How Wawa Surfed Its Way to Blue Ocean Success

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How Wawa Surfed Its Way to Blue Ocean Success

By Don Longo - 11/07/2017
Blue Ocean shift book

MEDIA, Pa. — In 2005, professors W. Chan Kim and Renee Mauborgne changed the international business landscape with their 100-plus-week bestseller, “Blue Ocean Strategy," which would sell 3.6 million copies and start a dynamic movement among entrepreneurs, startups and established organizations around the world.

With “Blue Ocean Strategy,” Kim and Mauborgne separated the underlying patterns that differentiate organizations that are competing in red oceans (highly competitive markets) from those that are creating blue oceans (new, uncontested markets).

In their new book, “Blue Ocean Shift,” the authors show how any team can move from red oceans to blue oceans in a way that builds confidence, ownership and, ultimately, growth.

Convenience Store News recently had the opportunity to interview both authors, as well as Wawa Vice Chairman Howard Stoeckel, who as CEO engineered the retailer’s transformation from a convenience store operator, fuel retailer and foodservice provider to a leading quick-service restaurant and leader in the fast-casual-to-go space that also sells gas and convenience items.

THE AUTHORS’ PERSPECTIVE


CSNews: Let’s start with a quick definition of what “Blue Ocean Shift” is.

Kim: “Blue Ocean Shift” is a roadmap to move you, your team and your organization to new heights of confidence, market creation and growth. It guides you step by step on how to shift from cutthroat markets — what we think of red oceans full of sharks — to wide-open new markets, or blue oceans of uncontested market space, in a way that brings your people along so they own and drive the process.

Professors W. Chan Kim and Renee Mauborgne

CSNews: Why did you write it and what’s the story behind it?

Mauborgne: A decade ago, we wrote our first book “Blue Ocean Strategy,” which went on to sell over 3.6 million copies and become a bestseller on five continents. As the tidal wave of interest grew, individuals, governments, companies and nonprofits started to look at their world through the lens of red and blue oceans. Suddenly, people the world over were identifying themselves as in a red ocean with a call to action to get out and create blue oceans. This raised the conversation and questions to a whole new level: from “What is blue ocean strategy?” to “How can I shift my organization from red to blue oceans?”

Established companies were unsure of how to start the process of moving to blue waters, which would often require getting the members of their team to buy into a concept that directly conflicted with the long-established rules of their industries. Entrepreneurs were looking for concrete steps and a systematic process they could follow to create and capture blue oceans at minimal risk.

Hence, what people were keenly interested to understand were the dynamics of actual transformation. What does it take to change, to move an organization — be it corporate, an upstart, government, a nonprofit, even an individual — from the red ocean to the blue? Achieving that requires a shift not just in strategy, but also in mindset and culture. 

To address this challenge head-on, we spent the last decade analyzing and comparing the successes and failures of blue ocean projects across the globe that have sprung out of the movement that “Blue Ocean Strategy” started. Analyzing a variety of sectors from business-to-customer and business-to-business, to public, nonprofit and governments and studying what worked and what didn’t, we developed a concise understanding of the process of new market creation and growth that unlocks people’s creativity as much as their confidence to act.

The result of this new research is Blue Ocean Shift.” At the risk of oversimplification, if “Blue Ocean Strategy” is the what, “Blue Ocean Shift” is the how.

CSNews: What do you believe are the one or two most important lessons from the new book?

Kim: First lesson is that you don’t have to be born Steve Jobs or be a startup to make a blue ocean shift. People are quick to discount the possibility that they or their organization could shift from red to blue oceans. But they shouldn’t. As our research over the last 10 years bears out, with a clear roadmap and easy-to-use tools, making a blue ocean shift becomes possible for organizations of every stripe, allowing them to reach new heights of market creation and growth.

“Blue Ocean Shift” is brimming with real-world examples of companies large and small, old and new, for-profit and nonprofit, and even a national government that faced the same types of organizational and bureaucratic hurdles we all face — be they resource, political or motivational — and yet overcame them to shift from red to blue oceans by applying the very process and tools outlined in the book. It is not about entrepreneur’s trial and error; anyone can create a blue ocean.

Second is the importance of recognizing our humanness to make change happen. People are paradoxical. We aspire to make a difference. We want to change the world for the better. That’s what makes our energies soar and our hearts beat faster, our adrenaline surge. Yet, simultaneously, most fear we can’t. We need reassurance. “Blue Ocean Shift” recognizes that while we all are replete with creative energy and resilience, at our core, most of us are also incredibly tender and vulnerable.

To suspend belief in the limits of today so we can see and create new possibilities and new pathways to growth, we need to inspire confidence in ourselves and our people. Without the confidence to act, few will venture down a new path, no matter how clear the roadmap. In “Blue Ocean Shift,” inspiring people’s confidence is put on an equal plane with a tested process and market-creating tools to move you, your team and your organization from red to blue oceans in a way that people own and drive the process.

Humanness, not carrots and sticks, is the key to inspiring and building people’s confidence to succeed. It builds psychological understanding into the strategic process so that people are willing to engage fully at every step — even when they are hesitant, may not trust one another, or are skeptical of their ability to succeed on the transformation journey.

If we add one more lesson, it is this: Disruption is only half the story of growth and the less important half. Nondisruptive creation is the missing and even more important half for growth of the future. The current popular mantra of disrupt or die is myopic, and a focus on disruption is limiting and leaves half the opportunities to create new growth and new markets off the table. “Blue Ocean Shift” reveals that nondisruptive creation also generates new markets and growth and the opportunities to unlock nondisruptive creation are huge. The power of nondisruptive creation is that it doesn't heroically pit companies against other established players with often many times the resources.

CSNews: One of the most important tenants in the book appears to be differentiating between market competing and market creating. Could you briefly explain the difference and how a company can move from one to the other?

Mauborgne: The strategic focus of market competing is on how to win in existing market space by beating the competition. You benchmark competition and strive for achieving competitive advantage to win in the existing market. For a market competing or red ocean strategy to succeed, an organization has to stand out either in value, which is called differentiation, or in low cost. But it cannot stand out in both.

Market creating is not about benchmarking the competition; it is about redefining industry boundaries and creating new market space that pulls in all new demand. It is about opening up a new value-cost frontier beyond the existing industry through a step-change in the kind and degree of value you offer. For a market creating or blue ocean strategy to succeed, an organization has to pursue both differentiation and low cost simultaneously.

For a company to move from market competing to market creating, three key components are needed: adopting a blue ocean perspective; having tools and methodology for market creation; and having a humanistic process.

The first component, adopting a blue ocean perspective, opens your mind to what could be, instead of limiting it to what is. Organizations that shift from market competing to market creating ask fundamentally different sets of questions which, in turn, enable them to perceive and appreciate the fallacies behind long-held industry assumptions and best practices. Adopting a blue ocean perspective expands your horizons and ensures that you are looking in the right direction. Without expanding and reorienting your perspective, striving to open up a new value-cost frontier is like running west looking for the sunrise. No matter how fast you run, you’re not going to find it.

The second component is having practical tools for market creation, with proper guidance on how to apply them. If the right perspective is a matter of shifting one’s strategic thinking by asking different questions, market-creating tools and guidance enable you to ask the right questions at the right point in the process and see the significance of the answers. Taken together, they build people’s creative competence and provide the structure and parameters within which to organize your thinking so you can conceive and discover what others don’t see, and avoid the potential pitfalls that trip up most organizations. Step by step, they guide you through the central questions for making a blue ocean shift. 

The third component is having a humanistic process, something we have come to call “humanness,” which inspires people to own and drive the process for effective execution. To suspend belief in the limits of today so we can see and create new possibilities and new pathways to growth, we need to inspire confidence in ourselves and our people. Without the confidence to act, few will venture down a new path, no matter how clear the roadmap. When creative competence and confidence to act are combined, real results are achievable.

“Blue Ocean Shift” shows you how to embrace and act on these three key components to successfully carve your path from market competing to market creating in a way that people own and drive the process.  

CSNews: In the retail industry, a lot of focus (and fear) is centered around Amazon.com and its ability to disrupt entire markets. Is Amazon a good example of a blue ocean shift and what should other companies do when confronted with a competitor that is disrupting the existing market?

Kim: While Amazon.com as a company has been mostly successful in making blue ocean shifts, we shouldn’t forget that it has also failed in several cases like its online auction move against eBay and its online fashion retailing move against Zappos. The interesting question here is why Amazon.com failed despite its huge resources and capabilities.

Amazon attempted to disrupt the online fashion retailing market by offering free overnight shipping at a loss against Zappos. As the strategic focus of its disruptive attempt was still on beating Zappos by offering more for less, it failed to create fundamentally new value that is compelling enough to change the existing industry order. The lesson for every retailer including Amazon is: Don’t focus on beating your competition when you want to make a blue ocean shift. Like Zappos, other retailers can win over Amazon by following the blue ocean principles laid out in “Blue Ocean Shift.”

Amazon.com has indeed disrupted many offline players in the retail industry. But we need to remember that it has also generated some nondisruptive creations by offering unprecedented retailing services like Prime that created a leap in value for buyers. The point we want to make here is that while Amazon needs to learn more about the principles of market-creating strategy, other retailers need to learn more about nondisruptive creation discussed and exemplified in “Blue Ocean Shift” so that they can create their own growth space when confronted with a disruptor like Amazon.     

CSNews: Is this book mainly aimed at upper management executives charged with setting strategy for their companies, or can the principles of “Blue Ocean Shift” be utilized by anyone within an organization?

Mauborgne: The humanistic, teachable and systematic process of “Blue Ocean Shift” makes market creation accessible to everyone, not just to senior leaders in an organization charged with setting strategy for their companies. It allows ordinary people like us to create markets and do extraordinary things.

Developing the mindset of a blue ocean strategist allows people to see new opportunities where others only see constraints. It allows them to ask a fundamentally different set of questions which, in turn, enables them to perceive and appreciate the fallacies behind long-held assumptions and the artificial boundaries we unknowingly impose upon ourselves. The process unlocks the potential all of us possess to see beyond what is to what could be. “Blue Ocean Shift” shows how anyone, regardless of their level in an organization or their entrepreneurial talent, can follow the systematic five-step process laid out within to build their confidence and seize new growth.

THE RETAILER’S PERSPECTIVE


CSNews: According to the book, you began to apply a Blue Ocean approach in 2009, at a time when the economy was slowing, but Wawa was still considered one of the best-in-class retailers in the convenience store industry. How hard was it to convince the rest of the company to go along with the changes needed to position the company better for future growth?

Stoeckel: This was a pivotal time for us. We realized that while Wawa was still strong, our company was drifting into a red ocean. We felt strongly we had created the perfect intersection of our three business offerings — a convenience store, fuel retailer and foodservice provider — and we did so with an unrelenting commitment to outstanding customer service. Yet, in the midst of the recession, the economy was tough and after the financial collapse, our competitors were catching up to Wawa.

Wawa exec Howard Stoeckel

We wanted to steer clear of the existing market space and take our business to the next level by finding the blue ocean, and establishing a unique space of our own. As we started applying the blue ocean process, it inspired a natural wakeup call about our current state of being. Our associates saw first-hand what the strategic reality was and truly we all came together in the name of change. The beauty of the process was that I didn’t need to tell anyone that a blue ocean shift was necessary. Rather, they found it themselves going through the process and viscerally felt it.

CSNews: Why did you decide to focus on foodservice (instead of c-store or fuel retailing) when you starting apply the blue ocean approach at Wawa?

Stoeckel: As we started applying the blue ocean approach at Wawa, we identified foodservice as the weakest link in our overall offering. It was in a red ocean, but had the greatest growth potential and potential for profits. Furthermore, we started as a food company and have roots as a dairy. It was time for us to reach our full potential. We saw the foodservice area of our business ripe to make a blue ocean shift.

If you sell gas, people have traditionally assumed you can't be a high-quality food restaurant. So, we set out to disrupt the space by completely changing that very perception. We aimed to create a leap in value, in the quality, freshness and overall health of the food we sold at the best possible price. The result was that we recast Wawa from a convenience store and gas station that also sells food, to a leading quick-service restaurant and leader in the fast-casual-to-go space that also sells gas and convenience items.

CSNews: A lot of the improvements in Wawa’s foodservice came from “behind-the-scenes” operations, like partnering with logistics providers. How did you come to focus on these operations instead of the most visible things like store design, menu, promotion, etc.?

Stoeckel: By applying the blue ocean approach, we were able to identify the full breadth and recipe of what it would take to make a leap in quality, value, convenience and presentation of food for customers. We were working to simultaneously raise the level of convenience and quality everyone experienced at Wawa and logistics was a key way to make this happen. The problem was we had no preparation facilities in-house. So, rather than compromise our blue ocean offering or make a costly attempt at developing this expertise ourselves, we partnered with third-party logistics and commissary providers to create high impact at a low cost.

CSNews: If you looked at Wawa’s business today, would you still focus on foodservice or is there another business upon which you would want to apply a blue ocean approach for future growth?

Stoeckel: We continue to focus on foodservice today by constantly upgrading our product line with fast-casual-to-go, built-to-order products. We also focus on remodeling stores to embody our "Restaurant-to-Go" brand image, expanding our presence in Florida and filling out our home and Mid-Atlantic markets with fuel and non-fuel locations. Ensuring that our convenience and fuel offer is relevant and part of the overall brand experience is part of the equation.

At the same time, we are always looking to find new opportunities to expand our blue ocean. That’s what being primed to shift is all about. Becoming even more convenient is very much on our mind. How to reach more of our existing foodservice customers more frequently and how to penetrate non-customers (customers that tend to utilize restaurants) is on our minds.

Currently, we predict a blue ocean shift in home delivery and/or catering. In addition, technology is a vehicle to help us connect with more customers than ever before. Most importantly, as one of the largest associate-owned companies in the United States, we are always looking at how we unleash associate ownership and humanism to create a blue ocean shift in our thinking.

In 2012, I gave a speech at a restaurant convention and I was introduced as the CEO of a leading convenience store chain. I responded by saying our dream is that if we are invited back, we would be introduced as the company leading the "restaurant to go" category that also sells fuel. Under [current Wawa CEO] Chris Gheysens’ leadership, we continue to pursue that dream. Dreams do come true with the right shift in thinking.

CSNews: Put on your blue ocean strategy hat for the convenience store industry. What implications could taking this approach have on the industry in general?

Stoeckel: Having been in the convenience industry for 30 years, there is no better time to apply the principles of “Blue Ocean Shift.” I have never witnessed so much convergence in our retail industry.

Think about the past year. Amazon buys a "brick-and-mortar" retailer. Walmart buys an ecommerce business. Restaurants enter the food delivery business once dominated and owned by pizza retailers. Supermarkets deliver to anyone’s home within an hour. Then, we have Panera and McDonald's roll out touchscreen ordering once exclusively found in the convenience industry. And, of course, every retailer now has an app to make customers’ lives easier.

Convenience retailers continue to upgrade their foodservice offerings to compete, and value has become center stage in the customer's mind. Change is occurring faster and faster. Everybody is attempting to do the same thing. The question is: What retailers and companies will shift their thinking and find a new blue ocean? There is a lot of room in the bloody red ocean, but not room for everyone in the blue ocean.

Those who follow disciplines, make the correct trade-offs and empower their people to take them on the journey will prevail. Apple demonstrated unique blue ocean shift thinking, Amazon demonstrated unique blue ocean shift thinking. Who will demonstrate blue ocean shift thinking in our industry and perhaps be the next Apple or Amazon? Only time will tell — but the sky is the limit.