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Blue Ocean Strategy Formulation Analytics and Principles (continue 3)

Strategy & Leadership: You also advise those attempting to formulate a blue ocean strategy to focus on the big picture, not the numbers. Can you explain what you mean and how it improves the development of blue ocean strategies in practice?

Kim and Mauborgne: Traditional numbers-driven strategic planning processes usually involve the preparation of large, complicated spreadsheet documents. A closer look reveals that most of these “strategic” plans don't contain a strategy at all but rather amount to a loose collection of tactics that individually make sense, but lack a compelling collective logic. Taken as a whole, they don't provide a unified, clear, distinctive direction that sets a company apart from its rivals – let alone makes the competition irrelevant.

We have developed an alternative approach to the existing strategic planning process that is based not on preparing a spreadsheet document but on drawing a strategy canvas. This approach consistently produces strategies that unlock the creativity of a wide range of people within an organization, open companies' eyes to blue oceans, and are easy to understand and communicate for effective execution.

Strategy & Leadership: How easy is it, in your experience, to wean experienced executives away from a strong focus on the numbers in the manner that you have described and how do you go about persuading them?

Kim and Mauborgne: We are not suggesting executives should not consider numbers. They should. Having the validation and security quantitative analysis provides is essential to executing a blue ocean strategy. But we do believe that the details will fall into place more easily if managers start with the big picture of how to break away from the competition, then move to the numbers behind their idea. The methods of visualizing strategy through the tools and frameworks outlined in Blue Ocean Strategy, we believe, will greatly improve managers' chances of creating blue oceans.

Strategy & Leadership: Two of the most counter-intuitive elements in the blue ocean approach to strategy development involve the approach to customers and segmentation. You advise strategists to focus more on non-customers and also less on finer and finer segmentation. Can you elaborate?

Kim and Mauborgne: The natural strategic orientation of many companies is toward retaining existing customers and seeking further segmentation opportunities. This often leads to finer segmentation and greater tailoring of offerings to better meet customer preferences. The more intense the competition is, the greater the resulting customization of offerings. Although this might be a good way to gain a focused competitive advantage and increase share of the existing market space, it is not likely to produce a blue ocean that expands the market and creates new demand.

To create and capture blue oceans, companies need to take a reverse course. Instead of concentrating on customers, they need to look to noncustomers. And instead of focusing on customer differences, they need to build on powerful commonalities in what buyers value. This allows companies to reach beyond existing demand to unlock a new mass of customers that did not exist before.

Although the universe of noncustomers typically offers substantial blue ocean opportunities, few companies have keen insight into who noncustomers are and how to unlock them. To convert this huge latent demand into real demand in the form of thriving new customers, companies need to deepen their understanding of the universe of noncustomers. The book identifies three tiers of noncustomers to further guide this process. Once identified, companies should look to the commonalities across noncustomers. If you focus on these, and not on the differences between them, you will glean insight into how to desegment buyers and unleash enormous latent untapped demand.

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