What is Blue Ocean Strategy

Unveiling the Blue Ocean Strategy: An Ocean of Opportunities

Imagine sailing in a vast ocean, serene and boundless, where there’s no competition for resources, only the endless horizon of possibilities. This is the essence of the Blue Ocean Strategy, an innovative approach that companies adopt to create uncontested market spaces, making competition irrelevant. Instead of battling in a saturated market, why not venture into uncharted waters?

Through this article, we’ll navigate the deep waters of the Blue Ocean Strategy, demystifying its principles, contrasting it with its ‘red’ counterpart, and highlighting how businesses have charted successful courses using this strategy.

What exactly is the Blue Ocean Strategy?

At its core, the Blue Ocean Strategy is a paradigm shift. It challenges companies to break out of the saturated market and create new spaces, or “Blue Oceans”, ripe for innovation. It’s about delivering unique value and positioning the company away from the shark-infested waters where businesses fiercely compete for a share of the pie.

Developed by W. Chan Kim and Renée Mauborgne, this strategy emphasizes the simultaneous pursuit of differentiation and low cost, crafting a unique market space. Rather than doing battle with competitors, the focus shifts to creating. Instead of capturing existing demand, it’s about cultivating new demand.

The strategy isn’t about mere market disruption; it’s about market creation. Companies like Cirque du Soleil exemplify this. Instead of competing head-to-head with traditional circuses, Cirque du Soleil redefined the very notion of a circus, merging theatrical romance with circus ambiance, creating an entirely new entertainment genre, and thereby a blue ocean of its own.

In essence, the Blue Ocean Strategy encourages businesses to redefine industries in their favor, offering an avenue for higher growth and profits. It’s a call to step out of the blood-red ocean of fierce rivalry and sail towards uncontested waters.

This approach is less about technological innovation and more about value innovation. It’s a blend of creating enhanced elements in an industry while eliminating or reducing non-essential elements.

Red Ocean vs. Blue Ocean: A Contrast

While the Blue Ocean Strategy seeks untapped market spaces, the Red Ocean Strategy plays in the existing market space. Here, companies try to outperform rivals and capture greater existing demand. The waters get bloody (hence “red”) due to cutthroat competition.

In the red ocean, boundaries are defined, and rules of competition are known. It’s a zero-sum game where one’s gain is achieved at another’s loss. The strategic focus is on beating the competition.

For instance, consider the cola wars between Pepsi and Coca-Cola. Both companies fiercely contest for greater market share in the already saturated soft drink market. Their strategies revolve around better advertising, pricing wars, and slight product variations.

The Blue Ocean, on the other hand, is about making the competition irrelevant. The rules of the game are waiting to be set. It’s a positive-sum game, a race to create a new market space that’s uncontested.

Going back to the example of Cirque du Soleil, they didn’t succeed by taking away the audience from traditional circuses. They attracted a whole new audience who were seeking sophisticated entertainment, willing to pay premium prices, creating a market that didn’t exist before.

Key Principles of Blue Ocean Strategy

The Blue Ocean Strategy isn’t about taking random leaps into unknown territories; it’s guided by systematic principles. These principles provide a structured approach to break away from the competition and create a leap in value for both the company and its customers.

The strategy can be distilled into four actionable principles:

• Eliminate: Remove factors that the industry takes for granted.
• Reduce: Decrease factors below the industry’s standard.
• Raise: Increase factors well above the industry’s standard.
• Create: Introduce new factors the industry has never offered.

These principles push businesses to think differently, challenging the status quo. For instance, iTunes eliminated the need for CDs, raised the ease of purchasing individual songs, reduced the reliance on entire albums, and created a new platform for digital music. This approach led to the restructuring of the music industry.

Moreover, the strategy also emphasizes the importance of a compelling tagline that captures the essence of a company’s Blue Ocean move. This serves as an external and internal compass guiding stakeholders and employees alike.

Implementing Blue Ocean Strategy: The Successful Voyage

Understanding the Blue Ocean Strategy is one thing; successful implementation is another. For a company to reap the full benefits, it needs a roadmap. This roadmap is designed to mitigate risks and leverage opportunities.

Firstly, it starts with a strategy canvas. This analytical tool helps companies see the current state of play. On one axis, you have the value factors that the industry competes on, and on the other, how a company performs on them. This canvas showcases where competition is currently investing and where the opportunities for blue oceans may lie.

Another critical tool is the Four Actions Framework, which provides a systematic approach to challenge industry assumptions and help a company redefine strategic elements. This, coupled with the Eliminate-Reduce-Raise-Create grid, offers a direct way to apply the four key principles and drive value innovation.

For instance, Yellow Tail, an Australian wine company, created a Blue Ocean by simplifying wine. While most wineries focused on prestigious advertising and varied ranges, Yellow Tail eliminated the usual wine jargons, reduced the range of wines, raised the ease of selection, and created a fun and adventurous image. The result? They transformed wine into a simple, social drink and captured a massive untapped market.

Lastly, it’s essential to understand that creating a Blue Ocean doesn’t mean forever sailing in calm, competition-free waters. Over time, as others notice the success, they too will venture into the newly created space, necessitating continuous innovation and exploration.

Real-World Blue Ocean Success Stories

The business landscape is dotted with companies that have embraced the Blue Ocean Strategy to great success. These companies didn’t just adapt to their industries; they transformed them.

Netflix: While Blockbuster and other rental stores competed in the physical rental space, Netflix created a new market with its mail-order subscription model. Later, they again innovated by transitioning to streaming, providing unlimited entertainment for a monthly fee.

Airbnb: Instead of going head-to-head with hotels, Airbnb unlocked a new market space. By allowing homeowners to rent out their spaces, they provided unique and personalized lodging experiences for travelers while creating income opportunities for hosts.

Warby Parker: The eyewear industry was dominated by a few major players that kept prices high. Warby Parker disrupted this by offering stylish glasses at a fraction of the price by cutting out the middleman and selling directly to consumers.

Nintendo Wii: While Sony’s PlayStation and Microsoft’s Xbox were battling it out in the hardcore gaming market, Nintendo’s Wii focused on casual gamers. By introducing motion controllers and family-friendly games, they expanded the gaming demographic.

These companies showcase the transformative power of the Blue Ocean Strategy. By shifting focus from existing competitive spaces to creating new ones, they carved out unique market positions and reaped the benefits of innovation and differentiation.

Setting Sail: The Journey Ahead with Blue Ocean Strategy

The allure of the Blue Ocean Strategy lies in its call to think beyond the present, to envision what could be rather than what is. It encourages companies to seek out new horizons, to venture where others haven’t, and to craft unique value propositions that resonate with untapped consumer desires.

However, like all voyages, it’s not without its challenges. It requires a bold vision, a willingness to challenge industry norms, and the tenacity to sail through uncharted waters. But for those who dare, the rewards are vast: a chance to redefine markets, capture new demand, and elevate their brand to unparalleled heights.

As we draw this exploration to a close, one thing remains clear: in the business seascape, while many companies choose to sail in crowded and contested waters, only a few brave the voyage towards the vast, blue, and untapped oceans. And those who do, often rewrite history.

Questions	Highlights
What exactly is the Blue Ocean Strategy?	Creation of uncontested market spaces, making competition irrelevant.
Red Ocean vs. Blue Ocean?	Red focuses on existing markets; Blue focuses on creating new markets.
Key principles of the strategy?	Eliminate, Reduce, Raise, Create.
How to implement the strategy?	Strategy canvas, Four Actions Framework, and continuous innovation.
Examples of successful Blue Ocean companies?	Netflix, Airbnb, Warby Parker, Nintendo Wii.

FAQ

Is the Blue Ocean Strategy suitable for startups?

Yes, startups often benefit from the Blue Ocean Strategy as it encourages innovation and finding unique market positions, which is essential for new companies trying to make a mark.

How does technology impact the Blue Ocean Strategy?

Technology often acts as an enabler, allowing companies to unlock new value propositions and reach customers in ways previously not possible. Netflix’s shift to streaming is a prime example.

Can a company switch from a Red Ocean to a Blue Ocean?

Absolutely. Many companies start in red oceans but later pivot or innovate to create their blue oceans. The shift requires a change in mindset and strategy.

Is the Blue Ocean Strategy a one-time activity?

No. Even after creating a blue ocean, companies need to continuously innovate and evolve, ensuring they stay ahead of potential competitors who might enter their newly created space.

What are the risks associated with the Blue Ocean Strategy?

While the rewards are high, so are the risks. Venturing into uncharted territories means companies might face unforeseen challenges, and there’s no guarantee of success. However, with proper research and execution, these risks can be mitigated.