Can you create a new market with Blue Ocean Strategy?

Blue Ocean Strategy is a business strategy that focuses on creating new market space rather than competing in existing markets. It is based on the idea that companies can create new value for both themselves and their customers by expanding the boundaries of existing industries or creating entirely new ones.

The term "blue ocean" is used to contrast with the more traditional "red ocean" of competition. In a red ocean, companies are competing for the same customers and market share. This can lead to cutthroat competition and low profits. In a blue ocean, on the other hand, there is no competition because the company has created a new market space. This allows the company to charge higher prices and earn higher profits.

Here are key principles of Blue Ocean Strategy:

• Create value innovation. Value innovation is the simultaneous pursuit of differentiation and low cost. This is achieved by breaking the trade-off between differentiation and cost leadership. This means creating products or services that are both different from what competitors are offering and more affordable.

• Reconstruct market boundaries. This involves challenging existing assumptions about what constitutes a market and who the customers are. By expanding the boundaries of existing markets or creating entirely new ones, companies can create new opportunities for growth.

• Shift the focus from competitors to non-customers. Rather than focusing on competing with other companies, Blue Ocean Strategy encourages companies to focus on attracting non-customers, or people who are not currently using the product or service. Identifying what can attract noncustomers is a critical aspect of the strategy. This can be done by creating new value offerings that appeal to these non-customers.

• Align the whole system. Once a company has identified a blue ocean opportunity, it needs to align its entire system to support its new strategy. This includes everything from the company's mission and vision to its products and services, marketing and sales, and operations.

• Red vs. Blue Oceans:

• Red Oceans: These represent existing markets characterized by intense competition, where companies fight for market share. In red oceans, innovation is often incremental, and competition drives down profitability.

• Blue Oceans: These represent new, uncontested market spaces with untapped demand. Creating a blue ocean means escaping the confines of existing market boundaries.

• The Four Actions Framework:

• To create a blue ocean, companies should focus on four key actions:

• Eliminate: Identify which factors or features that the industry has long competed on should be eliminated.

• Reduce: Determine which factors should be reduced well below the industry standard.

• Raise: Identify which factors should be raised well above the industry standard.

• Create: Introduce entirely new factors or features that the industry has never offered.

• The Strategy Canvas: The strategy canvas is a tool used to visualize a company's current strategy and its competitors' strategies. It helps identify areas where the company can differentiate and innovate to create a blue ocean.

• Tipping Point Leadership: The Blue Ocean Strategy framework emphasizes the need for strong leadership and change management to shift an organization's mindset and practices toward creating blue oceans.

• Execution Focus: A successful Blue Ocean Strategy requires disciplined execution. Once a blue ocean is identified and the strategy is defined, the company must effectively implement and bring it to market.

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

• Cirque du Soleil: Cirque du Soleil redefined the circus industry by eliminating animal acts and incorporating elements of theater and high-quality production. This innovative approach created a new form of entertainment that appealed to a broader audience, including adults and families, and allowed them to charge premium prices.

• Nintendo's Wii: The gaming industry was primarily focused on catering to dedicated gamers. Nintendo's Wii introduced motion-sensing technology, making gaming more accessible and appealing to a wider demographic, including non-gamers and families. This approach expanded the gaming market and created a blue ocean.

• Yellow Tail Wine: Yellow Tail, an Australian wine producer, entered the wine market with a focus on approachability and affordability. Their colorful labels, wide variety of wines, and marketing efforts targeted a broad consumer base, including those who were not traditionally wine connoisseurs. This approach allowed them to capture a significant market share.

• Uber: Uber disrupted the taxi and transportation industry by introducing a ride-sharing platform that connected riders with drivers through a mobile app. This created a more convenient and cost-effective alternative to traditional taxis, effectively expanding the market and redefining urban transportation.

• Airbnb: Airbnb created a blue ocean in the hospitality industry by allowing individuals to rent out their homes or spare rooms to travelers. This peer-to-peer accommodation model offered unique and often more affordable lodging options, attracting both hosts and travelers looking for more personalized experiences.

• Warby Parker: Warby Parker entered the eyewear industry by offering stylish and affordable prescription glasses and sunglasses directly to consumers through e-commerce. By cutting out the middlemen and reducing the cost of eyewear, they attracted customers who were seeking value and fashion-forward eyewear.

• Dyson: Dyson disrupted the vacuum cleaner industry with its innovative bagless vacuum technology and unique product design. Their vacuums appealed to consumers seeking advanced performance and convenience, allowing them to create a blue ocean within the market.

• Southwest Airlines: Southwest Airlines is known for its focus on low-cost, no-frills air travel. By offering lower fares, simplified services, and friendly customer service, they attracted budget-conscious travelers and those looking for straightforward air travel options.

These examples demonstrate how companies from various industries have successfully executed the Blue Ocean Strategy by identifying unmet customer needs, eliminating or reducing traditional industry features, and creating innovative value propositions that allowed them to stand out and capture new market spaces.

Blue Ocean Strategy is a powerful tool for companies that want to achieve sustainable growth. By creating new market space, companies can avoid the cutthroat competition of the red ocean and earn higher profits.

Sash Barige

Jul/19/2019

Here are some key online references regarding blue ocean strategy:

Overview Articles:

• "Red Ocean vs. Blue Ocean Strategy" (Harvard Business Review) - https://hbr.org/2020/01/red-ocean-vs-blue-ocean-strategy

• "Blue Ocean Shift" (Business Insider) - https://www.businessinsider.com/blue-ocean-shift

• "The Explainer: Blue Ocean Strategy" (Sloan Management Review) - https://sloanreview.mit.edu/article/the-explainer-blue-ocean-strategy/

Example Analyses:

• "Blue Ocean Strategy: A Study of Retail Industry" (IJRTE) - https://ijrte.org/wp-content/uploads/papers/v8i2/B1165088219.pdf

• "Nintendo's Disruptive Strategy: Implications for the Video Game Industry" (Technovation) - https://www.sciencedirect.com/science/article/abs/pii/S0166497201001097

• "Cirque du Soleil: Exploiting the Blue Ocean Strategy" (Ivey Publishing) - https://www.iveycases.com/ProductView.aspx?id=55582

Talks:

• "Blue Ocean Strategy" (TED Talks) - https://www.ted.com/talks/w_chan_kim_renee_mauborgne_blue_ocean_strategy

• "Red Ocean vs. Blue Ocean Strategy" (YouTube) - https://www.youtube.com/watch?v=EmSNhQagHq8

The key sources above provide a mix of overviews, analyses, and discussions from leading publications and experts on the concepts behind formulating blue ocean strategy.