Blue Ocean strategy

The Blue Ocean Strategy is a business strategy that focuses on creating uncontested market space instead of competing in existing markets. It was introduced by W. Chan Kim and Renée Mauborgne in their book “Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant”. This strategy is based on the premise that most companies compete in crowded, red oceans where they fight for a share of existing demand, resulting in cut-throat competition and limited profits. Instead, the Blue Ocean Strategy suggests creating new markets that are uncontested, making competition irrelevant, and maximising profits.

Principles of Blue Ocean Strategy

1. Value Innovation: Value innovation is at the heart of the Blue Ocean Strategy. It means creating a leap in value for customers while reducing costs. This can be achieved by identifying what factors customers value the most and what factors they are willing to sacrifice. By focusing on the factors that matter to customers, businesses can create new market space that is uncontested.
2. Eliminate and Reduce: The Blue Ocean Strategy advocates eliminating or reducing factors that are not valued by customers. This can help businesses reduce costs and create a leaner, more efficient operation. By eliminating non-essential features and services, businesses can focus on delivering what customers truly value.
3. Raise and Create: Raising and creating factors that customers value but are not currently offered by competitors is another key principle of the Blue Ocean Strategy. By identifying what factors are missing from existing markets, businesses can create new market space that is uncontested. This can be achieved by focusing on factors such as convenience, accessibility, and personalization.
4. Reach Beyond Existing Demand: The Blue Ocean Strategy suggests reaching beyond existing demand to create new markets. This can be achieved by targeting non-customers or creating demand through new products or services. By identifying new customers and markets, businesses can expand their customer base and grow their revenue.

Implementing Blue Ocean Strategy

1. Conduct a Value Curve Analysis: A value curve analysis is a graphical representation of a company’s performance in relation to its competitors. This analysis can help businesses identify what factors are valued by customers and what factors are not. By identifying what factors are valued by customers, businesses can create new market space that is uncontested.
2. Identify Non-Customers: The Blue Ocean Strategy suggests targeting non-customers to create new market space. Businesses can identify non-customers by segmenting the market and identifying who is not currently being served. This can be achieved by understanding what factors are preventing non-customers from purchasing and addressing those factors.
3. Create a Buyer Utility Map: A buyer utility map is a tool that helps businesses identify what factors are most important to customers. By mapping out the factors that customers value, businesses can create new market space that is uncontested. This can be achieved by focusing on factors such as convenience, accessibility, and personalization.
4. Develop a Strategy Canvas: A strategy canvas is a tool that helps businesses visualize their strategy in relation to their competitors. By identifying what factors are valued by customers and what factors are not, businesses can create a new strategy that is differentiated from their competitors. This can be achieved by focusing on factors that are important to customers but are not currently being offered by competitors.

Examples of Blue Ocean Strategy

Here are some more examples of companies that have successfully implemented the Blue Ocean Strategy:

1. Netflix: When Netflix first started, it offered DVD rentals by mail, which was a new concept at the time. Instead of competing in the crowded video rental market, Netflix created a new market space by offering convenience and accessibility to customers. Later, Netflix expanded its business model to offer streaming services, creating a new market space that was uncontested.
2. Southwest Airlines: Southwest Airlines is known for its low-cost, no-frills approach to air travel. Instead of competing in the crowded market of major airlines, Southwest Airlines created a new market space by focusing on affordable, point-to-point air travel. By offering fewer services than major airlines, Southwest was able to reduce costs and offer lower prices to customers.
3. Tesla: Tesla is a company that has disrupted the automotive industry by creating electric cars that are stylish, luxurious, and environmentally friendly. Instead of competing in the crowded market of traditional gasoline-powered cars, Tesla created a new market space by focusing on sustainability and technological innovation. By offering electric cars that are both practical and desirable, Tesla has created a loyal following of customers who are willing to pay a premium for its products.
4. Nintendo Wii: When Nintendo released its Wii gaming console, it created a new market space by focusing on casual gamers who were not interested in the complexity and high cost of traditional gaming consoles. By offering a simple, intuitive gaming experience that could be enjoyed by all ages, Nintendo was able to tap into a new market of customers who had not previously been interested in gaming.

Conclusion

The Blue Ocean Strategy is a powerful tool that can help businesses create uncontested market space, maximise profits, and make the competition irrelevant. By focusing on value innovation, eliminating and reducing non-essential features, raising and creating factors that customers value, and reaching beyond existing demand, businesses can differentiate themselves from their competitors and create new market space. Companies such as Cirque du Soleil, Netflix, Southwest Airlines, Tesla, and Nintendo Wii have successfully implemented the Blue Ocean Strategy and achieved significant success. By understanding and applying the principles of the Blue Ocean Strategy, businesses can unlock new opportunities and achieve long-term growth and profitability.

The Pros and Cons of a Blue Ocean Strategy

Like any business strategy, the Blue Ocean Strategy has its advantages and disadvantages. Here are some of the pros and cons of implementing a Blue Ocean Strategy:

Pros

1. Reduced competition: By creating a new market space, businesses can reduce competition and increase their profits. This can be especially beneficial for small businesses that may struggle to compete in crowded markets.
2. Increased revenue potential: By creating new markets and targeting non-customers, businesses can tap into new revenue streams that were previously untapped. This can help businesses achieve long-term growth and profitability.
3. Enhanced brand recognition: By creating new and innovative products or services, businesses can build a strong brand that is differentiated from competitors. This can help businesses build a loyal customer base and increase their market share.
4. Increased customer satisfaction: By focusing on what customers value and eliminating non-essential features, businesses can improve customer satisfaction and loyalty. This can lead to increased customer retention and word-of-mouth referrals.

Cons

1. Risk of failure: Creating new markets can be risky, and there is no guarantee that a business will be successful in a new market space. Businesses must be prepared to invest time and resources into market research and product development.
2. Requires innovation: Creating a new market space requires innovation and creativity, which can be challenging for some businesses. This may require significant investments in research and development.
3. May require significant resources: Implementing a Blue Ocean Strategy may require significant resources, including marketing and advertising, product development, and staff training. This can be a barrier for small businesses with limited resources.
4. Uncertainty: Creating a new market space can be unpredictable, and there is no guarantee of success. Businesses must be prepared to adapt and pivot their strategy as needed.

Blue Ocean vs Red ocean

Blue Ocean Strategy and Red Ocean Strategy are two opposing concepts in the world of business strategy. Red Ocean represents the traditional competitive market space, where companies compete for a share of the existing market. Blue Ocean, on the other hand, represents a new market space where companies create uncontested demand.

Here are some of the key differences between Blue Ocean and Red Ocean strategies:

1. Competition: In Red Ocean strategy, competition is intense, and companies compete against each other for market share. In Blue Ocean, there is no competition because companies create new markets, and there is no competition yet.
2. Innovation: In Red Ocean, companies innovate to improve their products and services to gain an edge over their competitors. In Blue Ocean, companies innovate to create new market space that is uncontested and make competition irrelevant.
3. Value: In Red Ocean, companies try to provide better value to their customers to outperform their competitors. In Blue Ocean, companies focus on creating new value for their customers that they did not have before.
4. Cost: In Red Ocean, companies try to reduce costs to improve their profitability. In Blue Ocean, companies focus on reducing costs while creating new value for their customers.
5. Customer base: In Red Ocean, companies target existing customers and try to retain them. In Blue Ocean, companies target non-customers and try to convert them into customers.

Important concepts in Blue Ocean strategy

The Blue Ocean Strategy is a powerful tool for businesses to create new market space and achieve long-term growth and profitability. Here are some of the important concepts in Blue Ocean Strategy:

Value Innovation

Value innovation is a key concept in Blue Ocean Strategy. It means creating a leap in value for customers while reducing costs. This can be achieved by identifying what factors customers value the most and what factors they are willing to sacrifice. By focusing on the factors that matter to customers, businesses can create new market space that is uncontested.

Strategy Canvas

The Strategy Canvas is a tool that helps businesses visualise their strategy in relation to their competitors. By identifying what factors are valued by customers and what factors are not, businesses can create a new strategy that is differentiated from their competitors. This can be achieved by focusing on factors that are important to customers but are not currently being offered by competitors.

Buyer Utility Map

A buyer utility map is a tool that helps businesses identify what factors are most important to customers. By mapping out the factors that customers value, businesses can create new market space that is uncontested. This can be achieved by focusing on factors such as convenience, accessibility, and personalization.

Four Actions Framework

The Four Actions Framework is a tool that helps businesses identify what factors to eliminate, reduce, raise, and create to create new market space. By focusing on factors that are important to customers but are not currently being offered by competitors, businesses can differentiate themselves from their competitors and create new market space.

Non-Customer Analysis

The Blue Ocean Strategy suggests reaching beyond existing demand to create new markets. This can be achieved by targeting non-customers or creating demand through new products or services. By identifying new customers and markets, businesses can expand their customer base and grow their revenue.

Tipping Point Leadership

Tipping Point Leadership is about creating momentum and buy-in for change within an organisation. It involves identifying and leveraging key stakeholders and influencers to drive change and overcome resistance to new ideas and strategies.