Wednesday, July 07, 2010

Curves: Not Such a Blue Ocean After All

I really like some of the concepts and frameworks offered by Kim and Mauborgne in their best-selling book, Blue Ocean Strategy. However, I think they do a disservice to themselves by positioning their framework against Michael Porter's classic work on strategy. To me, they set up a straw man for the purpose of making their argument more interesting and provocative, but it's not an accurate depiction of Porter's ideas. Moreover, some of the assertions they make simply don't hold water. For instance, they hold up Southwest Airlines as one of their examples, yet how can one possible argue that they are an example of a firm that has achieved both low cost and differentiation? Remember, in Porter's framework, differentiation does NOT mean simply being different. It means charging a price premium, and in so doing, driving a wider wedge between willingness to pay and cost than the average industry rival. Southwest clearly is not about differentiation in that sense. They are a classic low cost competitor.

In their work, Kim and Mauborgne use Curves, the women's fitness center, as one of their examples of a blue ocean strategy. Yet, today, we read in the Wall Street Journal that Curves has hit hard times. The firm has closed roughly 1/3 of its outlets in the past three years. What's interesting to me is that I've often taught a case study about the fitness center industry as a mechanism for introducing Porter's five forces framework of industry analysis. Using that framework, one concludes rather quickly that the fitness center industry is a horrible one. It's incredibly unattractive. It seems, then, that the unattractive industry structure has overwhelmed the "blue ocean" aspects of the Curve strategy. Perhaps Porter's framework is more useful than Kim and Mauborgne care to acknowledge.

It reminds me of a great quote from Warren Buffett: "When a manager with a reputation for brilliance tackles a business with a reputation for bad economics, the reputation of the business remains intact."


Magicard ID card Printers said...

Blue Ocean Strategy has become an International Bestseller, after reaching the Wall Street Journal Bestseller, BusinessWeek Bestseller, and National (American) Bestseller status.

Unknown said...

I think you're right. There are "Blue Ocean" companies out there, but most often they just create a new market to use Porter's model in.