Blue Ocean Strategy involves creating new market spaces by meeting unmet customer needs, thus making your product or service stand out and becoming irrelevant among competing products or services.
Businesses seeking to develop a new value curve should pose four key questions when developing it, such as “Which factors should be elevated far beyond industry standards?”, or “What factors resulted from competing against competitors that can be reduced?”.
1. Identify Unmet Needs
To use the blue ocean strategy effectively, begin by identifying unmet needs within your industry. This requires careful evaluation of current trends and customer satisfaction with existing services; furthermore, study industries where competition is already intense in order to identify new needs that have yet to be fulfilled.
Use a strategic sequence to develop your strategy based on buyer utility, cost and adoption methods. Furthermore, be prepared for challenges associated with implementation such as organizational roadblocks or an absence of expertise.
Kim and Mauborgne suggest employing a four-action framework to reassemble buyer value elements and determine how best to eliminate, reduce, raise or create features to unlock an industry’s new value curve and unlock its market space. Doing this will enable you to establish new market space while rendering rivalries obsolete.
2. Create a New Market Space
Companies can effectively challenge established industries and jobs without disrupting them through market innovation, as demonstrated by businesses such as Cirque du Soleil, Apple, Home Depot Yellow Tail and Southwest Airlines – just to name a few examples of companies which have achieved this feat.
Blue ocean strategists strive to find uncontested market spaces with immense growth potential, rather than engaging in fierce battles in existing markets. To do this, their focus must shift away from competition towards unlocking demand and creating innovative value propositions.
Analyze your existing market by using an ERRC grid, which is a strategic planning tool which asks four important questions about an industry. Research related industries for potential new market spaces. Exploring options thoroughly may allow your business to break free from cost/value tradeoffs and open a path towards creating new blue oceans.
3. Create a New Value Curve
The Blue Ocean Strategy asserts that companies don’t need to engage in direct competition to reach growth and profits; rather, they can create new market space by reconstructing industry boundaries. To do this, companies should identify non-customers and develop products tailored toward them.
To achieve this goal, blue ocean strategy refutes the assumption that differentiation and low costs must be in conflict; successful blue ocean moves seek both simultaneously. Guy Laliberte used his theater-circus experience to launch multibillion-dollar business Cirque du Soleil; creating brand equity which took Ringling Bros. & Barnum & Bailey over 100 years to attain.
4. Create a New Business Model
Companies that create blue oceans don’t just include start-ups; Ford, Apple and GM in the automotive sector; Dell & Compaq in computer technology; AMC & Nickelodeon in cinema are examples of established companies creating blue oceans.
Managers need to switch their mindset from competing with existing market structures to unlocking new demand, with differentiation and low costs being key components in doing this successfully. Achieve this through simultaneous pursuit of differentiation and low costs creates nonzero sum game that generates wealth for both company and customers – as evidenced by how onetime accordion player and stilt walker Guy Laliberte of Cirque du Soleil rose from humble origins into becoming a billionaire through this strategy.
5. Create a New Competitive Advantage
Blue ocean strategies enable companies to generate demand rather than compete for existing market space, creating sustained growth and profits over time.
Blue ocean strategies can be implemented by both established firms and start-ups alike, and have many notable examples, including General Motors (GM), Japanese automakers (NAM) and Chrysler; as well as Hewlett-Packard in PC servers, Apple computers and Netflix video streaming.
Blue ocean strategies often require companies to reinvent an industry. The challenge for companies lies in making this transition without alienating existing customers; for instance, Uber’s ride-sharing business was innovative but nondisruptive to their taxi business, as its rating system had created an ocean space within an already congested transportation marketplace.
