18 May Blue Ocean Thinking For Small Businesses
Many small businesses argue that they do not have the time, talent or resources to undertake strategic planning. Significantly, the persons who traditionally would be involved in such sessions are the ones running the business on a day-to-day basis. Because of these daily priorities and the need to constantly adapt, strategic planning is seen as a luxury in the face of cash flow challenges, customer complaints, technology disruption, competitor rivalry and other such business realities. It is however, this ever-changing environment that necessitates small businesses undertake some form of strategic planning or blue ocean strategy to redefine their industries, capture untapped opportunities and generate sustainable business success through new customer growth.
So is strategic planning or even blue ocean strategy necessary for the small business?
Strategic planning looks at the business’ vision and reason for being. It is futuristic and helps employees, partners and investors visualize where the business is heading and what success looks like, by defining goals and objectives and allocating resources to get there. Unlike the business plan, which focuses on the short term, the strategic plan uses various tools such as the SWOT (strengths, weaknesses, opportunities and threats) and Michael Porter’s Five Forces analysis to brainstorm, provide direction and develop organizational alignment.
Strategic planning is sometimes criticized as being inflexible and more suited for larger businesses. The criticism has extended to the call for more strategic thinking rather than strategic planning. However, the agility and close-to-the ground nature of small businesses,allows them to respond to opportunitiesfrom new operational patterns, customer feedback and general market developments. Take for example, the emergence of e-commerce (online stores) as a sales and distribution channel. For small businesses this presents an opportunity to reduce costs, increase value to customers and expand sales revenue while maintaining long-term goals. By engaging their suppliers and customers, the small business is able to assess the potential of this new channel.
If strategic plans are developed effectively, it can provide a roadmap to goal achievement while allowing for adaptive opportunistic market responses.
On the other hand, Blue Ocean Strategy, the business model coined by W. Chan. Kim and Renee Mauborgne in their book by the same name, is a mindset shift away from competing directly with competitors, to creating new or uncontested market space that makes the competition irrelevant. It is the simultaneous pursuit of a differentiation and low cost strategy, with clear focus on the big picture. Think Apple iPad – iPod – iTunes or the Nintendo Wii. Apple’s iTunes online music store made Napster (the illegal music file sharing program) and the CD irrelevant by entering the digital music space as a provider and distributor of content. Apple in using blue ocean strategy created an integrated value proposition – quality sound, choice and personalization across multiple channels (hardware, software and content); not competing directly with PC in the case of the iPad or MP3 players with the iPod. Likewise, Nintendo pursued the non-gamer segment with the Wii, while at the same time not directly competing with Sony’s Playstation or Microsoft’s Xbox. Nintendo sought to create a value proposition around simplicity, functionality, and interactivity for the traditional non-gamer.
In the Caribbean small businesses continue to benchmark the competition, while not bad; what the blue ocean strategy calls for is value innovation by looking at what the competition is NOT doing to secure customer growth and increased profitability in highly competitive and declining markets:
- Don’t fight the market: move the market boundaries by thinking differently about how you can serve the un-served market.
- Focus on the user: what value can you bring to capture customers and non-customers?
- Test your ideas: Use the strategy canvas tool contained in the Blue Ocean Strategy book to map the activity in the current market space (ie what the competition is competing on and where it is investing); then identify the offering level customers receive across all the competing factors. Once graphically depicted, a value curve depicts the blue ocean strategy move that the business can use to reorient focus from the current competitors and customers to uncontested market spaces and non-customers.
- Execute: moving from idea to strategy to execution is a challenge for many businesses due to limited resources, the small business has to therefore prioritize to maximize customer value.
For small businesses, there needs to be a marriage of strategic planning with blue ocean strategy to ensure focus around a common goal, whilst seeking to create new market space by re-imagining industry boundaries.