P A G E 2 4 A P R I L 1 3 - 1 9 , 2 0 1 2

BackPageC H I N A D A I L Y A S I A W E E K L Y

PROFESSOR W. CHAN KIMCo-Author of Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition IrrelevantCo-Director, INSEAD Blue Ocean Strategy InstituteBoston Consulting Group Bruce D. Henderson Chaired Professor of Strategy and International Management at INSEAD

BIO

As he talks, you get drawn into the com-pelling business theory he developed with a former student, Renée Mauborgne, who became his research collaborator and confi -dante. After about a decade of research, Kim and Mauborgne co-authored a book on their theory, Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant, which was published by Harvard Business Press in 2005.

The book took the business world by storm, with sales hitting two million copies. It was a bestseller across fi ve continents and has been published in 42 languages. It also fi rmly placed Kim and Mauborgne on the management-guru map. In 2011, they were runners-up in The Thinkers50 biennial rank-ing of the world’s best business thinkers, affi rming the continuing relevance of Blue Ocean Strategy in today’s highly competi-tive global economic climate. They are now INSEAD professors of strategy and manage-ment and co-directors of the INSEAD Blue Ocean Strategy Institute

To research and develop Blue Ocean Strat-egy, Kim and Mauborgne studied 150 strate-gic moves spanning more than 30 industries between 1880 and 2000. They chose strategic moves as the basis for their work because of an absence of companies and industries that remain high-performing in perpetuity. Kim and Mauborgne used the terms red and blue oceans to describe the market universe that they observed. In their theory, red oceans are all the industries in existence today, that is, the known market space. In the red oceans, industry boundaries are defi ned and accept-ed, and the competitive rules of the game are known.

In contrast, blue oceans denote all the industries not in existence today — the unknown market space, untainted by com-petition. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set.

To put all this in layman’s terms, you could say red oceans have a lot of fi shermen, all fi shing for the same fi sh, while in blue oceans, there is only one fi sherman fi shing in an ocean full of fi sh. The trick is to fi nd that ocean full of fi sh where no one is fi shing yet. This is Blue Ocean Strategy. Contemporary examples that demonstrate how the strategy works include Apple, with its immensely pop-ular iPhones and iPads consistently breaking and setting new rules in its technology space, and Cirque Du Soleil, the Canadian company that redefi ned the dynamics of a declining circus industry in the 1980s by creating a new form of entertainment to appeal to an

adult audience which had grown tired of traditional circuses.

Kim explains how Blue Ocean Strat-egy can potentially be put into action which would allow more Asian companies to emulate the likes of Apple and Cirque Du Soleil in their own ways. He starts by paint-ing a broad picture of what he sees as a com-monality across Asian economies. “Without exception, they are export-driven economies. For example, in China, two-thirds of the GDP is explained by export revenue. One-third is explained by domestic consumption. This shows how much China relies on interna-tional exports.”

South Korean-born Kim eyes three poten-tial threats to Asian economies going for-ward — slowing growth in Europe and the United States, the chronic debt situation in Europe, and the Iran situation and rising oil prices. He feels that these threats suggest opportunities for Asian companies outside regional boundaries are limited. Further, the competitive advantages of Asian companies, typically based on costs, resources and labor, mean they have a diffi cult time penetrating global leadership. “They still haven’t learnt how to create outstanding value for Western people. Therefore, we scramble inside Asia to compete against one another,” he says.

Against this backdrop, Kim feels there are two clear opportunities for Blue Ocean Strat-egy in Asia. Firstly, because Asian economies are export-driven, domestic markets tend to be underdeveloped and, as such, there is huge potential that can be tapped. “We have an opportunity to develop domestic markets. If companies keep relying on cost-, resource- and labour-based competitive advantages, we are not going to increase wealth,” he says. “It should be high-value and low-cost, meaning Blue Ocean thinking is needed to develop underdeveloped domestic markets like those in Asia.”

But he adds that there is a diffi culty here because competition is viewed as a basic pillar of strategy in Asia: “Once you think in that direction, you have a diffi cult time creat-ing the Blue Ocean. Strategy should not be seen as making trade-off s between value and costs. Strategy should be seen as breaking the trade-off between value and costs.”

The second opportunity in Asia for Blue Ocean Strategy is for companies to move out of the comfort zones within their domestic market and look to achieve global leadership. He cites an example from his home country, Samsung Electronics. Kim played a key role in establishing a value innovation program there in the late 1990s. He gave lectures to

top leaders at the company on the core con-cept of value innovation, which is about how all products must be marketed and devel-oped based on what customers recognize and value.

“Samsung Electronics used to be a small white goods manufacturer. But they have become a global consumer electronics giant,” he notes. “That’s the kind of quantum leap we need in Asia for global leadership.”

To help in executing Blue Ocean Strategy, Kim and Mauborgne introduced the idea of fair process. This is an important tool, partic-ularly in Asia, where a top-down, hierarchical approach is often adopted by management, and underscored by deference and respect. He noted three principles of fair process — engagement, explanation and explanation clarity. “You have to articulate the merits of a new idea in a horizontal fashion, rather than a vertical fashion. Your subordinate is able to argue with you, based on merit and not

because of deference. In many Asian cultures, out of deference, you don’t argue with your boss. Then it’s very diffi cult to have a creative

idea. So we need the horizontal culture to come out.”

While believing managerial under-standing of the importance of the three-principle fair process is critical for execution, he is quick to stress that fair process is by no means a democ-racy, but a rule of management; so it can be done very quickly if everyone is on board. “The hierarchy in the company will still work. The CEO will take the decision, but he will give his subordinates a chance to exercise their dignity and thinking,” he says.

Though passionate about Blue Ocean Strategy, he is reticent about his private life. But he shows some emotion when asked Mauborgne’s impact on him. “She inspired me,” he answers without hesitation. “Research is a very diffi cult journey. Sometimes, I have been very down and disap-pointed, and she’s picked me up. The

journey of research is not only about brain exercise, it’s about your spirit, your

religion, and the way you think about all that. Otherwise, how could you go 20, 30 years on such a journey! She has been giv-

ing me so much information and emotional support. Everywhere we go, I have memories of our emotional partnership. Research is life for us.”

To Kim, Blue Ocean Strategy is more than a business theory to be embraced by compa-nies and countries. He fi rmly believes it can also be applied to the way people live their lives. He cites the mundane task of shopping for groceries as an example.

“The Red Ocean shopper will be bench-marking herself against what her friends do. She will do the kind of shopping that her friends do, perhaps a little better here or a little better there. However, if her budget is limited, can she buy high quality food at low prices? Some housewives always know what to do. There is always high quality at low cost and they know where to go and how to nego-tiate. They think in a Blue Ocean Strategy way. If you are an average Red Ocean shop-per, you may never know where to go.”

Ocean of wisdom‘UNCONTESTED MARKET SPACE’ GURU SAYS THE BUSINESS THEORY SHOULD ALSO BE USED TO LEAD ONE’S LIFEBy THUSITHA DE SILVA in SingaporeFor China Daily Asia Weekly

Professor W. Chan Kim is a slight, bespectacled man with a generous disposition. He exudes an avuncular charm that immediately makes you feel comfortable in his presence. It makes you almost forget that he is one of the world’s foremost management gurus and being able to spend any time with him represents a rare opportunity.

2011: The Thinkers50 named Kim as second-most infl uential business thinker in the world, together with Renée Mauborgne, the co-writer of the Blue Ocean Strategy book.

2008: Received the Nobels Colloquia Prize for Leadership on Business and Economic Thinking.

Honors: A World Economic Forum fellow, Kim is also a recipient of the Eldridge Haynes Prize awarded by the Academy of International Business and the Eldridge

Haynes Memorial Trust of Business International for the best original paper on

international business.

WANG XIAOYING / CHINA DAILY

http://www.facebook.com/chinadailyapac