In today’s cut-throat competitive world of business, the question is how to differentiate and win at the gathering of new markets. Now there is a Blue Ocean Strategy, a revolutionary business approach that prompts business houses to create uncontested market space with new demand hatch. As authored by two professors W. Chan Kim and Renée Mauborgne, the Blue Ocean has a new take on innovation and growth: building utilization and capturing new demand, as opposed to simply competing to win over existing customers.
But what is the Blue Ocean Strategy and how do you use it to come up with such unique ideas that change around whole industries? This comprehensive guide will help you understand everything about the Blue Ocean Strategy, from the main principles to tools and applications. We’re going to see how you can apply this approach in innovating, opening up new market spaces, and coming up with new, astonishing products or services.
Whether you are an entrepreneur with the sole intention of disrupting an industry, a business leader who is looking for new growth opportunities, or a strategist wanting to innovate within the four walls of your organization, it becomes extremely relevant to know and apply the Blue Ocean Strategy to improve your capability in generating and executing unique ideas. In this article, we shall demystify the main concepts outlined in Blue Ocean Strategy, show real-life examples of its successful implementation, and present the practical steps on how to apply this approach in your business.
What is the Blue Ocean Strategy?
Simply, Blue Ocean Strategy is the achieving of market space where competition is of little or no relevance. It means creating this ‘Blue Ocean’ is in complete contrast to a ‘Red Ocean,’ where the industry boundaries are accepted and defined and rules of the competitive struggle are well defined.
Key Concepts of Blue Ocean Strategy:
- Create Uncontested Market Space: Instead of struggling with competitors within existing industry space, a firm simply creates a new industry of its own and makes the competition irrelevant.
- Making the Competition Irrelevant: The strategy does not focus on competition but on creating and capturing new demand.
- Create and Capture New Demand: The market is unlocked in two ways: by seeking opportunities in current and potential markets of noncustomers reachable by new competition.
- Break the Value-Cost Trade-Off: Strive to achieve differentiation and low cost simultaneously. Not one at the expense of the other.
- Align the Whole System: Ensure that your business system supports your strategic choice of differentiation and low cost.
The Red Ocean vs. Blue Ocean Paradigm
To fully appreciate the Blue Ocean Strategy, it is crucial to understand how it deviates from traditional competitive strategies:
Red Ocean Strategy:
- Compete in existing market space
- Overcome the rival
- Exploit existing demand
- Make the value-cost trade-off
- Align the whole system with the strategic choice of differentiation or low-cost
Blue Ocean Strategy:
Create uncontested market space
Make competition irrelevant
Create and capture new demand
Break value-cost trade-off
Align the whole system in pursuit of differentiation and low-cost
Tools and Frameworks of Blue Ocean Strategy
Blue Ocean Strategy provides some tools and frameworks to help businesses come up with ideas and new markets:
- Strategy Canvas
This is a diagnostic and action framework serving two purposes:
- Captures the current state of play in the known market space, explaining where the competition is currently investing and factors the industry competes on.
- It helps you see how you can change your strategy to create a blue ocean.
How to use it:
- Identify the key competing factors in your industry
- Plot these factors on a graph, with the level of offering on the vertical axis
- Plot the level of your offering and that of your competitors
- Look for opportunities to create new factors or to significantly raise/reduce existing ones
- Four Actions Framework
How it helps to challenge the strategic logic of an industry and its business model:
These four questions will assist the framework in questioning the strategic logic followed by the industry and the business model:
- Which of the factors that the industry has taken for granted should be eliminated?
- Which of the factors should be reduced well below the standard of the industry?
- Which of the factors should be raised well above the standard of the industry?
- Which of the factors should be created, that the industry has never offered?
- ERRC Grid
The ERRC Grid: A complementary tool to the Four Actions Framework, this compels firms to act on all four dimensions in a way that raises a new value curve.
Which of the factors can be eliminated?
Which of the factors can be reduced below the industry’s standard?
Which of the factors should be raised above the industry standard?
Which of the factors should be created that the industry has never offered?
- Six Paths Framework
This tool helps businesses to look at their industry from various new perspectives towards the discovery of bluer oceans. It suggests looking across:
- Alternative industries
- Strategic groups within the said industries
- The chain of buyers
- Complementary product and service offerings
- Functional or emotional appeal to buyers
- Time
- Three Tiers of Noncustomers
This tool helps identify potential new customers by looking at three tiers:
- First Tier: “Soon-to-be” noncustomers who are on the edge of your market
- Second Tier: “Refusing” noncustomers who consciously decide against your market
- Third Tier: “Unexplored” noncustomers who are in markets distant from yours
Using Blue Ocean Strategy for Unique Ideas
Now that you are through with the main opinions and tools, let us have a look at how the Blue Ocean Strategy is to be put into use to come up with unique ideas:
- Analyze Your Current Market
- Industry Strategy
Make a Strategy Canvas of your industry. This will help you see how you and your competitors are currently situated.
- Look for the Pain Points and Limitations
Identify the areas where the industry is doing poorly in serving the customers or creating the pain points. Those might be the areas of innovation.
- Look Beyond Your Industry
Consider options across industry boundaries using the Six Paths Framework. This may point to radical new ideas borrowing from other sectors.
- Redefine Your Value Proposition
Use the Four Actions Framework and ERRC Grid to go beyond the boundaries of the current industry definitions. Think about what you can eliminate, reduce, raise, or create in products/services to offer value like never before.
- Identify New Customer Segments
Identify new markets for your offering using the Three Tiers of Noncustomers framework. You may realize ideas for adjusting your product or your service to serve some as-yet-unmet needs.
- Prototype and Test
With some unique ideas, make prototypes and test them on potential customers. It will help you fine-tune your ideas and ensure you have value.
- Align Your Business Model
Make sure your entire business model can withstand a blue ocean strategy. You may need to reassess your resources, processes, and profit formula.
Examples of Real-World Blue Ocean Strategy
Let’s understand with the help of some Business Examples how the Blue Ocean Strategy ends in some unique benefit:
- Cirque du Soleil
Cirque du Soleil created a blue ocean by rebuilding the circus experience, starting with what a circus is. By stripping their circus to the very minimum that is associated with schools, and animals, and keeping only acrobatics, raising the performance level with top know-how and equipment, and integrating it with a story; thereby, attracting a whole new segment of adult theatre-goers, who would pay top dollar to watch.
- iTunes
Apple’s iTunes was able to generate a blue ocean in the music industry. It provided a legal, user-friendly platform to download individual songs. These people have eliminated the need for physical stores, cut the cost per song, increased the ease of finding and buying music, and created a perfect seamless integration with their iPod devices.
- Yellow Tail Wine
Yellow Tail created a blue ocean in the wine industry by making wine easy to choose fun to drink, and easy to enjoy. They eliminated any wine complexity and prestige, reduced the range of wines offered, augmented the ease of drinking and fun, and created a distinctive brand and packaging.
- Nintendo Wii
Nintendo, for instance, took the Wii console straight into a blue ocean. It targeted non-gamers: it removed the complications of game controllers and subdued the constituents responsible for high graphics quality; it increased the ease of social exchanges and made the gameplay in motion controls.
Problems in the Implementation of the Blue Ocean Strategy
Blue Ocean Strategy can create breakthrough ideas, but the resistance is a hindrance:
- Resistance to using new products or services
The implementation of a blue ocean strategy mostly involves significant changes and may be resisted easily within an organization.
- Risk of Failure
The making of new market spaces is accompanied by uncertainty and risk. Not all attempts at Blue Ocean will succeed.
- Difficulty in Execution
Even though the concept looks pretty simple, execution requires meticulous planning and alignment of all business activities.
- Sustaining the Blue Ocean
Once a blue ocean is created, imitators may quickly follow. Sustaining the advantage requires continuous innovation.
- Overcoming Cognitive Biases
Our minds are often anchored to existing industry norms, making it highly challenging to think outside of the box.
Tips for Successful Implementation of Blue Ocean Strategy for Unique Ideas
To successfully implement the Blue Ocean Strategy for unique ideas, follow the below tips:
- A Culture of Innovation
Drive imagination and out-of-the-box thinking throughout the organization.
- Cross-Functional Teams
Assemble people from different departments and hear their views on possible blue oceans.
- Start Small
Initiate pilot projects to test your blue ocean ideas before a scale-up of the great idea.
- Communicate the Vision
Make sure that all stakeholders have and subscribe to the blue ocean strategy.
- Be Patient
Because changing or coming up with a new market space may take a while, be ready for a long ride.
- Continuously Innovate
Remain to innovate to be a step ahead of potential imitators even after discovering a blue ocean.
- Learn from Failures
Not all will succeed. Take failures simply as learning experiences for readjusting your strategy.
Measuring the Success of Your Blue Ocean Strategy
To make sure that your Blue Ocean Strategy works in terms of producing and coming up with new and different ideas:
- Market Creation: Monitor the size and growth of your new market space.
- Value Innovation: Track the value innovation for your customers and cost reduction of your company.
- Non-Customer Conversion: Number of non-customers that you attract.
- Profitability: The difference in profitability of the blue ocean offering versus your traditional offerings.
- Competitive Advantage Duration: How long you can sustain the unique position before imitators catch up.
- Brand Perception: Determine how your brand perception changes by offering an ocean blue strategy.
Conclusion
The blue ocean strategy presents such an iconic theoretical model from which innovative conceptual thought can be derived capable of revolutionizing industries and building market spaces forcefully. A shift of focus from competing in existing markets to creating new markets will help value innovation to be achievable. With that, there is an unlocking of an unprecedented value for businesses and an unprecedented value for customers.
These tools and principles—the Strategy Canvas, Four Actions Framework, Six Paths, and Three Tiers of Noncustomers—make up a systematic approach to ‘out-of-the-box’ thinking, helping managers challenge status-quo thinking and conventional boundaries of an industry. When executed properly, these concepts help develop path-breaking innovations that make competition irrelevant.
On the other hand, a Blue Ocean Strategy does come with basic challenges. It needs the reconsideration of fundamental assumptions, taking bold risks, or even sometimes changing the business model itself. In other words, success through the strategy requires the creativity of generation of ideas, strict implementation, and engagement with further relentless continuous innovation.
From Cirque du Soleil to iTunes, Yellow Tail, and Nintendo Wii, as we have seen from the above real-world examples, the payoffs from successfully creating a blue ocean can be huge transformational. With these companies, it was no longer about competing and doing better; these companies intrinsically changed the game of competition in their respective industries.
In a rapidly changing technology era and rising consumer expectations, the critical importance of being able to create blue oceans for long-term business enterprise may turn out to be critical. Whether it may be a start-up aiming to disrupt an industry or an established company seeking new growth avenues, mastering the knowledge of Blue Ocean may lead to the generation of truly fresh concepts and carving out the market space for your company, together with your competitors.
Remember, the Blue Ocean Strategy is not about being different; it is about creating a significant difference. By this rule of value innovation and tune to the needs of noncustomers, your product, service, and business model will win not just commercially but by the quality of the value it adds to people’s lives.
Now a journey begins. Create curiosity; welcome thoughts that are out of the norm, and within the imagination. Never accept that everything is status quo. The next great blue ocean is out there, and with the right approach, it might be the one you are about to create.
