Blue Ocean Strategy is a strategic business concept that has gained a lot of currency in recent years. If you’re a business professional or student, odds are that you’ve heard people talk about Blue Ocean Strategy. However, there’s a good chance you haven’t actually seen anyone break down what Blue Ocean Strategy is and how it’s applied in the business world.
In this article, we’ll cover the basics of Blue Ocean Strategy, so you can better understand its benefits and how it might serve as a powerful tool in your business career.
What Is Blue Ocean Strategy?
First, let’s start with the most basic and obvious question: “What is Blue Ocean Strategy?” In brief, Blue Ocean Strategy is a business concept designed to help organizations develop more effective strategies. They are meant to circumscribe competition and exploit market inefficiencies. Blue Ocean Strategy was first developed by W. Chan Kim and Renée Mauborgne, and was first introduced to the public via their 2005 book, Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant.
Now let’s take a closer look at the principles behind Blue Ocean Strategy, as well as frameworks for implementing it to help achieve your business goals.
Blue Ocean Strategy Principles
Let’s examine some of the primary Blue Ocean Strategy principles.
Red Oceans vs. Blue Oceans:
The essential insight behind Blue Ocean Strategy is that certain markets are already fully saturated with competition. These are known as “red oceans” and are, by definition, extremely difficult for new organizations to win in. By contrast, “blue oceans” are defined as new markets that are not already forbiddingly competitive.
Value Innovation:
In addition to offering new products and services to new customer bases, Blue Ocean Strategy advocates for focusing on value innovation. This means tailoring products and services to offer meaningfully greater value to consumers, while requiring lower costs for the company.
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Blue Ocean Strategy Framework
Now we’ll take a deeper dive into the actual Blue Ocean Strategy framework.
The Blue Ocean Strategy framework actually makes use of several other frameworks to help companies to discern between blue and red oceans, and to increase value innovation within those spaces.
The Six Paths Framework:
This sub-framework within the greater Blue Ocean Strategy framework helps companies identify new market spaces that aren’t already saturated with competition (i.e., blue oceans). The framework involves deliberately questioning existing assumptions within an industry. From there, companies envision new innovative approaches by exploring alternative industries, reimagining strategic group norms within the industry, offering new value at different points in the chain of buyers, offering products and services that are complementary to existing ones, transforming the functional or emotional appeal of a certain product or service for buyers, and envisioning how current norms might transform in the future.
The Strategy Canvas:
This is a technique that involves creating a visual representation of your business’s strategic position and comparing it to that of your competitors. The Strategy Canvas employs the value curve in the vertical axis and key industry factors/attributes in the horizontal axis. The visuals are meant to help illustrate uncontested market areas, in other words: blue oceans.
Blue Ocean Strategy Examples
To help you better understand how the Blue Ocean Strategy can help companies become more successful in achieving their goals, let’s look at some Blue Ocean Strategy examples.
Cirque du Soleil.
The circus industry is actually very old and established, with famous and long-established operators like the Ringling Brothers dominating the market. In other words, the circus industry is a red ocean—to enter that market would be exceedingly difficult. Cirque du Soleil innovated around that saturation by adding elements of theater to the circus form, thus creating a new product that also targeted a new upscale audience that was previously overlooked by the circus industry.
Nintendo Wii.
For many years, the dominant trend in the gaming industry was toward increasingly sophisticated and powerful graphics, with games that focused on exploiting those increasing capacities. This created something of an arms race between different gaming platform companies, with Microsoft and Sony crowding Nintendo out of the market. Nintendo innovated by catering to an entirely new kind of gaming experience and gamer. The Wii focused on creating new and fun controls that supported a family-friendly gaming experience, which had been neglected by other platforms. This opened up a whole new market of gamers—a blue ocean.
Do Consulting Firms Use Blue Ocean Strategy?
You might say that the market of business-related books and strategies is itself a red ocean. Lots of new approaches are being marketed on a daily basis, but how many of those new tools and frameworks are actually being used by business professionals? Well, in the case of Blue Ocean Strategy, its legitimate value can be recognized by the fact that some of the world’s most competitive consulting firms regularly use Blue Ocean Strategy. Some of the most common Blue Ocean Strategy applications include helping clients find and create new market opportunities, differentiate themselves from their customers, and innovate by creating unique new value propositions.
Conclusion
Blue Ocean Strategy has only been around since 2005, but its approach is so intuitive and powerful that it feels like it must have been around forever. By applying the principles and frameworks of Blue Ocean Strategy toward your business scenarios, you can help your organization create new markets and new forms of value.