In the book The Life of Reason, the American philosopher George Santayana states that “those who cannot remember the past are condemned to repeat it.” Those of us who want IT to be viewed as something more than a “utility” need to hearken to these words, for many IT groups are on the verge of repeating the past and being condemned to the role of “commodity”.
In 2001 I wrote a column for Network World stating the strategic role of IT was in jeopardy because IT groups were not understanding the business uses of new technologies. Prior to this IT had started to gain a seat at the strategic table as companies implemented new technologies at a feverish pace. However, with the dot-com bust and the slowdown in new implementations, that role was at risk. In addition, IT departments weren’t helping matters by continuing to focus solely on how technologies worked and not understanding how companies could technology to increase profits, reduce costs, or gain competitive advantages.
In my column, I used the Web as an example. IT knew how the Web worked, but they failed to understand the strategic value the Web could bring. Instead of being viewed as the leaders in Web strategy, the IT groups were relegated to a support role with non-IT departments such as Marketing assuming the lead in defining Web strategy.
Fast forward seven years and the IT department in many companies is on the verge of making the same mistake with Web 2.0. Web 2.0 applications can provide a “richer” user experience which will create new ways for companies to use technology; yet how many people in IT really understand the business value of Web 2.0?
Most developers probably know how mash-ups, RSS, Wikis, and Blogs work; but how many IT departments are working to understand how these applications can bring value to the company? How many IT groups are actively leading the discussions with Sales, Marketing, HR, Training, and Legal on how these technologies can provide competitive advantage, reduce costs, or create operational efficiencies?
Now don’t get me wrong. I know there are IT groups out there taking the lead in Web 2.0. However, I also know that there are just as many – if not more – IT departments that are not involved in those conversations. As with Web 1.0, many of the Web 2.0 business strategies are being developed by non-IT departments. In many companies IT has already lost its seat at the strategic table and is viewed as a utility that “powers” the business strategy. The primary involvement of these departments in Web 2.0 is to provide the hardware, infrastructure and computing services to support the business strategies set by others.
Before I get a rash of comments, let me state that I agree wholeheartedly with the service/support component of IT. The provisioning and support of computing services is an integral part of any IT department and I am a proponent of ITIL, COBIT, and other disciplines that will enhance the service and support that IT provides.
But IT can be more than just a utility. As technologists, the IT group can and should be driving the adoption of new technologies and not just supporting them. CIOs and CTOs should have a seat in both the computer room and in the boardroom. And they can, if they remember the past and not repeat it.
(This is an update to a column I originally wrote for Network World. The original article is copyright 2008 by Network World, Inc., 118 Turnpike Road, Southboro, MA 01772. Reprinted from Network World.)
Wednesday
Monday
Strategy: Red or Blue?
Does your company swim in the Red ocean or the Blue ocean? This is the intriguing question asked in “The Blue Ocean Strategy” by W. Chan Kim and Renee Mauborgne – professors at INSEAD, the worlds second largest business school located in France. In the “Blue Ocean Strategy”, Kim and Mauborgne develop an alternate view of business strategy that goes against the grain of the accepted notions of strategic planning.
At the risk of being over-simplistic, traditional business strategic planning - which is heavily influenced by the writings of Michael Porter – focuses on creating competitive advantage through either cost reduction strategies OR product differentiation strategies. This type of strategy, according to Kim and Mauborgne, puts a company in the Red ocean – the known marketplace. Red ocean companies aggressively compete against each other for a larger piece of the existing market. As more companies enter the Red ocean the potential for increased marketshare is reduced which creates increased competition and turns the water “bloody” or Red.
The Blue ocean, on the other hand, is wide open. There is no competition because the marketplace is not defined. Companies create consumer demand instead of fighting for it. Blue oceans are not new. As Kim and Mauborgne note, just think of the industries that exist today that did not exist thirty years ago: mutual funds, DVDs, cell phones, digital cameras, juice bars, express delivery, etc. Companies jumped into the Blue ocean and created the markets for these products that many of them now dominate. And they did it with an emphasis on BOTH product differentiation AND cost reduction.
Kim and Mauborgne cite Cirque du Soleil as an example. Cirque du Soleil re-defined the concept of “circus” to provide a new entertainment experience at a lower cost than a traditional circus. By doing this, they created a new marketplace that was totally unique with no competition – a Blue ocean. As the only swimmer in that ocean, the marketplace was theirs.
The Blue Ocean Strategy is a thought-provoking book for anyone involved with business strategy. I can’t think of many strategists who would deny that creating demand is a much better strategy that competing for limited marketshare. But the question I have is how realistic is this strategy for most companies? How many Blue oceans can there be? How often can you re-define an airline, computer, camera, shoe, radio, television, refrigerator, car, shirt, etc.? Granted there will be innovators, but can every company be an innovator?
Kim and Mauborgne themselves state that Red oceans and Blue oceans have always coexisted and always will. There will always be Red oceans. However, Kim and Mauborgne make the argument that the Blue ocean strategies in the past have been largely “unconscious” and by raising the awareness of the underlying logic of these strategies, companies will be able to create more Blue oceans.
The jury is still out on Blue Ocean Strategy. On one hand I see a lot of value in this type of thinking and on the other hand I question how much real value most companies can truly obtain though this type of strategy. Can you really formalize into a logical process the unconscious innovative thinking that creates Blue oceans? Or are these “Eureka” moments the result of creative intuition that defies logic?
At the risk of being over-simplistic, traditional business strategic planning - which is heavily influenced by the writings of Michael Porter – focuses on creating competitive advantage through either cost reduction strategies OR product differentiation strategies. This type of strategy, according to Kim and Mauborgne, puts a company in the Red ocean – the known marketplace. Red ocean companies aggressively compete against each other for a larger piece of the existing market. As more companies enter the Red ocean the potential for increased marketshare is reduced which creates increased competition and turns the water “bloody” or Red.
The Blue ocean, on the other hand, is wide open. There is no competition because the marketplace is not defined. Companies create consumer demand instead of fighting for it. Blue oceans are not new. As Kim and Mauborgne note, just think of the industries that exist today that did not exist thirty years ago: mutual funds, DVDs, cell phones, digital cameras, juice bars, express delivery, etc. Companies jumped into the Blue ocean and created the markets for these products that many of them now dominate. And they did it with an emphasis on BOTH product differentiation AND cost reduction.
Kim and Mauborgne cite Cirque du Soleil as an example. Cirque du Soleil re-defined the concept of “circus” to provide a new entertainment experience at a lower cost than a traditional circus. By doing this, they created a new marketplace that was totally unique with no competition – a Blue ocean. As the only swimmer in that ocean, the marketplace was theirs.
The Blue Ocean Strategy is a thought-provoking book for anyone involved with business strategy. I can’t think of many strategists who would deny that creating demand is a much better strategy that competing for limited marketshare. But the question I have is how realistic is this strategy for most companies? How many Blue oceans can there be? How often can you re-define an airline, computer, camera, shoe, radio, television, refrigerator, car, shirt, etc.? Granted there will be innovators, but can every company be an innovator?
Kim and Mauborgne themselves state that Red oceans and Blue oceans have always coexisted and always will. There will always be Red oceans. However, Kim and Mauborgne make the argument that the Blue ocean strategies in the past have been largely “unconscious” and by raising the awareness of the underlying logic of these strategies, companies will be able to create more Blue oceans.
The jury is still out on Blue Ocean Strategy. On one hand I see a lot of value in this type of thinking and on the other hand I question how much real value most companies can truly obtain though this type of strategy. Can you really formalize into a logical process the unconscious innovative thinking that creates Blue oceans? Or are these “Eureka” moments the result of creative intuition that defies logic?
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