Posts Tagged blue ocean

Tipping Point Strategy

Posted by on Monday, 8 March, 2010

This is the second article on the Blue Ocean Strategy and involves convincing other members of an organization to go along with the changes you have planned. If you have a good business plan, the next step is to create an environment where you have a critical mass of people on your side, so you can start putting the plan into action. The goal of tipping point leadership is designing a strategy that takes you from the initial business plan to the tipping point where you can fundamentally alter the beliefs of coworkers and redirect the organization.

Authors Chan Kim and Renee Mauborgne give an example of William Bratton and the strategies he used to reform the NYPD. If you ever wondered what made him the choice of the city of Los Angeles, it was the decisions he made while he was advising the city of New York as the police chief. The strategy was very successful and crime has decreased significantly over several decades, and public confidence in the police force greatly rose from 37% to 73%. Police Chief Bratton was featured on the cover of Time Magazine and there is an article which covers his accomplishments. The article also mentioned that Bratton was forced out by then mayor Rudolph Giuliani, which is why Tipping Point Leadership emphasizes the need to involve key people in the implementation of the strategy. Bratton recently left the LAPD, as his work here is done and he’s riding into the sunset to clean up the next city.

Four hurdles must be removed to carry out this strategy. Hurdles are described as motivational, resource, cognitive, and political. Bratton’s plan dealt with each one in turn. To improve motivation he established a weekly meeting with all of the commanders across the city, with one commander each week selected to give a presentation in front of the group on two days’ notice. This kept all of the commanders alert, while not singling out any for special treatment. The authors also noted that this ensures that commanders were shown to only be responsible for their precinct, and the meeting in front of their peers prevented them from blaming others. Cognitive obstacles were dealt with by making the commanders ride the subway instead of driving cars to the police station. They realized that even without lots of crime reports, the subway needed to be cleaned up. Resource issues were dealt with by assigning priorities to current problems. The budget should be revised often and some companies even use strategies like zero based budgeting to make sure every item is relevant. Finally, political problems must be addressed. Bratton managed to stop the crime wave in New York, and was then forced out by Mayor Giuliani. Make sure your boss or other key people in the organization get the credit for your plan, and remove the last hurdle.

Does this story show you a picture of a solution for your organization? I’ll use the example of an oil company, as there’s a large potential for environmental improvement there. Cognitive recognition of resource depletion took off with the famous Hubbard’s Peak. Show the managers an empty range, with the oil drained out. We’ll need another product very soon. For resources, remember Blue Ocean. There’s no need to spend money on new refineries if all the fields are running out of oil. That frees some funds up. For motivation? Tell the managers they can move from a declining market, oil, to a rising one, which can include renewables such as solar and wind. Deal with the political hurdles by transferring employees in departments to be cut to the new ones which are planned, and using some of the budget for retraining.

Blue Ocean, Green Accounting

Posted by on Sunday, 7 March, 2010

Blue Ocean Strategy is a method of creating a business plan which has been applied successfully by many well known companies recently. The idea behind it is to leave the red ocean of well established competitors and aim for a new target market, the blue ocean. Of course, innovation and market segmentation are not new ideas, so the real breakthrough here is to create a strategy that allows you to change a few elements in a company and transform it into an entirely different competitor.

Value Innovation is the goal of the Blue Ocean Strategy. If you follow this link you’ll see the pyramids consisting of cost and value. This is often referred to as a tradeoff as it is considered the cost of quality at each level, and accountants can calculate which levels of quality each target market is willing to pay for. The goal of blue ocean strategy is to break through this tradeoff by completely eliminating traditional costs in the firm’s market that don’t actually add value, and apply the savings to add new features which open up a new market. Successful application allows a product launch with features competitors can’t match at a lower cost, while opening up a channel to additional customers.

Cirque Du Soleil is the most widespread example of this strategy. Critics of the theory mention that the group didn’t set out by planning to use the blue ocean strategy, although in my opinion it still explains why they managed to use it successfully. This case also involves sustainability elements as it replaces negative elements of the circus industry with positive elements. Circuses are well known for several acts, including the animal exhibits, concessions stands, and a ring with star performers. Cirque Du Soleil eliminated all of these. Customers are concerned with animal cruelty, getting ripped off by concessions stands, and don’t wish to pay a high price to see stars that are not well known outside the industry. This eliminates several negative elements without losing much value, but it’s only half the story. Cost savings were applied to improve the popular elements that are positive. Sound and visual effects were greatly improved, and elements of traditional theatre were added so that the performance would tell a story. The Moscow Circus acted as a benchmark for this part of the plan. So what does this story have to do with green accounting?

Green processes are considered too expensive in many companies. Management is always concerned with the bottom line, and telling the boss to consider the environment can make you sound like a hippy who wants to waste other people’s money. The point behind Blue Ocean is that you can create value and cut costs at the same time, so here’s an example. A lot of companies use bulky packaging to make their products visible on the shelf. They might even mix different components of the container to create an effect, like combining metal, plastic, and paper to make the package easy to see. Recyclers can’t handle this type of waste and it fills up the landfills. It’s possible to significantly cut the packaging costs, even as far as creating a plain brown paper wrapping. Why? Because this would open up a new market channel of environmentally conscious customers, while eliminating the added costs of the packaging which will just be discarded anyway. Similar strategies are possible in many other businesses, this was just the first one that came to mind for me.