Blue Ocean Strategy

As a business owner or manager, do you regularly focus on your competition? If so, you aren’t alone. Most businesses are focused on their competitors as they try to take control of a large slice of the market. While that is certainly a logical and time-tested method, the relatively new Blue Ocean Strategy is an innovative way to think about business. Rather than fighting toe-to-toe with your competitors for market share, this strategy instead encourages businesses to seek out uncontested market space that they can have all to their own. When successful in this pursuit, it is possible to dramatically increase the value of a company while simultaneously making the previously identified competition irrelevant. Blue Ocean Strategy is a book published in 2005 and written by W. Chan Kim and Renée Mauborgne, professors at INSEAD and co-directors of the INSEAD Blue Ocean Strategy Institute.

Blue Ocean Strategy

A ‘blue ocean’, as used in the title of this book and strategy, is basically uncharted territory in the business world. You can think of blue ocean as space that has yet to have been explored by any other business – meaning it is a land full of opportunity. If you can manage to get your company into a blue ocean in the market, you will have all the opportunity in the world to make large amounts of money in a potentially short period of time. While that blue ocean might not remain open forever (in fact, it certainly won’t remain open forever), you can make huge gains in both revenue and brand recognition while you are the only player in the game. Even as other competitors begin to work their way in, turning that ‘blue’ ocean ‘red’ (with competition), you should still have the advantage as you were the innovator in this space.

The Blue Ocean Strategy book defines ‘red oceans’ as those which already contain a high level of competition. Although there is an inevitability to having to compete in crowded markets, there are too many advantages to avoiding this situation to ignore the possibility of looking for blue space. In an already contested market, there is a natural cap in place on the potential of your business. You won’t be able to ‘hit the jackpot’ in terms of business growth or sales figures, because the market is already set.

Why You Should Avoid Red Oceans

Even if you are able to carve out a respectable share of business for yourself, it is highly unlikely that you will rocket to the top of the business world in an already competitive space. The prices and profit margins are largely set before you even arrive, meaning your ceiling is relatively low. You can’t afford to completely stay away from red oceans because that is where the majority of business takes place, but continuing to look for blue oceans is a great way to take the limit off of what you can accomplish.

Creating New Demand

Most businesses start with the idea of filling a demand in the market, but the Blue Ocean Strategy holds that it is far better to create a new demand that doesn’t even exist at the moment.

Creating New Demand

While doing so is obviously a great challenge, the rewards can be many. There are new markets being created all the time by the innovation of new products and services, and the businesses that are on the cutting edge of these markets tend to be some of the largest in the world. Organizations willing to go into untested territories are taking a big gamble, but that gamble sometimes pays off in a huge way.

Finding Open Space

Of course, locating the opportunity to create a blue ocean for your business is going to be the biggest challenge of all. It is easy to sit back and think that ‘everything has already been done’, even though that is clearly not the case.

Finding Open Space

There are four points that are presented within this book that will help you look for blue oceans around the edges of your business market.

  1. The first point has to do with raising the quality of one factor or another as compared to industry standard. In other words, you could create a blue ocean by offering a product that is of a significantly higher quality than anything else currently offered within the industry. Perhaps you will use more advanced technology, or better materials, to develop an amazing product that grabs the attention of consumers. By rising above and establishing a new level, you will be playing in a market all your own.
  2. Many industries have barriers or characteristics that simply do not need to be in place. Often, these are issues that were once relevant, but are no longer a problem thanks to developments in technology. If you can eliminate unnecessary parts of the business model within your organization, you could find a way into an open space that leaves you competing at a low price or on a faster timeline.
  3. This is the opposite of the idea of raising the level of a product or service within the industry that you compete. Instead, you can choose to reduce the standard on a point that isn’t necessary in order to leave your customers with a quality item. You might be over-engineering a certain element of your product, or you may be using an expensive material where a cheaper alternative would do the same thing.
  4. The last point on the list is where innovation comes into the picture. This point has you and your company creating something that has simply never before been seen in the industry. This is probably the most difficult point to be successful with, as it takes incredible creativity and a willingness to go out on a limb, but it also holds the biggest potential for success if your product is a hit.

The Blue Ocean Strategy allows business owners to ‘think big’. You aren’t just trying to scrape by when you use this kind of strategy in your business. Instead, you are trying to achieve great things on a large scale.

Blue Ocean Strategy Means Finding Open Space

It can be intimidating to approach your business from this big picture perspective, but it is exciting at the same time. If you do manage to find a section of blue ocean that you can claim as your own, it just might go down as the leading accomplishment of your professional career.

You can read more about Blue Ocean Strategy in our free eBook ‘Top 5 Strategy Development Tools’. Download it now for your PC, Mac, laptop, tablet, Kindle, eBook reader or Smartphone.

Key Points

  • Blue Ocean Strategy is a book published in 2005 and written by W. Chan Kim and Renée Mauborgne, professors at INSEAD and co-directors of the INSEAD Blue Ocean Strategy Institute.
  • The premise of the book is that companies can succeed by creating ″blue oceans″ of uncontested market space rather than by battling entrenched competitors.
  • They produce evidence that these strategic moves create a leap in value for the company, its buyers, and its employees while unlocking new demand and making the competition irrelevant.
  • They define ‘red oceans’ as those which already contain a high level of competition where there is a natural cap in place on the potential of your business.
  • You won’t be able to ‘hit the jackpot’ in terms of business growth or sales figures, because the market is already set.
  • Finding open space is difficult but there are four points that are presented in the book that will help you look for blue oceans around the edges of your business market.
  • The four principles are: create uncontested market space by reconstructing market boundaries, focus on the big picture, reach beyond existing demand and get the strategic sequence right.

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