MANILA, Philippines -- Just the other day, we had lunch with a director of a Fortune Top 10 company who is being besieged by new competition, including copycats. He asked us “What’s this Blue Ocean marketing [strategy] all about?” This is not the first time we’ve been asked this question. Our readers are also curious about Blue Ocean Strategy.
The Blue Ocean marketing strategy refers to the “Blue Ocean Strategy,” a bestseller written by W. Chan Kim and Renee Mauborgne and published by the Harvard Business School Press in 2005. The book has sold over a million copies (translated in 37 languages) and has made this Korean and French tandem one of the most sought-after business speakers in the industry. Last time we checked, Kim and Mauborgne now command $150,000 each, per talk!
To answer the question we turned to Josiah Go, prolific marketing author, and chairman of Mansmith and Fielders training company, who had the foresight to acquire the license to teach the Blue Ocean Strategy here in the Philippines. (Thus saving the Philippine marketing community $150,000 -- you could hire Go to speak, at a tiny fraction of what it would cost you to hire either Kim or Mauborgne.) Go is the first and only Filipino to successfully complete the Blue Ocean Strategy qualification process in France and the first professor of a three-unit, full-semester Blue Ocean Strategy in Southeast Asia.
This week, Go answers your frequently asked questions about Blue Ocean Strategy.
Question: What are the key principles of Blue Ocean Strategy?
Go: To win in the future, companies must stop competing with each other the traditional way. Instead, a change in paradigm is needed -- the only way to beat the competition is to stop trying to beat the competition. The concept of value innovation, which places equal emphasis on both value and innovation, is the cornerstone of Blue Ocean Strategy (BOS). This is done by creating a leap in value for buyers and the firm, thereby opening up new and uncontested market by aligning innovation with utility, price, and cost positions. Blue oceans are thus created in a sustainable manner by simultaneously driving costs down while driving value and differentiation up for the buyers.
Q: How is BOS similar to or different from marketing strategy?
Go: In terms of customers, BOS is similar to marketing strategy in that both aim to assemble products or services that can satisfy the target consumers. The difference is that traditional marketing strategy looks at existing demand and satisfying current customers, while BOS is not competition-based, and it looks at non-customers and captures new demand in an uncontested market space.
In terms of competition, both traditional marketing strategy and BOS need to compete, however, traditional marketing strategy aims to beat existing competition by gaining market shares while BOS tries to create new value to make existing competition irrelevant.
In terms of company, traditional marketing looks at incremental improvement in revenue and profit, while BOS looks at a giant leap of value, thus giant leap in revenue and profit growth. Also, profit-wise, traditional marketing strategy seldom looks at how to reduce cost while BOS is both differentiation and cost-based. Thus, while the whole system of an organization’s activities in traditional marketing strategy is aligned with differentiation; BOS is aligned with both differentiation and low cost simultaneously.
Q: Does my company/business really need this Blue Ocean strategy? We’re doing all right with our current promos. Are there Filipino companies adopting this strategy?
Go: A lot of companies are suffering in red oceans -- they continuously try to outperform rivals by competing on price or promo, grabbing a piece of the existing known market space without looking at other viable options. Their promo does not even help them build their brand equity. Many also have a wrong concept of a low-price offering. They focus too much on the competition and brand switching without looking at what customers really need and want. They should continuously be alert asking one simple question -- what fundamental change in offering level buyers receive will make the competition irrelevant?
HBC is one of my favorite examples of a Blue Ocean Strategy company in the Philippines. From an obscure retailer mixing incompatible grocery products and beauty care products, they dropped groceries and canned products and focused on pushing beauty products. From selling brands of multinational manufacturers, they successfully built their own multi-brand private label lines now accounting for over 60 percent of their total sales; thus enabling them to be both differentiated and have low-cost at the same time. Instead of competing with the traditional beauty care “vaciador” stores, they have repositioned themselves and attracted new customers who used to visit retail shops selling imported and branded beauty care products, transforming them from a retailer losing money four years ago to winning the Most Outstanding Retailer award given by the Philippine Retailers Association.
Another example is "C2," with great value innovation -- green tea brewed and bottled on the same day, matched with great taste, great image at an affordable price. Universal Robina Corp. positioned it against soft drinks that at the time of launch were 47 times bigger than ready-to-drink (RTD) tea and four times bigger than the company size of URC. Today, C2 sells much more than the original market size of RTD tea when the product was launched.
"C2" is a blue ocean strategy launch because instead of looking at the existing RTD tea market as competition, it looked at alternatives and competed in a relatively uncontested market space. Instead of beating the competition, they made the competition irrelevant. Instead of exploiting existing demand by simply convincing people to switch RTD tea brand, "C2" created and captured new demand from those no longer drinking soft drinks -- people who are health conscious or those who would like their family members to drink something healthier than the usual soda. And because Universal Robino is part of the JG Summit conglomerate, the synergy from the bottles and the sugar supplied by their sister companies made the product both differentiated and low-cost at the same time, breaking the traditional value-cost trade off.
Josiah Go will talk on “How to Formulate New Products via Blue Ocean Strategy and Make Competition Irrelevant” at the Third Market Masters Conference on March 21, Mandarin Oriental Hotel and co-sponsored by the Philippine Daily Inquirer. Profit will go to Mansmith and Fielders’ charity and advocacy projects. Call +632 7222318 or +632 7277142.
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