Blue Ocean Strategy
for Combined facilities support activities (ISIC 8110)
The 'Combined facilities support activities' sector is highly competitive and often characterized by 'red oceans' of price-based competition, leading to margin compression (MD03) and high client churn (MD07). Blue Ocean Strategy offers a compelling framework to break free from this by creating...
Strategic Overview
The 'Combined facilities support activities' industry (ISIC 8110) often operates within a 'red ocean' where intense competition, margin compression (MD03), and high client churn (MD07) are pervasive. Traditional approaches focus on competing on price or minor differentiations, leading to market saturation (MD08) and limited organic growth. Blue Ocean Strategy offers a potent alternative by advocating for the creation of uncontested market space through value innovation, making competition irrelevant.
This strategy is highly relevant for facilities support providers looking to escape commoditization and demonstrate value beyond price (MD03). It encourages a paradigm shift from merely delivering services to creating radically new integrated solutions, such as 'Facilities as a Service' (FaaS) models with guaranteed performance outcomes. By identifying and targeting 'non-customers' or underserved segments (MD08), and by systematically challenging industry conventions through the Eliminate-Reduce-Raise-Create (ERASE) framework, companies can carve out new demand and achieve significant competitive advantage.
Successfully implementing a Blue Ocean Strategy requires overcoming challenges like high capital expenditure for technology adoption (IN02) and securing investment for innovation (IN03). However, the potential rewards – including higher profitability, stronger brand differentiation, and reduced competitive pressure – make it a compelling strategic direction for the industry.
4 strategic insights for this industry
Shift from Service Bundles to Integrated Performance Outcomes (FaaS)
Instead of merely bundling cleaning, maintenance, and security, providers can create new value by offering 'Facilities as a Service' (FaaS) models focused on guaranteed outcomes, such as 'optimized workplace productivity' or 'assured operational uptime'. This shifts the client relationship from input-based transactions to value-driven partnerships, directly addressing evolving service delivery models (MD01) and structural competitive regime (MD07) by creating differentiation.
Unlocking 'Non-Customers' through Value Innovation
A significant opportunity lies in targeting segments that are currently underserved or do not utilize comprehensive facilities management services due to perceived cost, complexity, or lack of tailored solutions. This includes small-to-medium enterprises (SMEs) or niche industries with highly specific requirements. By innovating solutions that address these barriers, companies can access untapped demand and mitigate market saturation (MD08), reducing the high customer acquisition cost (MD06) associated with competing for existing clients.
Re-evaluating Service Attributes with the ERASE Grid
Applying the Eliminate-Reduce-Raise-Create (ERASE) framework to traditional facilities services can unearth innovative service models. For example, eliminating fixed, long-term contracts in favor of flexible, on-demand services; reducing client administrative overhead through digital platforms; raising predictive maintenance capabilities via IoT; and creating real-time occupant feedback loops for facility optimization. This helps address the challenge of evolving service delivery models (MD01) and margin compression (MD03) by redesigning the value curve.
Leveraging Technology for Differentiated Value
Integrating advanced technologies like IoT, AI, and data analytics beyond basic efficiency gains into core service offerings allows providers to deliver superior value. This includes predictive maintenance, energy optimization, space utilization insights, and personalized user experiences. Such integration directly helps in 'Maintaining Competitiveness Against Technological Substitution' (MD01) and overcoming 'Legacy Drag' (IN02) by transforming the service proposition rather than merely improving existing processes.
Prioritized actions for this industry
Develop and commercialize 'Facilities as a Service' (FaaS) offerings with guaranteed performance outcomes (e.g., Uptime-as-a-Service, Workspace-Experience-as-a-Service) for specific client segments.
This shifts the competitive focus from price to value, creating a new market space based on tangible, measurable client benefits, thereby addressing margin compression (MD03) and demonstrating value beyond price.
Conduct thorough market research to identify and develop bespoke, value-innovated solutions for 'non-customer' or highly underserved segments (e.g., specialized manufacturing facilities, small creative hubs).
By targeting segments not currently well-served by comprehensive FM providers, the company can create new demand and sidestep direct competition, mitigating structural market saturation (MD08) and reducing customer acquisition costs (MD06).
Initiate an internal 'ERASE Grid' innovation program, challenging existing service delivery conventions by systematically identifying elements to Eliminate, Reduce, Raise, and Create in current offerings.
This structured approach fosters creative destruction within the existing value chain, leading to differentiated service attributes that can make competition irrelevant and address evolving service delivery models (MD01).
Form strategic alliances with IoT, AI, and data analytics technology providers to embed advanced predictive and prescriptive capabilities into service delivery platforms.
This leverages external innovation to overcome legacy drag (IN02), enhancing service value, creating proprietary solutions, and establishing competitive barriers against technological substitution (MD01).
From quick wins to long-term transformation
- Conduct internal workshops to identify potential 'non-customer' segments and preliminary ERASE ideas for existing services.
- Map current service value chains to identify pain points and potential areas for value innovation.
- Pilot a small, low-cost 'smart facility' technology (e.g., smart lighting controls) with a willing client to gather data and showcase capabilities.
- Develop and pilot 1-2 FaaS models with key clients, focusing on specific performance guarantees.
- Invest in foundational IoT infrastructure (sensors, connectivity) for predictive maintenance in critical assets.
- Establish a dedicated innovation team or a cross-functional task force to drive Blue Ocean initiatives.
- Develop refined value propositions and communication strategies for targeted 'non-customer' segments.
- Achieve widespread adoption of FaaS models across the client portfolio.
- Establish strategic M&A activities for acquiring complementary technologies or niche market access.
- Cultivate an organizational culture of continuous value innovation and market exploration.
- Integrate AI/ML for real-time facility optimization, resource prediction, and personalized user experiences.
- Underestimating the internal and external resistance to change associated with radically new service models.
- Over-investing in technology without a clear, validated value proposition for target customers.
- Failing to effectively communicate the 'new value' to both existing and potential clients.
- Neglecting the performance of the existing core business while pursuing new ventures.
- Lack of sustained leadership commitment and funding for long-term innovation efforts.
Measuring strategic progress
| Metric | Description | Target Benchmark |
|---|---|---|
| Market Creation Index | Percentage of total revenue generated from new, previously uncontested market spaces or value propositions (e.g., FaaS contracts, new customer segments). | >10% annual growth in revenue from new market spaces |
| Value Innovation Scorecard | Quantifiable improvement in key customer value factors (e.g., % reduction in client operational costs, % increase in facility uptime, % increase in occupant satisfaction scores). | >15% improvement in client-defined value factors against industry average |
| Non-Customer Conversion Rate | Percentage of previously unserved or self-managed facilities (identified as 'non-customers') converted into new clients for tailored offerings. | >5% annual conversion rate for targeted 'non-customer' segments |
| Service Attribute Differentiation Index | A composite score reflecting the uniqueness and perceived value of services based on ERASE grid implementation, potentially via client surveys or competitive analysis. | >20% differentiation score against closest competitors |
Other strategy analyses for Combined facilities support activities
Also see: Blue Ocean Strategy Framework