and behavior • • • •

The strategy formulation process: need to have engagement, explanation and expectation clarity. About attitudes: need to have trust and commitment, like “I feel my opinion counts.” About behavior: the cooperation is voluntary, like “I will go beyond the call of duty.” About strategy execution: need to exceed expectations, it is self-initiated.

An important point to highlight is the three E principles of a fair process.

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Engagement: involve individual in strategic decisions that affect them. Explanation: everyone involved and affected should understand the final strategic decisions. Expectation clarity: leaders must state clearly the new rules of the game. It must be clear the targets and milestones, the responsibilities, the key process indicators, the standards and also the penalties for failure.

An interesting comparative about the execution of a fair process and an unfair process: Fair process – intellectual and emotional recognition – trust/commitment – voluntary cooperation Unfair process – intellectual and emotional indignation – distrust/resentment – refusal to execute A last comment about commitment, trust and voluntary cooperation, they are difficult to measure and monitor, they are intangible capital. Final Conclusions Creating blue oceans is a dynamic process. Sooner or later, competitors will appear. Final thoughts will address the sustainability and renewal of blue ocean strategy. Some points to consider that are related with imitation barriers: • • • • • • • •

A value innovation move does not make sense based on conventional strategic logic. Brand image conflict prevents competitors from imitating. Natural monopoly blocks imitation when size of market cannot support another competitor. Patents or legal permits block imitation. High volume generated by innovation leads to cost advantages and places competitors in costs disadvantages. Network externalities also block companies from easily and credibly imitating blue ocean strategy. Imitation requires substantial changes and investment which may take years. The offer of a leap in values rapidly earns brand buzz and loyal following.

Something that must be also, and always, clear: There is no permanently excellent industry. There are no permanently excellent companies. At the end of the Blue Ocean strategy book, it can be found various study cases of three American industries, automobiles, computers and movie theaters.