Effective Companies

As industry history shows, new market spaces are being created every day and are fluid with imagination. Buyers prove that as they trade across alternative industries, refusing to see or be constrained by the cognitive boundaries industries impose upon themselves. And firms prove that as they invent and reinvent industries, collapsing, altering, and going beyond existing market boundaries to create all new demand. Which is to say a red ocean need not stay red. This brings us to a third point of distinction. Strategic creativity can be unlocked systematically. Ever since Schumpeter's vision of the lone and creative entrepreneur, innovation and creativity have been essentially viewed as a black box, unknowable and random.3 Not surprisingly, with innovation and creativity viewed as such, the field of strategy predominantly focused on how to compete in established markets, creating an arsenal of analytic tools and frameworks to skillfully achieve this.

But is creativity a black box? But is the same true for strategic creativity that drives value innovation that opens up new market spaces? It revealed common strategic patterns behind the successful creation of blue oceans. Execution can be built into strategy formulation. Blue ocean strategy is a strategy that joins analytics with the human dimension of organizations. It recognizes and pays respect to the importance of aligning people's minds and hearts with a new strategy so that at the level of the individual, people embrace it of their own accord and willingly go beyond compulsory execution to voluntary cooperation in carrying it out. To achieve this, blue ocean strategy does not separate strategy formulation from execution. Instead, a new strategy builds execution into strategy from the start through the practice of fair process in the making and rolling out of strategy.

Commitment, trust, and voluntary cooperation are not merely attitudes or behaviors. They are intangible capital. They allow companies to stand apart in the speed, quality, and consistency of their execution and to implement strategic shifts fast at low cost. The field of strategy has produced a wealth of knowledge on the content of strategy. However, what it has remained virtually silent on is the key question of how to create a strategy to begin with. Of course, we know how to produce plans. But, as we all know, the planning process doesn't produce strategy. In short, we don't have a theory of strategy creation. While there are many theories that explain why companies fail and succeed, they are mostly descriptive, not prescriptive. It helps managers in action as they formulate strategies that are innovative and wealth creating.

There has hardly been a time in history when the strategies of players in so many industries and sectors needed fundamental rethinking. To remain relevant, all these players are increasingly being called on to reimagine their strategies to achieve innovative value at lower costs. The rising influence and use of public megaphones. It's hard to believe, but only ten years back, organizations still controlled the majority of information disseminated to the public on their products, services, and offerings. Today that's history. To not be a victim but a victor in this new reality, your offering needs to stand out as never before. A locational shift in future demand and growth. When people around the world talk about the growth markets of the future, Europe and Japan hardly get a mention these days. Even the United States, though still the largest economy in the world, has increasingly taken a backseat in terms of future growth prospects. Instead, today China and India, not to mention countries like Brazil, top the list. However, this new breed of big economies is not like the large economies the world has historically looked to and counted on to consume the goods and services produced by the world.

Unlike the relatively high per capita incomes enjoyed in the world's developed economies, these big emerging markets are the product of very low, though rising, per capita income for very large populations of citizens. This makes the importance of affordable low cost in organizations' offerings more critical than before. But do not be fooled. Low cost alone is not enough. To capture these increasingly savvy customers' imaginations and wallets, both differentiation and low cost are needed.