Tag: Blue Ocean Strategy

Growing up, I remember listening to a bunch of old guys talk about the idiocy of the Army Corp of Engineers.  Now, I am not one to criticize the ACE, I’m sure they’ve done great work, however, these rockin’ chair-bound grey beards would tell, and re-tell a story of the dam and the dam mud.

The story started with the ACE construction of a dam to flood an artificial lake.  (This feat was accomplished hundreds of times across the US.)  For a while, the lake and dam operated beautifully, but over time, the rains would wash countless tons of mud off the hill tops into the lake creating problems in boat navigating, and reduction of the lake’s water capacity.

The solution was to dredge the lake.  The company used a system of conveyors to move the dredged mud.  However, instead of moving it away from the lake, they moved it back to the hills that were washing into the lake.  The result was a system of mud washing into a lake, only to be dredge and replaced back on the ridge where it again washed back into the lake.

Now, does this sound like your business, non-profit, or governmental agency?  Here was a clear cut strategy to clear the lake.  However, in executing the strategy, the ACE failed to pass on the vision to the persons responsible for achieving it.  Thus the strategy failed.

In order to properly execute a strategy, you must:

1. Harmonize: Harmonize strategy, people, processes, technology, and operations by cascading the operating plan throughout the organization.  Cascading is aligning day-to-day tasks with the company vision.  In this case, you would start at a ACE higher level, like the project engineers and run the strategy down through managers and foremen.  This process would ensure that all participants are aware of the vision and the tasks needed to see it to a successful conclusion.
2. Communicate: In order to properly harmonize, you must communicate the strategy to all levels.
3. Operate: To execute a plan, you must have the right personnel.  A strategy collapses if your culture sabotages it.  Some authors preach that you should get the right people before you design the strategy.
4. Manage: While executing the operating plan, you must manage the risk and adjust your tactics.  Strategy is not meant to be a pillar of stone.  Performance indicators, benchmarks, and other tools can help you manage your strategy.

When developing  and executing a strategy, these steps will help in achieving your goals.  To create a nice thick strategic plan without crystal clear implementation is formula for disaster.  Next time you drink a glass of water, thing of the strategies that were executed to bring you the 8 ounces.

When my youngest son Austin was in middle school, his small business enterprise was known as “the candy man.”  He would go to the 99 Cent Store and buy about $50 of candy in bulk.  He then broke them down selling them in small quantaties for $1-$5 in his small business.  My favorite story is when he would approach the kids who were not strong in math. It went like this, “Hey, sell you 4 airheads for $6.00 ?”  The kid pulled back, “No way, that’s a rip off?” My son would respond, “Ok, how about 3 airheads for $5.00?” “Cool, I’ll take that deal!” screamed his customer.  (For you math-challenged people, he increased the sales price  from $1.50 cents each to $1.67 cents for each airhead).  My son didn’t realize it, but regardless of the victory of increasing his profit, he degraded his merchandise to the status of a commodity.

This status emerged in the article Are you ready for the era of ‘big data?” by Brown, Chui, and Manyika.  The article illustrated some good ideas on how small business could use data as a competative advantage.  But one use of the comments drifted into the same commodity trap:

     And with pricing data proliferating on the Web and elsewhere, entrepreneurs are      offering price comparison services that automatically compile information across millions of products. Such comparisons can be a disruptive force from a retailer’s perspective but have created substantial value for consumers. Studies show that those who use the services save an average of 10 percent—a sizable shift in value.

This is fine if your small business  sells an item that is truly a commodity.  But, if you choose that course, (or red ocean citing the Blue Ocean Strategy), then that will be the only distinction that you will have in your industry.

As pointed out in Kim and Mauborgne’s book, Blue Ocean Strategy, you may use tools like a strategy canvas to determine if your small business is providing unnecessary services or products. Furthermore, the same canvas can expose better products to your customers.

Take Mike Diamond’s Plumbing for example.  For the last few years he has promoted his company as “the smell good plumbers,” understanding that his company could be reduced to a plumbing commodity based on price.  Instead, he looked at a customer need that others were not providing in plumbing, a plumber whose stink remains in the house long after he leaves. (As teens, Mike and I worked for my stepfather’s plumbing company.  I won’t mention the name of the smelly plumber back then, who may have given Mike the idea.)

In this era of data prolification, a small business shouldn’t ignore price comparisons, but must focus mainly on creating an uncontested market space and make competition virtually irrelevant.