During the writing a this last patent application, some additional opportunities were discovered. And to add those into this application will take one more week. Hopefully that extra-time will add some real value my business.
The last parts of the Blue Ocean Strategy book is very different from the first parts. The last parts focus much more into practical aspects of making the strategy change happen. For example…
Strategic planning by pinning
- all managers present their unit strategy for 2 minutes
- => if a strategy can not be expressed in 2 minutes it’s too complex
- => a poster is made of each startegy plan
- => all managers have 5 pins
- => managers can put their pins into one or more of the presented strategy plans they find the most compelling
- => The plan with most pins wins (or at least has a good chance for winning)
How to prepare for strategy change resistance
- When you’re changing strategy there will be resistance, anticipate resistance
<=> make all kingpins to EXPERIENCE the maximally harsh reality of your current products offerings
<=> anticipate the key points and tactics your resistance will express
- make sure you have a consigliere (helpful & influencial adviser) at the board who is both respected and who knows
- who will fight you
- who will support you
When you’re changing a strategy
- be fair and open TO ALL involved parties
<=> or the change will paralyse many and make some even to sabotage your efforts
- To change a strategy you’ll need to shift resources from past activities to future activities
<=> Redirecting from cold spots to hot spots and do so horse trading to overcome the Resource Hurdle
- Place Kingpins (key influenciers) in a Fishbowl(on a spotlight one by one) and atomize the change related actions to a level of single individual/unit
When do you need to create a Blue Ocean
For better profits and brand value you should always have a Blue Ocean. Ok, here the authors finally appear bit more relaxed when they admit that having a Red Ocean is very useful too and especially if the money and resources generated from Red Ocean help creating that Blue Ocean. Also the authors assume that your company already has the basic skills for competing in the Red Ocean. Thus, the information in this book is for training your skills for creating that uncontested new markets – a Blue Ocean.
When do you need to create a NEW Blue Ocean
So, lets assume your company created a Blue Ocean with a revolutionary car the Ford Model T. And just recently a Japanese car manufacturer has started to gain market space with its revolutionary car, the Toyota Prius ZVW35.
How do you know if you should seek to change your strategy and start doing something else? The answer can be found from the strategy canvas. Basically you blot all the relevant customer values within car market and evaluate those against your and your competitor’s product. And if the results show your product offer has still some significant advantages over the competitor’s offer, you should NOT change your product offer or your product strategy.
Yes there are still more things to write about the Blue Ocean Strategy. In previous post I mentioned that the key behind successful Blue Ocean Strategy is the discovery of a Value Innovation. And the key for discovering those Value Innovations is to really learn what the customers want; not just observing the obvious needs but really going through the complete package of customer (and non-customer) needs. And often even the customers themselves may not need exactly what they want, which may sometimes make customer surveys pretty useless.
“If I had asked people what they wanted, they would have said faster horses.”
For example if a movie theatre wants to have more young couples as its customers may need to find out that it would need to offer a baby sitter service during the movies.
Blue Ocean strategy is not just a differentiation strategy, As the authors point out that in often the new services can often be provided less costly both for the customer and to the company – so blue ocean strategies often create such win-win situations. As an example of that, the book had a nice little story about a Hungarian bus company NABI that in just a few years had taken a significant portion US bus markets after discovering that for the buyers the initial price of a bus was less important than the totat costs of operating that bus. Therefore by making buses with fiberglass instead of steel NABI could hit about 5 flies with a single hit.
Traditional : Buses made from Steel
- Lower initial purchase price
- heavier & provides less space
- consumes more fuel
- maintenance prices higher (after each minor accident a major steel repair is needed)
New: NABI buses made from Fiberglass
- higher initial price
- provides more space
- it is lighter and thus consumes Less Fuel
- Thus fuel it’s more environmentally friendly
Another Value Innovation was the invention behind the fractionally owned NetJets airplane fleet. Basically someone at the company discovered in 1984 that the businesses generally wanted to use their own jet planes more than those could afford owning and maintaining ones. Therefore the solution was to sell 1/16th usage shares of jet planes to businesses. And naturally that small jet renting company with an innovative fractional ownership business model soon become worth a billion dollars.
Authors of the book also claim that the the success of Australian wine brand “Yellow tail” is also based on a Value Innovation. Basically the Aussies would have discovered wine drinking in the US being too elitist, too boring and too serious. So in year 2000 the “Yellow tail” brand was created and it skipped all the boring aspects of centuries of wine making traditions and all the hyping of the fine wine aromas. Yellow tail just started to brand itself as fun social drink available both in white and red wines. And suddenly the wine drinking become more fun – as long as people were consuming yellow tail wines. And they were … as the Yellow tail became the number one imported wine to the USA by 2003.
How to maximize the size of a Blue Ocean
Obviously its important to make sure you’re creating a true Blue Ocean – and not creating a puddle by locking yourself into a small niche market. The key for maximizing your customer base is not to focus in attracting a larger share of your industry’s existing customers, but instead successfully expanding the market to include current non-customers. The number of your industry’s non-customers is always greater than the amount of customers. And if you focus into your industry’s existing customers, there’s a big possibility that you’re still in a the Red Ocean and just providing incremental product improvements – not a true value invention.
The authors kindly provide Big Bertha as an example of maximizing a Blue Ocean. Until 1991 the Big Bertha was just a massive howitzer used by the German army in WWI, but then was re-designed (by “Callaway Golf Company”) into taking a shape of a massive golf club. The reason behind the introduction of Big Bertha Golf Club was a survey among non-golfers who had expressed lots of skills required in playing golf and especially that hitting-the-ball-thing was almost too difficult. For some reason “Callaway Golf Company’s” managers did not just sneer to those “stupid non-golfers” , but instead they decided to make a series of massive golf clubs that could just not miss the ball. And the legend was born. Soon the real-golfers also observed some benefits with using those ridiculously massive Big Bertha golf clubs and one year after the (1991) introduction of Big Bertha, the Callaway Golf Company went public and it’s now the worlds the world’s largest maker of golf clubs.
The final section of the Blue Ocean book is mostly about leadership and changing the company’s strategy. The book is actually improving towards the end. Next post will cover the rest of it.
I’m back, and thanks for asking …. patenting and business plan things went very nicely. Still some work to do with those but now those things are at least starting to look fine. That patenting thing could be seen as being a part of startup’s strategy,… which reminds me of a Blue Ocean Strategy book that I’m now going through… when time permits.
Blue Ocean Strategy is a quite well known and easy to understand concept. It become famous in 2005 through the business strategy book Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant. I (too) love the simplicity of that (differentiation) strategy, the basic idea is that
- In all well established markets the head-to-head competition is fierce and the profit margins are low, this is the Red Ocean
- However if a company can create its own market and dominate it, the profit margins will be higher and this is the Blue Ocean
Yes, the Blue Ocean looks like a better choice, but first a company must create its own “blue ocean”. The most important aspect behind a successful Blue Ocean Strategy is making a Value Innovation. And that is supposed to be a result of discovering something that gives surprisingly high amount of value to both customers and to company. Once that “value innovation” has been discovered the company needs to make it real business.
The creation of Blue Ocean is usually achieved through execution of a carefully thought strategic choice. Unfortunately, even those most clever strategic plans don’t just become real autonomously – typically those need to be enforced. According to Blue Ocean Strategy book, it usually takes a strong willed CEO or a major financial crisis to change the company’s overall strategy. And even then there will be friction; a term coined by Carl von Clausewitz a Prussian military theorist. Yet, the authors point out that the Blue Ocean strategy is mainly a risk avoiding strategy – not a strategy for risk taking. And most importantly the authors kindly provide a set of tools for creating blue oceans.
Tomorrow’s post will have some examples of discovering Value Innovations and creating Blue Oceans…
Yesterday I was in a half day seminar about cloud business and services as a main topic – or so it was supposed to be. I’m usually very happy with the contents of the seminars that I choose participate. This time the reaction is a bit mixed. The seminar arrangements were very good, but why were there so many speakers talking about totally non-cloud related things like…
“Hi, we sell airsoft toys and we have an online shop.” or “Hi, I’m a boring dude from the EK, and I’m here talk you about some law proposals that somehow relate to the safety” or “Hi, we at Viestimaa sell smart phones”
Those speakers were clearly just pushing their non-cloud related agendas and services. And I had rather spend that 1.5 hour watching ‘any’ TV advertisements. For those who managed to remain awake the real news was the…
Oulu Data Center
Currently there is very limited amount of information available of the new Oulu data center. But the cloud data center will be operated by Oulu ICT, a telecommunications company controlled and half owned by the city of Oulu. The lecturer told that the data center allows hosting truly scalable cloud services. The expected customers are expected to be the companies in northern Finland – including startups.
The Oulu Data Center will be first located at a DNA company’s ‘s Kirkkokatu office. The exact same location where the third of Finland’s FICIX data hubs is located. In 2014 the data center will establish a second hall for computers nearby. That second storage location will then provide additional security for the data – in case the house collapses into a car park underneath. I think this is fantastic news for the internet startups in Northern Finland. Because the datacenter is…
- located at a central hub, there will be far less points of failures due to road works or electric failures
- located at a central hub, it will have enough bandwidth (10Gbit/s) to deal with almost any amount of traffic
- located at a central hub, it will be much more resistant to various DDOS attacks
- located at Kirkkokatu office in, Oulu then you’ll know where your data is and you’ll have a clear contract telling who owns the data
- not located at the massive storage halls, run Amazon, Apple, Microsoft, Google, Oracle and the likes. Those massive cloud companies quite typically insist that they are the owners of the data , or that they can do what ever with the data. For example…
“According to the Google terms of service, Google has the right to use consumer data to improve and even promote their own services. The company also has the right, according to the terms of service, to create “derivative works” from content stored in Google Drive, and to “publically display and distribute such content” even with their partners. Yet, the wording is not necessarily that alarming.”
Going Offline Until 12.12.12
I’ll be making a concentrated patenting, business plan and presentation material effort and I’ll be offline until 12.12.12. Then the Polar Startup will be back
The yesterday’s seminar about the NASDAQ OMX First North marketplace is still amazing me. I mean how small are those companies. Where do they come from and what are their primary business areas. The complete answers are found from NASDAQ First North pages. But easy access outdated answers are here. Or you can just use my guesstimate that the company sizes range from 1 to 200 employees and the company market capitalization net worth is in a range of 1- 200 million EUR; probably most typical market capitalization values being 4-10 million EUR. Thus the stock market valuations of those companies are at the similar range as is the pre-market valuation of the companies seeking 1.5 – 3 million from the venture capitalists.
Sweden, Sweden, Sweden
NASAQ chief Lauri Rosendahl’s presentation also provided lists of companies that had entered the First North market in 2011 and 2012. Eighteen of those eighteen companies that were listed In 2011, … were Swedish. And in 2012, seven of the eight listed were Swedish. But one was Siili solutions from Finland. Still, the total score 25 vs. 1 is a very strong indication about some mysterious benefits with the Swedish version of the First North market. I mean markets are always right – Right?
There Must Be a Market Demand
The First North is marketplace and the laws of demand and supply dictate how successful your company will be. If your company isn’t growing rapidly or isn’t interesting enough, there’s no need to dream about getting listed in First North. Recently a Finnish company Ilmatar Windpower Plc tried and failed in getting listed in First North. When the company withdraw its share issue it stated…
“…the market environment among large institutional investors was not favourable enough for the listing of a new company within a growth sector. The large interest in wind power companies in Finland seen in private markets did not reflect in the public stock markets in an expected manner. The Share Issue is cancelled based on the recommendation of the Lead Manager of the Share Issue, Pohjola Corporate Finance Ltd.”
Thus if you want to get listed you’ll need to pay attention to the big players. And you’ll have the option and your should withdraw your share issue if there is no market demand. But why there was no demand for Ilmatar??? Well some clues can be found from the company’s 2011 financial statement (in finnish)..
“”Ilmatar Windpower Oyj (myös ”Ilmatar” tai ”yhtiö”) on 8.4.2011 perustettu suomalainen julkinen
osakeyhtiö. Täten tilikausi 2011 oli yhtiön ensimmäinen tilikausi”.
“”…Yhtiöllä ei ole ollut palkattua henkilökuntaa tilikaudella 2011.”
So the 1.5 years old company was seeking 10 million EUR from the First North stock market, but at least this time, they failed in getting investors interested in their business vision.
A bonus lesson learnt
I was a bit impressed by the great and simple looks of the Ilmatar Windpower’s website. So I took a peak at the source code and there it was… its based on the WordPress; the same engine that runs this blog. So if you don’t have a billion to spend, forget spending a million in creating a website. Use WordPress instead – it’s free.
Today I was in a half day seminar arranged by BusinessOulu. The topic was getting a startup company listed in NASDAQ OMX First North stock market and raising money for the company from that market. And what a great thought promoter it was. I had actually never considered some kind of early IPO being a realistic option for very new startup company. Apparently it is … or at least in Sweden it is.
The most eye opening fact
…was to learn that the companies that IPO in “First North” raise in average 2 million euros. WOW! Suddenly that marketplace become an almost realistic alternative to a venture capital round.
The most unexpected fact
…was to learn the companies that IPO in “First North” do not need to have any financial history.
The most thought promoting fact
…was to learn that 100+ startup companies had done their IPO in Stockholm’s “First North” marketplace and only three(3) had chosen to do it in Helsinki’s ”First North” marketplace. Think about that.
So, What is the NASDAQ OMX First North?
First North is marketplace for companies that are interested in the financial stock market markets opportunities, but who perhaps do not yet have the conditions or do not want to list to the NASDAQ OMX “Main Market”. First North is an alternative for small, newly established or fast growing companies who want the benefits of traditional IPO, the visibility in the market and a transparent valuation. Basically the companies can use the First North marketplace for raising the necessary capital for their growth and development. First North may also be a good springboard to the traditional stock market listing. For investors the First North provides an opportunity to invest in a company at its (cheapest) early stage and to take part in the company’s future growth and success.
Advantages with the NASDAQ OMX First North
In First North, the various reporting requirements are much lighter than in a traditional IPO and with the companies listed on NASDAQ OMX Main Market. Because the First North listed companies are small and less experienced the investors must also be safeguarded from various f*ck-ups. And for achieve that, the company has to hire a trusted observer; a so-called “Certified Adviser”. The official role of that “Certified Adviser” is to which help the company to enter the First North marketplace and to advise the company in various matters; such as external communication and financial reporting.
Here are the admission criterias for the NASDAQ OMX First North
Yesterday’s post was about a certain company systematically and successfully cloning successful web services. Even if that may seem dishonest theft of intellectual property, that is pretty much the standard behavior. In fact, the whole technological development is based on observing what works and improving those things.
Pioneers vs Fast Followers
A pioneering company in a certain field can remain relevant in that field for a long time. However, more often than not, the fast followers will surpass the pioneering company, by their resources, raw speed and industrial efficiency. For example…
- Google wasn’t the first search engine(Hello Altavista and others)
- The innovative Apple Inc. didn’t invent GUI (copied Xerox)
- …or a portable music player (think Sony Walkman)
- Facebook wasn’t the first social network(remember Myspace)
- Amazon wasn’t the first online shop (Intershop had started a year earlier)
- eBay wasn’t the first online auction site (‘Onsale’ had started four months earlier)
…and Microsoft… well Microsoft has rarely been first in anything, but its a very good fast follower. For example when Apple unveiled the first iPod, the same evening Microsoft executives were emailing to each others initial plans for copying Apple’s toys, tactics and tools.
For a startup the optimal tactic is probably to be a fast learning and a fast improving company.
As soon as someone comes up with a great online product or a service, there will be someone cloning it in Germany. And that someone has a name: it’s the Rocket Internet GmbH, a German online startup incubator firm run by the Samwer brothers. Basically their business model is to clone highly successful websites – and they do it with success.
Their business model goes like this. First they spot a highly successful online business model. Then the hire a MBA-trained executive to be the ‘Founder and Managing Director’ of that their soon to be cloned website. Then the brand new clone company rapidly builds an almost similar web service as the original site has. And because they act so quickly, they often end up becoming the second or third player in that newly discovered big business.In Finland their best known businesses are or have been citydeal.fi (a Groupon clone) and the online shoe shop zalando.fi (a Zappos clone); yes that one with those annoying TV advertisements
The Exit Strategy
If the clone company’s business becomes profitable, then the clone may just stay in business and continue to challenge the company who came up with the original idea. An example of this is Wimdu; which is a clone of the airbnb.com peer-to-peer apartment rental site. On the other hand, often the clone sites will be bought by the companies that created the original ideas. For example (the Groupon clone) Citydeal was bought by Groupon for $126 million in 2010.
So, why should anyone be taking the risk of experimenting with some weird untested business model when the successful business concept is just a few clicks away. Oh, I see that’s like… cheating.