Adopting a blue ocean strategy, moving to completely new markets without competitors, is for many the Holy Grail of corporate strategy. Who doesn't want to make competitors irrelevant and thrive in a vast new market as the undisputed leader? Is sailing in this direction too good to be true? And most of all - is the blue ocean strategy for everyone? Let's check.
When in 2005 management experts - Chan Kim and Renée Mauborgne - proposed in their book Blue ocean strategy a new look at how to stand out from the competition and do business in "unchallenged market space" seemed too good to be true. Most companies operate in what the authors refer to as "red oceans." Where there is a fierce fight with the competition on a daily basis. What would happen if companies tried to find a space relatively free from competition to do business? And is it even possible?
What is the blue ocean strategy?
Ch. Kim and R. Mauborgne studied 150 strategic business moves in 30 industries over 100 years. In the book Blue ocean strategy included all the details of this research, trying to answer the question: "Why are some companies able to create new market spaces, while others fail?" They found that most companies compete in the same crowded market with very similar products and value propositions. They are then fighting for the same diminishing profits. The blue ocean strategy says there is another way.
In the strategy blue ocean is about defining and exploiting new markets, not entering existing markets that are oversaturated. It is an approach to business that is not interested in competition. In a way, this strategy encourages you to forget everything you know about building success. It encourages you to jump into deep, unknown waters and dive into a new way of thinking about business strategy.
The blue ocean strategy proves that "ruthless competition only results in a bloody red ocean of rivals fighting for a dwindling profit pool." Instead, companies should look for new market space and ways to reformulate their business in a way no one has done before. In short, avoid direct competition and focus on innovation.
The key points of the blue ocean strategy
Some strategic planning models rely on theories that do not hold well with their go-to-market. In contrast, the blue ocean theory relies on proven data, not unproven ideas. The blue ocean approach means that your goal is not to outperform your competition or be the best in the industry. Instead, your goal is to redefine the boundaries of the industry and operate in this new space so that competition becomes irrelevant. Under the blue ocean strategy, consumers do not have to choose between value and affordability. If a firm can identify what consumers currently value and then rethink how to deliver that value, both differentiation and low cost can be achieved. This is called "value innovation".
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How to create your own blue ocean?
The blue ocean seems to be the perfect place where every company would like to be. But if it were so easy, wouldn't everyone flock to the blue oceans of their industries, being the undisputed market leaders? But the blue ocean strategy is not about finding the blue ocean. This place has to be created. How to do it? First, define the present reality. What are the key features of the product or service in your industry? Do it marketing audit and check if this area also needs remodeling. Then identify a segment of customers who are interested in or find value in only some of the product or service characteristics. This is your new target audience.
The next step may seem controversial. It involves changing your product or service to make it worse in aspects that are less appreciated by your new target audience. While this may seem like a bad business move at first glance, the reality is that creating value and reducing costs is very important. Thanks to the savings obtained in this way, it is possible to improve the product or service based on the values of the new target group. You can also enrich your offer or add new features that are intended specifically for this audience. The blue ocean strategy also requires preparation in terms of communication strategy. Remember that even if you have the best offer, you won't start selling until your customers know about it.
Challenges in the implementation of the blue ocean strategy
Finding the right blue ocean in your message sounds simple: step into a new market. Yes, but which one? In practice, it is very difficult to come up with new ideas and identify large untapped markets. After all, there are thousands of companies that have not been able to find profitable new markets, even though they really wanted to. Choosing the right blue ocean strategy must be the result of a thoughtful and detailed process, supported by appropriate research. There is no magic formula that will take your business there with the touch of a magic wand.
The first player advantage is a myth. Kodak invented the first digital camera. The iPhone was several years late with with smartphone. Entering the market too early is an obvious risk. Customers may not understand what you are trying to sell. The technology may not be fully developed. Amiga overtook PCs and Macs by a decade, was a technological marvel and died because the world was not ready for it. Apple Newton and the first tablets from Microsoft were good ideas, but… a few years too soon.
Some blue oceans are free of predators, but fish are also lacking. Many companies have great ideas, but the market is not ready, but target group it simply doesn't exist. New markets introduce new terminology, solve new problems or solve existing problems in new ways. Consumers don't like too much change. When P&G introduced its improved concentrated laundry detergents, it was disappointed by the lack of a warm welcome. Consumers couldn't imagine how a few drops could clean something as well as a full cap. We don't like changes. This entry was made on a QWERTY keyboard layout, designed in the early era of mechanical typewriters (1873) to slow down your typing. The DVORAK keyboard, designed in 1936, is clearly better and faster, but we don't want to change that.
There are spectacular successes in history that demonstrate the power of the blue ocean strategy. It is tempting to assume that this is the right strategy for any business. Unfortunately, it would be a mistake not to understand the dangers of using it. As is ignoring all the companies that have failed to conquer new oceans. Yes, you can successfully implement the blue ocean strategy. Many companies have done this. Nevertheless, the number of companies that have failed in this attempt is likely to be larger, with their skeletons still resting on the seabed to this day. If you want not only to stay afloat, but also to get wind of your sails and go straight in the chosen direction, contact us - we will show you the most up-to-date routes you will take to get there.