Does Your Business Need A Boost? Blue Ocean Strategy
December 10, 2014
By Andrea Simon
“We’re stalled and the competition is killing our margins.” Statements like this have surfaced from many CEOs recently, signaling a discernible detour along the road to economic recovery.
Cutting across many industries, this trend is occurring at many companies, including an international chemical trading firm, a global fishing rod retailer, a cement manufacturer, a large chiropractor’s practice and several struggling hospitals.
Zero growth, diminishing demand or saturated markets are among the key problems cited by the CEOs looking for solutions. In terms of frequency, we’ve seen more requests for help come in over the past six months, than we’ve seen in the past two years – up by as much as 120 percent.
Given this growing trend, what’s the solution? In many cases, each request can be satisfied by finding what’s called a Blue Ocean Strategy – an approach to developing creative strategies that help companies to open new market space. Wikipedia calls traditional competition-based strategies Red Ocean Strategies.
Here are the key goals behind every Blue Ocean Strategy:
Make the competition irrelevant.
Search for nonusers and unmet needs.
Add value and truly innovate to elevate solutions beyond the obvious.
Align your organization around a new culture that sees, feels and thinks innovatively about customer solutions.
To see how well this approach can work, consider this case study from Elkay Manufacturing, a successful, 90-year-old Chicago firm in the sink, water fountain, and kitchen cabinet industries.
A highly innovative company, Elkay developed a new product released in 2010: a proprietary water bottle filler placed on top of their water fountains, making it easier for people to refill their water bottles. Despite the new product’s merits, Elkay’s traditional distribution channels were only generating modest sales.
Company leaders knew that there was much more potential with this product. They also realized that it was hard to explain the benefit of an additional feature on top of an existing water fountain to their traditional customer base.
However, later in 2010, a non-user with unmet needs surfaced, leading to a textbook Blue Ocean scenario. Muhlenberg College in Allentown, PA discovered Elkay’s filler stations and installed them on all of its water fountains. It then ran an eco-friendly campus advertising campaign encouraging students to use the “filler stations” with refillable bottles, instead of buying water in disposable bottles. This effort was hugely successful at Muhlenberg and was covered by the national media.
At this point, Elkay was already in the process of establishing an emerging market sales team for demand creation purposes and wanted to determine the best ways to expand. The company asked us for a Blue Ocean Strategy session.
The timing could not have been better, as the session helped everyone in the room to see what was right in front of them. Ultimately, it validated and amplified the progress Elkay had already made, helping them to see the extent of the opportunity with the filler stations.
The group realized they should expand their efforts by targeting sustainability directors at many other organizations, since Muhlenberg’s sustainability directors were so receptive and engaged in the product’s potential. They stepped up their efforts to hire more sales people to grow this new channel, while still engaging established channels in new ways. Internet inquiries began to pop up, which meant Elkay also created a new inbound marketing and sales strategy.
So did using a Blue Ocean Strategy help Elkay’s business? It sure did. In the past four years, Elkay’s water filler sales went from zero to 25 percent of their current portfolio.
“Once you literally see a new ocean of opportunity, you never see the world with the same eyes again,” says Rod Magnuson, Elkay’s product director of sinks and faucets. “People were getting emotional about plumbing. They saw that we were making a product that matters.”
Most significantly, Elkay has:
Made the competition less relevant
Focused on new buyers and different market segments
Adopted a culture where it trains people to think in a “Blue Ocean” way
But by using the Blue Ocean approach and adapting your behaviors to gain a new perspective, you can overcome virtually any business challenge.
About the Author: Andrea Simon, Ph.D., principal and founder of Simon Associates Management Consultants (SAMC), has over 30 years’ experience as a senior executive with financial services and healthcare institutions, and as an entrepreneur. Please see www.simonassociates.net for more information or contact Andrea at @andisamc. This article was first published at forbes.com
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