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Blue Ocean, Value Chain and more

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Last week was busy in my MBA - the Environmental Analysis Paper took most of my time in research. I am happy with the end results, especially because I am using this exercise to help me the strategy for next fiscal year; at the end the result of this class may be my actual strategic plan, or very close. The timing of this class could not be better: the FY10 planning cycle has just started, and I have been using the concepts in the real life.

This week's discussions in class were, once again, excellent. The "blue ocean strategy" thread was really interesting; I had not heard about the concept yet, and as I learned about it I realized it makes a lot of sense. Along history, we can see many examples of companies who had their "blue oceans" until competition appeared and transformed it into a "red ocean". Innovation is the main factor that would allow a company to establish a blue ocean; I also thought about the opposite: companies that remain so much time in a "red ocean" until they lose sight of what it really important to drive shareholder wealth. Sometimes a whole industry collapses or loses its relevance; firms that realize that first, create their "blue oceans" and leave the moribund industry are the ones who write theis success stories.

The thread on value chain analysis was a highlight. I thought it was similar to the Six Sigma process improvement methodology. The interesting thing about value chain is that a company is never an isolated entity, and as such it is part of a value chain system, with upstream suppliers and downstream buyers; a firm's competitive advantage depends on this value system.

A discussion on the sources of competitive advantage was very enlightening; my opinion is that it is better for a firm to pull from the three sources (cost, differentiation and speed) so it can create its competitive advantage in the market. By pulling from these three sources, a company can have a better mix that makes it unique and difficult to imitate, which is the ultimate competitive advantage. In the end, the competitive advantage strategies need to match the industry stage, whether it is emerging, maturing, or declining, and its nature: fragmented, global, local, etc.

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