Case example: Innovation culture change to blue ocean strategy…. 103

In the 21^st century, globalization reached the consumers. Blue ocean strategy was developed by Kim and Maubourgne (2004 a, b) to find strategic answers to the changing markets after the millennium. The authors’ central belief is that an enterprise should focus on value innovation and try to find unoccupied territory outside the conventional market boundaries. By focusing on those aspects of a product, service, or brand that customers value most, an enterprise develops a so-called blue oceanthat is an enduring own market set aside from competition and competitive thinking. As the blue ocean strategy is primarily about being innovative, it represents a change in innovation culture within the PNC framework. In the following, we use the PNC to show the consequences of the adoption of a blue ocean strategy. Figure 2.4 visualizes the direct and indirect effects of the blue ocean

innovating: These are the PNC aspects HRM and PRODUCTIONof the action links as well as SUPPLIER RELATIONSHIP, SELLING POINTS/PARTNERS, and CUSTOMER RELATIONSHIPof the relationship frame, all to be further elucidated in the following.

The strategy change might have the following effects on the culture aspects, visualized with blue borders in Figure 2.4. The enterprise should invest in, inform, and train employees for adapting the INTERNAL COMMUNICATION CULTURE, WORK CULTURE, and INCENTIVE CULTURE. These three culture changes influence HRM

which is one of the five aspects being marked with an “I”. Changing INNOVATION CULTUREimplements that the workforce has to be convinced about the new strategy and trained accordingly with the help ofHRM activities. HRM belongs to the five aspects the PNC suggests to focus on when changing to blue ocean strategy.

Investing into the EXTERNAL COMMUNICATION CULTURE to inform the customers might be a costly event but will help to communicate the strategy change. The costs might increase due to spending for the new strategy implementation of all changes in the links and COST CULTURE changes accordingly. Second to the COST CULTURE, the GOVERNANCE CULTUREhas to be adapted, no matter which other changes occur in the PNC. The PRODUCT CULTUREis influenced by PRODUCTION adaptation, to be further explained in the following.

activities. Only where external or internal R&D is centred, a blue ocean can be implemented. Therefore, it might be useful to interact with the customers for finding out which changes they value and to guarantee value innovation. The PNC thus suggests an interaction between R&D and CUSTOMER RELATIONSHIP. In order to guarantee a full implementation of the strategy changes, the enterprise might invest inHRM to inform and train its employees, as exemplified above. Next to HRM, where the enterprise should lay a focus on when innovating, PRODUCTION is marked with an “I” in Figure 2.4. Following the blue ocean strategy, PRODUCTION¹⁴should be adapted to produce those products and brands that are valued most by customers.

This might include a change in product range or quality which then results in changes in the PRODUCT CULTURE. One possible option is to produce customer-oriented products, depending on what customers value most. This can be evaluated by an interaction with CUSTOMER RELATIONSHIP and R&D. Another possibility could be to further invest in new JOINT-PRODUCTION ASSEMBLY which might help the enterprise to steadily innovate by these inputs. The PNC also suggests investing inSERVICEoptions. For example, implementing additional related services and/or adapting service quality might help to inform the customers and to strengthen CUSTOMER RELATIONSHIP. These changes are cost- and time-intensive and have to be planned in advance. Otherwise, SALESmight decrease if the product, brand, or service changes are not communicated sufficiently. ACCOUNTING and

EXECUTIVE MANAGEMENT have to be adapted by the enterprise in question.

Especially the latter influences SALESand should be adjusted no matter which other aspects change.

The relationship aspects are framed with violet colour in Figure 1.4 and can be found in the third column of the figure. The PNC suggests no needful changes in the public interest sphere, namely at RESPONSIBILITY. In regards to the mutual interest sphere, investing into ACQUISITIONS might help to innovate and to find new blue oceans. If any change is made in PRODUCTION, new raw material is needed. One possibility to sourcing is to deepen the relationship with existing suppliers by buying

marked SUPPLIER RELATIONSHIP with an “I” as we find it important to lay a focus on sourcing when innovating. The enterprise should inform its shareholders about the costs and effort on finding a blue ocean. The main aim could be to convince them of future investments and to show the positive effects of the strategy change. The

SHAREHOLDER/INVESTOR RELATIONSHIP could worsen because of high spending if the blue ocean strategy is not communicated well. Thus MARKETING AND MARKET COMMUNICATION is a crucial aspect of the trade interest sphere that the enterprise should invest in. On the one hand, informing the shareholders is important to guarantee future investing. On the other hand, it is central to report to the customers about the strategy change, also with the help of EXTERNAL COMMUNICATION CULTURE. In addition to informing customers of the changes in strategy and the impact of the changes on them, CUSTOMER RELATIONSHIP might be used to find out what customers value in order to follow value innovation. CUSTOMER RELATIONSHIP

has a feedback effect on SALES. Besides, SELLING POINTS/PARTNERS have to be sufficiently informed about the new products to adequately consult the customers.

That is why we marked it, next to CUSTOMER RELATIONSHIP, with an “I”. The main aim of the enterprise might be to implement an enduring competitive advantage (COMPETITIVE AND/OR COOPERATIVE RELATIONSHIPof the peer interest sphere).

Summing up the case study on blue ocean strategy in the PNC, it becomes obvious that the strategy changing enterprise has to face interacting developments. Only few different decision possibilities occur once having decided to change the strategy.

COST CULTURE, GOVERNANCE CULTURE, as well as EXECUTIVE MANAGEMENT have to be adapted anyways. If changing to blue ocean strategy, the enterprise in question’s main task is to inform share- and stakeholders as well as customers of the new strategy which causes, as the innovation itself, costs. To guarantee steady value innovation, CUSTOMER RELATIONSHIP belongs to the most crucial aspects for finding out what customers value most. Besides, we believe that focusing on HRM,

PRODUCTION, SUPPLIER RELATIONSHIP, as well as SELLING POINTS/PARTNERS might

2.5 Replacing encapsulated units by networks

Obviously, our PNC incorporates the enterprise-centered view of the 1980s and 1990s and adds the innovation economics aspects of the 21^st century. What differentiates our work from previous holistic models is that the PNC breaks the conventional understanding of enterprises with encapsulated business units and separate task forces. It thus adapts to globalized network markets in a new way as the PNC internalizes the present network effects to open network collaboration. As a consequence, the PNC strategy enables every employee in an enterprise, no matter where he or she operates, to actively participate in the wellbeing of the enterprise.

Thus, in the net, social and innovative input can be assigned in a novel way. The network enables employees to ask for, but also to transmit expertise. Due to the reputational memory of the network, the employees are rewarded accordingly.

Breaking with conventional matrix structures and working in an open network leads to a new efficiency in enterprises.

To give an example, we come back to the Porter’s (1980, 1985) cost leadership and differentiation strategy. Assuming that a company wants to change cost culture and follow a cost leadership strategy, the PNC implies that in contrast to conventional methods, costs cannot be cut independently in the different subunits. To be more precise, cost cutting becomes a networked priority. In contrast to a former anonymous, hierarchical system, each employee has the possibility to participate in the cost leadership strategy change. With the help of crowd sourcing and a collective intelligence of the network, previous communication problems can be healed. This collaborative and participative innovation might lead to innovative cost cutting approaches.

As crowd intelligence leads to an increase of innovative ideas, the enterprise can also benefit from these inputs for developing an efficient differentiation strategy.

whole system. Learning from the blue ocean strategy, the network will better evaluate values besides the customers’ values that are only visualized in the aspect customer relationship.

We can sum up the following benefits of the PNC. First, in the network, the influences of the different aspects that describe a strategy can be seen in a clearer way. Second, an open discussion with the crowd leads to a higher acceptance of decision of changes and decisions within an enterprise. Third, the vision of the enterprise becomes more transparent and leads to a more efficient execution of the company’s goals by each individual. The PNC combines former holistic strategy concept with aspects of the globalized network markets. It thus visualizes a possible perfect fit for the business environment at current economies. To further evaluate our PNC, we conducted a power network analysis of global companies that we will come to in the next part.