Luciano Pezzotta | Today's Manager
Innovating across industries is key to move away from head-to-head competition and create new market space as recommended by the Blue Ocean Strategy methodology.
After completing his engineering degree from the Imperial College, London, in 1998, Mr Law Cheok Gheen joined Zuco Express as a workshop executive. The Malaysian company provides long-distance express bus services from Malaysia to Singapore. But what he found was far from ideal.
The Asian financial crisis seriously hit the company, which was already struggling with operational issues and an old fleet. To make things worse, the stunning new Kuala Lumpur International Airport (KLIA) had just been built in the country. In this respect, recent trends in the industry showed that Malaysian business travellers had a strong preference for flying, rather than travelling by coach. This was due not only to the better social perception of flying, but also to the far superior safety standards compared to those of local bus service providers. Traditionally, poor bus maintenance and exhausted drivers, who after long driving sessions also had to clean the buses upon arrival at a destination, had negatively influenced the security feelings of Malaysian bus travellers.
Not surprisingly, the owners of Zuco Express considered exiting the business. After all, what could be the prospects for an outdated transport service provider with very low profit margins and a shrinking customer base? Mr Law had a different point of view on how to escape from this impasse. While working at Zuco Express, he realised that short distance flights were much comfortable though more expensive than travelling by bus. Moreover, the total journey time, including multiple transfers to and from the airport could easily reach or even surpass bus travel time.
In 2002, he launched his revolutionary plan to lead the company in a new direction. To send a strong signal of change, Zuco Express started to operate under a new name: Aeroline. The company’s old fleet was substituted with modern double-decker buses, with beautiful interiors, comfortable seats, and a lower deck lounge. High-quality meals were served to passengers. Great attention was paid to passenger safety. While the bus body was manufactured locally, the chassis was produced in Sweden. In addition, bus maintenance routines were performed daily and followed specific guidelines. Further emphasis was placed on minimising bus driver fatigue. The company strictly limited the hours drivers were on duty and or at the wheel, and prohibited any ancillary activity. For the first time in the coach industry in Malaysia and Singapore, Aeroline introduced the online booking concept, allowing passengers to book their trips, and express seat and meal preferences online. Since the introduction of the turnaround plan, the company has grown steadily. Today, Aeroline connects more than 15,000 travellers monthly between Singapore and Malaysia.
Aeroline is an inspiring success case of how companies can foster growth through innovation. Many companies when looking for new and innovative ideas invest their financial and managerial resources on conducting extensive benchmarking analysis and market research. However, instead of developing innovative business opportunities, they end up looking more similar to the competitors they want to differentiate themselves from. By contrast, to innovate their strategies and unlock significant growth potential, companies should look across alternative industries and sectors. When looking at Aeroline’s business model, it clearly emerges how Mr Law successfully incorporated some traditional elements of air travel into the bus journey experience, such as flight assistants (drivers are called "captains", and passengers are assisted by "cabin crew"), on-board catering, a clean environment, and a nice atmosphere. Even tickets are called "boarding passes"!
The challenge is to develop commercially viable solutions that combine the current industry’s offering with key factors that drive customers’ decisions towards alternative industries. In this way, companies can create new appealing customer value propositions that retain their traditional users and attract new groups of customers from other industries. Just as Aeroline did.
Innovating across industries is key to move away from head-to-head competition and create new market space as recommended by the Blue Ocean Strategy methodology. In today’s complex and turbulent economic environment, dominated by weak macroeconomic scenarios, creating new market space is crucial for the survival and prosperity of both start-ups and large corporations in all sectors. Blue Ocean Strategy offers a set of systematic and reproducible principles, frameworks, and analytical tools for both strategy formulation and strategy execution that can be applied by new and existing firms.
Mr Luciano Pezzotta is an Associate Trainer with SIM Professional Development and conducts the seminar "Blue Ocean Strategy™ in Action" from September 27 to 28, 2017. For more information, please contact Grace Tan at 6248 9414 or email email@example.com.
Mr Luciano Pezzotta is a business strategy expert and a visionary entrepreneur with a strong background in strategic innovation and a particular focus on the InsurTech disruption. He is the Founder and Managing Partner of the Asian operations of a management research, advisory and executive education firm. Since 2006, he has completed the Blue Ocean Strategy qualification process under the supervision of Professors W Chan Kim and Renée Mauborgne, co-creators of Blue Ocean Strategy and has over 10 years of experience globally as a Blue Ocean Strategy practitioner.
Copyright © 2017 Singapore Institute of Management