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Taiwan's need for a `blue ocean' strategy

Conducting a study of 150 strategic moves spanning 120 years and 30 industries, W. Chan Kim and Renee Mauborgne, renowned professors at INSEAD business school and authors of Blue Ocean Strategy, outlined what they call "blue" and "red ocean strategies."

The blue ocean strategy focuses on value innovation to manage markets, while the red ocean strategy results in market competition focused on price competition.

Companies adopting the red ocean strategy will in the end shrink and disappear, while companies adopting the blue ocean strategy will generate their own value curve and break fresh ground.

Over the last decade, Taiwanese businesspeople faced with rising costs at home have dismantled their equipment and transferred operations to China where they have continued manufacturing their old products and fighting the same old price war.

The question is: Are they executing a blue or a red ocean strategy? What industries should Taiwan develop in the next stage to meet the requirements of the blue ocean strategy?

Judged by Harvard Business Review to have been the best business book of 2001, Good to Great: Why Some Companies Make the Leap, and Others Don't is a five-year collective work by Jim Collins, then a professor at the Stanford Graduate School of Business, and his research team.

After studying 6,000 reports on various enterprises, they identified 11 companies that had made the leap from good to great. The research conducted by Collins and his team suggests that successful enterprises all stress five managerial principles, including leadership characteristics, staff quality, principles for choosing projects, company culture and the ability to use technology to speed up company growth.

Among the five principles, the one used to choose new plans is called the "Hedgehog Concept." This concept consists of three dimensions, or circles, that outstanding companies follow when selecting their plans. The three circles are:

1. What you can be the best in the world at?

2. What drives your economic engine?

3. What you are deeply passionate about?

All three circles are required for any new plan, and the intersection of the three circles will be the new plan chosen by the company.

To become successful in the future companies in Taiwan will also have to follow this concept.

Taiwan has already come out ahead in the solar energy industry. Taiwan is also leading the world in the semiconductor industry, which, like solar energy, relies on silicon chips. However, the supply of materials for silicon chips is controlled by German and Japanese companies. This will force a vertical integration of the production of silicon chips, which will become a big industry. The recent inauguration of the Taiwan Solar Energy and Silicon Material Industry Association is a step in the right direction.

A delegation consisting of some 20 Taiwanese companies recently traveled to Middle Eastern oil-producers Bahrain and Qatar to attempt to market Taiwan's successful systems experience, including medical, health insurance and governmental digitization systems, and this is in clear compliance with the blue ocean strategy.

These are only two examples. As long as value innovation is based on Taiwan's advantages in industrial technology, operations and marketing, we will be able to create sustainable economic development for Taiwan.

Mike Chang is an accountant.

Translated by Daniel Cheng
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