Blue Ocean Strategy: Your Approach to Competition and Innovation
In today’s business world, competition is fierce, and startups are constantly searching for ways to differentiate themselves in order to stay ahead of the game. One approach that has created significant opportunities in recent years is known as the blue ocean strategy.
This innovative approach to business strategy focuses on creating new markets and opportunities rather than competing in existing ones.
Professors W. Chan Kim and Renée Mauborgne introduced the concept of blue ocean strategy in their 2005 book, “Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant.” The authors use the metaphor of the “red ocean” and the “blue ocean” to represent the state of the current market and the potential for creating new market spaces.
The red ocean strategy represents the crowded and competitive market in which companies are constantly fighting for a slice of the pie. In contrast, the blue ocean represents untapped market space that has yet to be explored and offers new opportunities for growth.
Blue Ocean Strategy Examples: How Have Other Companies Succeeded?
A blue ocean strategy can apply to a startup company, yet also to an existing business that launches a new product or makes a strategic blue ocean strategic change. Such tactical moves help established organizations break out of red oceans and let them establish new market space with little to no competition.
Some well-known examples of blue ocean strategy success are:
- NetJets created a new blue ocean market, known as fractional jet ownership, in 1987. This gave customers a new option between the historical two flight options: unreliable commercial airline flights, or expensive corporate aircraft. Fractional jet ownership saves money for their clients, with minimal upfront costs, and gives them a high-quality service, combining the best of private and commercial jet travel. In only 20 years, by 2006, NetJets was the largest operator of business jets in Europe, and today they operate the largest fleet of private jets in the world.
- In 2003, Apple iTunes unlocked the market of digital music, with their blue ocean strategy of paid and legal music downloads. Before iTunes, downloading music was mostly complicated, often illegal, and unreliable. After negotiating terms with the five major music groups, iTunes launched with an easy-to-use and seamless music experience, in full integration with their iPod digital mp3 player. The iTunes ecosytem earned billions in profits for Apple and their shareholders.
- Nintendo launched two well-known products with their blue ocean strategy, the Nintendo Wii and the Nintendo Switch. The Wii sold over 100 million units worldwide and its success was driven in part by its innovative controller and a strong lineup of exclusive games, and the low price point and appeal to a casual gaming audience. The Switch offered versatility as a home console and portable device, selling over 84 million units as of December 2021, driven by a strong lineup of exclusive games, such as “The Legend of Zelda: Breath of the Wild,” “Super Mario Odyssey,” and “Animal Crossing: New Horizons.” A lack of competition in the handheld console market has helped the Switch.
- Marvel Enterprises made one of the greatest turnarounds in modern business, coming out of their declining red ocean strategy after bankruptcy in the late 90s. They started a new blue action strategy and applied the four actions framework. The four actions: eliminate, reduce, raise, and create, help to ask key questions as a fresh blue ocean strategy is developed. In 2009, they sold for $4.2 billion dollars to Disney, and the Marvel films and characters are now household names to film lovers worldwide.
- Curves Fitness was one of the first fitness franchises to focus specifically on women. Curves built attractive fitness centres for women which encourage socializing and a fun experience. Then, Curves used a combination of print and television advertising to promote its franchises, and it also leveraged word-of-mouth marketing from satisfied customers. It has since grown to become one of the largest fitness chains in the world, with over 10,000 locations in more than 90 countries.
- JCDecaux is the creator of the outdoor advertising concept of street furniture. They initially focused on establishing contracts with cities and municipalities to provide new street furniture combined with advertising services, such as bus shelters. This became popular with cities because they were aesthetically pleasing and did not require costly maintenance or installation. In exchange for providing these services, JCDecaux was allowed to sell advertising space on its street furniture and generate revenue from it. It is now the largest outdoor advertising company in the world, with around €4 billion euros in annual revenue.
Exactly What is a Blue Ocean Strategy?
Fresh ideas, new territory, groundbreaking implementation. That’s blue ocean in a nutshell. Consider one more blue ocean example, a SaaS blue ocean success such as Salesforce. In their early days, they were a tiny ant, going against established industry giants with old-school on-premise software. Yet they had a vision for an easy-to-use cloud-based software with low setup costs, as an on-premise CRM could cost $2 million to setup and install in the first year.
Salesforce solved this massive pain point, applying strategic thinking, value innovation, and fresh technology. They took advantage of the new concept of cloud software, making it easy for small companies and startups to sign up and have a great CRM system right away. And they created multiple price points, to show an attractive value to many different types of customers.
Even better, they made it easy to use, to reduce expensive training costs. Today the company dominates about 20% of the CRM market and is valued at around $250 billion dollars.
One key aspect of blue ocean strategy is the focus on value innovation, which involves creating value for both the company and the customer. This can be achieved through a combination of differentiation and low cost, allowing a company to offer a unique product or service at a competitive price. Salesforce accomplished this by eliminating the million-plus up-front capital costs which old solutions required.
Another key element of blue ocean strategy is the emphasis on differentiation and uniqueness. Rather than trying to outdo the competition by offering a slightly better version of the same product or service, companies using this approach seek to create something quite new and innovative that meets the needs of their target market in a way that is not currently being offered by anyone else. Though modern, well-designed software and a great user experience (UX), Salesforce created a very attractive product.
Blue ocean strategy is a proactive approach to business that involves creating new markets and opportunities rather than competing in existing ones. By focusing on value innovation and differentiation, you can tap into untapped market space and achieve sustainable growth.
Essentially, you’re entering an uncontested marketplace.
5 Steps to Succeed with a Blue Ocean Strategy
Blue ocean strategy is a process that involves carefully evaluating and analyzing the current market landscape to identify opportunities for creating new market space. This involves a thorough understanding of competition, customer demand, and the factors that drive value for both the company and the consumer.
After considering pain points and brainstorming solutions, you might find a blue ocean idea for your existing business, or a new startup. We can break the process of blue ocean strategy down into several key steps:
- Analyze the current market landscape: This involves understanding the existing competition and identifying areas where the market is oversaturated or underserved.
- Identify value innovation opportunities: Look for ways to create value for both the company and the customer by identifying unmet needs and offering unique solutions. For example, some of these were accomplished by hiding capital costs from customers:
a. Car leasing (reduces monthly payments for the customer while ownership stays with the leasing company)
b. Car sharing(eliminates purchase costs & paperwork and regular monthly payments)
c. Mobile phonecontracts with “free” phones (hides the high capital-cost of a new phone)
d. Cloud software(eliminates expensive on-premise computer equipment and maintenance) - Define the target market and find underserved markets: Clearly define possible customers and understand their needs and preferences in order to create a product or service that meets those needs. For example, in developing countries, fintech companies found opportunities to serve customers who previously had no access to banking services.
- Create a value curve: Develop a value curve that illustrates the trade-offs between cost and value in order to determine the most optimal pricing strategy. Which price point(s) will be most attractive to your customers?
- Test and launch the new offering: Bring the new product or service to market, leveraging marketing and sales efforts to reach you audience. Collect feedback often as you refine your product.
By following this process, you can create a blue ocean strategy that allows you to differentiate yourself in the market and achieve sustainable growth.
Value Quotients in Blue Ocean Strategy
Value quotients measure the value your company’s offering creates for your customers, compared to the cost of creating that value.
The value quotient is calculated by dividing the value that the offering creates for customers, by the cost of creating that value. A high-value quotient indicates that your company is able to create a lot of value for your customers at a low cost. This can help you achieve a competitive advantage in the marketplace.
So to find a blue ocean strategy, you have to identify and eliminate factors which inhibit or create no value. These factors can include unnecessary features, complex processes, and high costs that do not add value for your customer. By eliminating these factors, you can create a simpler and more efficient product that meets customer needs at a lower cost.
And of course, a low cost with great features is very attractive to customers. Thus, the process of defining your blue ocean strategy involves creating a clear value proposition that clearly shows the unique benefits and value of your offering to your customer.
You can achieve this through effective branding and messaging and the design and functionality of the product or service (UX / PX).
Finally, every blue ocean success includes a keen focus on execution and implementation. Companies like Southwest Airlines found their initial success and beat their competitors by razor-sharp focus on advanced and efficient operations.
This includes building great customer experiences via a strong and dedicated team, a clear plan for bringing the product or service to market, and continuously monitoring and adapting to your customers’ needs.
By following an innovative strategy and executing it effectively, you have a good chance to achieve success with your blue ocean strategy.
The Book “Blue Ocean Strategy"
“Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant” is a book written by professors W. Chan Kim and Renée Mauborgne that introduces the concepts of the red and blue ocean strategies and provides a framework for an innovative approach to business.
The book argues that in order to succeed in today’s competitive business environment, companies must look beyond the red ocean of existing markets and instead focus on creating new market space, or blue oceans. The authors provide a step-by-step guide for identifying and creating these new markets, including strategies for value innovation, differentiation, and execution.
One key concept introduced in the book is the “value curve,” which illustrates the trade-offs between cost and value for a given product or service. By analyzing the value curve of their offering, companies can identify opportunities for creating value for both the customer and the company, and can determine the optimal pricing strategy.
The authors also emphasize the importance of creating a clear value proposition and executing the strategy effectively in order to achieve success with a blue ocean approach. They provide practical tools and techniques for analyzing the market, identifying value innovation opportunities, and bringing a new offering to market.
Innovation, Opportunity, and Leadership
One key advantage of operating in a blue ocean market is capturing a larger market share and achieving higher profitability. You can charge premium prices for your unique offerings and capture a larger market share with minimal competition.
In addition, blue ocean markets often offer the opportunity for you to create new demand rather than trying to capture a share of existing demand. This can involve introducing new products or services that meet the needs of a previously untapped market segment or creating creative new uses for existing products or services.
Another advantage of operating in a blue ocean market is the ability to shape industry structure and set the rules of competition rather than reacting to existing industry dynamics. This allows you to set the terms of the market and establish a leadership position that is difficult for competitors to challenge.
Operating in a blue ocean market offers significant advantages for startups looking to achieve sustainable growth and success through innovation and differentiation. And because the elements of blue ocean strategy open new markets, it is often a perfect fit for Corporate Venture Capital.
Blue Ocean Strategy and Competition
One of the key tenets of blue ocean strategy is the idea of making competition irrelevant by creating a new market space rather than competing in existing markets. This involves some detective work to identify untapped market opportunities and create a product or service that meets customer needs in a new way.
In a blue ocean market, competition is minimal or non-existent, allowing you to achieve significant commercial success without facing the same level of competition as in a red ocean strategy to market. You do this through value innovation, which involves creating value for both the company and the customer through a combination of differentiation and low cost.
By disrupting traditional industry structures and business models, you can create something completely new and unprecedented which sets you apart from the competition. This allows you to shape the industry structure and set the rules of competition rather than reacting to existing industry dynamics.
Shifting to a Blue Ocean Strategy
For startups looking to shift to a blue ocean strategy, develop a process with a combination of learning and creating. Conduct market research and brainstorming sessions to identify untapped market opportunities and develop a clear understanding of the needs and preferences of your customers.
You can also learn from existing industry models and make key changes that alter the value proposition. (Again, consider how the examples of car sharing or cloud software created value for customers).
Develop a clear value proposition that communicates the unique benefits and usefulness of your offering to your target market. Do this through effective branding and messaging, and through the design and functionality of the product or service itself. Create and communicate a wonderful product and user experience (PX / UX).
Finally, remember execution and implementation. Build a strong and dedicated team, develop a clear plan for bringing the product or service to market, and continuously monitor and adapt to changes in the market.
By following a well-defined strategy and executing it effectively, you can successfully shift to a blue ocean strategy and achieve sustainable growth and success.
Risk and Innovation in the Blue Ocean
To successfully shift to a blue ocean strategy, you must also be willing to take calculated risks and embrace innovation. You may need to invest in new technologies or processes, or make significant changes to your business model or funding plan.
You’ll need a clear understanding of the costs and resources required to develop and market a new product or service. This can involve developing a detailed budget and timeline for implementation and identifying and securing any necessary funding or resources.
You also need to monitor and adapt to market changes. This may involve conducting ongoing market research to identify new opportunities and staying abreast of customer preferences and needs changes.
Overall, the process of shifting to a blue ocean strategy involves a proactive approach to business.
5 Powerful Tools for Implementing a Blue Ocean Strategy
There are several tools and techniques that you can use to help implement a blue ocean strategy and successfully shift from a red ocean market to a blue ocean market. Use these tools as part of a structured process to identify new market opportunities and create a clear and effective strategy for achieving growth and success.
- One tool that is used in implementing a blue ocean strategy is the “Blue Ocean Strategy Canvas.” This tool helps you analyze and visualize the current market landscape, identify value innovation opportunities, and create a clear value proposition for your offering.
- Another tool that is useful to help implement a blue ocean strategy is the “Four Actions Framework.” This helps you identify and eliminate factors that create no value or are value-inhibiting. This can involve eliminating unnecessary features, streamlining complex processes, or reducing costs in order to create a simpler and more efficient offering.
- Other tools that can be helpful in implementing a blue ocean strategy include the “Three Tiers of Noncustomers“ and the
- “Eliminate-Reduce-Raise-Create Grid.” These tools help you identify potential customers who are not currently being served by existing offerings and to create a unique and valuable offering that meets their needs.
- As well, FourWeekMBA offers suggestions for strategy frameworks to grow your business.
By using these tools to analyze the market, identify opportunities for value innovation, and create a clear value proposition, you can achieve sustainable growth and success through a blue ocean approach.
Blue Ocean Strategy for Funding: A Strong Approach for Startups
For startups, when you create new marketspace you can apply to seek funding and investment. Untapped new markets appeal to investors, especially corporate venture capital seeking to expand into new markets.
Engage investors for funding by emphasizing your value innovation. Stress the value for both the company and the investor by offering a unique product or service that meets the target market’s needs in a way not currently offered by anyone else. By demonstrating the value and potential for growth of the your offering, you can make a strong case for investment.
Also focus on differentiation and uniqueness. Focus on how your product or service is innovative and differentiates you from competition. You’ll make your startup more attractive to investors looking for unique, high-potential opportunities.
The blue ocean strategy for funding offers a proactive approach for startups looking to secure funding and achieve growth. You can make a strong case for investment and set yourself apart from the red ocean strategy & competition.
The Startup Challenge
For startup owners, a blue ocean strategy can distinguish your business from competitors. You’ll also create the opportunity to capture a larger share of the market and achieve higher profitability.
A blue ocean strategy can be a powerful tool for startup owners looking to transform their business. But, it requires careful planning, research, and innovation and may involve taking calculated risks.
It may not be the right approach for every startup, but it can be a powerful option for those looking to create a unique value proposition and capture the lion's share of a market in just a few years.
At Wayra, we actively look for and support blue ocean ideas. Use our Startup Guide to see if you are ready to share your idea with us. See you there.
