In a business world where companies constantly fight for market share and lose themselves in bloody competition, the "Blue Ocean Strategy" offers a revolutionary approach to fostering growth and innovation. This concept, developed by renowned professors W. Chan Kim and Renée Mauborgne, has gained worldwide recognition and helped companies tap into new markets and make competition irrelevant.
What is the Blue Ocean Strategy?
Value Innovation: The Cornerstone of Blue Ocean Strategy
The Blue Ocean Strategy is based on the principle of value innovation. Instead of focusing on competition, value innovation aims to create a leap in value creation for both the company and its customers. This is achieved by simultaneously pursuing differentiation and cost reduction. Companies that successfully implement value innovation create new demand and tap into untouched markets.
Red Oceans vs. Blue Oceans
In the Blue Ocean Strategy, markets are divided into two categories: red oceans and blue oceans.
Red Oceans
Red oceans represent all existing industries – the known market space. In red oceans, industry rules are defined and accepted, and companies try to outperform their rivals to gain a larger share of existing demand. This often leads to intense competition and shrinking profit margins.
Blue Oceans
Blue oceans, on the other hand, represent all industries that don't exist today – the unknown market space. In blue oceans, demand is created rather than fought over. There are ample growth opportunities that are both profitable and rapid. Companies that tap into blue oceans create new markets and make competition irrelevant.
Strategic Tools of the Blue Ocean Strategy
Strategy Canvas: A Diagnostic and Action Framework
The strategy canvas is a central tool of the Blue Ocean Strategy. It serves as a diagnostic and action framework to capture the current state of the market and identify opportunities for creating a blue ocean. The strategy canvas helps companies recognize the factors on which the industry competes and invests.
Four Actions Framework: Redesigning Buyer Value Elements
The Four Actions Framework is another important tool of the Blue Ocean Strategy. It helps companies redesign buyer value elements and create a new value curve. The framework encompasses four actions: Eliminate, Reduce, Raise, and Create. Companies must analyze which factors should be eliminated, reduced, raised, or newly created to develop a unique value curve.
ERRC Grid: Systematic Pursuit of Differentiation and Cost Reduction
The ERRC (Eliminate-Reduce-Raise-Create) Grid is a tool that helps companies systematically pursue the four actions. It supports companies in achieving differentiation and cost reduction simultaneously, thereby creating a new market.
Success Examples of the Blue Ocean Strategy
Cirque du Soleil: A New Dimension of Entertainment
A famous example of the successful implementation of the Blue Ocean Strategy is Cirque du Soleil. Instead of competing with traditional circuses, Cirque du Soleil created a new market by combining elements from opera and ballet with the circus format. This appealed to a completely new target group – adults and corporate customers who were willing to pay a premium price for an unprecedented entertainment experience.
Nintendo Wii: Revolutionizing the Gaming Market
Nintendo Wii is another example of the Blue Ocean Strategy. Instead of competing in the high-tech gaming console market with Sony and Microsoft, Nintendo focused on casual gamers and families. By providing a simpler and more interactive gaming experience, Nintendo created a new market and made competition irrelevant.
Yellow Tail Wine: Wine for Everyone
Casella Wines created a blue ocean with Yellow Tail Wine by simplifying the wine selection process and targeting non-wine drinkers and beer drinkers. By making wine accessible and enjoyable for a broader audience, Yellow Tail Wine was able to tap into a new market and leave the competition behind.
Impact and Influence of the Blue Ocean Strategy
Global Spread and Application
The Blue Ocean Strategy has been adopted by companies, governments, and non-profit organizations worldwide. It has influenced strategic thinking in various sectors, including technology, healthcare, education, and public policy. Companies applying the Blue Ocean Strategy have tapped into new markets and achieved sustainable growth.
Influence on Education
The Blue Ocean Strategy is taught in business schools and executive education programs worldwide. It is an integral part of courses on strategy, innovation, and entrepreneurship. The principles of the Blue Ocean Strategy help aspiring leaders identify new markets and develop innovative business models.
Awards and Recognition
The Blue Ocean Strategy has received numerous awards, including the Thinkers50 Strategy Award for the best business book of the decade and induction into the Fast Company Leadership Hall of Fame. These recognitions underscore the significance and influence of the Blue Ocean Strategy on strategic thinking and the business world.
Tools and Frameworks of the Blue Ocean Strategy
Strategy Canvas: Visualization of the Market
The strategy canvas is a visual tool that represents the current state of the market and highlights opportunities for creating a blue ocean. Companies can use the strategy canvas to identify competitive factors and develop new value curves.
Pioneer-Migrator-Settler (PMS) Map: Visualization of the Portfolio
The Pioneer-Migrator-Settler (PMS) Map helps companies visualize their current portfolio and future growth opportunities. Companies can categorize their businesses into pioneers (creators of blue oceans), migrators (businesses moving towards blue oceans), and settlers (businesses in red oceans). This visualization helps companies set their strategic priorities and identify growth opportunities.
Buyer Utility Map: Discovery of Hidden Demand
The Buyer Utility Map identifies the entire spectrum of utility spaces that a product or service can offer buyers. This tool helps companies discover hidden opportunities to create new demand and develop innovative solutions that meet customer needs.
Further Literature and Resources
Blue Ocean Shift: The Next Step
"Blue Ocean Shift" is the indispensable follow-up work to the Blue Ocean Strategy. It provides a systematic process and practical tools to shift from red oceans to blue oceans. The book is based on more than a decade of new research and is a comprehensive guide to going beyond competition, inspiring employee confidence, and seizing new growth.
Harvard Business Review Articles
Numerous articles by authors W. Chan Kim and Renée Mauborgne in the Harvard Business Review provide additional insights and case studies on the Blue Ocean Strategy. These articles are valuable resources for executives and strategists who want to apply the principles of the Blue Ocean Strategy in their organizations.
Blue Ocean Strategy Institute
The Blue Ocean Strategy Institute is an academic center dedicated to researching and applying the principles of the Blue Ocean Strategy. The institute offers training, workshops, and consulting services to help companies implement the Blue Ocean Strategy and achieve sustainable growth.
Conclusion: The Future of Innovation and Growth
The Blue Ocean Strategy offers companies a revolutionary approach to tapping into new markets and achieving sustainable growth. By focusing on value innovation and creating uncontested market spaces, companies can make competition irrelevant and create new demand. The principles and tools of the Blue Ocean Strategy have gained worldwide recognition and helped companies develop innovative business models and grow successfully.
