Blue Ocean Strategy: Navigating to Uncontested Market Space
In the cutthroat world of business, companies often find themselves locked in fierce competition, battling for market share in overcrowded industries. This scenario, vividly described as a 'red ocean' by W. Chan Kim and Renée Mauborgne, is characterised by bloody competition that turns the ocean red. But what if there was a way to escape this bloodbath and find clear, blue waters of opportunity? Enter the Blue Ocean Strategy.
What is Blue Ocean Strategy?
Blue Ocean Strategy is a business theory and practice developed by W. Chan Kim and Renée Mauborgne, professors at INSEAD business school. Published in their 2005 book of the same name, this strategy challenges companies to break out of the red ocean of bloody competition by creating uncontested market space that makes the competition irrelevant.
The core idea is to stop competing in existing market space and instead create new market space or a 'blue ocean' where competition is irrelevant because the rules of the game are waiting to be set.
Key Principles of Blue Ocean Strategy
Create Uncontested Market Space: Rather than fighting over existing customers, find or create new demand.
Make the Competition Irrelevant: Instead of benchmarking competitors, aim to make them obsolete by offering a leap in value.
Create and Capture New Demand: Look beyond existing customers to non-customers and create new demand.
Break the Value-Cost Trade-Off: Increase value while simultaneously reducing costs.
Pursue Differentiation and Low Cost: Aim for both differentiation and low cost, rather than choosing between them.
Align the Whole System: Ensure that your entire business system supports your strategy.
Tools and Frameworks
Blue Ocean Strategy provides several tools to help companies create blue oceans:
The Strategy Canvas: A diagnostic and action framework that captures the current state of play and helps you visualise how to shift your strategy.
The Four Actions Framework: Helps you reconstruct buyer value elements by asking four key questions:
Which factors should be eliminated?
Which factors should be reduced well below the industry's standard?
Which factors should be raised well above the industry's standard?
Which factors should be created that the industry has never offered?
The Eliminate-Reduce-Raise-Create Grid: A supplementary tool to the Four Actions Framework that pushes companies to act on all four questions.
The Six Paths Framework: Helps companies look across alternative industries, strategic groups, buyer groups, complementary product and service offerings, functional-emotional orientation of an industry, and across time.
Case Study: Cirque du Soleil
A classic example of Blue Ocean Strategy in action is Cirque du Soleil. Traditional circuses were struggling with declining audiences, animal rights concerns, and high costs. Instead of competing in this red ocean, Cirque du Soleil created a blue ocean by:
Eliminating animal shows and star performers
Reducing arena style seating and classic circus acts
Raising the uniqueness of the venue and artistic music and dance
Creating a theme and refined watching environment
By doing so, Cirque du Soleil appealed to a whole new group of customers - adults and corporate clients prepared to pay a premium for a novel entertainment experience. They created a new market space that fused elements of circus with the sophistication of theatre.
Implementing Blue Ocean Strategy
Choose the Right Focus: Look for pain points in your industry that no one is addressing.
Reach Beyond Existing Demand: Don't just focus on current customers, but also on non-customers who might be attracted by a new offering.
Get the Strategic Sequence Right: Ensure you have the right sequence: buyer utility, price, cost, and adoption.
Overcome Organisational Hurdles: Address cognitive, resource, motivational, and political hurdles within your organisation.
Build Execution into Strategy: Involve people from across the organisation in the strategy development process.
Challenges and Criticisms
While Blue Ocean Strategy offers a compelling vision, it's not without its challenges:
Difficulty in Execution: Creating a truly new market space is easier said than done.
Sustainability: Blue oceans can eventually turn red as competitors imitate successful strategies.
Risk: Venturing into unknown market spaces carries significant risks.
Applicability: Some argue that the strategy may not be applicable in all industries or situations.
Conclusion
Blue Ocean Strategy offers a powerful framework for companies looking to break free from intense competition and create new market spaces. By focusing on value innovation - simultaneously pursuing differentiation and low cost - companies can potentially create win-win scenarios where they increase value for buyers while also reducing costs.
However, it's important to remember that creating a blue ocean is not a one-time event, but an ongoing process. Markets evolve, and yesterday's blue ocean can quickly become today's red ocean. The key is to foster a culture of continuous innovation and value creation.
As you consider your business strategy, ask yourself: Are you competing in a red ocean of bloody competition, or are you charting a course to clear blue waters of uncontested market space?
References:
Kim, W. C., & Mauborgne, R. (2005). Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant. Harvard Business Review Press.
Kim, W. C., & Mauborgne, R. (2017). Blue Ocean Shift: Beyond Competing - Proven Steps to Inspire Confidence and Seize New Growth. Hachette Books.
Osterwalder, A., & Pigneur, Y. (2010). Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. John Wiley & Sons.
Christensen, C. M., Hall, T., Dillon, K., & Duncan, D. S. (2016). Competing Against Luck: The Story of Innovation and Customer Choice. Harper Business.
Porter, M. E. (1996). What Is Strategy? Harvard Business Review, 74(6), 61-78.