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“The KaosPilots” - a Blue Ocean Strategy essay The following is a description of a company that through value innovation made

a strategic move which enabled the company to create a new and uncontested marked space – a blue ocean – and therefore made the competition irrelevant. In 1991 a new school in Aarhus, the second largest city in Denmark, started its first team of students under the characteristic name “The KaosPilots”. The school’s academic and pedagogical ambitions were – and still are to develop a unique educational program and competency environment for young people who wish to make a positive difference in society. The academic level of the school is similar to that of a graduate degree (Bachelor of Science) and the school calls itself ”International school of Creative Business Design and Social Innovation”. The criterion for success is not only that the students secure good jobs after they graduate, but that they themselves will create new and exciting jobs. The goal of the school is to become Scandinavia’s most attractive, modern, value-based entrepreneur educational program and at the same time, as an educational program and a competency milieu, significantly strengthen its international profile and collaborative relations. Because of the entrepreneurial focus the students only work with 'real world' projects defined by external clients/partners. Actually 30% of the students’ activities are practical project work and only 47% are classroom teaching/lectures. Hence a vital qualification required of the applying students is a high level of enthusiastic drive and ambition. However, if the high level of ambition is one of the characteristics of a KaosPilot, social identification and responsibility is the other. As the schools introduction pamphlet describes: “The students are entrepreneurial young adults with their hearts in the right place, who want to make a positive difference here in life”. In fact the students are so motivated that they don’t mind the $5500 annual student fee. The school itself has a social ambition to create a more sustainable world - culturally, environmentally and humanly thereby attracting students with this particular mindset. The students entering the KaosPilots are therefore not the typical average business school student. Though the school is partly government funded (44%) it is privately owned and has a relatively small budget compared to the public business schools. Besides the government funding other funds comes from the students itself and other sources such as lectures, projects and private companies. Although it is a Danish school, 50% of the school’s 100 students are from abroad. Besides attracting students from abroad the school has initiated what they call “system export” of the KaosPilots’ knowledge and experience to other countries. The school in Aarhus has through what they call “KaosPilot International”, established its sister school in Norway – the first academic year starting in August 1

creative project. The competition to attract students – especially the skilled ones . The business idea is to help organisations and individuals master the capability for innovation and creativity – leveraging on the KaosPilot philosophy and methodology. but also a commercial consultancy company working with both the private. Sweden in 2006 and serious negotiations are taking place about establishing KaosPilot programmes in Holland within a couple of years. The KaosPilots has no research facilities or professors doing research. Alan Webber (Fast Company) Kjeld Kristiansen (LEGO. project and process design. and Havanna. CEO) and many more. The school also has several on-going dialogues with a series of European and North American companies. it has not only been running an education. “If the KaosPilots didn’t exist. Durban. someone would have to invent them. owner). Today the graduates of the KaosPilots have a great rate of success both as employees in public and private companies as well as entrepreneurs and business owners – as it is written in the school’s fact sheet: “Unemployed KaosPilots don't exist – apparently”. process design and business design. experience and research in the school’s three core areas. That’s how you know that it’s an essential idea. A new school will follow in Malmö.1 The market for privately owned schools is extremely small and entry into this market is very difficult especially because studying in the public business schools and universities is free of charge. During the 14 years that the KaosPilots has been in Aarhus. San Fransisco. combining the disciplines of creative business. Mads Oevlisen (Novo Nordic. 2 . This also contributes to the knowledge creation at the school.” Let’s look at how they did it. therefore new knowledge is mostly created through the practical work of the students and through a vast international network of companies. You can’t imagine it not being there. Dee Hock (VISA). These schools offer Graduate and Post-Graduate degrees in business administration and economics. The School has close personal relations with a number of entrepreneurial people and great thinkers such as Otto Scharmer (MIT). The school also has academic networks/ educational outposts in Berlin. About the market/competition: The big business schools and universities in Denmark are all government funded and controlled. This competition is now gradually 1 The market described here does not include MBA studies. Collaborations that will ensure the school’s students access the most interesting and up-to-date knowledge. schools and innovative individuals.2005. Allan Webber. public and voluntary high among both private and public business schools since the financial support from the government is based on the number of graduating students. founding editor of Fast Company adds. educational institutions and ‘think tanks’ about future strategic collaborations.

This was done by eliminating expensive science research activities. By attracting students who otherwise would not have gotten a business/entrepreneurial education (or perhaps any education at all since they would have started a business of their own with out any education) they were able to create a win-win situation between the school and its students – giving the students an education that will make them able to cut some corners when starting their own business. How they achieved both differentiation and low cost: By focusing on teaching entrepreneurial business through “hands on” practices and not through science and heavy theory the KaosPilots were able to differentiate themselves from the competing business schools and thus making them irrelevant to the success of the school.) – they want to start up a business as soon as possible and what they need are some practical experiences combined with some relevant theory. Another reason is that these entrepreneurial “fire-souls” often are too impatient to sit for hours and study heavy lecture books about subjects that does not really interest them (advanced math. Furthermore they succeeded in attracting students from the public business schools – students that were perhaps not feeling motivated and perhaps would have even dropped out before completing their degrees. By creating this new market space they made the competition irrelevant and were able to both differentiate themselves from the competitors and keep the cost level at a low rate. The founders of the KaosPilots – they themselves being creative and entrepreneurial – saw this un-served market and created a school that would appeal to young innovative people all over the world. facilities and 3 . The founders of the KaosPilots looked at this red ocean of competing business schools and saw that there was a hidden potential in the market – a space between the existing markets with a lot of un-served potential customers. At the same time as differentiating themselves from the competitors they were able to keep the costs at a low and competitive level. This is mainly due to the reason that the business schools do not offer the subjects and activities that attract these young people. They created a school that would teach business to young people who perhaps otherwise would not have taken an the society. This calls for new ways of attracting students and also for ways of attracting young people that would perhaps not otherwise choose to take a Bachelor/Master degree education. financial accounting etc. or at least motivating them to go for an educational degree and giving the school a successful growing business. statistics. But the third – and perhaps most fortunate winner .increasing due to changes in the demography in Denmark with fewer young people in the age group of 20-30. At the same time students are gradually demanding more from their educational institutions. Many very creative and entrepreneurial young people in Denmark often end up not taking a business education. How they created a fundamentally new market space that made the competition irrelevant: The KaosPilots created a new market in the space between the existing markets of education.

The Strategy Canvas of the KaosPilots High Danish public business schools The KaosPilots Low Government Science Professors funding and research control (facilities etc) Heavy text Fieldwork books and and practical economic use of theory theories Student payment Auditorium lektures Focus on academic abilities Number of exams Focus on creative abilities Practical exercises and games Funding Focus on from networking consultancy abilities activities Approximate values The KaosPilots created a blue ocean by changing their value curve to match the needs and values of the identified un-served costumers.professors. They were able to successfully change and sharpen their strategic focus through changing the key competitive factors of the industry and thus eliminating. At the same time profits from the consultancy business covers some 28% of the schools expenses.partly from the students’ fieldwork and partly through the incorporated consultancy business.covering the need for computers of the entire school staff. Finally the school keeps itself less dependent on government funding through the student payments that covers another 28% of the expenses. which illustrates how both differentiation and low cost was achieved. In this way Apple donated free Mac’s to the school . which gives them experience and a possibility to use the methods they learnt. raising and creating new factors. The consultancy business gives inspiration to the school and vice versa – thus making sure that the school is updated on modern management tools and theories. reducing. A blue ocean was made by creating a strategy that through focus and divergence and including all or most of the schools activities made it possible to attain a leap in value for both customers and 4 . Students perform as part of their education various tasks for private companies for free. For this the companies give contributions to the school – both in form of raw materials and cash. Although not having any traditional research activities new knowledge is created at the school . The figure below shows the strategy canvas for the KaosPilots. The teachers are instead consultants from the private sector – some hired ad hoc for shorter periods. some permanently hired (some of them educated at the KaosPilots) – and all burning for the new ideas the school are producing. Another cost reducer comes through the school’s cooperation with the private sector.

The school seems to have the potential to be a leading player in creating the future of education.” . “In organisations of the David Gram 5 . Finally one could say that they certainly have looked across time and were able to create a new trend and a new way of looking at teaching business. the concept of superior/subordinate will crumble as we come to understand that everyone must constantly.Dee Hock. As for the compelling tagline.the company. Founder and CEO Emeritus. educational. simultaneously lead and follow and our governmental. commercial and social organisations must be reconceived to enable them to do so. but perhaps it will in the future. One could say that the school has looked across complementary product and service offerings and observed and noted that to start a business you need a network. The founders of the school looked across industries and incorporated a consultancy firm/innovation lab into the school – which was until then unheard of in Denmark – and thereby merging two different industries. the KaosPilots have an entire page on their homepage dedicated to how they came up with their tagline. This is what the KaosPilots are all about. So far the Kaospilots does not impose a threat to the public business schools. VISA . Through building a huge network of companies and individuals the school is able to offer the students access to companies and individuals around the world – contacts that could be crucial for starting their own business. They have had many and the latest really hits the spot: “The KaosPilots – Change the game” – and they certainly have. At the same time they redefined the industry’s buyer group to include a new group of buyers that were otherwise un-served.