Industry Insights

What is the Blue Ocean Strategy?

Posted by StratX on May 5, 2020 7:30:29 AM

How to Create Uncontested Market Space and Make Competition Irrelevant!

This was the compelling and bold promise made on the cover page of the book Blue Ocean Strategy when it was first published in 2005.

In the book, the authors, Professors Chan Kim and Renee Mauborgne from INSEAD business school, captured the findings from their extensive research on value innovation. In order to win in the marketplace, they found, companies should stop obsessing over the competition. Focusing on the competition leads to extensive benchmarking and rapid imitation between competitors which then leads to a commoditization of the market place and creates further head-to-head competition. In a vivid metaphor, the authors called this type of market a Red Ocean, evoking the idea of shark-infestation, the risk of someone getting hurt and the waters turning red with blood …

Instead, their research of winning strategic moves across thirty industry sectors suggested that companies should spend more time focusing on creating value for noncustomers as well as customers. By increasing customer value through innovation and at the same time decreasing costs to the company, firms can unlock new pools of customers in a profitable, market expanding move. Among the many powerful examples in the book, the story of Cirque du Soleil stands out. They reinvented the circus by removing animals from their shows, thus reducing costs, while increasing value to noncustomers of the traditional circus (people concerned about animal cruelty). It was a powerful illustration of the value up and cost down principle.

The book also contained practical process steps and tools to guide the reader through a systematic way of thinking differently about their market place

 

Is the Blue Ocean Strategy Still Relevant Today?

The world has seen a lot of changes in the past decade, since the first Blue Ocean Strategy (BOS) book was launched in 2005. Three fundamental changes affecting business are making BOS even more relevant today.

Competition: back in 2005, the increase in competition and the pressure it placed on costs and profits was at the heart of the need for the Blue Ocean Strategy. Today, competition continues to intensify with new players coming from emerging markets and new technologies helping businesses transact and communicate globally.

Social media: Facebook was barely one year old in 2005. Today, the prevalence of social media, blogs and forums have empowered customers to easily voice their excitement or frustration with any business offering. In this “rate-me” economy, me-too offerings have a hard time gaining momentum. On the other hand, social media helps Blue Ocean value innovations get even faster exposure through word-of-mouth and positive ratings.

Emerging markets: the rise of the BRIC countries and other emerging markets has attracted many global competitors. As they are vying for market share, they are at times struggling due to overly complex and costly offerings designed for their home markets. Local success often requires creating more relevant value at a lower cost. Witness the rapid success of Chinese smart phone maker Xiaomi, dubbed “the Apple of China” and now the third largest global smart phone company behind Samsung and Apple, just five years after the company was created.

Classic examples of companies that have implemented the Blue Ocean Strategy

Canon

When Canon released their personal, desktop printers and copiers, the rest of the industry was targeting the typical office purchasing managers who were looking for machines that were large, long lasting and required little maintenance. By shifting the target customer from corporate purchasers to personal users, Canon created a blue ocean of new market space. The desktop printer took the problem that the mass of non-customers needed to solve and provided a new way to unlock value, thus gaining a new audience of private secretaries and the self-employed.

Cirque de Soleil

Arguably one of the most famous examples of a company using the Blue Ocean strategy is Cirque De Soleil. By scrapping live animal acts, Cirque de Soleil was able to pursue low cost and differentiation and the introduction of music and a storyline inspired the world of theatre, and the emphasis on physical skill helped Cirque De Soleil to create new elements that had never been seen in the circus before. As a result of these changes, the company was able to create a new market space and their new audience (corporate clients and adults) are willing to pay above traditional circus costs to watch the extraordinary performance. The company now entertains millions around the globe every year.

Uber

Despite a long term success in the taxi industry, Uber has managed to grow faster than any other taxi firm simply by reinventing the market. Instead of choosing to compete within the confines of the existing industry - or trying to gain the customers of other firms, Uber developed a space that made taxis totally irrelevant. Just like the examples above, Uber turned non-customers into customers by making a product that appealed to customers that weren't already using that of a competitor.

Uncover the strategic secrets behind successful Blue Oceans of 8 companies across multiple industries by downloading The New Blue Ocean Strategy Casebook

Download the Casebook

What’s in the new Blue Ocean Strategy book?

The latest edition of the book and its new chapters bring many new insights about the implementation of Blue Ocean Strategy, along with new and updated case studies.

In particular, it addresses questions such as:

  • What do you do if your Blue Ocean becomes red?
  • How can you create a sustainable Blue Ocean?
  • What are the most common Red Ocean traps?

For more on the “Red Ocean Traps”, check out this article in the March issue of Harvard Business Review.

4 Steps to Get Started with the Blue Ocean Strategy

Here are four simple ways to dive in and start making an impact with Blue Ocean Strategy...

1 - Get the new and expanded edition of the book.

This book challenges conventional wisdom and will make you rethink what you know about business strategy, marketing and innovation.

You will undoubtedly enjoy the many examples and practical tools and tips.

2 - Use the 4 Actions Framework described below.

Do a first-pass by yourself and then use it in a meeting with your team.

Reflect on what factors or key activities you, your team or your business spend time and money resourcing.

Then scrutinize these activities: do they pass the value test? If not, consider eliminating or reducing them. This should free up time and money to raise activities that add value. Then brainstorm what new activities or factors should be created to add even more value.

  • ELIMINATE: Which factors that the industry has long competed on should be eliminated?
  • RAISE: Which factors should be raised well above the industry's standard?
  • REDUCE: Which factors should be reduced well below the industry's standard?
  • CREATE: Which factors should be created that the industry has never offered?

Discover the major concepts and tools behind Blue Ocean Strategy by downloading The New Blue Ocean Strategy Casebook

Download the Casebook

3 - Learn more about how you can immerse your team with the Blue Ocean Strategy Simulation.

We help companies create a culture of customer-driven and strategic innovation through our highly engaging experiential learning programs. Our fully web-based Blue Ocean Strategy simulation teaches participants the Blue Ocean Strategy methodology while making an impact and driving lasting change in the organizations we partner with.

Find out why your organization should invest in innovation training today.

4 - Get in touch with us.

We can help you explore how Blue Ocean Strategy might apply to your company. Contact us to book in a Blue Ocean Strategy webinar for your team or simply kick-start your Blue Ocean Strategy learning journey by downloading The New Blue Ocean Strategy Casebook

Contact Us

Topics: Innovation, Blue Ocean Strategy

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