Blue ocean strategy: make competition with competitors irrelevant by creating value innovation outside the red ocean
When it comes to organizational strategic planning, companies usually opt for differentiation, cost leadership or niche exploration.
In other words, they do better than competitors, or produce cheaper than them, or specialize in a very particular audience. The blue ocean strategy seeks, at the same time, to escape this and align a middle ground between the first two strategies.
To help you understand in more detail the secrets of blue ocean strategy, we have prepared below a list with explanations of its 8 main points and how to use them in your business, as well as a brief summary of some tools. Then look at the example of Cirque du Soleil and how it took advantage of this strategy.
Want to know what awaits you next? See what the main points of blue ocean strategy are:
- A strategy based on data and hard facts
- It is possible to combine differentiation and low cost
- It “creates” an unexplored space in the market
- It provides powerful tools to understand opportunities
- There is a step by step ready to be followed
- It maximizes opportunities and minimizes risks
- It turns execution into strategy
- A strategy that shows a win-win outcome
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Make your competition irrelevant with blue ocean strategy
What is the difference between the blue ocean and the red ocean?
The so-called Red Ocean is an extremely competitive scenario. Furthermore, their conditions lead to very small profit margins and, in some cases, to the commoditization of products and services. After all, the fierce struggle between companies can quickly transform all hard-won innovation into something obsolete, through the efforts of other players to surpass every initiative in the market.
Both to offer a benefit valued by customers at a higher level than the competitors, and to produce at a lower cost, an enormous operational, financial and marketing strategy effort is required. Likewise, serving a niche requires a deep knowledge of this small market, and it is often not large enough to generate an acceptable amount of revenue.
In this context, W. Chan Kim and Renée Mauborgne wrote in 2005 the famous book “The Blue Ocean Strategy”. Teaching how to do what some summarize as “detecting and exploring new markets, free from competitors”, the methodology advocated by the two presents a series of tools. In addition, it presents 8 fundamental points that must be followed by those who wish to escape the bloody and competitive red ocean to navigate with much more success in the calm waters of a blue and prosperous ocean.
How to apply the blue ocean strategy?
The implementation of the Blue Ocean strategy can be comprised of 4 different steps. Next, we’ll talk briefly about each of them.
- Visual awareness: step in which the business is analyzed in comparison with direct competitors. It is a kind of visualization, in which points of improvement and attitudes that should not be reproduced are highlighted.
- Visual exploration: in the second moment, the information from the previous step is used to explore possible ways to develop an action plan. This step is focused on finding a differentiating aspect of the business, in which to invest.
- Visual strategy presentation: here, the constructed strategy is presented to a key audience (consisting of customers, non-customers and even competitors’ customers), so that proposals can be evaluated and ideas improved.
- Visual communication: finally, the information developed is condensed into a final model, whose objective is to ensure the greatest possible profit and the lowest aggregate risk.
The 8 key points of blue ocean strategy
In order to maintain sustainable growth and relevant competitive advantages, companies are increasingly facing a fierce competition that only results in a “sea of blood”, dubbed the red ocean.
See now why some organizations are using another way to achieve profits and profitability, the blue ocean strategy:
1. A strategy based on data and hard facts
Blue Ocean Strategy was based on decades of studies and hundreds of strategic moves that have addressed more than 30 industry branches over more than 100 years.
2. It is possible to combine differentiation and low cost
The masters and gurus of management have always said: you produce with differentiated quality or you produce at a low cost. Contrary to this maxim, blue ocean strategies simultaneously seek to exploit the benefits of low cost and differentiation. It is a reasoning of adding advantages and not having to choose one of them over the other.
3. It “creates” an unexplored space in the market
The objective of this blue ocean strategy is not to intensify the competition and defeat your opponents. The point is to make your competitors irrelevant by creating a new threshold for the segment you want to explore, an entirely new perspective.
4. It provides powerful tools to understand opportunities
To escape the competition and develop in an unexplored blue ocean, it is necessary to know how to see the opportunities and how to create and develop all of this. For that, there are several tools that you can consult on this site: Blue Ocean Strategy.
5. There is a step by step ready to follow
The strategy must be based on 6 boundaries to be overcome and implemented through 4 well-defined and thoroughly tested steps to understand how to transform non-customers into customers and how to retain new customers.
The 6 Frontiers of Blue Ocean Strategy: What to Examine?
- alternative sectors
- strategic groups within sectors
- buyer chain
- offerings of complementary products and services
- functional and emotional appeals from buyers
- passage of time
The 4 Steps of Blue Ocean Strategy
- Visual awakening: Compare your company with competitors and see what needs to be changed.
- Visual exploration: Go out into the field to explore the six boundaries, see advantages and what factors should be eliminated, created or changed.
- Visual Strategy Fair: Build a value assessment matrix based on what you’ve seen and ask for feedback from customers, competitors’ customers, and non-customers.
- Visual communication: Create and distribute strategic profiles on a single page and support only those that allow you to implement the strategy.
6. It maximizes opportunities and minimizes risks
You can test the commercial viability of your ideas and then refine them to avoid risk and increase your chances of success through the so-called Blue Ocean Ideas Test (TOA).
7. It turns execution into strategy
The well-defined process and presented tools are available. Furthermore, they are easy and intuitive to understand, allowing for an effective implementation supported by the company’s collective knowledge.
8. A strategy that shows a win-win outcome
By having an integrated vision, the strategy shows how to align value, profit and people. In this way, it ensures that your company is convinced of the effectiveness of applying the new strategic guidelines.
The Cirque du Soleil example
One of the most famous circus companies in the world, Cirque du Soleil, discovered this new blue ocean by exploring: no circus, no theater, no ballet, but a mixture of all of these. In it, the high quality of actors, scenography and costume sets them apart from competitors; while the structure that abandons costly attractions and practices (such as animals and discounts) leads to a better managed cost. This is what creates a blue ocean, with no competitors, to be explored! This is one of the most successful examples of implementing a blue ocean strategy.
If you want to know another strategic tool used by large companies, reread this previous post from our blog: Balanced Scorecard: concept, perspectives and how to apply
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