Disruption is one of the concepts that have come to stay, and many confuse disruption with Blue Ocean. This article takes a closer look at the differences and why disruption is in reality just one possible element of a Blue Ocean Strategy. Non-disruptive creation, which involves creating new markets without destroying existing ones, is equally a viable path to growth and freeing companies from competition.
There are few business books that truly change the world – or at least our way of thinking about business. But Blue Ocean Strategy (written by professors Chan Kim and Renée Mauborgne) did just that when it was published in 2005. Since then, many companies have set their course toward the promised blue ocean, a sea without competition that flows with renewed strength and growth. Some have made the journey successfully, many have capsized along the way, and even more have been driven off course. Because something was missing. A sea chart, a way.
Blue Ocean Shift
Now, Chan Kim and Renée Mauborgne have released the book Blue Ocean Shift. It’s a detailed process description, or a sea chart if you will, that shows the way to the blue ocean. In this and the upcoming three articles on the blog, we take a closer look at how you and your company can succeed with Blue Ocean. We also explain how the processes behind fit hand in glove with the new generations of employees entering your company.
What are Blue Ocean Strategy and Blue Ocean Shift?
Blue Ocean Shift is a step-by-step guide with concrete tools and guidance on how to use them. Tools to challenge existing frameworks and conventions in your industry and create new, competition-free markets; Blue Oceans.
But before we dive into the differences and connections between the Blue Ocean Strategy (which is the strategy), Blue Ocean Shift (which is the method), and disruption (which is one of the possibilities to create a “Blue Ocean”), let’s get a clear understanding of the concepts:
Blue Ocean Strategy is about developing a strategy that can create new markets for the company instead of competing within the existing frameworks of existing markets, Red Oceans. In Blue Oceans, there are obviously untapped opportunities for growth, and here disruption also comes into the picture. But only as part of the picture.
Blue Ocean Shift is a model and a process description that guides the company to its Blue Ocean, step by step. Since the book Blue Ocean Strategy was released in 2005, professors Chan Kim and Renée Mauborgne have studied a large number of companies that have set their course toward the blue oceans. Both those who have managed the journey and those who have capsized or been driven off course along the way. The studies have resulted in the specific tools and guidelines that fill the book Blue Ocean Shift.
What is disruption?
Disruption, according to its father, Harvard professor Clayton Christensen:
“A company that through innovation of new products and services undermines or breaks down the typical business models of an existing industry.”
Critics of Christensen and the concept of disruption argue that it is really just a new and cool word for radical innovation – the invention of a new product or a new performance. But if you read closely the definition above, it’s clear that more is required. To be termed disruptive innovation, the new invention, whether it’s a product, a performance, a method, or something entirely fourth, must fundamentally disturb, challenge, and renew existing markets and business models.
Disruption is actually easiest to explain with a couple of classic examples that also illustrate that it’s really just the term that is new. Clayton Christensen simply put a name on something that has been going on for more than 100 years, but which with rapid technological development and digitalization has gained extra speed in recent years.
Henry Ford’s disruption
Henry Ford disrupted the market for personal transport with the mass-produced Ford T at the beginning of the last century. The example illustrates very well that disruption is not “just” about innovation – for the car had long been invented when the first Ford T rolled off the assembly line. In reality, Henry Ford’s disruption consisted of his vision, strategy, and production method.
His vision was that everyone in the American middle class should be able to afford a car. Therefore, he streamlined production by introducing the assembly line and at the same time doubled the salary for his employees. The assembly line reduced the production time of a car from 12.5 hours to 2 hours and 40 minutes. The wage increase partly meant that the employees, and thus their expertise, stayed in the company longer. Partly, it meant that everyone who worked to produce the car could afford to buy one.
Henry Ford challenged pretty much all the conventions within the budding car industry, and he did it with a strong belief that it was the right thing to do.
In a famous quote (that Henry Ford actually never said) he didn’t even let himself be guided by the customers’ expectations: “If I had asked the customers what they wanted, they would have said ‘a faster horse‘”.
It is a beautiful quote. But not Henry Ford’s. However, you can of course attribute the spirit of the quote to him.
His invention was a disruption because it marked the beginning of the end for many companies that produced horse-drawn carriages. Not to mention those who bred and sold work and draft horses. The Ford T eventually went on to produce 15 million copies and was the best-selling car in the world until 1972, when the title passed to VW Type 1.
Another example of disruption – that could have been avoided?
The streaming service Netflix has completely broken down the existing business models in the movie rental industry. Netflix does not even stop there but is now well underway to disrupt the very market for the production of both series and movies.
Netflix was founded in 1997 as a DVD mail-order service by American Reed Hastings. He had become dissatisfied with having received a fine in the local Blockbuster for returning a movie late. Therefore, Netflix had no return deadlines or fines. You just returned the movie when you were done with it, and could subsequently receive a new one.
Since then, Netflix has evolved into both a streaming service and a series and movie producer – and contributed to Blockbuster going bankrupt in 2014, but then re-emerged in 2016. The tragically comic twist in the story is that Blockbuster was actually offered to buy Netflix in the year 2000 for 50 million dollars …!
What are the differences between Blue Ocean Shift and disruption?
Disruption or disruptive innovation and the growth that companies achieve through it always happen at the expense of existing companies. Disruption can well be described as a Blue Ocean Shift, but the crucial difference is that Blue Ocean Shift does not need to happen at the expense of any existing companies. It’s about creating new markets – and can thus be just as well non-disruptive.
The authors behind the book Blue Ocean Shift themselves use several examples to illustrate the difference between disruption and non-disruptive creation. Thereby they explain why disruption is just one way for companies to carry out a Blue Ocean Shift:
Do you remember Big Bird, Elmo, Bert, and Ernie?
Most readers of this blog are probably old enough to remember Sesame Street and all the popular characters from the street. The whole concept was created with the aim of strengthening learning in children before they started school, so they were entertainingly introduced to numbers, the alphabet, colors, and shapes.
Sesame Street founded a whole new market for entertaining the education of preschool children. The market did not exist beforehand, and the product – the TV program itself – did not disrupt any existing companies or industries. Neither kindergarten teachers, librarians, nor others became unemployed because of Sesame Street. Not even the parents’ bedtime stories were made redundant by Big Bird, Elmo, and all the others.
Other examples of non-disruptive creation
There are many other good examples of new markets that were created without destroying existing companies and business models.
Viagra is yet another example. Pfizer’s invention to help men with erection problems founded a whole new market for so-called lifestyle medicine.
Online dating has neither caused discos, bars, or other places where people meet to have to close. Digital dating is a completely new opportunity for people to get to know each other but has not made other opportunities redundant.
Life coaching is the second fastest-growing industry in the United States in recent years. It’s a method that enables people to improve their quality of life in ways previously unseen. The industry, created about 20 years ago, today generates over two billion USD in revenue. However, no existing industry businesses have been shut down due to life coaching, nor have any jobs been lost. Instead, many new ones have been created.
How do these concepts relate?
Both disruptive and non-disruptive innovation can lead businesses to Blue Oceans, markets with little or no competition. However, as the examples illustrate, businesses and entrepreneurs focused solely on disrupting existing markets to create new ones are effectively “closing one eye.” With the other eye, they should look for needs and demands that no other businesses have yet met – by challenging the frameworks and conventions of their industry.
This is where the essence of the concept lies. The authors of the book argue against one of the mantras that have followed in the wake of the disruption wave: “Disrupt or die.” They point out that there are alternatives to disruption, which they consider more inspiring to pursue than the opportunities presented by the more destructive approach to growth and development.
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