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Refreshing Blue Ocean with a quantitative approach?

Refreshing Blue Ocean with a quantitative approach?

Few days ago, I got a message from a former student of mine at Roma Tre. He asked my advice about his idea of adopting a so-called Blue Ocean approach for helping a startup in the eyewear industry at finding “alternative” business models and markets.

To make a long story short, this is what I replied.

Dear Jacopo,

As you know, I have always been very critical about the conceptual approach and methodology that try to support the Blue Ocean (good) idea.

Just as a reminder, I am listing some of the serious weaknesses of the Blue Ocean (BO) approach:

  • lack of distinction, in the authors’ so-called Value Curve, between the choice criteria adopted by the market and the resources in which the company invests for satisfying these criteria
  • inconsistency between the bold statement made in the book’s subtitle (How to Create Uncontested Market Spaces and Make the Competition Irrelevant) and most case histories presented as examples of BO (e.g. Dell computers)
  • incoherent critique of the segmentation approach, without distinguishing the cognitive and analytical exercise of segmenting (“finding commonalities among segments” implies a previous identification of segments!) from the decision of diversifying the strategy among multiple segments
  • rejection of brand as a major component of the value perceived by the market (see, for example, the Apple iPhone case) and the absence of brand in all the examples of Value Curve made to describe the BO approach
  • total lack of consideration of potential synergies among businesses (again, the iPhone’s success, largely due, at least at the beginning, to the reputation of the well-known Apple brand in the computer industry).

Overall, I think that, underlying most of the above weaknesses, there are two major logical and methodological strictly related shortcomings:

  • the authors present a number of successful innovations and try to rationalize “ex post” the process that conducted to their success, without suggesting, in practice, how we could make, “ex ante”, a systematic assessment of the available market opportunities, focusing on some strategic factors rather than on others, especially from an economic and financial standpoint
  • in particular, they explicitly dismiss the importance of quantifying estimates and projections, suggesting that we should just focus on the “broad picture”.

Given these considerations, it’s incredible to see how this Blue Ocean idea has been succeeding over the years, since the publication of the bestseller Blue Ocean Strategy in 2005, followed in 2017 by a new book on Blue Ocean Shift.

My view is that it certainly was an excellent marketing operation, based on the expedient of an original title, an intriguing subtitle, an update and integration of several old concepts on strategy (renamed with new labels!), and an intelligent and well-targeted communication campaign, supported by the prestige of famous business schools (Harvard that published the first book, and INSEAD, where the authors teach).

I am probably “old fashioned” in some respect, but I have always been firmly convinced, together with famous gurus such as Peter Drucker, that “if we don’t measure, we cannot manage”, and that any “broad picture” must be supported by sound quantitative estimates, even if we’ll need to revise them over time thanks to new evidence.

… especially if we are not blessed like Steve Jobs, who could afford to “tell” the prospective users what they wanted and develop totally new product concepts accordingly!

Selected bibliography:
• G. Gandellini, “Mettiamo un pod’ordine nell’approccio Blue Ocean?”, Harvard Business Review Italia, 2012.
• G. Gandellini & D. Venanzi, Purple Ocean Strategy: How to Support SMEs’ Recovery, Procedia Social and Behavioral Science 24, 2011.
• C. Kim & R. Mauborgne, Blue Ocean Strategy: How to Create Uncontested Market Spaces and Make the Competition Irrelevant, Harvard Business School Press, 2005.
• R. Mauborgne & C. Kim, Blue Ocean Shift: Beyond Competing – Proven Steps to Inspire Confidence and Seize New Growth, Hachette Books, 2017.

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