7|business model |
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“Surfing in a blue ocean is better than competing in a red ocean” [1]
Rebel Alliance Empowering, business model philosophy: surfing in a Blue ocean is better than competing in a Red ocean [2]
With the adoption of this organization model there’s an ease regarding the definition and application of a new business model: based on the theory of “reconstituting strategy” … “in which is the same strategy to define the business’s structure while the competitive strategies are based on a structural theories where the form, the same structure are the definitions of the strategy”.
For a long time, businesses have been moving a battle head-to-head with the rivalry, seeking for a constant and a profitable growth.
Firms have been fighting for the achievement of the competitive advantage and the piece of market, and are fighting for the differentiation.
However, in the industries/markets, which are now overcrowded, fighting a frontal battle with competition has, as a consequence, the need of competing in a bloody “red ocean”, full of rivals which fight for a profit potential which is lower and lower.
Although many agencies tend to compete in such “red oceans” – this is no longer going to represent a future growth engine.
For this reason the Rebel Alliance Empowering system is self-determining on the markets, seeking a new type of positioning defining a strategy inspired to a reconstructive view of business.
“don’t compete with the rivals, make them irrelevant!”
A reconstructive view of the strategy.
Regarding the relation between the structure of a segment and the strategic operations of the player belonging to it, there exist, fundamentally, two different views.
The structural view of the strategy is built on the economic theory of the Industial Organization [IO] [3] .
The model of the IO analysis is based on the paradigm “structure-direction-performance” [4] , which suggests the existence of a random flow which goes from the market’s structure to the business direction and then to the performance.
Market’s structure, determined from the conditions imposed by supply and demand, influence directly the direction of the sellers and the buyers which determines itself the final performance. The changings on the system are induced by factors which are external if related to the market’s structure. For example a fundamental change of the basic economic conditions or a technologic turn.
The reconstructive view, on the other hand, is based on the theory of the endogenous growth.
This theory dates back to the initial observation made by Joseph A. Schumpeter according to which the forces which lead the change of the economic structure and the sector’s scenario can have birth inside the same system.
Schumpeter supposes that the innovation can have its origin from an endogenous process and that its principal source is the Creative entrepreneur.
Innovation for Schumpeter, however, remains a “black box” because it’s the same product of the entrepreneur and it cannot be reproduced systematically.
Recently, the new theory of growth had several forward-steps on this front, showing that innovation can be reproducible endogenously through the comprehension of model o formulas which create its foundations.
Essentially, this theoretical development deleted the innovation formula – or the model relative to the knowledge and the ideas that underlie it – from the hands of Schumpeter’s “lonely entrepreneur”, opening the way to the systematic reproduction of innovation.
Despite this important development, however, what we need now is the understanding of which are these formulas or these models.
In absence of this, the knowledge and the ideas cannot be transmitted to actions to produce innovation and growth on the single enterprise.
The theory of the “reconstructionist view” [5] (1997-2009, Chan Kim e Renée Mauborgne) moves from the point in which the “new growth theory” stopped.
Basing on it, the reconstructionist view shows how the new knowledge are applied, to produce an exogenous growth for the benefit of the business.
Specifically, it suggests that this process of creation can happen in every organization and in every moment, rebuilding on a cognitive basis the existing data and the elements of the market in a totally new way.
These two views – structural and reconstructive – involve a whole lot of implications, important for the approach of the enterprise to the strategy.
The structural view (also known as “environmental determinism”) leads often to a strategic way of competition-based thinking, based on completion obviously.
Taking as given the market’s structure, it leads the enterprise to try to gain a defensible position in the existing market space.
To grant a sustainability on the market, the responsible of the strategy focus on the aim of gaining an advance on the concurrency, generally analyzing the moves the competitors and struggling to do better than them.
In this view, the conquer of a bigger piece of market is seen as a “zero-product game, in which the profit of an enterprise is the loss of another one”.
Form this we obtain concurrency as itself, as the side of the equation corresponding to the demand, which becomes the determining variable of the strategy.
This strategic view leads the enterprise to divide the segments in “attractive” and “non-attractive”, to choose, afterwards, if it’s the case or not to get in them.
After entering a segment, the enterprise chooses a distinctive positioning basing on costs or differentiation, the one that adapts better to its internal capacity and/or systems.
In this case, expenses and values of a company are considered as trade-offs. As the level of the total profit of the segment is determined exogenously from structural factors, the company tries basically to conquer and redistribute the wealth instead of creating it.
It focuses on the division of the business in “market shares”, which as said, the metaphor of the “red ocean”, the winning of a competition is just the loss of other competitors.
To the eyes of a reconstructionist, instead, the strategic challenge appears totally in a different way.
Recognizing that the structure and the boundaries of the market exist only in the mind of management, the makers of the strategy that follow this view don’t permit that the not-existing market structure restricts their thinking.
For these managers, outside of their companies, there’s an additional demand, which is ready to use. The crux of the problem is how to look for it.
This, itself, requires a moving of attention from the supply to the demand, from a focus on concurrency to a focus on the innovation of value: the creation of an innovative value, the aim of unlocking a new demand.
With a focus of this type kept in mind, the company can hope to reach the right innovation, looking systematically further than the consolidated boundaries of concurrency and rearranging the elements which nowadays belong to different markets to the point of rebuilding inside a new market space, capable of generating a new type of demand.
In the reconstructivist view it’s hard that a sector can be attractive or non-attractive itself, because the level of attraction of the segment could be altered with a conscious effort of the company, tended exactly to the reconstruction.
In the process of reconstruction, as the morphing of the market’s structures, there’s the changing in the “game rules” previously considered as best practices.
Stimulating the part of the businesses’ economy connected to the demand, the strategy of the innovation of the value expands existent markets and creates some new.
Basically, who introduces an innovation of values creates new richness instead of subtracting them from the concurrent, as the orthodox tradition of the managing sciences, that today become old in almost all of the cases.
This type of strategy permit’s the company to start a process which is fundamentally different from the “zero-result” method.
Where’s the difference, so, between the reconstruction and the “combination” and “re-combination” so often discussed in literature relative to innovation?
Schumpeter, for example, sees the innovation as a “new combination of productive ways” .
An example of reconstructive strategy [6] is the one defined from the Cirque du Soleil, were the focus is aimed on the relative side of the demand; the other vision instead proposes to recombine technologies and/or the existing productive means, often focusing on the relative side of the supply.
The elementary components of the reconstruction are the elements connected to the value offered to the costumer, which reside transversely on the boundaries of existing sectors.
We’re not talking about technologies, not even about production means.
Focusing on the relative side of the supply, recombination tends to create an unseen solution to an existing problem.
Looking, instead, to the relative side of the demand, reconstruction goes out of the cognition limits defined by the actual competitive rules and focuses on the final aim of redefining the same problem.
Cirque du Soleil doesn’t have the purpose, in fact, of offering a better Circus recombining the knowledge or the existence technologies regarding shows or performances.
Somewhat, there’s the purpose of rebuilding the existing elements connected to the values given to the buyers, to create a new form of entertainment which offers entertainment and thrill of circus together with the intellectual refinement of theater.
One other important example of “re-constructionism” is defined and adopted by Apple for the service/product iTunes.
Redefining the problem generally creates a change inside the whole system, where the recombination can aim to find new solutions for the activities of the different subsystems, which have the only function to reinforce the existing strategic positioning.
Reconstruction gives new outline to boundaries and to the structures and looks to a blue ocean, which is a new market space.
Recombination, on the other hand, tries to maximize the opportunities given from technologies leading to discover innovative solutions.
Embracing, so, the theory of the “constructive destruction” given by Schumpeter and the reconstructive-strategic one by Richard Normann, W. Chan Kim and Renee Mauborgne, Rebel Alliance Empowering business model aims to the renovation of the distinctive capabilities through which the capacity of the whole Organizing System for the creation of the value together with the costumer (and not FOR the costumer), redefining the boundaries of the market and of the single companies (or of the single professionals) which belong to it.
Rebel Alliance Empowering is, so, outlining a new concept of competitive strategy which leans toward the reconfiguration of a total business, through the identification of new market competitive factors and through the usage of dynamic relations of actors which find themselves interacting and integrating one another in a bigger system in the “constellation of value”.
With the adoption of this organization model there’s an ease regarding the definition and application of a new business model: based on the theory of “reconstituting strategy” … “in which is the same strategy to define the business’s structure while the competitive strategies are based on a structural theories where the form, the same structure are the definitions of the strategy”.
For a long time, businesses have been moving a battle head-to-head with the rivalry, seeking for a constant and a profitable growth.
Firms have been fighting for the achievement of the competitive advantage and the piece of market, and are fighting for the differentiation.
However, in the industries/markets, which are now overcrowded, fighting a frontal battle with competition has, as a consequence, the need of competing in a bloody “red ocean”, full of rivals which fight for a profit potential which is lower and lower.
Although many agencies tend to compete in such “red oceans” – this is no longer going to represent a future growth engine.
For this reason the Rebel Alliance Empowering system is self-determining on the markets, seeking a new type of positioning defining a strategy inspired to a reconstructive view of business.
“don’t compete with the rivals, make them irrelevant!”
A reconstructive view of the strategy.
Regarding the relation between the structure of a segment and the strategic operations of the player belonging to it, there exist, fundamentally, two different views.
The structural view of the strategy is built on the economic theory of the Industial Organization [IO] [3] .
The model of the IO analysis is based on the paradigm “structure-direction-performance” [4] , which suggests the existence of a random flow which goes from the market’s structure to the business direction and then to the performance.
Market’s structure, determined from the conditions imposed by supply and demand, influence directly the direction of the sellers and the buyers which determines itself the final performance. The changings on the system are induced by factors which are external if related to the market’s structure. For example a fundamental change of the basic economic conditions or a technologic turn.
The reconstructive view, on the other hand, is based on the theory of the endogenous growth.
This theory dates back to the initial observation made by Joseph A. Schumpeter according to which the forces which lead the change of the economic structure and the sector’s scenario can have birth inside the same system.
Schumpeter supposes that the innovation can have its origin from an endogenous process and that its principal source is the Creative entrepreneur.
Innovation for Schumpeter, however, remains a “black box” because it’s the same product of the entrepreneur and it cannot be reproduced systematically.
Recently, the new theory of growth had several forward-steps on this front, showing that innovation can be reproducible endogenously through the comprehension of model o formulas which create its foundations.
Essentially, this theoretical development deleted the innovation formula – or the model relative to the knowledge and the ideas that underlie it – from the hands of Schumpeter’s “lonely entrepreneur”, opening the way to the systematic reproduction of innovation.
Despite this important development, however, what we need now is the understanding of which are these formulas or these models.
In absence of this, the knowledge and the ideas cannot be transmitted to actions to produce innovation and growth on the single enterprise.
The theory of the “reconstructionist view” [5] (1997-2009, Chan Kim e Renée Mauborgne) moves from the point in which the “new growth theory” stopped.
Basing on it, the reconstructionist view shows how the new knowledge are applied, to produce an exogenous growth for the benefit of the business.
Specifically, it suggests that this process of creation can happen in every organization and in every moment, rebuilding on a cognitive basis the existing data and the elements of the market in a totally new way.
These two views – structural and reconstructive – involve a whole lot of implications, important for the approach of the enterprise to the strategy.
The structural view (also known as “environmental determinism”) leads often to a strategic way of competition-based thinking, based on completion obviously.
Taking as given the market’s structure, it leads the enterprise to try to gain a defensible position in the existing market space.
To grant a sustainability on the market, the responsible of the strategy focus on the aim of gaining an advance on the concurrency, generally analyzing the moves the competitors and struggling to do better than them.
In this view, the conquer of a bigger piece of market is seen as a “zero-product game, in which the profit of an enterprise is the loss of another one”.
Form this we obtain concurrency as itself, as the side of the equation corresponding to the demand, which becomes the determining variable of the strategy.
This strategic view leads the enterprise to divide the segments in “attractive” and “non-attractive”, to choose, afterwards, if it’s the case or not to get in them.
After entering a segment, the enterprise chooses a distinctive positioning basing on costs or differentiation, the one that adapts better to its internal capacity and/or systems.
In this case, expenses and values of a company are considered as trade-offs. As the level of the total profit of the segment is determined exogenously from structural factors, the company tries basically to conquer and redistribute the wealth instead of creating it.
It focuses on the division of the business in “market shares”, which as said, the metaphor of the “red ocean”, the winning of a competition is just the loss of other competitors.
To the eyes of a reconstructionist, instead, the strategic challenge appears totally in a different way.
Recognizing that the structure and the boundaries of the market exist only in the mind of management, the makers of the strategy that follow this view don’t permit that the not-existing market structure restricts their thinking.
For these managers, outside of their companies, there’s an additional demand, which is ready to use. The crux of the problem is how to look for it.
This, itself, requires a moving of attention from the supply to the demand, from a focus on concurrency to a focus on the innovation of value: the creation of an innovative value, the aim of unlocking a new demand.
With a focus of this type kept in mind, the company can hope to reach the right innovation, looking systematically further than the consolidated boundaries of concurrency and rearranging the elements which nowadays belong to different markets to the point of rebuilding inside a new market space, capable of generating a new type of demand.
In the reconstructivist view it’s hard that a sector can be attractive or non-attractive itself, because the level of attraction of the segment could be altered with a conscious effort of the company, tended exactly to the reconstruction.
In the process of reconstruction, as the morphing of the market’s structures, there’s the changing in the “game rules” previously considered as best practices.
Stimulating the part of the businesses’ economy connected to the demand, the strategy of the innovation of the value expands existent markets and creates some new.
Basically, who introduces an innovation of values creates new richness instead of subtracting them from the concurrent, as the orthodox tradition of the managing sciences, that today become old in almost all of the cases.
This type of strategy permit’s the company to start a process which is fundamentally different from the “zero-result” method.
Where’s the difference, so, between the reconstruction and the “combination” and “re-combination” so often discussed in literature relative to innovation?
Schumpeter, for example, sees the innovation as a “new combination of productive ways” .
An example of reconstructive strategy [6] is the one defined from the Cirque du Soleil, were the focus is aimed on the relative side of the demand; the other vision instead proposes to recombine technologies and/or the existing productive means, often focusing on the relative side of the supply.
The elementary components of the reconstruction are the elements connected to the value offered to the costumer, which reside transversely on the boundaries of existing sectors.
We’re not talking about technologies, not even about production means.
Focusing on the relative side of the supply, recombination tends to create an unseen solution to an existing problem.
Looking, instead, to the relative side of the demand, reconstruction goes out of the cognition limits defined by the actual competitive rules and focuses on the final aim of redefining the same problem.
Cirque du Soleil doesn’t have the purpose, in fact, of offering a better Circus recombining the knowledge or the existence technologies regarding shows or performances.
Somewhat, there’s the purpose of rebuilding the existing elements connected to the values given to the buyers, to create a new form of entertainment which offers entertainment and thrill of circus together with the intellectual refinement of theater.
One other important example of “re-constructionism” is defined and adopted by Apple for the service/product iTunes.
Redefining the problem generally creates a change inside the whole system, where the recombination can aim to find new solutions for the activities of the different subsystems, which have the only function to reinforce the existing strategic positioning.
Reconstruction gives new outline to boundaries and to the structures and looks to a blue ocean, which is a new market space.
Recombination, on the other hand, tries to maximize the opportunities given from technologies leading to discover innovative solutions.
Embracing, so, the theory of the “constructive destruction” given by Schumpeter and the reconstructive-strategic one by Richard Normann, W. Chan Kim and Renee Mauborgne, Rebel Alliance Empowering business model aims to the renovation of the distinctive capabilities through which the capacity of the whole Organizing System for the creation of the value together with the costumer (and not FOR the costumer), redefining the boundaries of the market and of the single companies (or of the single professionals) which belong to it.
Rebel Alliance Empowering is, so, outlining a new concept of competitive strategy which leans toward the reconfiguration of a total business, through the identification of new market competitive factors and through the usage of dynamic relations of actors which find themselves interacting and integrating one another in a bigger system in the “constellation of value”.
[1] Using the methapora Red and Blue Oceans, the theorists W. Chan Kim and Renée Mauborgne have defined the competitive arena where firms compete, with theirs new theory they suggest us that an organization should create new demand in an uncontested market space, or a "Blue Ocean", rather than compete head-to-head with other suppliers in an existing industry.
[2] Some quotes and concepts drawn from Blue Oceans strategy ( 2005, W. Kim & R. Mauborgne, Ocean Blu Strategy, Harward Business Review Press)
[3] The structuralist school of the economic theory called IO goes back to the paradigm structure-behavior-performance, introduced by Joe S. Bain. Basing on the cross-segment empiric framework, Bain focuses especially on the impact which structure has over performance.
[4] F.M. Scherer bases his work on Bain’s and tries to explain in detail the rout which goes from “structure” to “performance”, using behavior as a middle variable.
[5] Cfr : 1997. "Value Innovation - The Strategic Logic of High Growth". Harvard Business Review 75, January–February, 103-112. - 1998. Procedural Justice, Strategic Decision Making and the Knowledge Economy." Strategic Management Journal, April. - 1999. "Creating New Market Space." Harvard Business Review 77, January–February, 83-93. - 1999. "Strategy, Value Innovation, and the Knowledge Economy." Sloan Management Review 40, no.3, Spring. - 2000. "Knowing a Winning Business Idea When You See One." Harvard Business Review 78, September–October, 129-141. - 2002. "Charting Your Company's Future." Harvard Business Review 80, June, 76-85 - 2003. "Tipping Point Leadership." Harvard Business Review 81, April, 60-69. - 2004. "Blue Ocean Strategy." Harvard Business Review, October, 76-85. - 2009. "How Strategy Shapes Structure." Harvard Business Review, September, p73-80.
Reconstructionist View [from: Blue Ocean Strategy)
"Reconstructionist View recognizes that market boundaries and industry structures are not set and can be cognitively reconstructed in a fundamentally new way. As industry structure and market boundaries exist only in managers’ minds, the reconstructionist view asserts that existing market structures should not limit one’s thinking. In this worldview, extra demand is out there. The problem is how to create it. Therefore, under the reconstructionist view, attention shifts from supply to demand, from a focus on competing to a focus on value innovation―that is, the creation of innovative value to unlock new demand. With this new focus in mind, it is possible to systematically look across established boundaries of competition and reconstruct existing elements in different markets to create all new market space where a higher level of demand is generated."
[6] As reported in: “Blue Ocean Strategy” ( 2005, W. Kim & R. Mauborgne)
