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BOSTON—A business strategy that touts finding new markets for existing products requires that HR managers increase their links to company strategists in organizations that adopt the concept, the author of a book detailing the strategy told an audience at SHRM’s 2008 Global Conference & Exposition here.
“Blue Ocean Strategy” is about creativity and finding new markets that allow a company not to get involved in—and bogged down by—hyper competition, said W. Chan Kim, co-author of the book Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant, during an April 1 keynote presentation.
Blue Ocean Strategy is the complete opposite of the business strategy of direct competition—called Red Ocean Strategy—employed by most companies, Kim said. Red Ocean Strategy is about competing in an existing marketplace and focusing on beating the competition to exploit the existing demand, he said. In Red Ocean Strategy, companies develop a plan to knock out—or kill—the competition, leaving the market stained red with the blood of the defeated competitors, he said.
Conversely, because existing markets are shrinking, Blue Ocean Strategy emphasizes that companies create an industry—or product—and open new markets for that industry or product, Kim said. While creativity—or innovation—is at the core of Blue Ocean Strategy, not every company is going to invent something new, but a lot of creative people can reconstruct existing ideas, he said.
Kim said Starbucks’ success is not entirely because of the coffee sold at its locations. That company took the idea of a “mom and pop” coffee shop and combined it with the comfort of a modern hotel lobby such as a Marriott. While the mom and pop coffee shop might sell good coffee, the patrons who go there are mostly truckers who are not interested in having conversations, he said. But in the lobby of a modern hotel, it is much easier to start a conversation; therefore Starbucks combined good coffee with comfortable, friendly locations to sell coffee, he said. While it is true that Starbucks sells coffee, “what they are really selling is atmosphere,” he said. By changing the atmosphere in which coffee is sold, Starbucks created an uncontested market and made the competition irrelevant, he said. Starbucks “created and captured new demand,” he said.
HR’s ‘Blue Ocean’ Role
The role of human resource managers in firms that implement the Blue Ocean Strategy—so called because companies that adopt it are opening up new, uncharted waters—is to increase the link between a business’ strategists with the rest of the company in support of the strategy, Kim said. Research for the Blue Ocean Strategy took 20 years, and those studies have shown that companies’ boards do not regard HR managers as strategists, he said.
HR managers are seen as important, but they are not strategists, he said. Therefore, it is up to human resource departments to forge a substantial link with those who develop corporate strategy, he said. HR has to create bonds so HR managers can be in the role of developing corporate strategies, he said. “I can’t show you all of it, but I will stimulate your minds to see how the Blue Ocean Strategy will contribute to human resource managers,” he added.
J.J. Smith is editor/manager of SHRM Online’s Global HR Focus Area.
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