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Toward a “Green Ocean Strategy”

| Friday October 9th, 2009 | 1 Comment

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iStock_000008899548XSmallBy Jacob Park
Managers must start to recognize environmental improvement as an economic and competitive opportunity…it is time to build on the underlying economic logic that links the environment, resource productivity, innovation, and competitiveness. – Michael Porter

What do SUVs, genetically modified organisms, and fast food all have in common? They’re all antithetical to sustainability…and they’re all described as exemplary “blue ocean” strategies.

Blue Ocean Strategy was published in 2005 by W. Chan Kim and Renée Mauborgne to considerable critical acclaim in the business press. Having sold more than two million copies in 41 languages it has already exerted a significant impact on the theory and practice of business strategy.

However, while it may serve as an admirable guide to creating new market space and rendering the competition (at least temporarily) irrelevant, its value is arguably diminished by an increasingly anachronistic lack of engagement with issues of sustainability. There need be no disconnect, however, and I suggest that the core concepts of Blue Ocean Strategy could be strengthened by the judicious integration of key sustainability principles. Here are a few suggestions.

Radical Resource Productivity – Kim and Mauborgne repeatedly stress the need to do more with less. Indeed, their central idea of “value innovation” is predicated on just this notion. The injunction is further elaborated in their observation that “tipping point leaders” are able to “jump the resource hurdle” by “multiplying the value of the resources they have.” Although they are referring explicitly to money, time, and attention, it is a simple matter to extend their concepts of “hot spots” (activities that have low resource input but high potential performance gains), “cold spots” (activities that have high resource input but low performance impact), and “horse trading” (exchanging a business unit’s excess resources in one area for another unit’s excess resources to fill remaining resource gaps) to energy and materials as well.

Kim and Mauborgne’s discussion of value innovation is strikingly reminiscent of the description of radical resource productivity in the sustainable business classic, Natural Capitalism: “Companies and designers are developing ways to make natural resources—energy, metals, water, and forests—work five, ten, even one hundred times harder than they do today. These efficiencies transcend the marginal gains in performance that industry constantly seeks as part of its evolution. Instead, revolutionary leaps in design and technology will alter industry itself.” Dematerialization, design for sustainability, biomimicry, cradle-to-cradle, closed loops, zero toxicity, and zero waste could be integrated under the same heading.


Managing for Stakeholders
– Blue Ocean Strategy rightly emphasizes the importance of “fair process”—via engagement, explanation, and clarity of explanation—to build trust and commitment and to inspire voluntary cooperation from employees. This approach is also suggested as a way to “educate the fearful” stakeholders (defined as employees, business partners, and the general public ) as a final component in the strategic sequence.

Although their discussion of procedural justice vis-à-vis employees is rather progressive, Kim and Mauborgne’s description of engagement with the general public seems somewhat less than dialogical: “the key challenge is to engage in an open discussion about why the adoption of the new idea is necessary”(emphasis mine).

In Managing for Stakeholders, R. Edward Freeman, Jeffrey S. Harrison, and Andrew C. Wicks describe how successful businesses see themselves as vehicles for maximizing not just shareholder value, but also stakeholder value. They encourage businesses to ask how they can create as much value as possible for all stakeholders and to reject Manichean tradeoffs—in much the same manner as Kim and Mauborgne assert that innovation and value should not be seen as inversely related.

Managing for Stakeholders delineates a two-tier “stakeholder map” in which the first tier, primary stakeholders, is comprised of customers, employees, suppliers, financiers, and communities, and the second tier includes the government, media, competitors, special interest groups, and consumer advocate groups. This expanded set of stakeholders is considerably broader than that defined by Blue Ocean Strategy.

At the same time, it’s not dissimilar to Kim and Mauborgne’s three tiers of “non-customers.” Just as Blue Ocean Strategy enjoins businesses to look beyond market boundaries to engage with the needs of non-customers, a green ocean strategy would seek ways to engage with those persons beyond narrowly defined stakeholder boundaries. A greater emphasis on transparency, ethics, and diversity could be integrated in a similar fashion.

Cooperation – Although swimming solo in a tranquil blue ocean is undoubtedly an improvement over bloody competition in a red one, would not cooperation be an even greater evolutionary leap? For, ultimately, how many blue oceans can one planet support? If permanent revolution is incompatible with the Second Law of Thermodynamics can we imagine a world in which companies aren’t forced to choose between fighting to the death and perpetually creating new uncontested market spaces?

Although it’s far from obvious, an answer may be hinted at by examining the innovative industrial ecology of Kalundborg, Denmark, described by Daniel Esty and Andrew Winston in Green to Gold as a place where “a series of companies are linked through a web of resource and waste flows some have dubbed ‘industrial symbiosis.’’ […] Everyone involved saves resources, time, and money.”

Blue Ocean Strategy offers compelling ideas for how businesses can excel within a neoclassical economic paradigm. However, to remain relevant today it needs to be updated to account for the exigencies of our rapidly warming and resource-constrained world.

Jacob Park is an international man of mystery and sustainability. He has monitored elections in Kyrgyzstan, taught literature in Paris, and watched The Simpsons with leftist rebels in Mexico. Having spent years working on human rights issues and political activism in New York City, he recently relocated to San Francisco to pursue an MBA in Sustainability at the Presidio Graduate School.

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  • Ted Ocampo,DLSU DBA student

    I am a passionate advocate of green economy. I want to contribute in whatever way to propagate this green economy mindset for the benefit of our planet and future generations.
    For government to pursue relentlessly green initiatives to the greatest number of its constituents-transport system, forest, green buildings, green communities- to reach a carbon neutral nation status and corporations to be active participants in green growth strategies. sustainable production(green production) and consumption(green marketing). This article by Jacob Park comes in perfectly to contribute to this green economy mindset.. Ted Ocampo, Doctoral student, DLSU, Manila, Philippines