Key Learning Outcomes
- Learn about the “Blue Ocean Strategy” and the benefits it offers your business.
- Delivering products and services in unique ways, rather than adopting new technology, may win you new clients and increase your market share.
- Understand the importance of identifying new product markets and offering products that represent value for your customers.
- Assess your customers’ needs and preferences in order to reinvent your business, retain existing customers and win new customers.
Most businesses compete hard for market share, looking to gain any competitive advantage they can over the competition. They would give almost anything to be able to create a business strategy where demand for their product or service is high and the competition is virtually non-existent. Professors at the INSEAD business school, W Chan Kim and Renee Mauborgne, developed a strategy that helps businesses to fulfil this goal, known as “Blue Ocean Strategy”. They conducted research over 30 years and first published the work in the Harvard Business Review in 2004. They later released a book titled Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant.
The authors describe the market as an ocean with most businesses competing in crowded sections of the waters. Competition is fierce with many businesses offering similar products and services, fighting hard for customers and income. The waters become bloodied from the fights, they are overcrowded and consequently profits decline. This is referred to by Kim and Mauborgne as the “red ocean”, and over time it becomes harder and harder for all the businesses in the red ocean to remain viable.
The “blue ocean” is the complete opposite. There are vast clear waters with little or no competition; you are free to sail wherever you want and there is plenty of space to expand. Market share and profits are there for the taking and the strategy in essence outlines how you can navigate your business from the red ocean through to the blue ocean where growth and higher levels of profit can be achieved.[wlm_ismember]
A key finding in the research is that most companies that successfully used this strategy did not use new technology; they more often than not used existing technologies to offer a product or service in a unique way. The other characteristic of the strategy is that in most cases, products and services are offered to the market at a cost that will attract a mass market. The key is to offer a superior product or service at a price that represents value to the customers.
One of the case studies that best illustrates the strategy is the Canadian company, Cirque du Soleil. The circus industry was dying when Cirque du Soleil was formed in 1984. Other forms of entertainment were taking market share from the circus; children who were the traditional customers had turned to other things and animal rights groups were making it harder for circus companies to compete and operate profitably. Rather than trying to compete head on with the traditional circus companies, Cirque du Soleil navigated to clear blue waters creating a new market for a new group of customers. With their tag line “we reinvent the circus” they were able to create a whole market for a new set of customers who traditionally were not circus goers. The strategy was extremely successful and to date over 40 million people have been to this “circus” all over the world.
The steps for the Blue Ocean Strategy are outlined below. It is important to first look at the bigger picture. Blue Ocean Strategy is about starting with a blank canvas rather than being caught up with the numbers. The first step is to identify all the places clear blue waters might be found.
Look for opportunities
Analyse your market and your competition and look for blue oceans where the competition is not likely to be looking. Examples might be creating a market for non-traditional customers, looking to industries that provide alternatives to your product or reinventing the delivery of your product or service.
Identify new markets
Often Blue Ocean Strategies predict consumer trends or help customers discover a need that they did not know they had. Examples include airlines that provide a more relaxed and fun environment for clients, such as Virgin; and the women-only gyms such as Curves who identified that many women didn’t go to the gym because the environment intimidated them, not because they didn’t want to get fit. More recently, the car service Uber has disrupted the taxi and hire car industry by offering an alternative that the market has embraced.
Companies that use the Blue Ocean Strategy succeed because they are able to offer a desirable product at a cost that represents value to the mass market. This is different to many innovative models where new products are priced high initially and early adopters pay a premium.
Now is the time to look at those numbers to make sure that profits can be made at the price point that the product or service is to be offered. Other things to consider might be the reaction from your stakeholders who may be fearful of leaving the tried and tested waters in the red ocean.
Blue Ocean Strategy offers a way for you leave your competitors behind while still providing your customers with value. The best way to start looking at how you might be able to implement the strategy in your own business is to start from a blank canvas. If you were to start all over again, knowing what you know today, what would you do differently? Put yourself in your customers’ shoes, spend time talking to them and see if there are possibilities for you to reinvent the way that you currently do business.[/wlm_ismember]
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