Krispy Kreme Applies Blue Ocean Strategy
It has been seven years since W. Chan Kim and Renée Mauborgne came out with a book called The Blue Ocean Strategy. In the Philippines, it is still relatively new.
It is rather odd that a few companies have invested in adopting a strategy that would allow them to get out of a situation where many businesses are competing in the same market with very similar products, where profits are eaten up by the costs of competition. This situation is called a Red Ocean.
In their book, Kim and Mauborgne chart out in detail how businesses can achieve high growth and profits by creating new demand in an uncontested market space, or a “Blue Ocean”, rather than by competing head-to-head with other suppliers for known customers in an existing industry.
Most would think that applying Blue Ocean Strategy would mean creating a new product or finding a new market — activities which could be as costly or even more costly than head-to-head competition. But this is not the case.
John Baybay, the senior strategy consultant and Blue Ocean Strategy expert of Impetus, describes how Krispy Kreme applied this business strategy and came out on top without having to come out with a new product or engage in different market:
While others try to compete with the closest competitors, it begs to ask: “Are we really in the business to make the best donuts? Knowing that we already make the best donuts, do we even stop there?” The answer for Krispy Kreme Philippines is a loud and resounding NO!
This focus on the big picture demonstrates how Krispy Kreme has adapted the principles and practice behind Blue Ocean Strategy (BOS). It started with the awakening that they are not competing with competitors drawn along similar categories (where their brand simply leads), but rather on alternatives. Rather than focusing on core donut users, they took a broader look into analyzing the non-customer’s perspective. Key managers took to the field to gather insights from other establishments that their industry would not consider as competition; here they realize that they are simply not competing for a larger share of a segment but rather competing for everyone else’s share of time and wallet.
With this perspective they learned that there is a large and uncontested market out there that their industry simply ignores and now has become the subject of courting.
Instead of bringing emphasis on internal processes, they turned their attention towards the actual Human Experience. Using tools such as the Buyer Experience Cycle and the Buyer Utility Map (BEC/BUM)**, managers were able to empathize with what is going on with the customer Before, During and After the use of their service offering. This developed a greater sense of empathy for their customers. Also by using the Buyer Utility Map, their managers were able to identify customer problems even before they happen.
While many companies are familiar with Blue Ocean Strategy, there still remains a misconception that BOS is about abandoning everything that we are doing now for something totally new and untested. The case proves however that BOS is a matter of changing the perspective away from competition towards things that create true value back to the customers (both existing and future customers). By using tractable tools and frameworks, managers are awakened towards a bigger picture of opportunity and an in-depth understanding of customer needs.
But how exactly did Krispy Kreme make long standing and well known donut brands in the Philippines irrelevant through its adoption of Blue Ocean Strategy?
Well, that’s something you have to hear John talk about and you can reach him by clicking “here”
