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Blue Ocean Loss Prevention Strategies

Posted on 1/4/11 11:03 AM

A new year brings with it a time for reflection, goal setting and an opportunity to move forward with new ideas and a fresh outlook. Taking time off during the holiday week, part of my own reflection included re-reading several books. One of the books I reviewed was “Blue Ocean Strategy” by W. Chan Kim and Renee Mauborgne.

describe the imageAn international best-selling book, it focuses on thinking differently to form strategies outside the norm. The goal is to create new “value innovations”, where you can leap ahead being more strategic and successful in business development instead of swimming in “blood red oceans,” which are often crowded and not likely to bring greater success.

Although the book was written primarily to support marketing and business development, I found myself thinking about how its strategies and frameworks can relate to the initiatives of a loss prevention department. How can a loss prevention department, who competes on budget and resources with other business functions, create new ways to be more successful and provide new “value innovations” to the business?

A loss prevention program solely focused on catching thieves or reducing store shrink is a program swimming in its company’s “red ocean.” Yes, the program can reduce shrink, but how low can it go? Yes, new technologies and programs can be introduced, but to what extent and cost? At some point, the question may come - How beneficial is your loss prevention program to the overall business success? Today’s LP executive needs to continue to develop “blue oceans” and create greater value within its organization.

The following are 4 principles of formulating blue ocean strategy. Within each principle is a translation as to how an LP department can use these concepts to create its own blue ocean strategies.

Reconstruct Market Boundaries

This principle focuses on removing the current boundaries and looking across your existing market, industry and sector to find how you can create new opportunities in other markets. From a loss prevention perspective, this means that a department should look across its organization to see how loss prevention can benefit other departments, business functions and more of the overall business. Most departments focus solely on store-related shrink and perhaps distribution centers. Are there other areas of the business that can benefit from the perspective of loss prevention? How can you protect your supply chain? What about the buyers, merchants or accounts payable?

Focus on the Big Picture, Not the Numbers

Shrink percentages and cases. Those are the two big numbers most loss prevention departments focus on to determine their success. To think in terms of blue ocean strategy, you need to think holistically about loss prevention. How can your loss prevention increase the overall business profitability? What else effects profitability in your company that you can help to control? Have you taken a look at how you can increase margin? What are some innovating ways you can reduce operating costs but increase your program success?

Reach Beyond Existing Demand

To generate more value you need to create more demand. You need to look beyond your current customer base and transform non-customers into new customers. This principle is all about finding others who can benefit from your team’s skills, initiatives and programs. It includes educating them on how you can help them and developing together new demand for your services. Who within your company can be educated to prevent losses within their function? How can you build relationships in other business functions to see how you can help them achieve more value from your department? Who is your next customer?

Get the Strategic Sequence Right

This principle is all about planning the execution. The overall strategy usually fails because the right strategic sequence wasn’t developed and executed properly (The third part of the book is all about execution). To build a strategic sequence, you need to think about the end game and work on building relationships, education and progressing toward a common goal. No bulls in the china closet when it comes to blue ocean strategy. The best place to look for success stories about executing strategy is within the pages of Loss Prevention Magazine. They regularly provide success stories that include how LP executives build relationships and work with other departments to create new initiatives. One of my favorites was Brown Shoe (July – August 2005) and how they acquired exception-based reporting on an ROI that did not include any theft terminations. They built and achieved an ROI model solely on margin improvement and included multiple departments and executives in their efforts.

Are are you looking at developing strategies that will bring value innovations to your organization?

Where can you create blue oceans for your loss prevention initiatives? What “non-customers” in your organization should be using your service?

This is the year to think greater value, improved profitability and outside the norm.

To learn more about the concepts of Blue Ocean Strategy, visit

Written by David Johnston, Director of Business Development

Topics: Loss Prevention program and development

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