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Strategy

How One Company Turned the Recession into an Opportunity – and Thrived

W. Chan Kim and Renée Mauborgne, INSEAD Professors of Strategy and Co-Directors of the INSEAD Blue Ocean Strategy Institute |

We recently had the opportunity to interview Shawn Busse, CEO of Kinesis – a Portland marketing firm founded in 2000. When his company started to feel the impact of the downturn in 2009, Shawn turned to Blue Ocean Strategy to change the course of the company and steer it towards uncontested market space. This blue ocean journey has allowed Kinesis to enjoy becoming one of the Portland Business Journal’s 100 fastest growing private companies three years in a row, and be selected as a 2015 Portland Business Journal Small Business & Innovation Award honoree.

Here is our interview with Busse:

Kim & Mauborgne: Effective branding rests on bringing creativity to bear on what companies do. How would you describe the branding industry and what are the challenges Kinesis faced?

“If ever there were a red ocean market space it would be in the branding arena!”

Shawn Busse: As the recession brought to light, if ever there were a red ocean market space (a crowded, competitive market) it would be in the branding arena!  It is incredibly crowded. Branding agencies are everywhere, and at all different price points – from a freelancer to help with your logo, all the way up to global branding agencies with huge staff, designed to serve Fortune500 companies.

Before the recession, we were riding the wave of a good economy – people had money to spend and work was just coming in. We had no idea how crowded the market was or that it was even bad to be in a red ocean.  Kinesis has been around since 2000 – which is pretty long, considering marketing firms usually come and go with the economy. I would say that for the first ten years, we were fine with being a branding agency that helps companies to communicate how they are exceptional, and to visually demonstrate their uniqueness in the market place.

But the recession really highlighted how red that ocean was, and also how customers do not necessarily want to pay for that kind of work when times are tough. So we faced two huge challenges: a very crowded market place, and doing work we discovered was seen as just a “nice-to-have” only when the economy is strong. 

Kim & Mauborgne: What inspired you to apply blue ocean strategy in 2009?  

Shawn Busse: Right around 2009, I started thinking the business model of the industry was not all it was cracked up to be. I read a number of books during that time, including Blue Ocean Strategy. I quickly realised my company was in a red ocean. This happened almost at the same time as we were starting to feel the impact of the downturn.

“What I have seen over and over again is when people stay in their red ocean, they go and hire a marketing agency for this kind of miracle that they are hoping for and it does not happen. Then, they fire the marketing agency and go hire another marketing agency. They face the same problem over and over again.”

As I started to analyse our business model, I realised we were fighting these huge players that we were never going to be – and principally using the same strategic approach, just on a smaller scale. That is when I knew we had to change the business 180 degrees.  To be in an overcrowded industry – and do the same things as the large guys do but with a tiny fraction of the resources – is not smart.  Blue ocean strategy crystallised this for me, and gave me a language system to understand that we were in a red ocean and we needed to get out and create new market space.

Kim & Mauborgne: Blue ocean strategy is about creating new demand and looking to noncustomers of the industry.  How has Kinesis’ strategy shifted in this regard? 

Shawn Busse: We used to work with marketers within a company of any size. We worked with anybody from small start-ups to global players, and marketers would ask us to help them with their branding initiative. We were competing for these projects with other agencies and sometimes there were requests for proposals (RFPs), which as we all know are costly and time-consuming to produce. One day, that work effectively stopped. It was like somebody just turned off the phone. So, in a few months, we went from being a healthy company to major lay-offs. We went down to no staff at all. It was emotionally tough, nobody likes to lay people off.

I started asking questions about the business model and the existing market space, and I realised we needed to create something different.  As I analysed the industry, I saw that all of our customers (who were marketing managers or marketing coordinators within companies) were either being fired or had their budget eliminated.  But if marketing is supposed to bring customers to your door, and supposed to help you grow revenues, why were these marketing functions and the people in them being disempowered? The more I asked this question, the more I realised that there was a fundamental problem with marketing: business owners were not able to see how marketing is connected to the profit and loss statement.

That was the beginning of this journey of realisation. This disconnection between executives and marketing was actually pretty profound, and the blue ocean opportunity we saw was to close that gap. In order to do that we shifted our buyer group from marketing managers to the heads of the companies.  We wanted to build a place where we were actually just working with the owner of the company, and the intermediary was eliminated.

Kim & Mauborgne: Shifting the buyer group the industry focuses on is one of the six paths to new market space. As a small company without a big staff, how did you apply blue ocean strategy? And who were the noncustomers you focused on?   

“Blue ocean strategy is one of the ideas which, without it, would not have made me half as successful as I am today.”

Shawn Busse: After thinking through blue ocean strategy, it was clear we had to aim to operate in a marketplace where there is little to no competition – and to create an offering that had not existed before.  That, in itself, fundamentally shifted our thought process. It led us to ask what to eliminate, reduce, raise, and create to stand apart while having lower costs.

The idea was to create a marketing mechanism that is a lot like an in-house employee, but without actually being on a company’s payroll and still bringing so much more to the table. Typically the branding agency industry focuses on going upstream to work with bigger and bigger companies.  However, that completely ignores a far larger share of the economy, which are growing businesses of 1 to 10 million in sales.  Interestingly, this is often thought of as a niche market – though the number of companies here is far larger than the market space of large companies (which most in the industry focuses on).  So instead of fighting to capture a larger share of the existing industry space, blue ocean strategy gave me the insight to focus on these noncustomers. I felt like I could create a space that other competitors were not going into, for a number of reasons. It is hard to operate in that space and make money using the existing industry business model. You have to be able to systematise many things and create a transferable process around clients so you are efficient.

Comments
Mary,

Fantastic article. We need more stories like this one on IK!

Ariadne,

Very insightful look into how a small company applied blue ocean strategy. An inspiration for us all!

Alex,

Great to read about a company that has successfully made the transition from their old business model to a new blue ocean one

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