Blue Ocean, Red Ocean…What is Your Strategy?

July 10, 2014 By JB Henriksen

Many people believe that a mission statement is a strategy.  Let’s not beat around the bush…it is not. A strategy governs how a company is going to reach its Big Hairy Audacious Goals.  For instance, are you a low cost leader, or are you different enough that you can charge a higher price than your competition?  Your strategy is your high level path to achieve your goals.

Nearly 10 years ago W. Chan Kim and Renee Mauborgne wrote a fantastic book called Blue Ocean Strategy.  They talk about how so many companies are trying to fight with competition in a competitive ocean.  Companies fight over price, market share and customers.  The fight becomes very bloody and the “competitive” ocean becomes very red with blood very quickly.  They suggest that the best strategy is to create an idea that has very little competition.   Companies can succeed by not battling competitors, but rather by creating ″blue oceans″ of uncontested market space. They assert that these strategic moves create a leap in value for the company, its buyers, and its employees, while unlocking new demand and making competition irrelevant.  The strategy sounds great, but it isn’t so easy to implement.  You may already be in a blue ocean, but don’t know how to grow your business.  You may be in a red ocean, but have a new idea that is in a blue ocean and you don’t have the money or the organization to get to the blue ocean. Money will ultimately follow good ideas, but good ideas have to be led by strong management with the experience and the fortitude to see the idea through to that blue ocean.

red ocean blue ocean

If you believe you are in a red ocean, how should you compete?  How do you create a blue ocean strategy?  Ask yourself: Do I have the ability to create something that is valuable, rare, difficult to imitate, and have the organization to manage that new idea?  Many companies have something valuable and or rare, but it is easily duplicated or simply don’t have the management organization to take the company to the next level.  As our founding partner Kent Thomas has said many times, you need to know what you don’t know.  If, for example, you don’t have the management team, you must bring in the right talent to help you execute.  So, part of your strategy setting is to look for a Blue Ocean or a space to create one.  But it also includes how you intend to implement the strategy.

Your strategy is your all encompassing plan to achieve your goals.  It is the goal and the path.  This is true whether your goal is a blue ocean, to be a low price leader, to own a large portion of the market or to exploit some point of differentiation where you can charge a premium.  As the leader of your company, ensure your team is spending adequate time determining where you want to be (your goal), whether you can reach it via a blue ocean strategy or more effectively competing in a red ocean, and your path to reach the goal.

JB Henricksen is a partner at Advanced CFO Solutions.  At Advanced CFO Solutions, we provide outsourced accounting and financial services. We have served with more than 450 companies. Our clients see us as their strategic, outsourced CFO.  We provide CEOs with critical information so they can make key decisions with confidence.  We do this by leveraging our experience and technology to provide actionable information and results.  And, we do it for a fraction of the cost of a full time employee.  For more information, click here.

 

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