Blue Ocean Strategy

The phrase “blue ocean strategy” traces to a book of the same name by two Insead faculty, W Chan Kim and Renee Mauborgne. The basic thesis of their work is that the focus of a majority of research on “strategic thinking has been on competition-based red ocean strategies”. They write that this has been the case because corporate strategy has been heavily influenced by its roots in military strategy. Significantly, they add that in such a perspective, “strategy is about confronting an opponent and fighting over a given piece of land that is both limited and constant”.

Pause and think about this for a moment. China’s OBOR is, indeed, such a strategic framework – not disregarding the obvious fact that China is a Communist country with a red flag – and one that sees itself in competition only with one country: the United States (US). Given this geopolitical context, where the US has had historical energy “assets” in the Middle East, OBOR is nothing short of fighting its opponent – the US – over land and other resources (oil and gas, minerals, labour and markets), most of which are limited and constant. “Limited” has to be seen in the context of finite supplies or slowing growth of these resources within its country and, therefore, having to go out to secure them.

Now, suddenly, the imagery of the extensive OBOR tellurocratic (from the Greek telluro, meaning land, and cracy for power) and thalassocratic (Greek for thalassa, meaning sea) extensions across the Central Asian plains into the Middle East and across the oceans from the South China Sea to the Indian Ocean makes a lot more sense. Not for nothing has China come up with this ambitious programme of raising the geopolitical stakes for global leadership. In seeking to secure an unambiguous presence across continents and disparate nation-states, it is putting up its red flag in far outposts to claim, commandeer and appropriate resources for itself to power its huge economy and use trade as a means for hegemony.

But it is also blunt and, shall we say, unsophisticated. Sophistication comes from hiding intent with the means to secure the intent. Here, we have it all on show in the manner of the Genghis warriors plundering across the Eurasian plains with scythes and swords.

It is Colonialism 3.0 which takes off where the nineteenth-century imperial colonisers left off and then some. Evidence comes from a news article in Dawn, a national English-language daily in Pakistan, that accessed a Chinese government report that CPEC is based on showing a “range and scope” that, according to the Times of India, amounts to “deep penetration of Pakistan’s economic life”. The plan calls for leasing several thousand acres of agricultural land to Chinese companies, 24x7 monitoring and surveillance of all major cities, a national fibre-optic backbone network managed by China, in addition to sourcing minerals and gas and developing rail, road and port infrastructure. The report is mind-boggling in how blunt it is. The CPEC model itself follows China’s central Asian forays for oil and gas in the past decade, and will serve as the blueprint for the rest of OBOR.

As a nation that has perfected the art of hugely scaled manufacture, you can bet what they intend to roll out in Pakistan, in pursuit of its aims, will be the mold for OBOR in other places as well. The partner countries either just don’t know it yet or prefer to ignore the prospect for immediate gains. The world has decried the American and European imperialism. But, as Americans would say, you ain’t seen nothin’ yet. If this is unmistakably a “red ocean” strategy (pun intended), how should India rethink its game?

Not with another red ocean strategy of its own.

The India-Japan Freedom Corridor, in this context, appears misconceived and too imitative of China’s OBOR to have much impact. First, China has over a trillion dollars in its war chest and a unitary decision-making apparatus that an India-Japan combine, with their individual consensus-driven democracies, cannot hope to match. Second, China has fundamental reasons – economic and political – to see advantages with OBOR, not least of it being to ensure that the slackening growth of its economy owing to over-investments could be successfully transitioned to consumption-led economic growth and there is no domestic disturbance that poses a danger to its dictatorship. Japan has been in a low-inflation, low-growth trap for two decades while the possibilities for India to show there is still room for considerable growth domestically. Neither country has the pressing preconditions to pursue an OBOR-like effort other than simply to thwart China in its efforts at global dominance.

Imitating China in its acquisition of energy assets and investments in railroad across the European landmass is flawed: it would raise the cost of such investments while the logic itself is questionable. Europe is in deep political and economic crisis – its aging demographics presage slow growth in the foreseeable future, national sentiments that are increasingly turning protectionist, the EU itself is facing an existential threat internally, and revealing cracks in uncharted areas of security. Russia is a superpower past its prime and which is yet to stabilise and articulate where and how it seeks to engage. It is verily bereft of ideas for itself. Central Asia, other than energy, presents tiny markets. Europe and Central Asia, therefore, hold few long-term advantages other than the weight of history from that area of the world.

India and Japan would be better off imagining, defining, articulating and executing a blue ocean strategy that dismisses China as competition and look to innovate in their foreign economic policy. The Indian Ocean, with its clock metaphor, would be a good place to start. The authors of the Blue Ocean Strategy note that the cornerstone of such a strategy is the practice of “value innovation”, whereby, instead of seeking to beat the competition, “you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space”.

Such a perspective would allow India and Japan to think of the Indian Ocean clock in two halves – the eastern Indian Ocean (12 O’clock to 5 O’clock) and the western Indian Ocean (7 O’clock to 11 O’clock). As my previous article (‘One Belt One Road: How India Can More Than Match China’s Grand Design’) argued, India would need to quickly involve and collaborate with its immediate neighbours – minus Pakistan – to create a South Asian Union that integrates completely with the Indian common market. If we put our minds to it, demonstrate largeness of heart, and offer our neighbours broad-based access to our markets, the SAU could be a reality within five years.

This complete, the SAU members would then have to work assiduously to integrate with the Association of South East Asian Nations (ASEAN). All of this, ideally, should happen in a spirit of generosity and welfare for all where India would need to take leadership and open its markets to neighbours for both products and services. Remember: Lee Kuan Yew of Singapore did invite India to become a founding member of ASEAN. As in numerous other occasions, we passed this over and have regretted it ever since. We now have the chance at recompense, with a much more mature and fast-growing Indian economy, but one also where everyone benefits and is shielded from China’s mercantilist onslaught.

The interesting thing about this eastern Indian Ocean market integration is that financial resources required for infrastructure development – road and rail networks linking the South Asian countries with ASEAN at the edges – would be far lower than OBOR’s capital infusion for its purposes. All that is needed is to connect India and its neighbours to the ASEAN logistics network.

When SAU and ASEAN integrate, a blue ocean strategy for value innovation of the eastern Indian Ocean would have been achieved. This would serve as the model for the western half – to cajole, collaborate and partner with countries along the east coast of Africa to create a similar common market of their region. Here is where India and Japan could come together to create infrastructure networks comprising road, rail and power to knit the countries together. The blue ocean strategy here would be to ensure this is not colonialism of the sort China is rolling out but a markedly different one that emphasises consent, consultation, collaboration and value delivery for every one of the partners.

Value innovation would, and should, emphasise continued ownership of infrastructure and capacity to rest within the respective countries in return for the creation of a common market that would integrate with the eastern half of the Indian Ocean. The private sector of the collaborating nations could participate and invest in assets in the normal course of business, but it cannot be in the form of subsidy capital by India or Japan to promote their own enterprises. That is exactly what China is pursuing with OBOR. India cannot pursue mercantilist ideas of wholesale ownership of everything from raw materials to intermediaries to final products without attracting domestic ire and opposition in several countries. That is also China’s way, and the results of this are now becoming more evident in Africa. In time, China would have to pay attention to these or have OBOR unravel even without the heavy indebtedness of partner countries that might likely ensue.

The essence of value innovation is to eschew a fundamental notion of international diplomacy, particularly foreign economic policy, that individual strategies pursued by nations is a zero-sum game – i.e., the idea of a fixed pie wherein one nation wins and another inevitably loses. A blue ocean strategy for the Indian Ocean, on the other hand, would argue for a growing pie wherein all participants could seek to grow with.

Genuine cooperation is more easily achieved when win-wins are apparent and shared from a large and growing pie. This presents an opportunity for an international economic strategy that is markedly different from China’s, innovates all along the continuum, and makes possible an “uncontested market” for its members.

Pipe dream? Perhaps. The world could never have imagined China would ever realistically roll out or seek to execute OBOR in its current stated form. But they have. China does not emphasise common markets, has not offered a spirit of cooperation or a win-win. It has chosen to tread the past imperialist path of neo-Colonialism modified for the twenty-first century that seeks to pillage and plunder without bloodshed.

That is the difference in thought leadership in international diplomacy that India could offer. The Indian Ocean is big enough for creative partnerships that could deliver on this front. The only thing required: to stop thinking in terms of red oceans and competing with China head-on. Let China not consume our thinking. Leave Pakistan for China to fret over.

Instead, make China irrelevant for India’s purposes and for the purposes of the larger Indian Ocean community. This is a huge market: when the dust settles, it could be bigger than the Chinese market, with two-thirds of its demographics comprising a young population, and serve as effective ballast for the world economy.

Also Read: One Belt One Road: How India Can More Than Match China’s Grand Design