Is your product sailing in Blue Ocean?

Blue Ocean Strategy for businesses

WHAT IS BLUE OCEAN STRATEGY?

I came across with this new term thanks to the book, Blue Ocean Strategy, written by Chan Kim & Renée Mauborgne.

In their book, Chan and Renée talks about terms ’red ocean’ and ‘blue ocean’ to describe the market universe.

Red ocean refers to all existing industries today, which are typically competitive and crowded market spaces. Here, companies try to outperform their rivals with pricing, cost optimization, but due to high number of market players, profit and growth are reduced & slow. Typical business strategy utilized by companies in red ocean is competition-based.

Blue ocean, in contrast is unexplored market space yet, therefore, demand is created here rather than fought over. Because blue ocean is an untapped market space, there is no competition, while growth and retention are both profitable and rapid.

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HOW TO BUILD BLUE OCEAN STRATEGY?

“To build a unique Blue Ocean Strategy, you must bring something to the marketplace that is…

• Unique and compelling

• That your target customer sees great value in and is willing to pay any reasonable price

• Is difficult or impossible for your competition to copy

• You can consistently deliver it superbly” , says, Renee and Chan.

To create Blue Ocean strategy, you need to look for value innovation, which lies at the intersection of innovative value and decreased costs. As any good product, it needs to have a good level of user utility elements such as easy-to-use, convenience, simplicity, image, reputation and more. While building this strategy you need to avoid:

• Innovating without creating value (to make sure your product isn’t being impractical)

• Creating value with no innovation (to avoid competitive landscape)

Once you're sailing in the blue oceans, you no longer have to do trade-offs between value and cost: the more valuable the product is, the more flexibility you have to decide on pricing. However, you still need to be cautious about it, considering network externalities and price of alternative products (the same function or similar value product prices) not to over/underprice your product.

Blue Ocean Strategy in practise

My favourite example of Blue Ocean Strategy is Cirque Du Soleil. At a time when circus industry was suffering from declining revenue and slow growth rate, Cirque Du Soleil created an innovative playground - new market, rather than diving into existing saturated market.

By simply removing animal acts and adding more features from opera and broadway shows into cirques, Cirque Du Soleil changed target audience from children to adults who could afford paying high and would be interested in the show. It created completely new value for another audience that has been undiscovered till that moment.

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Blue Ocean Strategy is an ultimate source of the greatest innovations happening. Despite most of the businesses prefer to operate in its safe zone, companies applying this strategy are proven to be much more profitable. If you ever consider utilising this strategy, check those examples out.