Bill Gates was recently uncrowned the world’s richest man by Ortega, son of a rail worker who started selling bathrobes and lingerie and is now the founder and owner of Inditex – a retailer group mostly known by Zara but which holds other reputed brands such as Massimo Dutti or Pull&Bear.
Other than being obviously a bright entrepreneur and having the right team backing up his business, Ortega was bold enough to challenge the market and make some tough (yet clever) decisions. Within a very competitive retailer industry full of sharks looking for differentiation and exploiting the existing market demand, how was Inditex owner able to navigate in calmer waters and find his blue ocean safe from constant shark attack?
Kim and Mauborgne may be able to help us clarify why Ortega reached the top of the chart – mainly due to Zara success – through their Blue Ocean Strategy according to which managers should be able to avoid competing head-to-head in existing markets, trying to beat the competition by exploiting prevailing demand.
Instead, company owners should look for differentiation in a new emerging market, build new assets and capabilities, challenge industry assumptions, and provide new products and services focused on customer value. Plus, one should do it by following four main premises: eliminate, reduce, raise and create. How was Ortega able to follow and implement these?
Well, first Ortega was able to hear existing and new clients’ preferences as well as the market current demand of real time solutions to real time problems. As such, he concluded that opting for a just-in-time approach to deliver fashionable items, to be able to provide a rapid response while keeping variety and low prices a plus, would require some logistic adjustments.
Thus, Inditex has now more designers than the direct competitors (around 300 designers) working on demand and answering directly to customers’ needs instead of having less designers working a year in advance on building the ultimate fashion collection guide for next season (which is usually how the industry players work).
He then reduced delivery time by partnering up with key distributors who will guarantee greater flexibility to the service. Also, unlike most competitors, Ortega has chosen to keep the key fashion items to be produced in-house avoiding outsourcing while maintaining high wages (higher than most of his competitors).
He was able to implement the 4 contemplated forces in Kim & Mauborgne’s Blue Ocean Strategy theory:
- Eliminate – industry barriers and old methods such as planning fashion collections a year in advance;
- Reduce – stocking cost, delivery cost and time; outsourcing.
- Raise – customers’ needs and preferences analysis; extensive use of information and communication technologies.
- Create – workforce (over 300 designers); faster, effective and innovative approach of acting in real time.
Would you be able to understand how to apply these to your products or services in order to find your own Blue Ocean? Keep it simple and down to the core – the Blue Ocean Strategy motto sounds nice and simple but it’s challenging enough to implement, mainly on existing big and reputed organizations. If you’re just starting, work on your competitive advantage now and you may be the next one to jump to the billionaire list… in a couple of years.
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