As we conclude our Blue Ocean Basics series, today our focus turns to when to value innovate again. Each entry from this series is accessible through the Blue Ocean Strategy Basics section. Now, let’s turn to pages 188 — 189 of the book Blue Ocean Strategy (co-authored by Professor W. Chan Kim and Professor Renée Mauborgne).
Eventually, however, almost every blue ocean strategy will be imitated. As imitators try to grab a share of your blue ocean, you typically launch offenses to defend your hard-earned customer base. But imitators often persist. Obsessed with hanging on to market share, you may fall into the trap of competing, racing to beat the new competition. Over time, the competition, and not the buyer, may come to occupy the center of your strategic thought and actions. If you stay on this course, the basic shape of your value curve will begin to converge with those of the competition.
To avoid the trap of competing, you need to monitor value curves on the strategy canvas. Monitoring value curves signals when to value-innovate and when not to. It alerts you to reach out for another blue ocean when your value curve begins to converge with those of the competition.
It also keeps you from pursuing another blue ocean when there is still a huge profit stream to be collected from your current offering. When the company’s value curve still has focus, divergence, and a compelling tagline, you should resist the temptation to value innovate again and instead should focus on lengthening, widening, and deepening your rent stream through operational improvements and geographical expansion to achieve maximum economies of scale and market coverage. You should swim as far as possible in the blue ocean, making yourself a moving target, distancing yourself from your early imitators, and discouraging them in the process. The aim here is to dominate the blue ocean over your imitators for as long as possible.
As rivalry intensifies and total supply exceeds demand, bloody competition commences and the ocean will turn red. As competitors’ value curves converge toward yours, you should begin reaching out for another value innovation to create a new blue ocean. Hence, by charting your value curve on the strategy canvas and intermittently replotting your competitors’ value curves versus your own, you will be able to visually see the degree of imitation, and hence of value curve convergence and the extent to which your blue ocean is turning red.
Tune in tomorrow for a practical example of when to value innovate again from one of the world’s leaders in entertainment.
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