Blue Ocean Strategy is a concept popularized by business management professors W. Chan Kim�and Ren�e Mauborgne in their 2004 book, Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market Space and Make the Competition Irrelevant.� The authors describe analytical frameworks and tools to foster an organization's ability to systematically create and capture "blue oceans"�unexplored new market areas.
Blue ocean strategy challenges companies to break out of the red ocean of bloody competition by creating uncontested market space that makes the competition irrelevant. Instead of dividing up existing�and often shrinking�demand and benchmarking competitors, blue ocean strategy is about growing demand and breaking away from the competition.
{% youtube "https://www.youtube.com/watch?v=clp-IMpuwaQ" %}
What is Blue Ocean Strategy?
Blue Ocean Strategy is the simultaneous pursuit of differentiation and low cost to open up a new market space and create new demand. It is about creating and capturing uncontested market space, thereby making the competition irrelevant. �It is based on the view that market boundaries and industry structure are not a given and can be reconstructed by the actions and beliefs of industry players.
Red Ocean vs Blue Ocean
�Red Oceans�are all the industries in existence today � the known market space. In red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known.
Here, companies try to outperform their rivals to grab a greater share of existing demand. As the market space gets crowded, profits and growth are reduced. Products become commodities, leading to cutthroat or �bloody� competition. Hence the term red oceans.
Blue Oceans denotes all the industries not in existence today � the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid.
In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. A blue ocean is an analogy to describe the wider, deeper potential to be found in unexplored market space. A blue ocean is vast, deep, and powerful in terms of profitable growth.
Value Innovation�
Value innovation occurs only when companies align innovation with utility, price, and cost positions. Value innovation requires companies to orient the whole system toward achieving a leap in value for both buyers and themselves.
The aim of the Blue Ocean Strategy was not to outperform competitors. It was to offer a quantum leap in value that made the competition irrelevant. The focus on innovating at value, not positioning against competitors, drives companies to challenge all the factors an industry competes on and to not assume that just because the competition is doing something means it is connected to buyer value.
SWOT Analysis vs Blue Ocean Strategy
SWOT analysis�where strategy is about matching a company�s strengths and weaknesses to the opportunities and threats present in the existing industry.
Blue Ocean Strategy
The Blue Ocean Strategy shows how strategy can shape structure in an organization�s favor to create new market space. It is based on the view that market boundaries and industry structure are not given and can be reconstructed by the actions and beliefs of industry players.�
The Four Actions Framework
To break the trade-off between differentiation and low cost and to create a new value curve, there are four key questions to challenge an industry�s strategic logic and business model:
Which of the factors that the industry takes for granted should be eliminated?
- The first question forces you to consider eliminating factors that companies in your industry have long competed on. Often those factors are taken for granted even though they no longer have value or may even detract from value.
Which factors should be reduced well below the industry�s standard?
- The second question forces you to determine whether products or services have been overdesigned in the race to match and beat the competition.
Which factors should be raised well above the industry�s standard?
- The third question pushes you to uncover and eliminate the compromises your industry forces customers to make.
Which factors should be created that the industry has never offered?
- The fourth question helps you to discover entirely new sources of value for buyers and to create new demand and shift the strategic pricing of the industry.
The Red Ocean Trap
The belief that blue ocean strategy is a theory of marketing and a niche strategy.
�Blue ocean strategy should also not be confused with a niche strategy. While the field of marketing has placed significant emphasis on finer segmentation to effectively capture niche markets, blue ocean strategy works in the reverse direction. It is more about de-segmenting markets by focusing on key commonalities across buyer groups to open up and capture the largest catchment of demand.�
Looking to build your successful tech Startup?�Join our 12-week cohort�of tech startups for Black founders by Black industry experts.
