Blue ocean strategies: should Asia-Pacific managers sail in these waters?

Citation

Dufour, Y. and Steane, P. (2009), "Blue ocean strategies: should Asia-Pacific managers sail in these waters?", Asia-Pacific Journal of Business Administration, Vol. 1 No. 2. https://doi.org/10.1108/apjba.2009.41501baa.001

Blue ocean strategies: should Asia-Pacific managers sail in these waters?

Article Type: Editorial From: Asia-Pacific Journal of Business Administration, Volume 1, Issue 2

Blue ocean strategy (BOS) is a metaphor for one of the latest business buzz ideas circulating the bookshops. The skill to create BOSs (Chan Kim and Mouborgne, 2005) is touted as one of the necessary skills in the repertoire of all aspiring CEOs. The essential thesis of BOS is that in order to secure profitable business growth and sustainable high corporate performance, companies need to go beyond competing in established industries to create “blue ocean”, The lesson for Asia-Pacific managers and executives is deceptively simple: better to be the sole company in a viable fast growing lucrative new market (blue ocean) than one of the numerous competitors fighting for incremental growth in a mature and less profitable market (red ocean). Learning the lesson might contribute reducing the great income inequalities within and between nations in the Asia-Pacific region that Donald K. Gates and Peter Steane talk about in the first paper in this second issue of the Asia-Pacific Journal of Business Administration (APJBA).

There are common patterns that characterise high-performing organizations. When Asia-Pacific CEOs look at how their competitors are actually “strategizing” it quickly becomes apparent that some are investing much more time and energy in how strategic decisions are made. For some, the primary focus is on formulation rather than implementation; on thinking rather than acting. For others though, there is much more concern about trying things out, without too much time planning beforehand. For this latter group, the primary focus is on acting rather than thinking; on implementation rather than strategy formulation. The two groups form the end points of a continuum along which strategy that are crafted in the real world may be found. Some companies may approach either end, but many more fall in intermediate points.

CEOs and executives may also see the “strategizing” of competitors reveal another key difference. For some managers, the weight of past decisions and action is a strong influence on what decision they should take next. Conversely, there are others for whom the past has very little influence. Here, again some companies may fall in between these two extremes, as a decision to create a different future (in a product or strategy) does not always require the abandonment of past wisdom. But it is critical for a firm to ask what part of our past is a pivot to the future, and what part of our past represents excess baggage? The variability in the manner in which companies do strategy can be characterised using two key analytical dimensions (Figure 1):

Figure 1 Configurations of strategizing

1. 1.

   time – past/future; and

2. 2.

   focus – thinking/acting.

Indeed, as Benjamin Zammit, Donald G. Ross and Dorothy Wood suggest in the second paper of this issue of APJBA size matters and there are differences between larger and smaller firms. Companies big and small – represented by the various sizes of the circles – can be found in each of the four quadrants (Q1, Q2, Q3 and Q4) of the matrix. They are successfully competing against one another within and between different strategic thinking groups. Companies that are acting from the past (Q1) are more or less acting without being attentive to what is going on around them. They are less concerned about customer needs or customer segmentation and more concerned about outperforming rivals. Differences in operational effectiveness are an important source of difference in profitability among competitors because they directly affect relative cost positions and the level of differentiation. To remain profitable, their unremitting challenge is to get even smaller, better and faster through some adaptive and incremental processes of decisions and actions.

Companies that are thinking more from the past, and positioned in Q2, are doing more or less what they always have done. However, as opposed to those in Q1, these managers are much more aware of what is going on around them and what makes and keeps their company successful. They are not concerned by operational effectiveness per se, but by building on their collective experience, their routines, and the “business recipe” that feeds their competitive advantage and success thus far. To remain successful their unremitting challenge is to reinvent themselves; a challenge that usually requires a deliberate top-down process of change. Companies that are thinking about the future (Q3) are ready to change whatever is needed in order to make the best of any forthcoming opportunities. Therefore, they are much more aware of what is going on in their environment. In fact, they are obsessed by building and matching their strengths to meet the opportunities as they arise. To remain successful their unremitting challenge is to secure their position usually through a deliberate top-down rational, structured, analytical process of decisions and actions. The final group are those companies acting in the future (Q4). They are the entrepreneurial innovators. For them, little emphasis is placed on top-down design; they instead encourage deviation, non-conformity, experimentation and diversity. The future will emerge despite the plans; but bold actions need to be undertaken to make it happen. To remain successful their unremitting challenge is to relentlessly create new products, new rules, new industries and new marketplaces. The main responsibility of managers is to put into place a context and the conditions that foster new ideas through a bottom-up, adaptive, incremental emerging process of decisions and actions.

The world is changing. For instance, in the third paper of this issue of the APJBA, Qi Wei and Chris Rowley are arguing that Chinese firms are becoming much more receptive to performance-oriented reward. In the fourth paper, Stephanie Slater, Stanley Paliwoda and Jim Slater show that Japanese corporation are replying to change by changing course in their search for a sustainable competitive advantage. Indeed, as the world is changing so is the way companies strategize. For example, in the 1990s Body Shop was moving from the bottom right position (Q4, create new marketplaces and new rules) to the upper left corner of the matrix (Q2, reinventing itself) particularly in developing the American market. At the same time, IBM was travelling from the lower left hand side (Q1, getting smaller) to the upper right-hand side (Q3, in securing their position) catching the internet wave ahead of Microsoft, to reposition itself as the Internet Business Machine company.

BOS offers new space by building a bridge between two of these groups. It offers to companies who would like to generate new highly innovative ideas that create the future (Q4) a deliberate rational prescriptive methodology of the type already available to CEOs in the other quadrants and in particular to those who attempt to think about the future (Q3) and make the best of it. There are already numerous tools and analytical frameworks to succeed but few in blue oceans. What BOS does provide CEOs and marketing strategists with is a step-by-step thinking method that leads towards the creation of new market space. It claims to differentiate from efforts thus far, where the key role of the CEOs has been to create a receptive context that emphases “acting” over “thinking”, and de-emphases formal planning and systems. BOS advocates a return to more formalized thinking to reduce risk and increase the likelihood of success.

BOS arrives at a time when the traditional arsenals of analytical tools and strategic planning frameworks have lost their lustre. Its appeal is manifested in the million-odd sales of the book, now available in more than 30 different languages. The danger is that a large number of Asia-Pacific companies attracted by BOS's prescriptive step-by-step methodology will end up bitterly disappointed to discover that opening up new marketplace is still a long and difficult journey, involving not so much formal step-by-step planning and rational decision making but entrepreneurship, opportunism and emergent learning from trial and error. Furthermore, as Yong Han and Nada K. Kakabadse point out in the fifth paper of this issue of APJBA, we must be careful of potential shortcomings in using Western concepts, models, and practices in non-western cultures. For instance, the study conducted by Sooksan Kantabutra and Pisanu Vimolratana reported in the sixth paper of this issue of APJBA shows the difference between vision-based leadership in Tai and Australian retail stores. In the final paper of this issue of APJBA, Zangina Isshaq and Godfred Alufar Bokpin show that the differences could also be related to levels of development.

The key and most important advice of BOS's advocates is that companies should spend relatively less time thinking about identifying attractive markets to position their offerings within existing industry space (red ocean) and more time thinking about opening up new uncontested market places (blue ocean). Such advice is a new and fresh perspective. It is most welcome as it diverges from the normative wisdom and thinking in strategy making. Many of the BOS frameworks and tools sound familiar, particularly to practitioners in strategic marketing. But what is innovative is the explanation and methodology on how to venture into new unknown market place in such a systematic and comprehensive way. However, the journey to create new market space is featuring a fair amount of entrepreneurship, opportunism, risk-taking, and emergent learning from trial and error. Such an approach to strategy should not be discarded yet. Asia-Pacific companies engaged in the exercise of creating new marketplace should expect the unexpected. If their main attraction is for a strategic methodology with a prescriptive promise of increased control and minimal risks, then this would suggest they lack the managerial and entrepreneurial spirit for undertaking the journey to start with.

In short, this issue of the APJBA combines a mix of contributions that relate to the context of present climes, the content in what responses work, and processes in how to best deliver them. Articles on the financial context include corporate liquidity management (Zangina Isshaq and Godfred Alufar Bokpin) and perceptions of export credit insurance (Benjamin Zammit, Donald G. Ross and Dorothy Wood). Issues related to content are in analyses of economic rationalism upon policy (Donald K. Gates and Peter Steane) and implementation successes in a competitive environment (Stephanie Slater, Stanley Paliwoda and Jim Slater). Process contributions lie in the role of vision in leadership (Sooksan Kantabutra and Pisanu Vimolratana), and two articles on people management issues in China: Yong Han and Nada K. Kakabadse in their study of job satisfaction, followed by Qi Wei and Chris Rowley in the paper on pay for performance in China's public sector.

It is gratifying to see the scope and scale of topics beginning to manifest through the collection of articles in this issue. It reinforces the trust that Emerald publishing has that the Asia-Pacific region will continue to pay a major role in the discourse on business administration. The editors welcome further contributions from the region in subsequent issues.

Yvon Dufour, Peter Steane