BOS014

How to Implement Blue

Ocean Strategy

07/2016-5624

This case was written by Katrina Ling, Institute Executive Fellow of the INSEAD Blue Ocean Strategy Institute, under
the supervision of Professors W. Chan Kim and Renée Mauborgne at INSEAD. It is intended to accompany the Blue
Ocean Strategy Implementation Interactive Class Exercise: Tipping Point Leadership and Fair Process in Action.
Additional material about INSEAD case studies (e.g., videos, spreadsheets, links) can be accessed at
cases.insead.edu.
Copyright © 2009 INSEAD
How to Apply Tipping Point Leadership and Fair
Process Principles to Implement Blue Ocean Strategy
Braynesbridge Industries (BI) is a conglomerate which manufactures products in cement,
aerospace, aluminum, steel, and ship building. Over the last 20 years, BI Steel had benefited
from a surge in demand for steel construction materials in the US and abroad, especially in
China and India. However, as China’s steel production capacity started to exceed its
domestic demand, a surplus supply of low-cost steel began to flood the global marketplace
and major steel manufacturers entered a red ocean of bloody competition. As a result, BI
Steel’s profitability has suffered a rapid decline in recent years. The situation in the US has
become so dire that upwards of 32 US steel companies have filed for bankruptcy and, along
1
with the filings, the elimination of over 100,000 jobs. To put the steel company on a
trajectory of strong profitable growth, the head of BI Steel has worked with his team to craft
a new strategy that would allow the company to break out of this red ocean of bloody
competition. Figure 1 shows the Strategy Canvas for BI Steel. It highlights the strategic shift
in the division’s strategy.

Figure 1 – Strategy Canvas for BI Steel

As Figure 1 illustrates, BI Steel’s new blue ocean strategy represents a substantial departure
from the way the business unit has traditionally operated, allowing it to break away from the
competition and achieve differentiation and low costs. To implement the new strategy,
however, BI Steel would have to overcome key organizational challenges, including the
cognitive, resource, motivational and political hurdles, as well as build trust and
commitment deep into its organization. Consider:

1 Dan DiMicco, CEO of Nucor, interviewed on 60 Minutes, February 15, 2009

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The Cognitive Hurdle. The cognitive hurdle refers to waking employees up to the need for
a strategic shift. In shifting to the new strategy, the key cognitive issue management faced
was getting BI Steel workers to recognize the need not only to eliminate the iron ore
smelting and the roughing mill processes, but also to drastically reduce the complexity of
other production processes. For example, the iron ore smelting process has been used by BI
Steel since its founding and has set the industry standard for decades. With iron ore
smelting being widespread and used by the company for decades, top management could
predict that workers experienced in using it would resist the need to change this time-tested
process. Foot-dragging and denial could be expected.

The Resource Hurdle. The resource hurdle refers to the limited availability of resources to
implement a new strategy. Executives often assume that the greater the shift in strategy, the
greater the resources needed to execute the shift. However, in BI Steel, as in many
organizations, resources were being cut, not raised. Due to BI Steel’s rapidly deteriorating
performance over the last few years, it was now cash-strapped and running out of time. In
order to ward off the encroaching creditors, the new division head had to implement the new
strategy fast without any additional resources.

The Motivational Hurdle. This hurdle addresses how to motivate employees and key
players to move fast and tenaciously to carry out a break from the status quo. In order to
implement the strategic shift at BI Steel, the new division head had to affect a change in the
company’s underlying culture to significantly raise workers’ sense of ownership. A sense of
ownership was critical to get all workers focused on driving down costs while driving up
quality and making innovative improvements to the way things got done. It was also critical
to the new performance-based compensation that was being put in place. If employees were
motivated to implement the new strategy their compensation based on performance would
go up, creating a higher level of motivation and with it even better corporate performance.
However, if employees were not motivated the reverse could be expected. Traditional
change efforts would have called for the issuance of a grand strategic vision to motivate the
masses from the top down. However, if employees had failed to see the connection between
the vision and their roles in the company, it would have inspired lip service rather than the
intended action. Furthermore, the use of time-consuming and costly training and
communication programs to satisfy a wide array of motivational needs simply was not an
option for BI Steel, where time was of essence and resources were scarce.

The Political Hurdle. The political hurdle refers to the need to overcome opposition from
individuals with powerful vested interests who fear a loss of position or stature as a result of
the strategic shift. For example, the elimination of the smelting process under the new
strategy made the smelting skill obsolete. Many of the workers who excelled at smelting
were second- or third-generation smelters who had learned their skills from the previous
generation and had worked in this same capacity their whole career. As a result, the
management at BI Steel could expect strong resistance when it came to implementing the
new strategy if management did not effectively address this hurdle upfront. With BI Steel’s
conversion from an integrated mill to a mini-mill structure taking more than a year to
accomplish, during this time strong opposition from these detractors could seriously delay, if
not derail, the entire implementation of the new strategy.

Despite the above organizational hurdles, the new division head was able to lead the
implementation team to successfully overcome them fast and at low cost. The team did so by

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challenging conventional logic and applying the principles of tipping point leadership and
fair process.

Braynesbridge Industries’ board, impressed with the effective implementation of the new
strategy, asked that the key players involved in the implementation be brought before them
so they could understand the key concepts used in achieving the implementation fast and at
low cost. Lessons learned from BI Steel would be transferred to the company’s other
business units which faced similar challenges and also needed to break out of the red ocean.

Your Challenge

As a key member of BI Steel’s implementation team, you will now participate in an

interactive class exercise that consists of general questions on tipping point leadership and
fair process, the key concepts behind the implementation of blue ocean strategy. The
questions are representative of those the BI board will ask the implementation team
members at BI Steel. Your team will be given a chance to select (by team rotation) one
question among the four key organizational hurdles, including the cognitive, resource,
motivational and political hurdles. Each question is worth from 100 to 300 points, depending
on the degree of difficulty. Incorrect and partial answers will cause your team to forfeit the
chance to score points on that question; it will also allow another team to earn points by
correctly answering the same question. Conversely, if another team fails to answer their
question accurately or in full, you and your team members will have a chance to win the
right to answer the selected question and score points. Your goal is to answer as many
questions as fully and accurately as possible during this exercise. At the end of the exercise,
team scores will be tallied and a winning team will be announced.

This is an important briefing for the board. There is talk about special recognitions and
promotions for members of the team who can contribute the most. The CEO is counting on
you to make a good impression on the board at their next meeting and to share your insight
into the key pillars of tipping point leadership and fair process.

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