Thomas Edison was a person who contributed greatly to creative thinking. Here are several of his ideas and techniques regarding creative thinking. (These are what I learned from the very first Soft Skills programme I attended: Thinking Out-of-the-box.)
1. Focus your creative mind power
This method is based on the principle that compressing and focusing the energy of anything to a point will increase the power and force of that thing. Edison believed that with focus, effort and determination, one could achieve whatever one wanted to achieve. This included the creative mind power to make an idea come to fruition.
2. Work on ideas that are being worked on by others
This does not mean that you can simply copy the ideas of others. It means that you should try to think of ideas that are related to its time. Edison deliberately chose to pursue projects that were being explored and worked on by other inventors. The prime example would be the invention he is most famous for: the electric lightbulb that is efficient. By putting your creativity to work in existing industries and improving upon the current systems and ways of operating, you can succeed. Another way is to take existing inventions ans apply them to different industries.
3. Always be exited about your ideas
To sell your idea, you need to be enthusiastic about it. No matter how creative or clever your idea may be, it would be no good if other people are not sold on it. By being exited about your ideas, you can make the public be enthusiastic about your ideas as well. This helps greatly in making the public embrace your creative ideas and not reject it.
4. Scribble your ideas on a notebook
Edison himself has compiled more than 3500 notebooks containing his various ideas and experiments. To be successful in generating creative ideas, you must always record your thoughts and ideas into a notebook. This is because when you write your ideas down, you will create a feedback loop with your mind that accelerates your creative mind power.
5. Use experimental feedback
You should always put your ideas to the test though trial and experimentation in order to understand its various flaws. After discovering the flaws, you can then fix them to ensure that your ideas are not only creative, but also practical. With more and more knowledge and experience gained through trial and error, you will find it easier and easier to create workable ideas.The process of feedback is essential to the creative process of improving upon existing or new ideas.
6. Set an Idea Quota
Throughout his life, Edison has amassed as much as 1093 patents, a record for a single individual. This achievement is due to the fact that he had set a personal Idea Quota which demanded that he come up with a minor invention every 10 days and a major invention every 6 months. The fact is, your brain responds to the demands placed on it. So, try aiming for a good idea each week, and a great idea every two months or so.
7. Power nap
In the space between being fully awake and fully asleep, your brain's creative thinking process will go into overdrive. This is known as accessing the alpha and theta levels of the mind. Edison himself slept little and had naps of about twenty minutes each instead. He found that great flashes of insight would often come to him that helps him in solving a particular problem while developing creative ideas.
8. Work with other creative minds
Two heads are better than one. When you work together with other creative people, you can exponentially increase your creative output. Edison was a master at organising and utilising the creative abilities and talents of other creative people. He focused their minds on very focused creative pursuits and in the process of doing so, he himself became better at coming up with creative ideas.
Thursday, July 25, 2013
Friday, July 19, 2013
Negotiation Skills
Last Sunday, I attended a workshop organised by the DSSC called "Advanced Negotiation Skills". Here, I will share some of the things I learned from there.
First of all, negotiation is defined as a process by which two parties communicate with each other in order to reach an outcome on which they mutually benefit.
There are 4 basic types of negotiation styles, and everybody has their own preferred style. However, not all negotiation styles are suitable in every situations. A person trying to negotiate should try the different styles based on the situation.
The first style is the Win-Lose style. (You win, the other party lose.) This style is best used when you need a quick decision and are in a strong bargaining position. If you are using this style to negotiate, you should make sure that winning is your goal and building relationships with the other party is not important.
The second negotiation style is the Lose-Win style. (You lose, the other party win.) This style should only be used when you are desperate to get a certain thing from the other party. You will need to concede to the other party's demands in order for this style to work.
The third style is the Win-Win style. (Both parties win.) This is the best style to use in most situations. This negotiation style emphasises mutual gain. You should make sure that all information presented is accurate and try your best to engage with the other party in a non-confrontational way.
The fourth and last style is the Lose-Lose style. (Both parties lose.) This style is best avoided unless you are dealing with very minor issues that do not require much negotiation. You could also use this style of negotiation when you are lacking of time.
There are six sources of negotiation power. They are:
Position: The higher your position, the more power you have over any negotiation. This is why people complain to the restaurant manager rather than the waiter.
Relationship: The more connected you are, the stronger your negotiation powers. Dealing with somebody you are familiar with allows you to be more forceful. Alternatively, you can get favourable deals from somebody you know well.
Options: The more options you have, the more powerful you will be in any negotiation. This is because you have more options available to you, and you do not necessarily have to make concessions to the other party.
Specialised skills & knowledge: The more skills you possess, the better your negotiating position. This is especially true if you are one of the few who possess that knowledge.
Information: The more informed you are, the better you will be able to make decisions when negotiating. Obviously, it is always good to have as much information about the deal as possible.
Time: Time can work both ways. If you are short of time, you can pressure the other party into agreeing with your proposals. If you spend a long time trying to deal with the other party, eventually they will concede to your requests.
There are 5 steps in the negotiation process.
Step 1 is defining your goal. You must know about both parties' wants and needs. You must have a plan for a settlement range. You must also list all concessions you are willing to make. There are generally four types of concessions.
Finance: You make concessions in terms of price, discounts, and rates.
People: You make concessions in terms of manpower given/loaned.
Recognition & reward: You give the other party some form of prize, acknowledgement or favoured position.
Mitigation of risks: You make sure the other party is insured against loss. (Warranties, indemnifications of loss or guarantees).
Step 2 is using your interpersonal skills. You should exchange pleasantries and make compliments whenever suitable. Always be polite.
Step 3 is listening to the other party. You should explore your options after listening to the other party's wants and needs. You should try to match concessions to needs.
Step 4 is making concessions. You must be willing to make small concessions. Always avoid making the first major concession, always offer concessions in reverse order of priority, and behave as if every concession you make is important.
Step 5 is reaching a compromise. Always make sure to summarise your agreements and make formal documentations to ensure accountability. Explore the pitfalls of implementing the agreements with your superiors before putting pen to paper.
If you ever run into deadlocks during negotiations, don't panic. Remain calm and step back from the heat of the talks and try to understand what led to this deadlock. Try suggesting to the other party that you both take a break. As a last resort, you may choose to change the members of the negotiation team.
Lastly, there are some gambits (cheats) you can use when negotiating.
1. Ask for more than you expect to get. This gives you more room for negotiation.
2. Never say "yes" to the first offer. After all, the whole point of negotiating is to get a favourable outcome for both parties.
3. Flinch at proposals. Try to show that you are shocked at what the other party is offering you. This will signal to the other party that they may not get what they are asking for.
4. Play the reluctant buyer/seller roles. This can help a lot in squeezing the other party's negotiating range before the negotiation has even started.
5. Use the "vise" technique. In other words, say things like "you'll have to do better than that".
6. Refer to higher authority. This will allow you to pretend that you are not the one rejecting the other party's offers, but your boss.
I'll end this post with a quote from John F. Kennedy: "Never negotiate out of fear. but never fear to negotiate."
First of all, negotiation is defined as a process by which two parties communicate with each other in order to reach an outcome on which they mutually benefit.
There are 4 basic types of negotiation styles, and everybody has their own preferred style. However, not all negotiation styles are suitable in every situations. A person trying to negotiate should try the different styles based on the situation.
The first style is the Win-Lose style. (You win, the other party lose.) This style is best used when you need a quick decision and are in a strong bargaining position. If you are using this style to negotiate, you should make sure that winning is your goal and building relationships with the other party is not important.
The second negotiation style is the Lose-Win style. (You lose, the other party win.) This style should only be used when you are desperate to get a certain thing from the other party. You will need to concede to the other party's demands in order for this style to work.
The third style is the Win-Win style. (Both parties win.) This is the best style to use in most situations. This negotiation style emphasises mutual gain. You should make sure that all information presented is accurate and try your best to engage with the other party in a non-confrontational way.
The fourth and last style is the Lose-Lose style. (Both parties lose.) This style is best avoided unless you are dealing with very minor issues that do not require much negotiation. You could also use this style of negotiation when you are lacking of time.
There are six sources of negotiation power. They are:
Position: The higher your position, the more power you have over any negotiation. This is why people complain to the restaurant manager rather than the waiter.
Relationship: The more connected you are, the stronger your negotiation powers. Dealing with somebody you are familiar with allows you to be more forceful. Alternatively, you can get favourable deals from somebody you know well.
Options: The more options you have, the more powerful you will be in any negotiation. This is because you have more options available to you, and you do not necessarily have to make concessions to the other party.
Specialised skills & knowledge: The more skills you possess, the better your negotiating position. This is especially true if you are one of the few who possess that knowledge.
Information: The more informed you are, the better you will be able to make decisions when negotiating. Obviously, it is always good to have as much information about the deal as possible.
Time: Time can work both ways. If you are short of time, you can pressure the other party into agreeing with your proposals. If you spend a long time trying to deal with the other party, eventually they will concede to your requests.
There are 5 steps in the negotiation process.
Step 1 is defining your goal. You must know about both parties' wants and needs. You must have a plan for a settlement range. You must also list all concessions you are willing to make. There are generally four types of concessions.
Finance: You make concessions in terms of price, discounts, and rates.
People: You make concessions in terms of manpower given/loaned.
Recognition & reward: You give the other party some form of prize, acknowledgement or favoured position.
Mitigation of risks: You make sure the other party is insured against loss. (Warranties, indemnifications of loss or guarantees).
Step 2 is using your interpersonal skills. You should exchange pleasantries and make compliments whenever suitable. Always be polite.
Step 3 is listening to the other party. You should explore your options after listening to the other party's wants and needs. You should try to match concessions to needs.
Step 4 is making concessions. You must be willing to make small concessions. Always avoid making the first major concession, always offer concessions in reverse order of priority, and behave as if every concession you make is important.
Step 5 is reaching a compromise. Always make sure to summarise your agreements and make formal documentations to ensure accountability. Explore the pitfalls of implementing the agreements with your superiors before putting pen to paper.
If you ever run into deadlocks during negotiations, don't panic. Remain calm and step back from the heat of the talks and try to understand what led to this deadlock. Try suggesting to the other party that you both take a break. As a last resort, you may choose to change the members of the negotiation team.
Lastly, there are some gambits (cheats) you can use when negotiating.
1. Ask for more than you expect to get. This gives you more room for negotiation.
2. Never say "yes" to the first offer. After all, the whole point of negotiating is to get a favourable outcome for both parties.
3. Flinch at proposals. Try to show that you are shocked at what the other party is offering you. This will signal to the other party that they may not get what they are asking for.
4. Play the reluctant buyer/seller roles. This can help a lot in squeezing the other party's negotiating range before the negotiation has even started.
5. Use the "vise" technique. In other words, say things like "you'll have to do better than that".
6. Refer to higher authority. This will allow you to pretend that you are not the one rejecting the other party's offers, but your boss.
I'll end this post with a quote from John F. Kennedy: "Never negotiate out of fear. but never fear to negotiate."
Thursday, July 11, 2013
Blue Ocean Strategy (Part 3)
This is the third and last post about Blue Ocean strategy in marketing.
Kodak,Polaroid,Fujifilm
As I mentioned in the first post about Blue Ocean strategy, it is essential for companies to continually innovate. They should never be complacent and think that the products they have today will still be relevant in tomorrow's market. If they do not innovate, companies will eventually go "extinct".
One such company that went bankrupt was Kodak. Kodak was originally THE grandfather of photographic film. They practically invented the whole photography industry. At the beginning, the company was very innovative, introducing new products to the market. That was how they came to dominate the photographic film sales from mid-20th century all the way to the 90's.
However, they eventually forgot to adapt to changing trends, namely the emergence of digital photography. They failed to fully realise that everybody wanted to use digital cameras to take photos, rather than using the old and outdated film cameras. As such, Kodak was very slow in turning around their business to focus on digital photography. This was especially ironic as Kodak was actually the inventor of the core technology used in current digital cameras.
Kodak's financial struggles began at the turn of the century. A few years ago, they resorted to aggressive patent litigation instead of trying to invent new products. By the time they had finally built up a large but not profitable digital camera business, the age of smartphone cameras had arrived. In the end, they filed for bankruptcy protection in 2012. This result serves as a good reminder that no matter how big a company is, they can still fall if they do not bother to be creative and innovative. In January 2013, a court finally approved financing for Kodak to emerge from bankruptcy by mid-2013. (Around now.) Kodak had to sell many of its patents to the likes of Google, Microsoft, Apple, Samsung, Facebook,and Amazon.
Another company that followed in Kodak's footsteps to bankruptcy was one of its rivals, Polaroid. Polaroid was famous for one thing, its instant film camera. With the camera, users can instantly see the results of their snapshot, unlike Kodak's camera which required users to wait for the film to be developed before seeing the results. One major shortcoming of Polaroid's instant film camera was that it could only take one photo at a time. Nevertheless, the camera was a huge success when it came out in 1948. When Kodak tried to imitate them, Polaroid managed to defeat Kodak in a patent battle and Kodak had to leave the instant camera business in 1986.
With that single product, Polaroid managed to survive until very recently. Like Kodak, the company failed to recognise the shift in market trends. Now, users want instant imaging, not of one photo, but of many. Polaroid had stubbornly clung to their instant film camera, believing that it is actually preferable to the digital cameras. Needless to say, their strategy was a failure and the company filed for bankruptcy protection again in 2008.(They had actually already filed for bankruptcy earlier in 2001.) Nowadays, Polaroid is mainly an eyewear company, a return to its original roots.
There was one company that could have went the same way as its rivals but managed to avoid bankruptcy by changing their company policy in time. The company was Fujifilm. In doing so, they actually broke longstanding Japanese corporate traditions in terms of changing a company's directions drastically. By diversifying into digital technology in cameras, Fujifilm never had to file for bankruptcy protection.
The 3 examples above show how important it is for companies to continually innovate and adapt to changing market trends.
P&G
P&G (formerly Procter and Gamble) was a success story in using the Blue Ocean strategy. Many people would not know it, but P&G was the first ever company to produce the 2-in-1 shampoo. Before P&G's Rejoice, shampoos and conditioners for hair were produced and sold separately. With the launch of Rejoice, however, most hair shampoos today are 2-in-1 shampoos, 3-in-1 shampoos, even 4-in-1 shampoos. P&G showed that if a company is innovative, they will be successful.
Nintendo
Nintendo was another success story in utilising the Blue Ocean strategy. Specifically, the part about understanding customers' pain points and reaching out to new groups of customers.
First, some history. Nintendo was the pioneer in home gaming consoles. The company managed to dominate the console industry until the early 21st century. That was when a new generation of consoles were released by the big 3 of console manufacturers today. The consoles released at the time were the PS2 (by Sony), the Xbox (by Microsoft), and the Gamecube (by Nintendo itself). Compared to its rivals, the Gamecube sold comparatively few units. Nintendo now had to find a way to produce a new console for the next generation that is successful, or the company will probably face bankruptcy.
First, Nintendo identified the core market for their consoles: kids, teenagers and young adults. Then, they interviewed a select group of people from those categories to find out what they wanted for the new generation of consoles. The results were not very encouraging, as the interviewees demanded a new console with better graphics, better processing power, better DVD systems, better everything, except for a lower price. That was quite simply not feasible.
So, Nintendo tried to branch out to other target audiences. They identified two major non-customer groups: parents and grandparents. first, they interviewed the parents (who are the actual buyers of the consoles that their kids play video games on). The company asked the parents if they liked their kids playing video games all day long. The answer was obviously a no. Nintendo then asked the parents why they did not like their children playing on their consoles. The reasons given were: the children no longer exercised or played sports, and they also preferred to stare at the TV screen for long hours than to go out and socialise with their friends.
Next, Nintendo directed the same questions to a select group of grandparents. The grandparents did not like their grandchildren playing video games, either. In fact, some of them do not even know about the consoles very well, since they were born quite some years before game consoles even existed. The main reason given for their dislike of their grandchildren playing video games were that they no longer came to visit them frequently. the kids were just too busy playing on their consoles to bother with their grandparents.
When inquired why they did not join their grandchildren in playing the video games, the answer was similiar: the grandparents simply do not have the skills and reaction speed to cope with the video games played by their grandchildren. Even if they tried playing, their avatars will be dead in seconds because they could not even cope with the number of buttons on the game controller. Nintendo then asked the grandparents what they normally did in their free time. The activities they gave as examples include: fishing, gardening, cooking, playing golf, etc.
Looking at the data the obtained, Nintendo tried to identify which Key Competitive Factors they should improve on and which to give less focus to. In the end, the company decided that they will produce a game console that focuses less on its technical abilities, but focuses more on social gaming, interaction between family members,fitness and motion controls. They wanted the console to be used by every member of the family, including the parents and grandparents. Their new target audience would be casual gamers.
So, in 2006, Nintendo rolled out the Wii. Bundled together with the console was the game Wii Sports. The game was meant to showcase the motion control abilities of their new console. With it, even the grandparents can play golf and bowling with their grandchildren. Another game, Wii Fit, was also produced by Nintendo. The game was meant to be a fitness tool to promote physical activity and exercise among children as well as adults. The motion control features were not limited to sports and fitness, however. Games that incorporated the motion control abilities ranged from cooking games to fighting games, from party games to adventure games.
The reception towards Nintendo's new console were excellent. Despite having lower graphical qualities as well as processing power compared to its competitors' new consoles, the Wii actually managed to outsell both the PS3 produced by Sony and the Xbox 360 produced by Microsoft. The sales and profits made by Nintendo increased, a situation which lasted for 5 years. Over the 5 years, Sony and Microsoft also released controllers with motion sensing abilities, namely the PlayStation Move and the Kinect respectively. The Blue Ocean market created by Nintendo slowly turned into a Red Ocean market. Still, Nintendo managed to fend off the challenges provided by its rival.
However, in 2012, Nintendo began having financial troubles again. The reason for this was the rise of a whole new phenomenon over the past few years: mobile gaming. The whole gaming landscape has changed dramatically. Casual gamers switched form Nintendo's Wii console to their mobile phones and tablets. Despite this new threat, Nintendo refused to innovate again. The company's CEO, when asked about measures to counter this threat, replied that Nintendo would not have to compete with mobile gaming. Mobile gaming is just a fad that would soon pass, he said, and then gamers would return to their home console. There was no need for Nintendo to adjust their strategy.
Indeed, Nintendo introduced their newest console, the Wii U, in late 2012. The Wii U was not a huge departure from the original Wii. Sales were not really great. Yet, even till today, Nintendo had still not moved into the new mobile sphere. They staunchly believed that gamers would stick to their own dedicated handheld gaming set, rather than the mobile phones. For example, Nintendo had firmly refused to publish an app for its highly successful and popular Pokémon franchise. All this in spite of clear sales figures indicating that more and more people are downloading gaming apps on their phones and tablets.
Whether or not Nintendo can still continue to succeed without innovation remains to be seen. Chances are, Nintendo will go the way of Kodak if they do not innovate soon.
Samsung
Ten years ago, nobody in the world except those living in South Korea would have heard of Samsung. They were only a run-of-the-mill company producing mainly electronic products and other services back then. Today, of course, they are the number one mobile phone manufacturer in the world, having snatched away Nokia's throne.
One of the reasons for their success was their continued innovation. Have you noticed that for each of their products, there are always new, improved models released based on the first version? First, the Galaxy S would be released. Then, its updated versions would follow gradually: the S2, the S3, the S4, and so on. Ditto the Galaxy Note series.
The reason behind this was that for every product Samsung was planning to release, they already had at least four revisions ready in the pipeline. Thus, once the first edition of a product was released, a newer version would follow not much later. This way, the company can force itself to continually innovate. By doing this, the company has became one of the largest company by revenue and profits in the world today.
Air Asia
Air Asia is yet another example of a company using Blue ocean concepts to become successful. There was always a misconception that Dato' Tony Fernandes bought Air Asia to compete with the national carrier, Malaysia Airlines. The truth is, Air Asia was not meant to compete with MAS, but with other budget airliners in Asia and the world.
So how did Air Asia became a success? The answer is: by looking beyond traditional market boundaries of airliners and setting up new flight destinations. Did you know that Air Asia was the first ever to set up a flight form Kuala Lumpur straight to Bandung? Before this, Indonesian migrant workers wishing to return to their hometown in Bandung had to fly form KL to Jakarta, then take the train or the bus to Bandung, which takes a long time as Bandung is 180 km away form Jakarta. More likely, they even had to take a ship just to get to Jakarta. With Air Asia's (relatively) cheap flights, however, the migrants can easily fly straight to Bandung.
Direct flights to Bandung was not the only route Air Asia offered that MAS did not. In previous times, a Malaysian who wanted to visit the Angkor Wat had to fly into Cambodia's capital, Phnom Penh first. Then, they would take the local transport to Siem Reap province, where the Angkor Wat is located. Air Asia saw an opportunity and set up a direct flight from KL to Siem Reap province.
Not only that, Air Asia was the first to set up a direct flight from KL to Chiang Mai in Thailand as well. The company proved that with the Blue Ocean strategy, a company can be successful and profitable.
Casella Wines
Casella Wines was an Australian wine company. Several years ago, they were looking to penetrate the wine market of the U.S.A. This was not an easy task, however, as wine drinkers in the United States were mostly connoisseurs who preferred to consume wines from France and Italy. As a result, Casella Wines decided to look into a new target market, the second tier of non-customers (refusing customers). In other words, beer drinkers who know about the existence of wine, but refuse to drink them.
To get what influenced beer drinkers to choose beer over wine, Casella Wines conducted a research to identify the non-customers' pain points. Their interviewees gave a litany of reasons as to why they do not buy and consume wine. Among the reasons given were: they do not know which wine to drink after their meal, wines are too expensive, wines are too exclusive and high-class, and so on.
To overcome these issues, Casella Wines decided to produce a new brand of wines under the label of [Yellow Tail]. The company spent 24 million dollars in its marketing campaign. on one of the advertisements, Godzilla was seen destroying some buildings. Then, the camera cuts to Godzilla's tail, which was yellow. The advert was meant to show people that wine can be associated with destruction and action, that wine is not exclusive to posh families.
[Yellow Tail] wines were priced reasonably and were much cheaper than traditional wines. It also featured a yellow-footed rock wallaby, an animal native to Australia, on its bottle. Casella Wines was one of the first wine companies to use animals as branding. The label on [Yellow Tail] wine bottle also contained instructions on how to drink the wine, as in which food would go well with the wine. Most of the food listed were food commonly associated with American culture: burgers, bacons, and such.
[Yellow Tail] wines became the most popular wine in the United States for a while. Sales of the wine jumped from 100,000 cases in 2001 to 7.5 million cases in 2005.
Cirque du Soleil
Cirque du Soleil, a Canadian company, runs the largest and most profitable circus business in the world now. In fact, its co-founder, Guy Laliberté, is now a billionaire. How did a circus company became so successful?
Cirque du Soleil followed the Blue Ocean strategy in creating a new approach in running a circus and a new target audience. The company wanted to be different from traditional circuses, most of which are failing to turn a profit in today's world. One such example of an old circus struggling to be relevant is the Royal London Circus. It is now in fact owned by a Malaysian and based in Johor, and is still struggling to make much of a profit.
Like Nintendo and Casella Wines, Cirque du Soleil first identified the pain points of people going to circuses. Specifically, they wanted to understand why adults who used to go to circuses as kids no longer went to circuses when they grew up. The answers given by the interviewed people: circuses are always hot and stuffy as they are held in tents, the tents are smelly due to animals, there are no relations between the various acts performed in a circus, there is a lack of storyline in circus performances, circuses are boring for adults, and so on and so forth.
To overcome the above pain points, Cirque du Soleil used the ERRC grid to craft a new strategy in running a circus. They pinpointed elements to Eliminate, Reduce, Raise, and Create in their circus business.
Eliminate: Animals,tents
Reduce: Clowns
Raise: Sounds and lightings
Create: Stories
First, they decided to eliminate animals in an effort to reduce the cost of running a circus. One of the largest parts of expenditure was on the animals, and Cirque du Soleil aimed to eliminate that costly part. Cirque du Soleil also decided to eliminate tents as venues for their circus performances. Instead, they will always perform in an air-conditioned venue or theatre. This move would actually help reduce the cost as well, despite the rental fees of the venues. The truth is, most of the rental fees at the venues at which Cirque du Soleil perform are waived by the owners of the place or paid for by other companies. For example, there are nightly performances held by Cirque du Soleil in Las Vegas. The hotel fees are paid for by the hotels in Las Vegas. The reason the hotels are willing to pay for their fees is because Cirque du Soleil is such a popular circus that it will help attract other customers to stay at the hotel.
Cirque du Soleil also reduced the number of clowns in their circus. There are much fewer clowns employed by the company in comparison to the traditional circuses. This is also an effort to reduce costs, as well as o attract more adults to their circuses. They felt that clowns are only effective in attracting children.
Next, Cirque du Soleil raised the amount of special effects in their circus acts. This is done through increased use of lighting and sounds, smokes and music. With this, the circus performances are seen as more exciting.
By doing all this, the company managed to create stories in their performances. Each Cirque du Soleil has a special theme, some more geared towards adults, some more suitable for children. There is a narrative linking all the acrobatics on show in each performance.
By using the ERRC grid to crate value for customers, Cirque du Soleil became as successful as it is today.
Singapore
Companies are not the only institutions following the Blue Ocean strategy. Governments of countries can use Blue Ocean strategy to successfully run their countries too.
As we all know, Singapore is famous for being a very strict country. If you set up an unauthorised stall by the streets, you will be caught by the police in literally minutes. You cannot even eat chewing gum in the country as it is a banned substance. So how did it came to be that there are suddenly not one, but two, casinos in Singapore? Casinos are not exactly good in promoting civic values, after all.
To know the reason Singapore allowed the construction of two casinos in the country, we have to wind back the time. Back when Singapore was newly independent again, they had zero resources to exploit. Thus, the government asked itself, who is the strongest country in the world right now? The answer was America. So, they proposed to the Americans to set up an army base in Singapore. The Americans agreed. In return, Singapore received favourable trade conditions from America.
Some decades later, the Singaporean government saw another opportunity to attract companies to set up their headquarters in the country. This was due to the Communist takeover of Hong Kong by China. Previously, many companies set up their company headquarters in Hong Kong thanks to the tax policy. Companies with headquarters in Hong Kong pay zero tax for revenues and profits gained overseas (outside of Hong Kong and Mainland China). After China took over Hong Kong from the British, however, many companies fear that their businesses will be affected in some ways due to the Communist government of China. As such, many companies relocated their headquarters to Singapore, who welcomed them with open arms.
This situation did not last for too long. Companies soon relocated their headquarters to Hong Kong again, since the Chinese government did not really interfere in the running of businesses based in Hong Kong. Singapore has to rethink its strategy again. In looking for a new target market to attract, the government asked itself again, who is the strongest country in the world right now?(Besides America.) The answer was China.
Singapore decided that it will lure Chinese nationals to the country. The path to achieve that objective would be tourism. The Singaporean government would promote Singapore as a must-visit tourist destination for the Chinese. To do this, they must first set up something to attract the Chinese tourists. The solution was to let the Chinese gamble in Singapore, since they loved gambling. Hence, the construction of the two casinos in the famously strait-laced nation.
By changing strategies and target markets based on current trends, Singapore managed to become a first-world country despite having no resources at all.
Malaysia
The Malaysian government has also used the Blue Ocean strategy in advancing the country. Through the Government Transformation Programme (GTP), the Performance Management & Delivery Unit (PEMANDU) was set up. The aim of PEMANDU was to monitor the achievements of each ministry and to ensure that the Key Performance Indexes (KPIs) are met on time. This unit is under the Prime Minister's Department and was meant to oversee the progress of the ministries in the government in improving their services given to the public. Its primary function is to act as a catalyst. (However, the CEO of PEMANDU, Dato' Seri Idris Jala, has hinted that the role of the unit would diminish over time provided Malaysia achieves its aspirations to become an advanced nation by 2020.)
Kodak,Polaroid,Fujifilm
As I mentioned in the first post about Blue Ocean strategy, it is essential for companies to continually innovate. They should never be complacent and think that the products they have today will still be relevant in tomorrow's market. If they do not innovate, companies will eventually go "extinct".
One such company that went bankrupt was Kodak. Kodak was originally THE grandfather of photographic film. They practically invented the whole photography industry. At the beginning, the company was very innovative, introducing new products to the market. That was how they came to dominate the photographic film sales from mid-20th century all the way to the 90's.
However, they eventually forgot to adapt to changing trends, namely the emergence of digital photography. They failed to fully realise that everybody wanted to use digital cameras to take photos, rather than using the old and outdated film cameras. As such, Kodak was very slow in turning around their business to focus on digital photography. This was especially ironic as Kodak was actually the inventor of the core technology used in current digital cameras.
Kodak's financial struggles began at the turn of the century. A few years ago, they resorted to aggressive patent litigation instead of trying to invent new products. By the time they had finally built up a large but not profitable digital camera business, the age of smartphone cameras had arrived. In the end, they filed for bankruptcy protection in 2012. This result serves as a good reminder that no matter how big a company is, they can still fall if they do not bother to be creative and innovative. In January 2013, a court finally approved financing for Kodak to emerge from bankruptcy by mid-2013. (Around now.) Kodak had to sell many of its patents to the likes of Google, Microsoft, Apple, Samsung, Facebook,and Amazon.
Another company that followed in Kodak's footsteps to bankruptcy was one of its rivals, Polaroid. Polaroid was famous for one thing, its instant film camera. With the camera, users can instantly see the results of their snapshot, unlike Kodak's camera which required users to wait for the film to be developed before seeing the results. One major shortcoming of Polaroid's instant film camera was that it could only take one photo at a time. Nevertheless, the camera was a huge success when it came out in 1948. When Kodak tried to imitate them, Polaroid managed to defeat Kodak in a patent battle and Kodak had to leave the instant camera business in 1986.
With that single product, Polaroid managed to survive until very recently. Like Kodak, the company failed to recognise the shift in market trends. Now, users want instant imaging, not of one photo, but of many. Polaroid had stubbornly clung to their instant film camera, believing that it is actually preferable to the digital cameras. Needless to say, their strategy was a failure and the company filed for bankruptcy protection again in 2008.(They had actually already filed for bankruptcy earlier in 2001.) Nowadays, Polaroid is mainly an eyewear company, a return to its original roots.
There was one company that could have went the same way as its rivals but managed to avoid bankruptcy by changing their company policy in time. The company was Fujifilm. In doing so, they actually broke longstanding Japanese corporate traditions in terms of changing a company's directions drastically. By diversifying into digital technology in cameras, Fujifilm never had to file for bankruptcy protection.
The 3 examples above show how important it is for companies to continually innovate and adapt to changing market trends.
P&G
P&G (formerly Procter and Gamble) was a success story in using the Blue Ocean strategy. Many people would not know it, but P&G was the first ever company to produce the 2-in-1 shampoo. Before P&G's Rejoice, shampoos and conditioners for hair were produced and sold separately. With the launch of Rejoice, however, most hair shampoos today are 2-in-1 shampoos, 3-in-1 shampoos, even 4-in-1 shampoos. P&G showed that if a company is innovative, they will be successful.
Nintendo
Nintendo was another success story in utilising the Blue Ocean strategy. Specifically, the part about understanding customers' pain points and reaching out to new groups of customers.
First, some history. Nintendo was the pioneer in home gaming consoles. The company managed to dominate the console industry until the early 21st century. That was when a new generation of consoles were released by the big 3 of console manufacturers today. The consoles released at the time were the PS2 (by Sony), the Xbox (by Microsoft), and the Gamecube (by Nintendo itself). Compared to its rivals, the Gamecube sold comparatively few units. Nintendo now had to find a way to produce a new console for the next generation that is successful, or the company will probably face bankruptcy.
First, Nintendo identified the core market for their consoles: kids, teenagers and young adults. Then, they interviewed a select group of people from those categories to find out what they wanted for the new generation of consoles. The results were not very encouraging, as the interviewees demanded a new console with better graphics, better processing power, better DVD systems, better everything, except for a lower price. That was quite simply not feasible.
So, Nintendo tried to branch out to other target audiences. They identified two major non-customer groups: parents and grandparents. first, they interviewed the parents (who are the actual buyers of the consoles that their kids play video games on). The company asked the parents if they liked their kids playing video games all day long. The answer was obviously a no. Nintendo then asked the parents why they did not like their children playing on their consoles. The reasons given were: the children no longer exercised or played sports, and they also preferred to stare at the TV screen for long hours than to go out and socialise with their friends.
Next, Nintendo directed the same questions to a select group of grandparents. The grandparents did not like their grandchildren playing video games, either. In fact, some of them do not even know about the consoles very well, since they were born quite some years before game consoles even existed. The main reason given for their dislike of their grandchildren playing video games were that they no longer came to visit them frequently. the kids were just too busy playing on their consoles to bother with their grandparents.
When inquired why they did not join their grandchildren in playing the video games, the answer was similiar: the grandparents simply do not have the skills and reaction speed to cope with the video games played by their grandchildren. Even if they tried playing, their avatars will be dead in seconds because they could not even cope with the number of buttons on the game controller. Nintendo then asked the grandparents what they normally did in their free time. The activities they gave as examples include: fishing, gardening, cooking, playing golf, etc.
Looking at the data the obtained, Nintendo tried to identify which Key Competitive Factors they should improve on and which to give less focus to. In the end, the company decided that they will produce a game console that focuses less on its technical abilities, but focuses more on social gaming, interaction between family members,fitness and motion controls. They wanted the console to be used by every member of the family, including the parents and grandparents. Their new target audience would be casual gamers.
So, in 2006, Nintendo rolled out the Wii. Bundled together with the console was the game Wii Sports. The game was meant to showcase the motion control abilities of their new console. With it, even the grandparents can play golf and bowling with their grandchildren. Another game, Wii Fit, was also produced by Nintendo. The game was meant to be a fitness tool to promote physical activity and exercise among children as well as adults. The motion control features were not limited to sports and fitness, however. Games that incorporated the motion control abilities ranged from cooking games to fighting games, from party games to adventure games.
The reception towards Nintendo's new console were excellent. Despite having lower graphical qualities as well as processing power compared to its competitors' new consoles, the Wii actually managed to outsell both the PS3 produced by Sony and the Xbox 360 produced by Microsoft. The sales and profits made by Nintendo increased, a situation which lasted for 5 years. Over the 5 years, Sony and Microsoft also released controllers with motion sensing abilities, namely the PlayStation Move and the Kinect respectively. The Blue Ocean market created by Nintendo slowly turned into a Red Ocean market. Still, Nintendo managed to fend off the challenges provided by its rival.
However, in 2012, Nintendo began having financial troubles again. The reason for this was the rise of a whole new phenomenon over the past few years: mobile gaming. The whole gaming landscape has changed dramatically. Casual gamers switched form Nintendo's Wii console to their mobile phones and tablets. Despite this new threat, Nintendo refused to innovate again. The company's CEO, when asked about measures to counter this threat, replied that Nintendo would not have to compete with mobile gaming. Mobile gaming is just a fad that would soon pass, he said, and then gamers would return to their home console. There was no need for Nintendo to adjust their strategy.
Indeed, Nintendo introduced their newest console, the Wii U, in late 2012. The Wii U was not a huge departure from the original Wii. Sales were not really great. Yet, even till today, Nintendo had still not moved into the new mobile sphere. They staunchly believed that gamers would stick to their own dedicated handheld gaming set, rather than the mobile phones. For example, Nintendo had firmly refused to publish an app for its highly successful and popular Pokémon franchise. All this in spite of clear sales figures indicating that more and more people are downloading gaming apps on their phones and tablets.
Whether or not Nintendo can still continue to succeed without innovation remains to be seen. Chances are, Nintendo will go the way of Kodak if they do not innovate soon.
Samsung
Ten years ago, nobody in the world except those living in South Korea would have heard of Samsung. They were only a run-of-the-mill company producing mainly electronic products and other services back then. Today, of course, they are the number one mobile phone manufacturer in the world, having snatched away Nokia's throne.
One of the reasons for their success was their continued innovation. Have you noticed that for each of their products, there are always new, improved models released based on the first version? First, the Galaxy S would be released. Then, its updated versions would follow gradually: the S2, the S3, the S4, and so on. Ditto the Galaxy Note series.
The reason behind this was that for every product Samsung was planning to release, they already had at least four revisions ready in the pipeline. Thus, once the first edition of a product was released, a newer version would follow not much later. This way, the company can force itself to continually innovate. By doing this, the company has became one of the largest company by revenue and profits in the world today.
Air Asia
Air Asia is yet another example of a company using Blue ocean concepts to become successful. There was always a misconception that Dato' Tony Fernandes bought Air Asia to compete with the national carrier, Malaysia Airlines. The truth is, Air Asia was not meant to compete with MAS, but with other budget airliners in Asia and the world.
So how did Air Asia became a success? The answer is: by looking beyond traditional market boundaries of airliners and setting up new flight destinations. Did you know that Air Asia was the first ever to set up a flight form Kuala Lumpur straight to Bandung? Before this, Indonesian migrant workers wishing to return to their hometown in Bandung had to fly form KL to Jakarta, then take the train or the bus to Bandung, which takes a long time as Bandung is 180 km away form Jakarta. More likely, they even had to take a ship just to get to Jakarta. With Air Asia's (relatively) cheap flights, however, the migrants can easily fly straight to Bandung.
Direct flights to Bandung was not the only route Air Asia offered that MAS did not. In previous times, a Malaysian who wanted to visit the Angkor Wat had to fly into Cambodia's capital, Phnom Penh first. Then, they would take the local transport to Siem Reap province, where the Angkor Wat is located. Air Asia saw an opportunity and set up a direct flight from KL to Siem Reap province.
Not only that, Air Asia was the first to set up a direct flight from KL to Chiang Mai in Thailand as well. The company proved that with the Blue Ocean strategy, a company can be successful and profitable.
Casella Wines
Casella Wines was an Australian wine company. Several years ago, they were looking to penetrate the wine market of the U.S.A. This was not an easy task, however, as wine drinkers in the United States were mostly connoisseurs who preferred to consume wines from France and Italy. As a result, Casella Wines decided to look into a new target market, the second tier of non-customers (refusing customers). In other words, beer drinkers who know about the existence of wine, but refuse to drink them.
To get what influenced beer drinkers to choose beer over wine, Casella Wines conducted a research to identify the non-customers' pain points. Their interviewees gave a litany of reasons as to why they do not buy and consume wine. Among the reasons given were: they do not know which wine to drink after their meal, wines are too expensive, wines are too exclusive and high-class, and so on.
To overcome these issues, Casella Wines decided to produce a new brand of wines under the label of [Yellow Tail]. The company spent 24 million dollars in its marketing campaign. on one of the advertisements, Godzilla was seen destroying some buildings. Then, the camera cuts to Godzilla's tail, which was yellow. The advert was meant to show people that wine can be associated with destruction and action, that wine is not exclusive to posh families.
[Yellow Tail] wines were priced reasonably and were much cheaper than traditional wines. It also featured a yellow-footed rock wallaby, an animal native to Australia, on its bottle. Casella Wines was one of the first wine companies to use animals as branding. The label on [Yellow Tail] wine bottle also contained instructions on how to drink the wine, as in which food would go well with the wine. Most of the food listed were food commonly associated with American culture: burgers, bacons, and such.
[Yellow Tail] wines became the most popular wine in the United States for a while. Sales of the wine jumped from 100,000 cases in 2001 to 7.5 million cases in 2005.
Cirque du Soleil
Cirque du Soleil, a Canadian company, runs the largest and most profitable circus business in the world now. In fact, its co-founder, Guy Laliberté, is now a billionaire. How did a circus company became so successful?
Cirque du Soleil followed the Blue Ocean strategy in creating a new approach in running a circus and a new target audience. The company wanted to be different from traditional circuses, most of which are failing to turn a profit in today's world. One such example of an old circus struggling to be relevant is the Royal London Circus. It is now in fact owned by a Malaysian and based in Johor, and is still struggling to make much of a profit.
Like Nintendo and Casella Wines, Cirque du Soleil first identified the pain points of people going to circuses. Specifically, they wanted to understand why adults who used to go to circuses as kids no longer went to circuses when they grew up. The answers given by the interviewed people: circuses are always hot and stuffy as they are held in tents, the tents are smelly due to animals, there are no relations between the various acts performed in a circus, there is a lack of storyline in circus performances, circuses are boring for adults, and so on and so forth.
To overcome the above pain points, Cirque du Soleil used the ERRC grid to craft a new strategy in running a circus. They pinpointed elements to Eliminate, Reduce, Raise, and Create in their circus business.
Eliminate: Animals,tents
Reduce: Clowns
Raise: Sounds and lightings
Create: Stories
First, they decided to eliminate animals in an effort to reduce the cost of running a circus. One of the largest parts of expenditure was on the animals, and Cirque du Soleil aimed to eliminate that costly part. Cirque du Soleil also decided to eliminate tents as venues for their circus performances. Instead, they will always perform in an air-conditioned venue or theatre. This move would actually help reduce the cost as well, despite the rental fees of the venues. The truth is, most of the rental fees at the venues at which Cirque du Soleil perform are waived by the owners of the place or paid for by other companies. For example, there are nightly performances held by Cirque du Soleil in Las Vegas. The hotel fees are paid for by the hotels in Las Vegas. The reason the hotels are willing to pay for their fees is because Cirque du Soleil is such a popular circus that it will help attract other customers to stay at the hotel.
Cirque du Soleil also reduced the number of clowns in their circus. There are much fewer clowns employed by the company in comparison to the traditional circuses. This is also an effort to reduce costs, as well as o attract more adults to their circuses. They felt that clowns are only effective in attracting children.
Next, Cirque du Soleil raised the amount of special effects in their circus acts. This is done through increased use of lighting and sounds, smokes and music. With this, the circus performances are seen as more exciting.
By doing all this, the company managed to create stories in their performances. Each Cirque du Soleil has a special theme, some more geared towards adults, some more suitable for children. There is a narrative linking all the acrobatics on show in each performance.
By using the ERRC grid to crate value for customers, Cirque du Soleil became as successful as it is today.
Singapore
Companies are not the only institutions following the Blue Ocean strategy. Governments of countries can use Blue Ocean strategy to successfully run their countries too.
As we all know, Singapore is famous for being a very strict country. If you set up an unauthorised stall by the streets, you will be caught by the police in literally minutes. You cannot even eat chewing gum in the country as it is a banned substance. So how did it came to be that there are suddenly not one, but two, casinos in Singapore? Casinos are not exactly good in promoting civic values, after all.
To know the reason Singapore allowed the construction of two casinos in the country, we have to wind back the time. Back when Singapore was newly independent again, they had zero resources to exploit. Thus, the government asked itself, who is the strongest country in the world right now? The answer was America. So, they proposed to the Americans to set up an army base in Singapore. The Americans agreed. In return, Singapore received favourable trade conditions from America.
Some decades later, the Singaporean government saw another opportunity to attract companies to set up their headquarters in the country. This was due to the Communist takeover of Hong Kong by China. Previously, many companies set up their company headquarters in Hong Kong thanks to the tax policy. Companies with headquarters in Hong Kong pay zero tax for revenues and profits gained overseas (outside of Hong Kong and Mainland China). After China took over Hong Kong from the British, however, many companies fear that their businesses will be affected in some ways due to the Communist government of China. As such, many companies relocated their headquarters to Singapore, who welcomed them with open arms.
This situation did not last for too long. Companies soon relocated their headquarters to Hong Kong again, since the Chinese government did not really interfere in the running of businesses based in Hong Kong. Singapore has to rethink its strategy again. In looking for a new target market to attract, the government asked itself again, who is the strongest country in the world right now?(Besides America.) The answer was China.
Singapore decided that it will lure Chinese nationals to the country. The path to achieve that objective would be tourism. The Singaporean government would promote Singapore as a must-visit tourist destination for the Chinese. To do this, they must first set up something to attract the Chinese tourists. The solution was to let the Chinese gamble in Singapore, since they loved gambling. Hence, the construction of the two casinos in the famously strait-laced nation.
By changing strategies and target markets based on current trends, Singapore managed to become a first-world country despite having no resources at all.
Malaysia
The Malaysian government has also used the Blue Ocean strategy in advancing the country. Through the Government Transformation Programme (GTP), the Performance Management & Delivery Unit (PEMANDU) was set up. The aim of PEMANDU was to monitor the achievements of each ministry and to ensure that the Key Performance Indexes (KPIs) are met on time. This unit is under the Prime Minister's Department and was meant to oversee the progress of the ministries in the government in improving their services given to the public. Its primary function is to act as a catalyst. (However, the CEO of PEMANDU, Dato' Seri Idris Jala, has hinted that the role of the unit would diminish over time provided Malaysia achieves its aspirations to become an advanced nation by 2020.)
Saturday, July 6, 2013
Blue Ocean Strategy (Part 2)
*Last week, I promised to show examples of companies who used the 6 paths to reconstruct market boundaries successfully. So here they are.
The first path to reconstruct traditional market boundaries is to look across alternative industries instead of focusing on competing within an over-saturated industry. Companies using this path have to ask themselves: why do buyers trade across?
NTT DoCoMo
Here's a question: there is a cellphone in the market with which you could only call 4 people, which only 15 people may call you, and which does not offer you any Wi-Fi, apps, games, video, camera, or music. Would you buy it?
The answer will surely be: no. In today's world, the smartphone is ubiquitous, and people will expect to get as many different functions as possible from their phones. However, the telecom company NTT DoCoMo did exactly what people would not expect. They manufactured a phone that is exactly like the example above. They have managed to look across alternative industries and found a new target market: schoolchildren.
Most smartphone makers (Samsung, Apple, Nokia, HTC, etc.) chose to focus on a specific target market to which they try to sell their products. That market is the modern, connected, white-collar urbanites. As such, the smartphone market is currently a Red Ocean market, with all manufacturers offering roughly the same products. Was there really such a big difference between the iPhone 5 and the Galaxy S4?
On the other hand, NTT DoCoMo has found a market which would prefer a simple phone with which to contact others over an advanced gadget that can perform multiple tasks. In Malaysia as well as many other countries, schoolchildren are forbidden to bring their own phones to school for obvious reasons. The phones will be a major distraction to their school life. However, it cannot be denied that schoolchildren do need to have an avenue with which to contact other people. Something other than public payphones that never, ever work.
NTT DoCoMo's phone made for schoolchildren solved the above problem. There were 4 buttons on the phone, representing the 4 people which the schoolchildren may call using their mobile phone. Their parents have the choice to control whom their child may call by setting the buttons on NTT DoCoMo's website. For example, the first button may correspond to the mother, the second to the father, and so on.
Parents may also control who may call in to their child through their child's phone. There are a maximum of 15 people who may call in to the phone, and the list of people can be managed by the parents through NTT's website. Don't want their child to have contacts with that gambler of an uncle? The parents can simply choose to exclude him from the list of 15 people.
Lastly, there are no extra features of any kind on NTT DoCoMo's phone for schoolchildren. No music, no games, no texting, no nothing except for calling others. As such, it will not be a source of distraction to the children's studies. Now, with the phone, schoolchildren have an avenue with which to inform their parents about any changes in the time their classes end, and their parents and teachers do not have to worry about them misusing the phone.
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The second path to reconstruct market boundaries is to look across strategic groups within industries instead of confining oneself to established strategic groups. Companies following this path have to ask themselves: why do buyers trade up or down?
Curves International
Imagine that you are a woman determined to lose some weight, or to make your body fitter. What are your choices? The standard choice is to pay the fees and attend a gym. Still, not everyone can afford to go to gym on a regular basis. Another obstacle to going to gym is the traffic. Gyms are normally located downtown, which mean that people living in suburban areas have to travel a long way just to reach the gym.
Picture this: you have spent an entire evening taking care of your children, and in order to work out, you have to drive for more than an hour through the traffic congestion just to reach the gym with which you applied for membership. You exercise there for a short while (since you are short of time), and then it's back to suffering through the traffic jam again. In no time, you will be throwing away your gym membership card into the trash can.
What other choices do you have? You may choose to trade down and work out in the local neighbourhood park instead. Yet, there are few equipments and facilities in the park, and you may not feel to comfortable exercising in public. What to do then? You may choose to give up on getting fitter after all.
Curves International, the fitness franchise chain, realised the dilemma facing those customers and came up with a whole new concept. Their gyms cater only to women, and are located throughout the United States. There are many advantages for a woman to go to Curves International fitness centers than to go to a traditional gym.
1. The distance. As mentioned above, the distance between a gym and a home is often great, since gyms are mostly located in city centers. Curves fitness centers, on the other hand, are located very near neighbourhoods. They managed to do this by having many smaller centers scattered throughout the land rather than having one big gym in only one location.
2. The environment. Gyms are usually the domains of very fit people looking to show off their physique. It is simply no place for ordinary, fat people to work out in. The stares alone will be enough to discourage people to go to gyms. Curves fitness centers does not pose such problems as all its members are women looking to become fitter. Another notable thing about Curves is the arrangement of their equipments: in a circle. That way, women may chat with each other as they work out.
3. The time factor. Going to gyms require a lot of time. You have to change in and out of your gym clothing. In Curves fitness centers, though, there are no changing rooms, so all you need do is walk in and start exercising without wasting time.
4. The equipment. Curves fitness centers are well equipped with all the usual gym equipments (treadmills and the like). Since Curves design their centers based on the circuit training concept, you will never have to wait because a certain equipment was being used by others. This is because everyone only have a certain amount of time to use an equipment before moving on to the next. Another advantage of circuit training is that you get to have a complete workout on different equipments in a short space of time.
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The third path in reconstructing old market boundaries is looking across the chain of buyers instead of focusing on the same buyer group as the rest of the industry. Who are the purchasers, users, and influencers of your product?
Xerox,Canon
In the past, photocopiers were big, bulky, and expensive items. A company has at most one photocopier per department. The users and influencers of the decision to buy them were one and the same: the secretaries. The purchasers were different though: they were the head of the company.
In order to make a purchase, the secretaries have to inform their heads of departments, who in turn have to inform their bosses, who inturn have to inform their superiors, all the way up to the board of directors. All this to purchase a simple photocopier, an expensive investment at the time. After the purchase was approved, it could take anywhere from 2 to 3 months for the photocopier to be delivered.
Once the photocopier was delivered, it belongs to the company. In other words, if anything goes wrong with it, the cost of repairing it have to be paid for by the company. For the expenses to be approved, it would take a long time as well. Meanwhile, the primary users of the photocopier, the secretaries, have no choice but to wait and wait.
Realising this problem and opportunity, Xerox introduced a new type of photocopier that is less bulky and less expensive. Effectively, this means that the secretaries do not have to gain the the approval of the leadership of the company to get a photocopier. They needed only the approval of their immediate superiors. Another advantage of the Xerox photocopier is that it does not belong to the company, but to Xerox. This is because Xerox do not completely sell the photocopiers to companies. Instead, they lease it to them and charge them according to the number of copies printed in a month. In the case of a malfunction, Xerox will pay for the repairing fees.
Later, Canon will make the lives of secretaries even easier by producing small all-in-one printers. Employees can print, fax, photocopy, and scan their documents using the same machine. Nowadays, it is not uncommon to find an all-in-one printer on every desk in a company, since the machine has reduced in size a lot since the olden days.
By focusing on the needs of the user of their products, Xerox and Canon has made their products sell well. All the same, this does not mean that the purchaser of the products should be ignored. They are still important since they are the ones actually buying the products.
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The fourth path towards reconstructing market boundaries is to look across product and services offering. Companies using this path have to identify the pain points of using their products and find solutions to mitigate the pain of using them.
Borders,IKEA
Borders is a chain of stores selling books. Everybody knows that. So why is there a Starbucks in every Borders store anyway? Do Borders sell coffee or books?
The reasoning behind the existence of a Starbucks in every Borders is that customers seldom have the time to read the books they bought. Customers who have bought a book often have a hard time finding free moments to read the books. What with working all day, customers will be too tired to read the book by the time they are at home. Most likely, the book will eventually be left on a shelf, forgotten by its owner.
Knowing this issue, Borders arranged with Starbucks to set up a small coffee shop inside its stores. This way, customers who bought books may easily spend time in the store drinking coffee and relaxing, giving them time to browse the books they had purchased. As such, they were rather successful at finding and retaining customers. (Of course, all of this was in the past. Borders went bankrupt in the United States some time ago.)
Another company using the fourth path is IKEA. IKEA, as everyone should know, is in the furniture industry. It is most definitely not in the child care industry. Nor the restaurant industry. Neither is it in the delivery services industry. Yet, it offers all three services that it was not supposed to offer. There is a reason why IKEA was so successful in selling furniture compared to other furniture stores.
Put yourself in the shoes of a young couple with small children. When you are out buying furniture, you chose to go to IKEA. Now, IKEA is a huge place to explore fully. Walking for 3 hours with your children in tow is not possible. They do not have the stamina to walk continuously for a long period of time. Hence, the playrooms in IKEA offering supervised care for children.
After walking for so long, naturally you will start to feel hungry. You will now have to leave IKEA and find a restaurant outside. Most likely, once you leave IKEA, you won't be coming all the way back again. To overcome this problem, IKEA set up a restaurant inside all of its stores selling delicious Swedish meatballs.
Afterwards, you have finally bought a bed and a cabinet. IKEA furniture are built such that you may assemble them yourself. Be that as it may, it is still a bother to carry the furniture home in your tiny little car. That's why IKEA provides delivery services to those who prefer it.
By looking its products and services offering, IKEA managed to attract many customers to its doors. It may be primarily a furniture company, but it is also involved in several other industries that combine to make a whole new shopping experience that is comfortable.
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The fifth path to break free of market boundaries is looking across functional or emotional appeal to buyers instead of accepting the industry's original functional or emotional orientation. If a company is competing on emotional appeal, it might try to remove some of those emotional aspects to make the products more functional. If a company is competing in an industry that focuses on functional appeal, the company could add in some emotional components to the products to make it more appealing.
Lumix,The Body Shop,Ford,Hewlett-Packard (HP)
Lumix is a company competing in an industry orientated towards emotional appeal to buyers. Cameras are tools that captures the important moments in one's life, so the camera manufacturers will naturally advertise their products from an emotional point of view. Example: slogans such as "I am Nikon".
Anyhow, Lumix decided to try a different tact. In one of its advertisement, it did not show happy families gathering together and taking pictures. Instead, that particular advert showed a man taking pictures alone in an outdoor environment. He wanted to take a photo of himself but had difficulties, until another man came along. The both of them were standing on opposite banks of a river. The first man threw the camera towards the river, making it skip like a stone towards the other man.
What the advertisement was trying to show was that the camera Lumix made was tough and water-resistant. Therefore, it was able to safely bounce in water and was not damaged when it hit the ground. In the advert, Lumix tried to show the funtional side of its camera, instead of the usual emotional aspects.
Another company choosing to inject some functional aspects into its products is The Body Shop. Most companies selling beauty products will promote their products with heavy emphasis on the emotional aspect. That's why we often encounter bizarre advertisements from cosmetics companies showing a person jumping from a cliff, somebody singing in a stormy rain, or a white person putting on black-face.
The Body Shop, on the other hand, chose to feature the functional appeal of its products more prominently. If you step into any of its shop outlets, you will find all kinds of beauty products on its shelves. On the bottles of those products, every single ingredient used to produce it would be listed. This is a huge contrast with nearly all other cosmetics companies. After all, when was the last Christian Dior told you the ingredients of its perfume on the bottle?
For companies competing in an industry that focuses on the functional aspects of the products, the opposite approach is needed. They have to use a more emotional way to present their products. One such company is Ford. A few years ago, Ford decided to change the philosophy of the company. Rather than making cars that carry a person from point A to point B, they decided that they want to design cars that evoke strong emotional responses from its customers. When they see a car made by Ford, the customers should immediately wish to buy it. When driving the cars produced by Ford, the customers should feel very happy. All this from a company whose founder once declared that "any customer can have a car painted any colour that he wants so long as it is black".(This means that Henry Ford cares little about the emotional experience of driving a car, only the functional aspects of the car.)
Ford's new approach was also very different from others in the car industry. Car companies will always boast about the practical aspects of their cars: how much horsepower the car has, how fast they can go, how fuel-efficient their car is, how quick the car can go from 0 to 60 m.p.h., etc. In its recent adverts, Ford has decided not to focus on all those aspects, instead deciding to show people driving their cars and their emotional experiences.
Similarly, HP came out with the tagline "The Computer Is Personal Again" in 2006. This was to show that the computer (inherently a cold,hard machine) can be viewed as a personal experience to be enjoyed. The marketing campaign employed many celebrities to star in its ads and was generally successful in promoting HP's products in a different light.
***
The sixth and final path to reconstruct market boundaries is to look across time rather than focusing on the same point in time as the rest of the industry. This means a company have to try to predict the trends that have a high probability of impacting the industry it is in. The trend should also be irreversible and be evolving in a clear trajectory.
Apple
In the days before the digital distribution of music was the norm, there was a company named Napster. (The co-founder of Napster was Sean Parker, the first president of Facebook.) When Napster started distributing music through digital means, it was considered a company advocating piracy as Napster never paid any royalties to the record companies who produced the labels. Due to the fact that it was infringing copyright laws, it was used by all the major record companies and music distribution companies in the world. In the end, Napster had to be closed down. (The new incarnation of Napster was an online music store, later acquired by Rhapsody in 2011.)
At the same time that Napster was being brought down by lawsuits, another company saw the potential of online distribution of music. They correctly predicted the trend of music moving to the online sphere. They correctly predicted that people will no longer want to buy CD's or music in any other physical form of storage. That company was Apple, who introduced the iTunes store.
Rather than going against all the recording studios in the world, Apple decided to sign contracts with them for the rights to distribute music digitally. In return, Apple will pay the appropriate royalties for the music. Thus, a partnership was formed that still exists today. The iTunes store is now one of the most popular music store in existence.
Besides that, Apple also has a whole range of products that are well integrated with one another. At first, you could only listen to music on the iPod. Later, the iTunes store will also be available on the iPhone and the iPad. Together with the iMac, these products helped retain customer loyalty since purchasing something from the Apple store on the iPhone means you do not have to buy the same thing again on the iPod touch or the iPad.
***
Next week, I will show more examples of companies or institutions who succeeded or failed in implementing the Blue Ocean strategy. They are: Kodak, Polaroid, Fujifilm, P&G, Nintendo, Samsung, Air Asia, Casella Wines, Cirque du Soleil, as well as the Singaporean and the Malaysian governments.
The first path to reconstruct traditional market boundaries is to look across alternative industries instead of focusing on competing within an over-saturated industry. Companies using this path have to ask themselves: why do buyers trade across?
NTT DoCoMo
Here's a question: there is a cellphone in the market with which you could only call 4 people, which only 15 people may call you, and which does not offer you any Wi-Fi, apps, games, video, camera, or music. Would you buy it?
The answer will surely be: no. In today's world, the smartphone is ubiquitous, and people will expect to get as many different functions as possible from their phones. However, the telecom company NTT DoCoMo did exactly what people would not expect. They manufactured a phone that is exactly like the example above. They have managed to look across alternative industries and found a new target market: schoolchildren.
Most smartphone makers (Samsung, Apple, Nokia, HTC, etc.) chose to focus on a specific target market to which they try to sell their products. That market is the modern, connected, white-collar urbanites. As such, the smartphone market is currently a Red Ocean market, with all manufacturers offering roughly the same products. Was there really such a big difference between the iPhone 5 and the Galaxy S4?
On the other hand, NTT DoCoMo has found a market which would prefer a simple phone with which to contact others over an advanced gadget that can perform multiple tasks. In Malaysia as well as many other countries, schoolchildren are forbidden to bring their own phones to school for obvious reasons. The phones will be a major distraction to their school life. However, it cannot be denied that schoolchildren do need to have an avenue with which to contact other people. Something other than public payphones that never, ever work.
NTT DoCoMo's phone made for schoolchildren solved the above problem. There were 4 buttons on the phone, representing the 4 people which the schoolchildren may call using their mobile phone. Their parents have the choice to control whom their child may call by setting the buttons on NTT DoCoMo's website. For example, the first button may correspond to the mother, the second to the father, and so on.
Parents may also control who may call in to their child through their child's phone. There are a maximum of 15 people who may call in to the phone, and the list of people can be managed by the parents through NTT's website. Don't want their child to have contacts with that gambler of an uncle? The parents can simply choose to exclude him from the list of 15 people.
Lastly, there are no extra features of any kind on NTT DoCoMo's phone for schoolchildren. No music, no games, no texting, no nothing except for calling others. As such, it will not be a source of distraction to the children's studies. Now, with the phone, schoolchildren have an avenue with which to inform their parents about any changes in the time their classes end, and their parents and teachers do not have to worry about them misusing the phone.
***
The second path to reconstruct market boundaries is to look across strategic groups within industries instead of confining oneself to established strategic groups. Companies following this path have to ask themselves: why do buyers trade up or down?
Curves International
Imagine that you are a woman determined to lose some weight, or to make your body fitter. What are your choices? The standard choice is to pay the fees and attend a gym. Still, not everyone can afford to go to gym on a regular basis. Another obstacle to going to gym is the traffic. Gyms are normally located downtown, which mean that people living in suburban areas have to travel a long way just to reach the gym.
Picture this: you have spent an entire evening taking care of your children, and in order to work out, you have to drive for more than an hour through the traffic congestion just to reach the gym with which you applied for membership. You exercise there for a short while (since you are short of time), and then it's back to suffering through the traffic jam again. In no time, you will be throwing away your gym membership card into the trash can.
What other choices do you have? You may choose to trade down and work out in the local neighbourhood park instead. Yet, there are few equipments and facilities in the park, and you may not feel to comfortable exercising in public. What to do then? You may choose to give up on getting fitter after all.
Curves International, the fitness franchise chain, realised the dilemma facing those customers and came up with a whole new concept. Their gyms cater only to women, and are located throughout the United States. There are many advantages for a woman to go to Curves International fitness centers than to go to a traditional gym.
1. The distance. As mentioned above, the distance between a gym and a home is often great, since gyms are mostly located in city centers. Curves fitness centers, on the other hand, are located very near neighbourhoods. They managed to do this by having many smaller centers scattered throughout the land rather than having one big gym in only one location.
2. The environment. Gyms are usually the domains of very fit people looking to show off their physique. It is simply no place for ordinary, fat people to work out in. The stares alone will be enough to discourage people to go to gyms. Curves fitness centers does not pose such problems as all its members are women looking to become fitter. Another notable thing about Curves is the arrangement of their equipments: in a circle. That way, women may chat with each other as they work out.
3. The time factor. Going to gyms require a lot of time. You have to change in and out of your gym clothing. In Curves fitness centers, though, there are no changing rooms, so all you need do is walk in and start exercising without wasting time.
4. The equipment. Curves fitness centers are well equipped with all the usual gym equipments (treadmills and the like). Since Curves design their centers based on the circuit training concept, you will never have to wait because a certain equipment was being used by others. This is because everyone only have a certain amount of time to use an equipment before moving on to the next. Another advantage of circuit training is that you get to have a complete workout on different equipments in a short space of time.
***
The third path in reconstructing old market boundaries is looking across the chain of buyers instead of focusing on the same buyer group as the rest of the industry. Who are the purchasers, users, and influencers of your product?
Xerox,Canon
In the past, photocopiers were big, bulky, and expensive items. A company has at most one photocopier per department. The users and influencers of the decision to buy them were one and the same: the secretaries. The purchasers were different though: they were the head of the company.
In order to make a purchase, the secretaries have to inform their heads of departments, who in turn have to inform their bosses, who inturn have to inform their superiors, all the way up to the board of directors. All this to purchase a simple photocopier, an expensive investment at the time. After the purchase was approved, it could take anywhere from 2 to 3 months for the photocopier to be delivered.
Once the photocopier was delivered, it belongs to the company. In other words, if anything goes wrong with it, the cost of repairing it have to be paid for by the company. For the expenses to be approved, it would take a long time as well. Meanwhile, the primary users of the photocopier, the secretaries, have no choice but to wait and wait.
Realising this problem and opportunity, Xerox introduced a new type of photocopier that is less bulky and less expensive. Effectively, this means that the secretaries do not have to gain the the approval of the leadership of the company to get a photocopier. They needed only the approval of their immediate superiors. Another advantage of the Xerox photocopier is that it does not belong to the company, but to Xerox. This is because Xerox do not completely sell the photocopiers to companies. Instead, they lease it to them and charge them according to the number of copies printed in a month. In the case of a malfunction, Xerox will pay for the repairing fees.
Later, Canon will make the lives of secretaries even easier by producing small all-in-one printers. Employees can print, fax, photocopy, and scan their documents using the same machine. Nowadays, it is not uncommon to find an all-in-one printer on every desk in a company, since the machine has reduced in size a lot since the olden days.
By focusing on the needs of the user of their products, Xerox and Canon has made their products sell well. All the same, this does not mean that the purchaser of the products should be ignored. They are still important since they are the ones actually buying the products.
***
The fourth path towards reconstructing market boundaries is to look across product and services offering. Companies using this path have to identify the pain points of using their products and find solutions to mitigate the pain of using them.
Borders,IKEA
Borders is a chain of stores selling books. Everybody knows that. So why is there a Starbucks in every Borders store anyway? Do Borders sell coffee or books?
The reasoning behind the existence of a Starbucks in every Borders is that customers seldom have the time to read the books they bought. Customers who have bought a book often have a hard time finding free moments to read the books. What with working all day, customers will be too tired to read the book by the time they are at home. Most likely, the book will eventually be left on a shelf, forgotten by its owner.
Knowing this issue, Borders arranged with Starbucks to set up a small coffee shop inside its stores. This way, customers who bought books may easily spend time in the store drinking coffee and relaxing, giving them time to browse the books they had purchased. As such, they were rather successful at finding and retaining customers. (Of course, all of this was in the past. Borders went bankrupt in the United States some time ago.)
Another company using the fourth path is IKEA. IKEA, as everyone should know, is in the furniture industry. It is most definitely not in the child care industry. Nor the restaurant industry. Neither is it in the delivery services industry. Yet, it offers all three services that it was not supposed to offer. There is a reason why IKEA was so successful in selling furniture compared to other furniture stores.
Put yourself in the shoes of a young couple with small children. When you are out buying furniture, you chose to go to IKEA. Now, IKEA is a huge place to explore fully. Walking for 3 hours with your children in tow is not possible. They do not have the stamina to walk continuously for a long period of time. Hence, the playrooms in IKEA offering supervised care for children.
After walking for so long, naturally you will start to feel hungry. You will now have to leave IKEA and find a restaurant outside. Most likely, once you leave IKEA, you won't be coming all the way back again. To overcome this problem, IKEA set up a restaurant inside all of its stores selling delicious Swedish meatballs.
Afterwards, you have finally bought a bed and a cabinet. IKEA furniture are built such that you may assemble them yourself. Be that as it may, it is still a bother to carry the furniture home in your tiny little car. That's why IKEA provides delivery services to those who prefer it.
By looking its products and services offering, IKEA managed to attract many customers to its doors. It may be primarily a furniture company, but it is also involved in several other industries that combine to make a whole new shopping experience that is comfortable.
***
The fifth path to break free of market boundaries is looking across functional or emotional appeal to buyers instead of accepting the industry's original functional or emotional orientation. If a company is competing on emotional appeal, it might try to remove some of those emotional aspects to make the products more functional. If a company is competing in an industry that focuses on functional appeal, the company could add in some emotional components to the products to make it more appealing.
Lumix,The Body Shop,Ford,Hewlett-Packard (HP)
Lumix is a company competing in an industry orientated towards emotional appeal to buyers. Cameras are tools that captures the important moments in one's life, so the camera manufacturers will naturally advertise their products from an emotional point of view. Example: slogans such as "I am Nikon".
Anyhow, Lumix decided to try a different tact. In one of its advertisement, it did not show happy families gathering together and taking pictures. Instead, that particular advert showed a man taking pictures alone in an outdoor environment. He wanted to take a photo of himself but had difficulties, until another man came along. The both of them were standing on opposite banks of a river. The first man threw the camera towards the river, making it skip like a stone towards the other man.
What the advertisement was trying to show was that the camera Lumix made was tough and water-resistant. Therefore, it was able to safely bounce in water and was not damaged when it hit the ground. In the advert, Lumix tried to show the funtional side of its camera, instead of the usual emotional aspects.
Another company choosing to inject some functional aspects into its products is The Body Shop. Most companies selling beauty products will promote their products with heavy emphasis on the emotional aspect. That's why we often encounter bizarre advertisements from cosmetics companies showing a person jumping from a cliff, somebody singing in a stormy rain, or a white person putting on black-face.
The Body Shop, on the other hand, chose to feature the functional appeal of its products more prominently. If you step into any of its shop outlets, you will find all kinds of beauty products on its shelves. On the bottles of those products, every single ingredient used to produce it would be listed. This is a huge contrast with nearly all other cosmetics companies. After all, when was the last Christian Dior told you the ingredients of its perfume on the bottle?
For companies competing in an industry that focuses on the functional aspects of the products, the opposite approach is needed. They have to use a more emotional way to present their products. One such company is Ford. A few years ago, Ford decided to change the philosophy of the company. Rather than making cars that carry a person from point A to point B, they decided that they want to design cars that evoke strong emotional responses from its customers. When they see a car made by Ford, the customers should immediately wish to buy it. When driving the cars produced by Ford, the customers should feel very happy. All this from a company whose founder once declared that "any customer can have a car painted any colour that he wants so long as it is black".(This means that Henry Ford cares little about the emotional experience of driving a car, only the functional aspects of the car.)
Ford's new approach was also very different from others in the car industry. Car companies will always boast about the practical aspects of their cars: how much horsepower the car has, how fast they can go, how fuel-efficient their car is, how quick the car can go from 0 to 60 m.p.h., etc. In its recent adverts, Ford has decided not to focus on all those aspects, instead deciding to show people driving their cars and their emotional experiences.
Similarly, HP came out with the tagline "The Computer Is Personal Again" in 2006. This was to show that the computer (inherently a cold,hard machine) can be viewed as a personal experience to be enjoyed. The marketing campaign employed many celebrities to star in its ads and was generally successful in promoting HP's products in a different light.
***
The sixth and final path to reconstruct market boundaries is to look across time rather than focusing on the same point in time as the rest of the industry. This means a company have to try to predict the trends that have a high probability of impacting the industry it is in. The trend should also be irreversible and be evolving in a clear trajectory.
Apple
In the days before the digital distribution of music was the norm, there was a company named Napster. (The co-founder of Napster was Sean Parker, the first president of Facebook.) When Napster started distributing music through digital means, it was considered a company advocating piracy as Napster never paid any royalties to the record companies who produced the labels. Due to the fact that it was infringing copyright laws, it was used by all the major record companies and music distribution companies in the world. In the end, Napster had to be closed down. (The new incarnation of Napster was an online music store, later acquired by Rhapsody in 2011.)
At the same time that Napster was being brought down by lawsuits, another company saw the potential of online distribution of music. They correctly predicted the trend of music moving to the online sphere. They correctly predicted that people will no longer want to buy CD's or music in any other physical form of storage. That company was Apple, who introduced the iTunes store.
Rather than going against all the recording studios in the world, Apple decided to sign contracts with them for the rights to distribute music digitally. In return, Apple will pay the appropriate royalties for the music. Thus, a partnership was formed that still exists today. The iTunes store is now one of the most popular music store in existence.
Besides that, Apple also has a whole range of products that are well integrated with one another. At first, you could only listen to music on the iPod. Later, the iTunes store will also be available on the iPhone and the iPad. Together with the iMac, these products helped retain customer loyalty since purchasing something from the Apple store on the iPhone means you do not have to buy the same thing again on the iPod touch or the iPad.
***
Next week, I will show more examples of companies or institutions who succeeded or failed in implementing the Blue Ocean strategy. They are: Kodak, Polaroid, Fujifilm, P&G, Nintendo, Samsung, Air Asia, Casella Wines, Cirque du Soleil, as well as the Singaporean and the Malaysian governments.
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