Blue Ocean Strategy

Synopsis

Your competition is fierce and you can't outspend or outperform them at what they already do best. So how do you stand out? Create uncontested market space and make your competition irrelevant with Blue Ocean Strategy. Blue Ocean Strategy helps build a product that's innovative, profitable, and untouchable by your competition.

Questions and answers

Can you name a company that could benefit from the Blue Ocean Strategy and explain how?

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A company that could benefit from the Blue Ocean Strategy is a traditional taxi service company. With the rise of ride-sharing apps like Uber and Lyft, traditional taxi services have been facing fierce competition. By applying the Blue Ocean Strategy, they could identify and create uncontested market spaces that are ripe for growth. For example, they could focus on providing services to elderly or disabled individuals who require more assistance than what is typically provided by ride-sharing apps. This could include features like trained drivers, assistance with getting in and out of the vehicle, and easy-to-use booking services for those who are not tech-savvy.

What case studies demonstrate the effectiveness of the Blue Ocean Strategy?

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Several case studies demonstrate the effectiveness of the Blue Ocean Strategy. For instance, Cirque du Soleil successfully applied this strategy by creating a unique blend of theater, dance, and circus, thus eliminating competition from traditional circuses and theater productions. Another example is Nintendo's Wii, which expanded the gaming market beyond traditional gamers to include families and older adults by focusing on fun, interactive games rather than high-end graphics and complex gameplay. These companies created a new, uncontested market space, making their competition irrelevant.

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Slide highlights

Learn the Blue Ocean Shift Process to start from where you are now, imagine where you could be, discover how to get there, and make your move. (Slide 6)

Use a Buyer Utility Map to plot how your Blue Ocean offering stacks up against the current focus of your industry. (Slide 9)

Move your organization's mindset beyond value limitations and towards value innovation for your customers. (Slide 16)

Outcome

Before there was Ford, there was no market for automobiles – because the competition was horses. Before Apple created iTunes, no one bought individual mp3 tracks over CDs. Before Uber, no one clicked a button to have a stranger pick them up.

While "disruption" has become a buzzword, the concept of value innovation is the secret ingredient used by legendary favorites across different industries. Competing in a crowded and over-saturated Red Ocean only maintains your status quo, and is probably costly and futile. Instead, dive into a Blue Ocean to create your own market space, with products that align innovation, price, utility, and cost.

Questions and answers

Can you name a company that could benefit from the Blue Ocean Strategy and explain how?

View answer

A company that could benefit from the Blue Ocean Strategy is a traditional taxi service. Currently, they are competing in a saturated market (Red Ocean) with other taxi services and ride-sharing apps like Uber and Lyft. By applying the Blue Ocean Strategy, they could identify and create new demand in untapped markets. For instance, they could develop a unique service for elderly or disabled individuals who require special transportation assistance. This could include features like trained drivers, equipped vehicles, and personalized care. This would not only cater to a market that is currently underserved but also reduce competition.

Can you provide a case study that demonstrates the effectiveness of the Blue Ocean Strategy?

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Yes, a classic example of the Blue Ocean Strategy is the launch of the Nintendo Wii. Instead of competing directly with powerful competitors like Sony and Microsoft in the Red Ocean of high-spec gaming, Nintendo created a Blue Ocean by targeting a new market segment: casual and family gamers. They introduced a unique, motion-sensitive controller and games that were easy to understand and play, making gaming accessible to a wider audience. This strategy allowed Nintendo to capture a new market, making the competition irrelevant.

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Application

Introduction

Blue Ocean Strategy was conceptualized based on studies of company success and failure in more than 30 industries over 10 years. The study revealed companies that go after markets with high profit potential and less competition are the most successful. Blue Ocean Strategy is the framework to pursue both differentiation and low cost to open a new market with new demands. (Slide 2)

Questions and answers

How can the Blue Ocean Strategy be aligned with a company's digital transformation initiatives?

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The Blue Ocean Strategy can be aligned with a company's digital transformation initiatives by identifying and creating new, uncontested market spaces that make the competition irrelevant. This can be achieved through the use of digital technologies to innovate and differentiate the company's offerings, while also reducing costs. For example, a company could leverage data analytics to gain insights into customer needs and preferences, and then use these insights to develop unique products or services. Additionally, digital technologies can be used to streamline operations and improve efficiency, thereby reducing costs. Ultimately, the goal is to create a 'blue ocean' of new market space where the company is the sole player, rather than competing in a 'red ocean' where competition is fierce.

What are the key components of the Blue Ocean Strategy that contribute to its success?

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The key components of the Blue Ocean Strategy that contribute to its success are its focus on differentiation and low cost. This strategy encourages companies to create new markets with high profit potential and less competition, rather than competing in existing markets. It's about creating and capturing new demand, and making the competition irrelevant. The strategy was conceptualized based on studies of company success and failure in more than 30 industries over 10 years.

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Six principles

There are six principles of Blue Ocean Strategy, each with key tools and objectives. Each principle comes with its own set of risks. For instance, Blue Ocean Strategy operates under the belief that boundaries and industry structures can be reconstructed based on the actions of the players involved. So under this first principle, reconstruct market boundaries, your company could face a "search risk". The "search risk" comes from the need to educate your customer base about the new market that's been created. (Slide 4)

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Value innovation

The concept of value innovation is crucial to Blue Ocean Strategy. For traditional companies, their key value proposition meets at the intersection of price and product or feature value. For value innovation to occur, however, you need to focus on the big picture, not the numbers. Discover which factors your industry has long competed on that should be eliminated, and explore which factors should be created that the industry has yet offered. (Slide 5)

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Strategic sequence

Get the strategic sequence right to create a commercially viable blue ocean idea. Sequence your priorities first by utility, next to price, to cost, and finally adoption. To do this, ask yourself if there is exceptional buyer utility in your business idea? If not, rethink your strategy. If so, what about your price – is it easily accessible to the mass of buyers? If not, rethink. And so forth. This process adds value to your business by reducing costs and increasing profits after widescale adoption. (Slide 7)

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Strategy canvas

Reach beyond existing demand to determine which factors should be raised above the current industry standard, as these factors limit the size of your industry. The strategy canvas visualizes the different products or features you could create. Rank your industry's current standards against a potential Blue Ocean offering from low to high. The areas where your new offering can out-compete the current standard are the competitive factors to focus on. For instance, perhaps you are creating a new software platform for a niche industry with very low cybersecurity standards. Instead of trying to outcompete your industry on price or functionality, provide a more secure offering that could appeal to privacy-conscious customers across multiple industries. When done right, you can uncover the ocean of non-customers to unlock. (Slide 10)

Questions and answers

What are the key features to focus on when developing a product using the Blue Ocean Strategy?

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When developing a product using the Blue Ocean Strategy, the key features to focus on include:

1. Value Innovation: This is the cornerstone of the Blue Ocean Strategy. It involves creating innovative value to make the competition irrelevant.

2. Utility: The product should serve a useful purpose or meet a need in a new or unique way.

3. Price: The product should be priced in a way that it attracts a large number of customers, thereby creating a new market.

4. Cost: The cost of production should be kept low without compromising on the quality or features of the product.

5. Ease of use: The product should be user-friendly and easy to use.

6. Overhead costs: Overhead costs should be minimized to maximize profit.

How does the Blue Ocean Strategy help in capturing new markets and making competition irrelevant?

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The Blue Ocean Strategy helps in capturing new markets and making competition irrelevant by encouraging businesses to innovate and create new market spaces rather than competing in existing ones. This strategy involves developing unique products or services that are not available in the current market, thereby creating a 'blue ocean' of uncontested market space. This reduces competition as the business is no longer competing on the same factors as others. It also allows the business to set its own pricing and quality standards, which can lead to higher profits and growth.

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An alternate visualization allows you to canvas features as opposed to competing factors. List the products you want to develop and compare them across the main features you are focusing on. For instance, compare how the three products you envision track across key features like price, utility, ease of use, and overhead costs. Maybe your cyber-security cloud platform is more costly to develop, but its ease of use and utility score far higher than the competition, making it much more appealing to a wide variety of players outside your niche industry. (Slide 11)

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Mindset and implementation

Define your organization's current mindset alongside the barriers that keep your potential customer base from adopting your product to overcome organizational hurdles. A key tenant of Blue Ocean is looking for customers that could be reached beyond what exists today. For instance, Tier 1 could be non-customers who are on the edge of your market due to the high costs of securing their businesses against cyber threats. Tier 2 could be "refusing" non-customers who consciously choose against doing business online, but could benefit from your easy-to-use software. Tier 3 could be the unexplored non-customers who work in other industries but could benefit from a secure cloud service that helps keep their data safe. And now, you have a whole new ocean outside of your current industry to explore. (Slide 15)

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Lastly, use all of the findings from this process to build your execution strategy into a roadmap. For more on that front, check out our Strategic Roadmap deck on how to deploy a plan into success.