Blue Ocean Strategy is the title of a book published in 2005 and written by W. Chan Kim and Renée Mauborgne, Professors at INSEAD and Co-Directors of the INSEAD Blue Ocean Strategy Institute. Based on a study of 150 strategic moves spanning more than a hundred years and thirty industries, Kim & Mauborgne show that companies can succeed not by battling competitors, but rather by creating ″blue oceans″ of uncontested market space. These strategic moves create a leap in value for the company, its buyers, and its employees, while unlocking new demand and making the competition irrelevant. The book presents analytical frameworks and tools to foster organisation’s ability to systematically create and capture blue oceans.
There must be something in the idea. The book has been published in 43 languages and is bestseller across 5 continents. The concepts are used in over 1,600 universities and 101 countries around the world.
The aim of the strategy is not to out-perform the competition in the existing industry, but to create new market space or a blue ocean, thereby making the competition irrelevant.
In the book, the authors ask readers to imagine a market universe which has two sorts of oceans – red oceans and blue oceans:
- The red oceans represent all the industries that exist today: the known marketplace where industry boundaries are defined where business and competition rules are known and accepted. Swimmers try to outperform rivals to gain a greater share of existing demand resulting in profit pressure and reduced growth prospects.
- The blue oceans represent all the industries not in existence today: the unknown and untapped marketplace. Most blue oceans are created from within red oceans by expanding existing industry boundaries. Swimmers here create a new demand and enjoy the opportunity for highly profitable growth in a marketplace where competition is irrelevant.
So, have accountants and lawyers been missing out for most of the last decade by focusing on the wrong things. In my view, the answer is yes. At least, that goes for most firms.
The BOS website asserts that companies have long engaged in head-to-head competition in search of sustained, profitable growth. Yet in today’s overcrowded industries, battling head-on results in nothing but a bloody “red ocean” of rivals fighting over a shrinking profit pool. The book presents a proven analytical framework and the tools for successfully creating and capturing blue oceans.
But you had better prepare yourself for making changes as the book upends traditional thinking about strategy and charts a bold new path to winning the future.
There’s a good article on Blue Ocean Strategy from Canopus Business Management Group.
- Buy and read the book (from Amazon, WH Smith, Waterstones or wherever), and
- Read up on what the Cirque du Soleil can teach your firm, here. When you read this article you’ll understand why the book authors use that organisation as a great example of the idea in practice.
There’s another particularly good article on Blue Ocean Strategy. Don’t miss it.
So, for accountants and law firm leaders the choice is clear…
Carry on as you’ve done for years and reflect on how hard it is to succeed, cut fees to match your competitors or cut swathes of work from your portfolios in trying to specialise.
Or swim in the Blue Ocean, in the words from the book, “as you create an uncontested market space and make competition irrelevant”.
Here are some considerations relating to how accountancy and law firms might extend their services into consultancy:
- Fees: Avoid the “race to the bottom” by demonstrating added value to clients through the insights gathered from financial or legal due diligence. It will be crucial to successfully toe the line of compliance with Sarbanes Oxley regulations and those firms that do so could find themselves being able to extend their service offerings into the traditional delivery space that is usually reserved for consulting firms.
- Pseudo-Consulting: Can accounting and law firms move into more delivery-based projects requiring legal compliance (again, adhering to Sarbanes Oxley is key here)? For example, consider OJEU (Official Journal of the European Union) procurement projects. Big law firms are starting to provide the support and assistance that regulated organisations require to successfully deliver large, complex procurement activities which is usually conducted by an in-house project team or an external consultancy. Last month, The European Parliament voted to support a package of reforms to the EU Public Procurement Directive, which includes clauses designed to encourage all European countries to recommend the use of electronic tools on public works contracts. The Directive establishes public procurement rules throughout the European Union and applies to any public purchases above defined thresholds. This may appeal to larger firms but there are opportunities for smaller firms too: see here. For UK government help: Doing business with government: a guide for SMEs, is a useful resource.
Finally, the INSEAD website lists Ten Key Points about Blue Ocean Strategy: you can start straightaway by following the link here.
Acknowledgement: Thanks to David Parkinson, Management Consultant at PwC Consulting for his contribution to this article.