Blue Ocean Strategy Simplified
From the very outset, businesses face a formidable challenge – competition. Almost every industry we can think of is locked in an ongoing, invisible battle with its rivals. Just as trying to lift multiple watermelons with one hand can be a daunting task, navigating the competitive battlefield is no less challenging. However, the true progress for many companies and industries lies in breaking free from the relentless cycle of competition. But how can one thrive without the cutthroat rivalry and still stand out among competitors? In this discourse, we delve into the pages of a book that offers the blueprint for progress without the constraints of competition. That book is none other than “Blue Ocean Strategy,” penned by “W. Chan Kim” and “Renee Mauborgne.” Join us on this journey as we explore the wisdom contained in this literary treasure
What Is a Blue Ocean?
Before delving into the concept of a “blue ocean,” it’s essential to understand the idea of oceans in the business context. Fortunately, this exploration is not as challenging as navigating the high seas. In business, we refer to markets as oceans, and they serve as the arenas where companies offer their products and services.
When a market is untapped, pristine, and teeming with marketing opportunities, it resembles the deep blue of the world’s unspoiled oceans. However, as it becomes saturated with competitors, a fierce, cutthroat battle among them ensues, and the color of this market transitions from serene blue to a tumultuous red. It’s worth noting that the degree of “redness” can vary.
Some markets turn dark red due to the high costs and efforts required to enter and compete, while others might still retain hints of blue in their depths.
Interestingly, any business has the potential to carve out a new blue ocean for itself or even transform an existing red ocean. The crucial point to keep in mind is that the process of creating or reimagining blue oceans is not instantaneous; it takes time.
Most industries predominantly exist in red oceans, where competition is the lifeblood that keeps them afloat. The slightest misstep in this environment can lead to a rival seizing the advantage and surging ahead. However, in the world of blue oceans, competition is virtually absent. Here, everyone is a newcomer, and there are no established rules to constrain innovation.
That said, it’s essential to acknowledge that red oceans are not futile or unimportant in various industries. In fact, much of the progress and development in various sectors owe their existence to the competitive dynamics of the red ocean. However, this doesn’t mean that industries should remain entrenched in the red ocean continuously. They have the opportunity to showcase a different facet of their industry by creating blue oceans.
How to Create a Blue Ocean
The concept of creating a blue ocean may seem like a daunting endeavor, but it’s not reserved for the few; any business has the potential to set sail on uncharted waters and find its own path to success. An excellent example of this can be found in the story of “Cirque du Soleil,” a circus that revolutionized the entertainment industry and created a blue ocean right in the heart of the red ocean.
Cirque du Soleil demonstrated that even in traditional, highly competitive industries like the circus, innovation can pave the way to a blue ocean. So, how can you, too, navigate your way to a blue ocean?
In blue oceans, the game isn’t about beating your competitors; it’s about reshaping the industry landscape to your advantage. Victory here comes not from outperforming rivals, but from abandoning the relentless competition and concentrating on your own unique approach.
If your business has been immersed in the competitive waters of the red ocean for an extended period, you must exercise caution. It’s easy to mistake the growth and profits you’ve seen as products of your success in this fiercely competitive space. However, these gains could be attributed to the overall industry’s favorable position, not just your efforts. When the industry’s fortunes change, you might find yourself falling in tandem. To secure your business’s longevity, it’s essential to consistently seek opportunities to create new blue oceans. By doing so, you ensure that your business remains adaptable and resilient, irrespective of the success or failure of your industry.
Your Approach to Strategy: What Sets Winners Apart from Losers
In a world where companies across various industries are on a relentless quest for innovation, the ability to deliver something profoundly novel, something that leaves competitors baffled and sometimes struggling to even comprehend, can be the ultimate ace up one’s sleeve in the fiercely competitive arena of innovation.
However, amidst this pursuit of innovation, many forward-thinking companies often overlook a critical aspect. They forget to pause and ask themselves, as well as their users, whether this innovative leap genuinely alleviates human pain or fulfills a genuine need. Where can this innovation find a home, and, perhaps more importantly, will users embrace it for the long haul? Sometimes, the answers to these pivotal questions are faint and indistinct. The annals of history are littered with the remains of innovations that drained fortunes from their creators but failed to resonate with the human experience.
In stark contrast, companies employing a consistent blue ocean strategy opt for innovation in values over innovation in technology. They recognize that values lie at the core of every successful enterprise. It’s the heartbeat of their business, and by aligning their offerings with values, they transcend mere technological advancements.
What Is Not a Blue Ocean Strategy?
It’s often not what you have, but what you lack that sets the boundaries for progress. This holds true for the Blue Ocean strategy as well.
Not Driven by Motivation: The Blue Ocean strategy isn’t solely about motivation. While motivation plays a significant role, it’s the formulation of a clear plan and the strategic analysis that constitute the primary steps for initiating change.
Not About Creating Risk: Contrary to popular belief, the Blue Ocean strategy isn’t about creating risk; it aims to reduce risk and find shelter in the harbor of stability.
Not Conventional: Blue Ocean strategy doesn’t adhere to conventional directions. Instead, it redirects your focus to areas that are either obscured from view or purposefully ignored. Companies pursuing Blue Ocean strategies target non-customers, a seemingly unconventional approach that redefines the industry landscape.
Not Overly Complicated: Instead of bombarding you with numerous questions, the Blue Ocean strategy presents four key questions that are like golden nuggets. To create a Blue Ocean in your business, you must find clear answers to these questions:
What common and usual elements in your business are you willing to eliminate?
What aspects of your business need to be scaled back?
Which underutilized factors should be intensified beyond the ordinary?
What new elements should be introduced to your business?
The excessive variety, complexity, and similarity of choices in your industry may be what transforms it into a red ocean. Regardless, you must search for the most unconventional solutions in your industry to create your unique blue ocean.
Breaking Down the Invisible Walls of Industries
At first glance, it might seem that different industries have little to do with each other and that changes in one sector won’t affect the others. However, the reality is that all industries operate on a common platform, serving diverse needs separated by invisible walls. Let’s explore some of these barriers:
The Influence of Alternative Industries:
Many industries underestimate the indirect yet powerful influence of alternative sectors. Take, for example, the amusement park and restaurant industries. While they may appear unrelated, they effectively serve as substitutes for each other. These alternative industries differ in form and service delivery but share a fundamental purpose: providing simple and wholesome pleasures to fill people’s leisure time. Creating a Blue Ocean often demands considering the impact of alternative industries.
Hidden Overlaps in Industrial Groups:
Just as a school comprises different classes, different industries consist of various groups. These groups have their distinct boundaries and typically don’t venture beyond their limits. For instance, consider the beverage industry, where the two major groups are soft drinks and juices. To uncover a Blue Ocean in your business, you must reevaluate the border between these two types of drinks.
Reassessing Customer Boundaries:
Every industry categorizes customers into various groups, a result of research, review, and the experience of industrial groups in defining their target audience. However, many industries are reluctant to change their customer groups and fail to look beyond their mental boundaries. This approach can be a path to discovering uncharted Blue Oceans in any industry. New customer segments bring new needs, and addressing these needs can create markets without competitors.
Redefining Complementary Products and Services:
Many products and services in your industry are used alongside offerings from other sectors. This is a crucial consideration because, in some cases, facilitating the use of complementary products can open the door to entirely new Blue Oceans for your business.
When you redefine the traditional boundaries of buyer-seller relationships and examine the potential synergies between complementary products or services, you unlock countless opportunities to create Blue Oceans within your industry.
The Intricate Dance of Numbers in Corporate Realms
A substantial portion of managers finds themselves deeply immersed in the world of numbers. They tirelessly crunch numerical reports in hopes of uncovering pathways to save, expand, and enhance their company’s profitability through these data-driven insights. Their ultimate goal? To formulate a winning strategy based on these numbers. Yet, the fixation on figures can often lead them astray, diverting their attention from the true essence of strategy formation, which lies not within the numerical labyrinth but in the uncharted territories of innovative thinking. This misalignment is one of the reasons many businesses find themselves ensnared in the relentless waves of red oceans.
Our proposal is a departure from this numbers-focused approach and a shift towards envisioning the future image of your company to create a Blue Ocean strategy, liberating yourself from the shackles of mere data.
Four Steps to Craft the Future Image of Your Business
Following the steps detailed below can help you embark on the journey of rebuilding your business with finesse:
Acknowledge the Imperative for Change: Recognizing that a new future cannot be reached by following the worn paths of the past is paramount. Resistance to change is the Achilles heel of any business. Persisting on this course inadvertently condemns your enterprise to the graveyard of inflexible businesses.
Observe with Intent: In this phase, roll up your sleeves and step into the arena to experience the outcomes of your efforts firsthand. Engage with your customers, listen to their genuine opinions about your products and services, and observe their actions. Often, customers may not vocalize their true sentiments, but their behavior speaks volumes.
Integrate New Insights: By this stage, you will have gathered a wealth of fresh data. It’s time to share these insights with your team and collectively envision the future image for your business. This is where you can identify the strengths and weaknesses in your current approach. But it doesn’t stop there. You must delve deeper to discern the roots of your weaknesses and the sources of your strengths. Next, eliminate the negative and reinforce the positive. It may feel harsh to discontinue certain aspects you’ve invested time, effort, and capital in, but this is the path to avoid obsolescence and venture into a pristine Blue Ocean.
Communicate the Change: Now is the moment to unveil the new vision of the future to your entire workforce and guide them toward their new trajectory. This new vision should be concise and easily comprehensible. Complexity is the nemesis of progress, and simplicity is your ally. Challenge yourself to condense the future direction of your business into a single, succinct page.
By following these steps, you can effectively steer your business towards uncharted waters and create your own Blue Ocean strategy, unburdened by the complexities and limitations of the past.
Ocean or Pond? Navigating the Depths of the Infinite Blue
What truly distinguishes an ocean from a pond? The answer is refreshingly simple: oceans are deep and vast, while ponds are shallow and limited. Surprisingly, some companies fall into a visual illusion, mistakenly confusing the vastness of an ocean with the limitations of a pond. In this way, they inadvertently veer toward the shallow waters of a blue pond when the vast, unexplored depths of a blue ocean await them.
To avoid this misstep, businesses must shift their gaze away from conventional markets and set their sights on undiscovered territories, where substantial, unmet demands lie hidden. The key to achieving this lies in attuning to the collective desires of all customers. To gauge the depth and accuracy of your potential blue ocean, reflect upon the following four essential questions:
Why Should Customers Choose Your Product?
If you struggle to articulate a compelling reason for customers to select your product, it’s time to retrace your steps to the initial idea. Scrutinize whether your concept is genuinely desirable and practical or merely a figment of wishful thinking.
Is Your Pricing Fair? Companies typically aim to maximize revenue and profitability through pricing. However, if you aspire to carve out your unique blue ocean, reevaluate your pricing strategy. Ask yourself if the value customers receive post-purchase aligns with the cost they incur. In many red oceans, this balance has been lost, leading to either reduced profit margins or customers paying exorbitant fees for value.
Can You Effectively Manage Production Costs? Cutting costs at the expense of product or service quality won’t guide you toward a blue ocean. Balancing cost management with maintaining or even enhancing product quality and profitability is a multifaceted puzzle that eludes many businesses. It is your art as a marketer to identify and eliminate overhead while creatively managing costs.
What Stands Between Your Product and Your Customers?
All your hard work in designing and producing a product pays off when customers not only see your product but also understand its utility and feel the need to acquire it. Do your intended customers even know about your product? Can you identify and remove the barriers that obstruct their path? Sometimes, it’s not the customers who fail to see the product; it’s your proximity to the offering that blinds you to potential obstacles. For instance, you might have overestimated the product’s value, setting a price that appears exorbitant to customers. The enthusiasm for pioneering a new market may lead you to undertake unwarranted risks, committing to high production costs for a product that’s cherished only by your team. Identifying these roadblocks demands a thorough reassessment of your steps thus far. However, once the fog clears, you’ll gain the ability to spot and surmount obstacles.
How to Implement a Blue Ocean Strategy: Overcoming Challenges and Accelerating Execution
Creating a Blue Ocean strategy is a commendable feat, but transitioning from the planning phase to successful implementation presents a distinct challenge. Regrettably, many companies find their situation unchanged even after developing a Blue Ocean strategy, primarily due to their futile attempts to create a new Blue Ocean using the same strategies employed in Red Oceans. This is an impossible feat. Why do companies resist the implementation of a Blue Ocean strategy? There are several reasons for this:
- Miscalculating Resource Requirements: When navigating the Red Ocean, every new action demands significant resources and effort. Competition is fierce, and any lapses can jeopardize a company’s position in this environment. However, Blue Oceans operate on the opposite principle; their objective is to create high value with minimal resource consumption.
- Unnecessary Concern About Customer Reactions: It’s natural to be concerned about customer reactions when operating in a Red Ocean. However, Blue Oceans are centered on new strategies that target new customers or offer distinct value to existing ones.
Key Solutions to Accelerate Blue Ocean Execution
Sometimes, simple reminders can be more effective than the most complex instructions:
Embrace Reality Wholeheartedly: One reason companies remain entrenched in Red Oceans is their resistance to facing reality. They often hide behind arguments, statistics, figures, and excuses to evade the truth about their failures. To make progress toward Blue Oceans, you must confront your company’s shortcomings, resource misallocation, and untapped potential. Will this lead to frustration and a sense of failure? Absolutely. Yet, these emotions serve as the driving force needed to propel you toward Blue Oceans.
Hold Managers Accountable for Decisions: Giving orders from an executive chair is a straightforward task, especially if you’re insulated from the consequences of those orders. Managers who oppose the Blue Ocean concept often lack a genuine understanding of the ramifications of their decisions. Creative and practical interventions can reveal the truth to them. For instance, invite an unsatisfied customer, particularly one who consistently purchases your product out of necessity despite dissatisfaction, to meet with the managers. This firsthand account from a dissatisfied customer can be eye-opening. Use your creativity to devise various methods for exposing managers to reality.
Maximize Existing Resources’ Value: The scarcity of resources is a formidable challenge when pursuing Blue Oceans. However, a simple solution can free resources and render them more valuable. Conduct a comprehensive review of your company’s resource allocation, identifying areas where they yield high output versus those where they provide little or no substantial benefit. Categorize resources into two groups: those allocated to tasks with high output, and those assigned to tasks with limited output or suboptimal expected returns. By streamlining or minimizing resource-intensive, low-impact tasks, you can boost overall company performance and liberate significant resources.
Blue Oceans Within Reach: Instead of viewing the process of discovering or creating Blue Oceans as something separate from your core business, search for these opportunities within your organization’s heart. Scrutinize your resources, assess performance, gather feedback, and actively listen to your customers. By doing so, you can uncover your own Blue Ocean strategies right beneath your nose.
