Blue Ocean & ERRC Grid
The Blue Ocean’s strategic tool, the ERRC Grid, is a procedure to make a trade-off. According to the movie, The Founder, the MacDonald brothers showed a good example to tell every businessman how to “swim” in the Blue Ocean.
At the very beginning, they mis-estimated the timing and opened a cinema in America during the Great Depression, when people had no discretionary cash for entertainment. However, they immediately realised the problem and moved to another industry, catering. When these two brothers first got into the catering field, they also wanted to copy Wylie Reid’s successful business story. It made them anxious to achieve a quick result. Their anxiety was reflected on the menu of their drive-in restaurant, MacDonald’s Famous Barbecue: too many dishes to handle in a limited space by limited labourers.
In this step, they did the Eliminate and the Reduce of ERRC. After calculating, they confirmed the most profitable dishes: hamburgers, fried chips and coke, and stopped offering other kinds of dishes. It meant that they partially gave up the diversity of food, which was an unwritten rule of catering. This action saved the busy back kitchen. As followed, they made the biggest cut of all: the wait of customers. Or I am more willing to call it an improvement of the efficiency, which could be considered as the Raise of ERRC. After cutting the dishes on the menu, they finally found efficiency as the domain they wanted to fight in. After optimising the workflow, re-designed the back kitchen’s layout, and customising the cookers, they finally shrank the time to prepare a customer’s order from 30 minutes to 30 seconds.
Also, in the 1930s, beautiful, charming female carhops were one of the most attractive components of drive-in restaurants. This seduction service model can be spurned nowadays but was common in the U.S. back then. However, the MacDonald Brothers decided not to hire these charming waitresses anymore, in order to reduce the unnecessary cost. It means “Pick-up by Yourselves” appeared for the first time, which naturally brought the Create of ERRC because other restaurants had never done this model before. But not everything is working as you think it should be. In the beginning, customers still waited in their cars and waited for carhops’ service. When the MacDonald Brothers explained that they needed to take orders and pick up their food by themselves, these customers were pissed off. This period was the “Valley of Death” of their business. Substantial upfront investment and less favourable reaction from consumers almost dragged these brothers down. However, thanks to their insistence, customers gradually got used to their operation model and McDonald's survived the period of pain. Then, the earliest fast-food model formed.
When developing a business, overcoming human greed and laziness is the most important step to breaking the wall. People hope to gain each piece of merit in their own business, but it’s totally impossible; People try to take other people’s success as their own business formula, but usually, still only the first mover can get the profit. In my opinion, there are two critical points, “freezing your head” and “being similar but not the same”.
Some people attracted by the Red Ocean are like gamblers who think that they can't do the same- business as well as giants in the same industry only because of the bad timing but don’t consider the industry saturation. So every time they want to retry, mistakes are also repeating themselves. Of course, it is demanding to create a 100% new thing. Even the MacDonald Brothers’ business started from a long-existing drive-in business model. Nevertheless, we can seek the shortages in the old business and find if there are any pain points for customers. Furthermore, sometimes these shortages are mixed with superficial advantages. For example, MacDonald Brothers deleted dishes on their menu, which apparently decreased customers’ options but actually reduced the back kitchen’s burden and increased both ordering and delivering efficiency. Deciding which one you should take or abandon depends on your business value: Efficiency or refinement? Fussy or casual? Winning on high price per unit or volume?
But last, to be honest, I believe the success of a business needs proper timing, good partners and wise investors, and one can not do without the other. Gaining all of these components is up to the person’s fortune, a thing of which people can’t make heads or tails. A good strategy can only ice on the cake. I’m not saying so to discourage anybody but to comfort frustrated businessmen: don’t blame yourselves too much because those who invested in the tourism industry and were ready to make a splash wouldn’t have seen the 2020 pandemic coming, right?
Despite the fact that we are always learning about strategies or tactics to analyze the market, there are, still, doomed to be surprises or outliers that do not follow the expectations made basing on these strategies. What we can do is to realize the importance of timing, partners, investors and to understand the ever-changing market as much as possible.
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