The creators of Blue Ocean Strategy recently a wrote Harvard Business Review article called “How to Achieve Resilient Growth Throughout the Business Cycle”
In it they address this fundamental question: How do you build growth and resilience, irrespective of the stage of the business cycle?
Below I summarise some of the key insight from the article:
Strategize like a market-creator
The authors Chan Kim and Renee Mauborgne argue that based on their 30 years of research, they have identified two types of strategy:
1. Market-competing strategy, which focuses on beating rivals in existing markets, and
2. Market-creating strategy, which focuses on generating new markets.
While both types of strategy have their role to play, companies pursuing market-creating strategies are not only better positioned to unlock a growth edge when economic conditions are favorable. They are also able to generate resilient growth during unfavorable economic conditions.
Red ocean and blue ocean strategies are not a binary choice. You need both. But while you’re already focusing on market-competing strategies, ask yourself how much of your focus is going to market-creating moves that generate the resilient growth.
How to build resilient growth
There are four actions companies take to best manage growth through market cycles:
1. Focus on building a healthy, balanced portfolio of market-competing and market-creating strategic moves.
Both are important. While market-competing moves generate today’s cash, market-creating moves ensure tomorrow’s growth.
2. Don’t wait for growth to slow to make market-creation a strategic priority.
Prepare in advance. You’ll be buffered by your market-creating move in a downturn cycle only when your market-creating move is already launched or set to launch. Don’t wait. Act now.
3. Ensure your market-creating efforts are a core component of your strategy.
It shouldn’t be siloed into a function, effectively a side show. If you want to achieve market-creation you need to make it a priority.
4. Remember, technology itself doesn’t create markets.
What creates new markets is the use of technology and whether it provides a leap in value to the buyer. Ask yourself: Is it linked to value innovation or not?
In a nutshell, the principles focus on both (i) leaders being aware and fully committing to exploring opportunities beyond the short-term and (ii) organisations being organised – or ‘building the muscles’ – through culture, systems, processes and talent to embed the focus on exploring and exploiting market-creating growth opportunities.
The late Professor Clayton Christensen and co-authors applied these theories to the prosperity and income inequality challenges the world faces and continues to face today with the book The Prosperity Paradox
This book and Blue Ocean Strategy is a must-read for anyone wanting to learn more about market-creating innovations.