Chan Kim, Chair Professor of INSEAD Business School delivered an energic and humorous speech at the Global Entrepreneurship Summit in Kuala Lumpur, after Malaysia PM Najib Razak and US Secretary of State John Kerry had opened it (see wrap up of the keynote). This professor is known for a strategy called “Blue ocean”. Blue, because he envision a business strategy they gets rid of competitors to focus on niche markets and customer experience. Ocean, “because it’s not a blue pond, you need to think big of course!”
This UX-based economy tries to improve a few figures from economic reports. For instance, the startup failure rate in the OECD is 48% on average, versus 60% in Malaysia. Improving even a bit in Malaysia will generate millions. Malaysian SME could also do better, as they occupy 56.4% of the workforce (77% in OECD countries), but account for only 32.7% of the GDP (54% in OECD countries). Productivity must be raised, and innovation is a key driver. But what kind of innovation?
Chan Kim tells us about the two types of innovation
- On the one hand, Schumpeterian innovation. The boss has animal instincts. He learns from trial and error, and fights a lot against an ever-standing and renewing competition. Napster or Segway are typical: a strong innovation, a huge buzz, even a huge user base or funding, but a failure in the end.
- On the other hand, Blue ocean innovation. Entrepreneurs can be educated, and provided they have the right methodologies and tools, they can minimize failure. Innovation is driven by the consumer and the demand, rather than supply-side.
A good example of Blue ocean in practice is the Dollar Shave Club. Traditionally, the shavers market is a red ocean, tainted of the blood of a ferocious competition. And the consumer is screwed: either he pays a lot for a highly qualitative shaver, or he pays almost nothing but get cuts, bumps, wounds every time he shaves.
Dollar Shave Club applied the 3-tier non customer analysis to get out of the red ocean and to think out the box of “what are costumers wanting/buying”. They focused on:
- soon-to-be non customers (dissatisfied razors users)
- refusing customers (dry shave users)
- unexplored non-customers (occasional shavers, barber shop goers)
With zero marketing, a viral video and a community with an access to social media, a new pricing plan of $1/month and a home delivery on time, Dollar Shave Club answered many undressed needs of the shavers (who don’t want to pay the marketing of Gillette and Roger Federer, for one). ROI of Dollar Shave Club: 10M video views, $1.1 million monthly sales, 62% gross profit margin, and even 10.9M Silicon Valley funding !
In Malaysia, the Blue ocean strategy makes also a few hits, such as AirAsia, and the newly “5 star quality, 1 star price” hotel chain Tune hotel, which offers a night for RM 9.99 (about $2) with security and a clean room, and nothing else. Epal sewing school, a social venture from Malaysia, also used the same to answer women’ need to master sewing, they now have 18stores in Malaysia, 2 in Jakarta, 27 000 women members earning up to RM 200/machine in sales commission.
This same blue ocean strategy was used by Obama, who addressed citizens not voting, by addressing their needs and getting in touch in a personal way with them (e-mail marketing based on data, social media).
For national policies, it’s the same, says Chan Kim: the big regions of the world have key cultural traits, that a government agency can leverage to find its own Blue ocean strategy:
- Silicon Valley is private sector driven
- Nordic countries in Europe are community and cooperatives driven
- Asia societies are government and clan driven
To differentiate, a state could decide not to focus on but on struggling entrepreneurs, failed entrepreneurs, and this who never considered to become entrepreneurs (women, poor, elderly)
In a nutshell, Chan Kim offers an interesting point of view to break our intuition, think out of the field we think we should be, and find our own blue ocean, where competition is less intense, and the value more obvious.
Check out ourÂ report on Malaysia innovation ecosystemÂ on Slideshare too