What is Blue Ocean Strategy?
Blue Ocean Strategy is a business concept developed by W. Chan Kim and Renée Mauborgne. It refers to the simultaneous pursuit of differentiation and low cost to open up a new market space and create new demand. This strategy seeks to make the competition irrelevant by creating a
blue ocean of uncontested market space, as opposed to competing in an existing industry, which is referred to as a
red ocean due to its bloody nature of competition.
How Does Blue Ocean Strategy Differ from Traditional Competitive Strategies?
Traditional competitive strategies focus on outperforming rivals to grab a larger share of existing demand. This often results in a zero-sum game where one company's gain is another's loss. However, the Blue Ocean Strategy advocates for creating new demand in an uncontested market space, thereby avoiding the cut-throat competition. It emphasizes
value innovation, which is about creating value for both the company and its customers, thereby opening up new and uncontested market spaces.
Reconstruct Market Boundaries: Challenging the conventional wisdom and finding new market spaces.
Focus on the Big Picture: Rather than getting bogged down by numbers, focus on the overall strategy.
Reach Beyond Existing Demand: Tap into new customer segments by addressing non-customers.
Get the Strategic Sequence Right: Ensure that the strategy aligns with the company's overall goals and offers a compelling
value proposition.
Cirque du Soleil: By combining elements of circus and theatre, Cirque du Soleil created a new form of entertainment that attracted a broad audience.
Nintendo Wii: Instead of competing with other gaming consoles on graphics and processing power, Nintendo focused on an intuitive user experience, attracting non-gamers and families.
Southwest Airlines: By offering low-cost, no-frills flights with frequent departures, Southwest Airlines tapped into a new market of price-sensitive travelers.
Analyze the Current Market: Understand the existing competitive landscape and identify pain points.
Identify Non-Customers: Look beyond the current customer base to find untapped potential.
Create a Value Innovation Framework: Develop a business model that offers unique value at a lower cost.
Test and Refine: Implement the strategy on a small scale, gather feedback, and make necessary adjustments.
Scale Up: Once the strategy proves successful, expand it to a larger market.
Uncertainty: Venturing into uncharted territories always carries a level of risk and uncertainty.
Resource Allocation: Significant investments in R&D and marketing may be required.
Execution: Successfully implementing a Blue Ocean Strategy requires strong leadership and a committed team.
Imitation: Once a new market space is created, competitors may quickly follow suit, eroding the advantages.
Conclusion
Blue Ocean Strategy offers a compelling alternative to traditional competitive strategies by focusing on creating new market spaces rather than fighting over existing ones. While it comes with its own set of challenges and risks, the potential rewards in terms of market share, profitability, and growth are substantial. Companies that successfully implement this strategy can make competition irrelevant and achieve sustainable success.