Chapter 6: Get the Strategic Sequence Right

Introduction: Chapter 6 focuses on the importance of getting the strategic sequence right when implementing a Blue Ocean Strategy. The authors argue that following a specific sequence of strategic actions is crucial to successfully creating a Blue Ocean and maximizing its potential for growth and profitability.

The Four Steps of the Strategic Sequence: The chapter outlines four essential steps that companies should follow in the strategic sequence:

1. Step 1: Buyer Utility – Address the Buyer’s Experience: The first step is to create a compelling buyer utility, which refers to the overall value and satisfaction that buyers experience when using a product or service. Companies should identify what elements of the offering can make the buyer’s life easier, more enjoyable, or more productive. By understanding buyer preferences and pain points, companies can create products and services that generate high utility and attract a broad customer base.
2. Step 2: Price – Set the Right Strategic Price: The second step involves setting the right strategic price for the offering. Instead of focusing on cost-based pricing, which is common in Red Ocean markets, companies should adopt a value-based pricing approach. The price should reflect the unique value proposition and the leap in value that the product or service offers to customers. By providing exceptional value at an attractive price, companies can create demand and drive customer adoption.
3. Step 3: Cost – Align the Cost Structure with the Value: The third step is to align the cost structure with the value provided to customers. Companies should identify and eliminate cost drivers that do not contribute significantly to buyer utility. By streamlining operations and optimizing resources, companies can achieve a lower cost structure without sacrificing the unique value proposition. This allows for competitive pricing while maintaining healthy profit margins.
4. Step 4: Adoption – Overcome Barriers to Adoption: The final step is to ensure successful adoption of the Blue Ocean Strategy within the organization. Often, employees may resist change or find it challenging to embrace a new strategic direction. It is essential to overcome internal barriers by engaging employees and aligning their efforts with the new strategy. The authors stress the importance of “Fair Process,” which involves involving employees in the decision-making process, providing clear explanations for strategic choices, and ensuring consistency in the execution.

Sequencing Matters: The chapter emphasizes that the sequence of these four steps is crucial. Each step builds on the previous one, and getting the sequence right is essential for the successful implementation of a Blue Ocean Strategy. For example, setting a low price without first delivering sufficient buyer utility or optimizing the cost structure may lead to financial challenges and limited market acceptance.

Long-Term Sustainable Advantage: By following the strategic sequence, companies can create a long-term sustainable advantage. The Blue Ocean Strategy is not about just launching a one-time innovation; it is about consistently delivering superior value to customers and maintaining a distinct market position.