"CEOs can't wait to read Sunny Bindra's articles every week."

Stop competing and start re-imagining

Sep 07, 2007 Business Daily, Strategy

“…imagine a market universe composed of two sorts of oceans: red oceans and blue oceans. Red oceans represent all the industries in existence today. This is the known market space. Blue oceans denote all the industries not in existence today. This is the unknown market space.

In the red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known. Here, companies try to outperform their rivals to grab a greater share of existing demand. As the market space gets crowded, prospects for profits and growth are reduced. Products become commodities, and cutthroat competition turns the red ocean bloody.

Blue oceans, in contrast, are defined by untapped market space, demand creation, and the opportunity for highly profitable growth…in blue oceans, competition is irrelevant because the rules of the game are waiting to be set.”

W. Chan Kim and Renee Mauborgne, Blue Ocean Strategy

As the economy grows and is opened up to all-comers, business in Kenya is becoming uncomfortable. In many industries these days, there are just too many businesses chasing the same customers. In the media industry, the restaurant trade, the retail sector, banking, telecommunications and many more: competition has become intense. You have to be able to take on smaller businesses which have quick decision-making and low overheads, as well as larger corporations with huge marketing budgets and low unit costs.

Not everyone is going to survive this process. The same old ways of competing – lower price, better product, better location – may not take any firm very far. Kim and Mauborgne’s book Blue Ocean Strategy, which has sold a more than a million copies in hardback, is a welcome addition to management thinking about competition. As the excerpt indicates the authors, professors at INSEAD, urge us to find or invent ‘blue oceans’ – undiscovered market territory.

Can this be done? It is intellectually lazy to confine our thinking to just fighting pitch battles standing exactly in the same place. The authors point out that we have always created blue oceans. A hundred years ago there were no industries in aviation, petrochemicals, health care – or management consulting. Thirty years ago, mutual funds, cell phones, package delivery and home videos did not exist. Today, all of these are multi-billion-dollar industries.

We have huge capacity to create new industries and recreate existing ones. Today, that imperative is stronger than ever. Technological advances have led to massive over-production and variety. Globalisation has dismantled many a protected market. Products are increasingly commoditised and subject to price wars and shrinking margins.

In this environment, blue-ocean thinking becomes ever more important. Kenyan companies need to learn from Southwest Airlines, which reinvented the air travel business in the 1970s and is consistently the world’s most profitable airline. Or from Cirque du Soleil, which breathed innovation and new life into an old entertainment business – the circus. Or from Starbucks, which turned the banal act of drinking coffee into a branded experience – and into a huge global business.

Changing business models abound in Kenya. We now send money over mobile-phone networks; we watch movies in multiplex cinema halls; we buy shares through investment clubs; we pay companies to stand in queues and pay our bills for us. It isn’t that hard to create new market space when you remove the chains of conventional thinking.

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