BOS Essay the Kaospilot David Gram

8/3/2019 BOS Essay the Kaospilot David Gram

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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

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2005. A new school will follow in Malmö, Sweden in 2006 and serious negotiations are taking place about

establishing KaosPilot programmes in Holland within a couple of years. The school also has academic

networks/ educational outposts in Berlin, San Fransisco, Durban, and Havanna.

The KaosPilots has no research facilities or professors doing research, therefore new knowledge is mostly

created through the practical work of the students and through a vast international network of companies,

schools and innovative individuals. The School has close personal relations with a number of entrepreneurial

people and great thinkers such as Otto Scharmer (MIT), Dee Hock (VISA), Alan Webber (Fast Company) Kjeld

Kristiansen (LEGO, owner), Mads Oevlisen (Novo Nordic, CEO) and many more. The school also has several

on-going dialogues with a series of European and North American companies, educational institutions and

‘think tanks’ about future strategic collaborations. Collaborations that will ensure the school’s students access

the most interesting and up-to-date knowledge, experience and research in the school’s three core areas;

creative project, process design and business design.

During the 14 years that the KaosPilots has been in Aarhus, it has not only been running an education, but

also a commercial consultancy company working with both the private, public and voluntary sector. The

business idea is to help organisations and individuals master the capability for innovation and creativity –

leveraging on the KaosPilot philosophy and methodology, combining the disciplines of creative business,

project and process design. This also contributes to the knowledge creation at the school.

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”. Allan Webber, founding editor of Fast Company adds, “If

the KaosPilots didn’t exist, someone would have to invent them. That’s how you know that it’s an essential

idea. You can’t imagine it not being there.”

Let’s look at how they did it.

About the market/competition:

The big business schools and universities in Denmark are all government funded and controlled. These

schools offer Graduate and Post-Graduate degrees in business administration and economics.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. The competition to attract students –

especially the skilled ones - is high among both private and public business schools since the financial support

from the government is based on the number of graduating students. This competition is now gradually

1 The market described here does not include MBA studies.

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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. 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. 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 theexisting markets with a lot of un-served potential customers.

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. Many very

creative and entrepreneurial young people in Denmark often end up not taking a business education. This is

mainly due to the reason that the business schools do not offer the subjects and activities that attract these

young people. Another reason is that these entrepreneurial “fire-souls” often are too impatient to sit for hoursand study heavy lecture books about subjects that does not really interest them (advanced math, statistics,

financial accounting etc.) – they want to start up a business as soon as possible and what they need are some

practical experiences combined with some relevant theory. 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. They created a school that would teach business to young people

who perhaps otherwise would not have taken an education. 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.

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. 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, or at least motivating them to go for an educational degree and giving the school a

successful growing business. But the third – and perhaps most fortunate winner - is the society.

At the same time as differentiating themselves from the competitors they were able to keep the costs at a low

and competitive level. This was done by eliminating expensive science research activities, facilities and

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professors. 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. Although not having any traditional research activities new knowledge is

created at the school - partly from the students’ fieldwork and partly through the incorporated consultancy

business. The consultancy business gives inspiration to the school and vice versa – thus making sure that theschool is updated on modern management tools and theories. At the same time profits from the consultancy

business covers some 28% of the schools expenses.

Another cost reducer comes through the school’s cooperation with the private sector. Students perform as part

of their education various tasks for private companies for free, which gives them experience and a possibility

to use the methods they learnt. For this the companies give contributions to the school – both in form of raw

materials and cash. In this way Apple donated free Mac’s to the school - 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.

The figure below shows the strategy canvas for the KaosPilots, which illustrates how both differentiation and

low cost was achieved.

Government

funding and

control

Science

research

(facilities etc)

Professors Heavy text

books and

economic

theories

Fieldwork

and practical

use of theory

Student

payment

Auditorium

lektures

Focus on

academic

abilities

Number of

exams

Focus on

creative

abilities

Practical

exercises

and games

Focus on

networking

abilities

Funding

from

consultancy

activities

Low

High

The Strategy Canvas of the KaosPilots

Danish publicbusiness schools

The KaosPilots

The KaosPilots created a blue ocean by changing their value curve to match the needs and values of the

identified un-served costumers. They were able to successfully change and sharpen their strategic focus

through changing the key competitive factors of the industry and thus eliminating, reducing, raising and

creating new factors. 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

Approximate values

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the company. 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. At the same time they redefined the industry’s buyer group to include a new group of

buyers that were otherwise un-served. 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 couldbe crucial for starting their own business. 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. 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.

As for the compelling tagline, the KaosPilots have an entire page on their homepage dedicated to how they

came up with their tagline. They have had many and the latest really hits the spot: “The KaosPilots – Changethe game” – and they certainly have.

The school seems to have the potential to be a leading player in creating the future of education. So far the

Kaospilots does not impose a threat to the public business schools, but perhaps it will in the future.

“In organisations of the future, the concept of superior/subordinate will crumble as we come to understand that

everyone must constantly, simultaneously lead and follow and our governmental, educational, commercial and

social organisations must be reconceived to enable them to do so. This is what the KaosPilots are all about.”

- Dee Hock, Founder and CEO Emeritus, VISA

- by David Gram

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BOS Essay the Kaospilot David Gram