Blue Ocean Chapter 9 - Aligning the three propositions
This chapter talks about how one needs to align the three propositions to create a blue ocean that others can't replicate. The three are the value proposition, the profit proposition and the people proposition. Value proposition if of course the unique value for the customers - the job that gets done better cheaper. The profit proposition depends on the cost structure. If competitors do not understand and imitate the cost proposition, they would bleed and eventually have to stop. These two together are similar to the disruptive innovation proposition of opening up a market customer not served or who find existing services too expensive and quicky making it profitable to serve them. And finally, the people proposition which includes employees and all other stakeholders across the eco systems, including the channels for sales and delivery - the execution part. As the popular truism goes however good a strategy the true test is in the execution, which has to be really meticulous.
Since three elements have to interlock, it becomes difficult for competitors to imitate. They would be averse because the margins would slowly decline and after aligning so many elements, they may not get the same margins the first mover got. So they might even be reluctant to follow. That gives the one who has aligned the three elements some time to reap the markets.
One risk I see in aligning multiple elements to create an entry barrier is that the same thing can become an exit barrier. Once a company is locked into the blue ocean, I am not sure how easy it would be to unwind and move to the next thing, especially when it involves external stakeholders like suppliers and distributors.
Airbnb can be considered a good example. They have created the value proposition of cost effective rooms anywhere for the end customer enabling budget travelers to travel anywhere without worrying about accommodation costs. They have hit upon the right cost structure by not having any costs of their own unlike even the smallest of hotels who need to maintain infrastructure, and employees as well as lock in on certain level of minimum comfort level to cater to various needs. And finally the ecosystem - they have build the network of bed and breakfast places willing to lend. The network is the killer here. The idea won't work unless the network is in place and a competitor will find it very difficult to build such a network. Probably they have had to work on other elements such a reliability, safety, compliance to different government regulations across countries. etc. over time which will be difficult to replicate even if someone knew how to do it. I can't even imagine how someone can break the stronghold they have except by burning money and replicating everything they have done.