Ideas & thoughts for Business leaders: Niall Phelan

Every week I am approached by business leaders looking to re establish growth or even steer the ship in a different direction. Most are surprised when I dig deep into their existing business and/or ask probing questions about how they started. 

The reality of business is that it's way easier to fix or correct something you're good at (a core competency) than to add a new product of service (a value innovation).  Unfortunately, more often than not, we try to fix our business by adding a new vertical, new product or innovation before addressing the the things that made us great in the first place. 

About 7 years ago, I wrote a postgraduate paper on Blue Ocean Strategy (strategy for value innovation). Blue Ocean had been buzzing around business leaders, just like every new model seems to become the hot topic, and it seemed like everyone was trying to create their own Blue Ocean. 

If you're not familiar with the Blue Ocean or Core Competency Model, they are pretty simple in concept. Core Competency is effectively about identifying the things that truly make you great and ultimately define you vs your competitors. It could be amazing customer service and a product that performs multiple times better that your competition, or it could be as simple as price (although I don't recommend that one on its own). Most businesses will have 3-7 core competencies and they will be the heart and soul of the business and the people who drive it.

Meanwhile, Blue Ocean is about innovation, disruption and creating new categories or revenue streams that are so far away from competitors that they are truly unique. Think of your current market being the Red Ocean (full of sharks and a bit of a blood bath), while a Blue Ocean creates a new opportunity for increased profitability per unit, new levels of customer acquisition and significant revenue increases. Sounds great but in reality Blue Oceans are expensive and also have a high failure rate due to their very nature. 

Now, please don't take that as a push away from a Blue Ocean model for your business. In fact, I believe that all businesses with a true focus on long term profitability and growth should dedicate time and cash to Blue Ocean. But the point is that it's not a fix all. 

Back to my paper (or musings). I theorized that companies who wished to survive and prosper in a world of uncertainty need to adopt Blue Ocean as an additional core competency. To be truly great at disruption, category growth, and new verticals, you must have dedication to it, which means you must deploy focussed resources on Blue Ocean to create experts in not just launching and executing the Blue Ocean but also in integrating it back into your business over time, as the Blue ocean becomes crowded. 

Now you're thinking, but Niall you just said a Blue Ocean was new, innovative and disruptive, and now you're saying in the same sentence to transition it when it becomes crowded. 

Well, It's pretty simple. Blue Oceans don't stay blue for long. How long is relative and probably brings in another business model, Porters Five Forces (you can read about that one here (https://en.wikipedia.org/wiki/Porter's_five_forces_analysis)

And because Blue Oceans don't stay blue, ultimately profit per unit will normalize, competition will take you from high growth to normal growth to defense strategies. And thats when you deploy the next Blue Ocean.

Lastly, I strongly believe that the time to strengthen your core competencies and to add a value innovation pipeline (Blue Ocean) is when you're already riding the growth wave (ahem....excuse the pun). It's a tough ask to divert resources to these areas when your whole organization is trying to manage the growth, but its a hell of a lot harder when you've stalled or are declining. 

I have built a graph below which shows how revenue and profit grow quickly in the Blue Ocean and then decline with competitor entry. 

If you want to know more and your thinking about your current business and how to either sustain your high growth or kick start your growth again, give us a shout here at Phoenix and let's see if we can help you.